LNG export critics call on Energy Dept. for time out

With the Obama administration on Wednesday approving a fourth company’s plans to sell natural gas overseas, some lawmakers and manufacturers said it’s time for the federal government to reassess the economic risks of those export approvals.

The Energy Department has now authorized companies to export 6.37 billion cubic feet of liquefied natural gas daily, including Wednesday’s approval of foreign sales from Dominion’s Cove Point facility in eastern Maryland.

That puts the U.S. squarely within widely projected ranges for eventual natural gas exports — and past a 5 bcf/day threshold at which some manufacturers say domestic prices for the fossil fuel could be pushed upward.

The Energy Department “has an obligation to use most recent data about U.S. natural gas demand and production and prove to American families and manufacturers that these exports will not have a significant impact on domestic prices, and in turn on energy security, growth and employment,” said Sen. Ron Wyden, D-Ore.

The head of the Senate Energy and Natural Resources Committee, Wyden has criticized the government’s reliance on energy market projections made in 2010 in assessing the economic effect of additional natural gas exports. A government-commissioned study last year using those numbers — and a baseline projection of 6 bcf/day in exports — concluded that the United States would score big economic benefits by broadly exporting natural gas, with only modest domestic price increases for the fossil fuel.

A coalition of large industrial users of natural gas, including the Dow Chemical Co., Dallas-based Celanese and Nucor Corp., said the Energy Department should tread more carefully, given the cumulative exports it has already authorized.

“We are now approaching a volume of LNG exports that many experts project will impact price and volatility for natural gas,” noted Jennifer Diggins, chair of the group, known as America’s Energy Advantage.

“We’re increasingly concerned with the process and data (the Energy Department) is using to justify more exports of American natural gas to our global competitors,” said Diggins, who is also a public affairs director for Nucor Corp. The Energy Department “is making decisions that could have far-reaching and potentially irreversible impacts on our economy and American manufacturing based on 30-year-old guidelines for natural gas imports, not exports.”

A federal law dictates that the Energy Department must affirm proposed exports are in the public interest before granting licenses to sell the fossil fuel to countries that don’t have free-trade agreements with the United States.

In issuing conditional approval to Dominion Cove Point on Wednesday, the Energy Department reiterated its plans to consider additional pending export applications on a case-by-case basis. But the department also pledged “to assess the cumulative impacts of each succeeding request for export authorization on the public interest with due regard to the effect on domestic natural gas supply and demand fundamentals.”

The Energy Department also has previously vowed to “assess the impact of any market developments on subsequent public interest determinations” when “further information becomes available at the end of 2013.”

Analysts at ClearView Energy Partners told clients in a research note that they expect the Energy Department to take a “pause” to review the issue, probably around the end of the year, when new market forecasts are available. ClearView analysts also said they expect “increasing scrutiny as cumulative volumes rise.”

A timeout in December or January may be too late for some export skeptics. Diggins said America’s Energy Advantage wants the Energy Department to reassess the issue right now:

“Because of all this uncertainty and because so much is at stake,” she said, the Energy Department “should immediately undertake a review of the cumulative impacts of its decisions up to this point, and clearly articulate in advance its criteria for determining the public interest under the law.”

Not all U.S. manufacturers are wary. The National Association of Manufacturers applauded the Energy Department’s decision on Cove Point, saying swift export approvals put the market — not the government — in charge of deciding what projects survive or fail.

“Principles of free trade and open markets should govern whether companies can move forward and construct LNG export terminals on U.S. soil,” said Ross Eisenberg, vice president of energy and resources policy for the group.