Manufacturers call for halt on natural gas export approvals

WASHINGTON — Dow Chemical and other big industrial users of natural gas are imploring the Obama administration to stop approving licenses to broadly export the fossil fuel.

Through a coalition known as America’s Energy Advantage, the manufacturers and public utilities on Thursday asked Energy Secretary Ernest Moniz to take a timeout on issuing new export licenses until the Obama administration completes a fresh review of economic, demand and production data. The request, delivered in a letter to Moniz that was released publicly on Friday, dovetails with some lawmakers’ efforts to prod the Energy Department to study new market data before approving more exports.

The Energy Department has already issued five licenses to sell up to 8 billion cubic feet per day of liquefied natural gas to countries that do not have free trade agreements with the United States, based largely on a 2012 study that concluded that exports would mean big economic gains for the U.S..

But critics say the report relied on outdated projections of demand for the fossil fuel while ignoring the potential economic contributions from domestic manufacturers taking advantage of inexpensive natural gas as a power source and a feedstock. If foreign demand pushes natural gas prices too high, they say, it could undermine the current competitive advantage for domestic manufacturers driven by surging U.S. production of the fossil fuel.

Energy Department officials have said they will use new market data to periodically reassess their assumptions about exports. With the release of the Energy Information Administration’s long-term economic forecast last month — including revised predictions of natural gas prices — now is the perfect time for a timeout, America’s Energy Advantage said.

“The natural gas market . . . is a dynamic and volatile market that is continually changing,” the group’s chairwoman, Jennifer Diggins, said in the letter. “With so much at stake for the economy and U.S. energy security, we should not take chances and gamble with this critical strategic resource.”

The group is particularly worried that the cumulative Energy Department approvals may soon exceed a tipping point beyond the “low export scenario” analyzed in the 2012 study.

“The administration is pursuing a dangerous policy path that would take the nation to authorized export levels above 8 billion cubic feet per day based on a theoretical model with no actual market validation,” Diggins told Moniz. “We are very concerned that exporting such a large volume of this strategic commodity, which is vital to U.S. competitiveness, is contrary to the national interest.”

But export advocates say the fears are overblown because the market itself will constrain U.S. natural gas sales. Even if the Obama administration approved all of the nearly two dozen LNG export applications pending at the Energy Department, just a handful of the multi-billion-dollar natural gas liquefaction facilities are expected to ever be built.

“AEA’s latest letter to the Department of Energy appeals to unfounded fears to protect a narrow special interest instead of adhering to sound economics,” said Margo Thorning, chief economist with the American Council for Capital Formation and head of the Act on LNG advocacy group. “LNG exports will create jobs and growth, reduce our trade deficit and enhance America’s geopolitical position.”

Thorning and other export advocates have implored the Energy Department to move more swiftly on the pending licenses; lengthy reviews mean the U.S. could lose out to Australia and other companies aiming to sell their own natural gas to Asian and European customers.

A timeout isn’t necessary, Thorning said, since “this issue has been studied to death.”

“These projects have enormous hurdles to get online, even after license approval,” she noted.

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. That benchmark tilts in favor of the foreign sales.

In its most recent forecast, the EIA predicted that U.S. exports of liquefied natural gas will climb to 9.6 billion cubic feet per day before 2030 and then remain at that level through 2040.

Under that scenario, the agency believes natural gas-intensive industries still will benefit from rising U.S. production, as natural gas prices stay relatively low, about $4.80 per million British thermal units in 2018. But the EIA also predicted that over decades of exports and rising domestic demand, the price will keep climbing, up to $7.65 per million Btu in 2040.

AEA Letter to Sec Moniz 1-9-14 [1]

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