By Simone Sebastian, Chronicle
Debate is brewing over whether to keep the nation’s glut of natural gas at home for cheap energy or export it at five times the price, possibly creating jobs and boosting the domestic economy.
Businesses that purchase natural gas for industrial and residential use have rallied against proposals to liquefy and export the fossil fuel to Asian and European nations willing to pay much higher prices.
Nine companies have sought federal approval to export about 10 billion cubic feet of liquefied natural gas per day, which would boost prices for U.S. customers.
Cheniere Energy’s Sabine Pass LNG plant in Louisiana already has won approval to ship out more than 2 billion cubic feet of liquefied natural gas a day.
In total, the proposed export volume equals about 14 percent of the natural gas produced in the United States — 26.8 trillion cubic feet in 2010, according to the U.S. Energy Information Administration. The U.S. consumed about 23.8 trillion cubic feet.
Rates versus jobs
There’s little doubt that exports will cause the price of natural gas to rise. The debate is whether the rise in gross domestic product and gas field employment might offset the negative effects of higher domestic energy prices.
“I don’t think anybody knows the answer to that question, which we think argues for slowing down these (export) facilities,” said Dave Schryver, executive vice president of the American Public Gas Association, a trade group for municipal gas utilities.
“Until you have a strong, accurate view of what the impact is going to have on consumers, it’s premature.”
The price of natural gas in the U.S. has plummeted as technology has made it economical to extract natural gas from dense shale rock.
Natural gas futures closed at $2.67 per million British thermal units in trading Friday on the New York Mercantile Exchange. The price was more than $15 in 2005.
“We have so much natural gas coming up that we don’t know what to do with it,” said Andrew Ware, spokesman for Houston-based Cheniere Energy.
Except, maybe, ship it overseas.
Natural gas is selling for as much as $12 per million Btu in Europe and as high as $18 in some Asian markets, said Ira Joseph, executive director for international gas at consulting firm PIRA Energy Group.
Cheniere and other LNG companies have said that allowing natural gas exports from the Gulf Coast would create jobs by encouraging more drilling.
The Energy Information Administration is expected to issue a report next week examining the price effects of exports.
A second report in March will examine how the proposed exports would affect the broader U.S. economy on job creation and gross domestic product, said Bob Corbin, director of the office reviewing the applications.
It’s not clear when the Energy Department will decide on the pending export permits, because the nation previously hasn’t had to contemplate exporting natural gas on this scale, Corbin said.
The U.S. has exported some gas since the 1960s, when Conoco’s Alaska LNG plant began shipments to Japan.
From the Lower 48
But the Sabine Pass terminal, along with other LNG facilities seeking federal approval, represents the first effort to export it from the Lower 48 states.
That worries companies that buy natural gas for home heating and factories.
“If you create this highway that makes it easy for natural gas to flow to where the price is highest, that would make natural gas prices higher here,” said Schryver, of the Public Gas Association.
Price is one factor in considering export permits, Corbin acknowledged, but the chief concern is supply.
“If there wasn’t enough gas to support both domestic demand and exports, that would be enough to disqualify the application,” Corbin said.