While NERA concluded that LNG exports would slightly boost gross domestic product, researchers from

The Obama Administration is blocking china international travel service cits a comprehensive environmental study on the impact of exporting massive quantities of liquefied natural gas, or LNG, on the grounds that new gas drilling induced china international travel service cits by the exports is not “reasonably foreseeable.”
Meanwhile, the U.S. Department of Energy is resisting calls by Dow Chemical and other manufacturers for a more clearly defined china international travel service cits and transparent DOE process for determining whether proposed LNG export projects serve the “public interest.”
Both the DOE and the Federal Energy Regulatory Commission china international travel service cits face mounting pressure to evaluate the economic and environmental consequences of licensing LNG export china international travel service cits facilities. Since the agencies licensed an LNG export terminal in Sabine Pass, La., in 2011, 19 other applicants have lined up with licensing requests.
Sensitive to the potentially huge cumulative impact china international travel service cits those projects could have on the U.S. economy, the two agencies suspended approvals pending a two-part economic study by the Energy Information Agency and a private contractor, NERA Economic Consulting.
Both analyses are now finished, and Christopher Smith, a deputy assistant secretary of DOE for oil and gas, testified March 19 that LNG export applications china international travel service cits would be considered on a “case-by-case basis” in light of their economic conclusions, which have been sharply criticized.
Independent studies predict that unfettered LNG exports will drive up the domestic price of natural gas, spur a boom in fracking shale formations china international travel service cits and cause a major transfer or wealth from consumers and energy-dependent industries to the natural gas industry and its investors.
While NERA, the DOE’s private contractor, has not disputed those points, its December 2012 report asserts that aggressive LNG exporting would be a net positive for the U.S. economy. “Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased,” NERA wrote in its policy-driving report.
For example, John Detwiler, an engineer from Pittsburgh, wrote that none of NERA’s scenarios “take a realistic view of the swings in gas supply, demand and pricing in the real world.” Detwiler also charged that NERA has a “consistent public record of advocacy against environmental protections and promoting denial of climate change” and that its lead author, W. David Montgomery, has publicly opposed carbon emission controls and DOE investments in green energy.
While NERA concluded that LNG exports would slightly boost gross domestic product, researchers from Purdue University found the exports would slightly depress GDP. But the two conclusions on GDP were not far apart and were not nearly as important, the Purdue team said, as the wealth-shifting and environmental effects of LNG exports.
While the DOE has listed the environment as one factor it may consider when evaluating the “public interest” china international travel service cits of a proposed LNG export project, FERC takes the lead in applying the National Environmental Policy Act (NEPA). In February, FERC granted Cheniere Energy authority to build the Creole Trail Pipeline to connect to its already-approved LNG export terminal in Sabine Pass, La.
The Sierra Club is suing to block the project, alleging that FERC’s failure to require a comprehensive china international travel service cits environmental impact statement, or EIS, violates the NEPA law. It argues that FERC’s stance that LNG export-induced gas drilling is not “reasonably foreseeable” collapses in the face of detailed models prepared china international travel service cits by the Energy Information Agency. The EIA predicts that an average of 63 percent of exported LNG will come from new gas drilling. Deloitte and other private analysts china international travel service cits agree that LNG exports and new gas drilling go hand in hand.
The NEPA law requires a formal china international travel service cits EIS whenever there is a “substantial question” about a project’s potential to harm the environment. Since export-induced china international travel service cits gas drilling is a given and the preferred modern method of drilling high-volume china international travel service cits hydrofracking has a controversial environmental record, the FERC staff had no authority to waive a formal EIS, the Sierra Club argument goes.
Cheniere responded to the Sierra Club legal challenge April 9, writing: FERC “has previously explained that ‘projections of the locations and amount of future (gas drilling) production would be very speculative if attempted on the basis of’ the Creole Trail Expansion china international travel service cits Project. Sierra Club’s mere disagreement with the commission does not entitle it to a stay.”
Cheniere is in favored position. It is the only company recently licensed by FERC and the DOE to export LNG to countries that do not have a free trade agreement with the United States (aside from a small facility in Alaska that has been exporting to Japan for decades). Virtually all of the world’s leading LNG importers are non-free trade agreement countries, including Japan, China, India and most of Europe. china international travel service cits (Licenses to export to countries with a free trade agreement with the U.S. are routinely granted and are far less valuable.)
Located on the Sabine River on the Texas-Louisiana border, the terminal is authorized to export 2.2 billion cubic feet of gas per day. The 19 pending non-FTA export applications seek a combined 26 bcfd, nearly half of the existing domestic gas supply.
The DOE has divided the applications into two groups, prioritizing according to when they were filed and how much success they’ve had lining up financing and customers. Of the nine projects with the best chance, one is in Maryland, two are in Oregon and six others are in Texas or Louisiana on the Gulf Coast.
The applicants expect FERC and DOE to apply the same licensing standards to them that they applied to Cheniere. “We’re pretty confident that we deserve these permits,” Thomas Farrell, chairman and CEO of Dominion Resources Inc., told Jim Cramer, host of CNBC’s “Mad Money” April 2. Dominion china international travel service cits has signed deals to export Marcellus and Utica shale gas to India and China from its planned Cove Point terminal in the Chesapeake Bay.
Although FERC dismisses the likelihood that an LNG exporter might stimulate new gas drilling, Dominion’s license application touts the project’s power to do precisely that. “The most basic benefit of the proposed LNG exports will be to encourage and support increased domestic production of natural gas,” Dominion says in its FERC application.
The Obama Administration can count on intense lobbying and political pressure to approve china international travel service cits LNG export projects china international travel service cits like Dominion’s. In the case of the Cove Point project, U.S. Rep. Steny H. Hoyer, a Maryland Democrat and the House minority whip, has voiced support.
china international travel service cits The market price for natural gas in the U.S. has been fluctuating around $3.50 per million cubic feet, compared to around $15 mcf in Japan. Even allowing for shipping and processing costs, that leaves room for wide profit margins.
Aside from the gas industry’s profit motive, the other incentives to export LNG relate to its potential contribution to the U.S. balance of trade and to trade relations with allies. “It would be a major mistake not to do it in terms of U.S.-Japanese relations,” Dennis Blair, Obama’s national intelligence china international travel service cits director from 2009 to 2010, told Platt’s earlier this month. “History shows that every time you try to set government policy china international travel service cits against market forces in the interest of near term popularity, china international travel service cits you end up making your lift that much heavier in the long run.”
Purdue researchers Wallace E. Tyner and Kemal Sarica calculated that LNG exports totaling 6 bcfd would push domestic wellhead gas prices up 16 percent above the no-export china international travel service cits case by 2035. Exports of 18 bcfd would drive a 47 percent increase by that year.
Both the EIA and NERA, the DOE’s economic consultant, predicted a similar effect but found smaller jumps in domestic prices. On the other hand, Charles River Associates found that unlimited LNG exports could triple domestic gas prices. That study was sponsored by Dow Chemical, a leader of America’s Energy Advantage, a group of prominent manufacturers who rely on low-cost energy. Dow uses gas to run its plants, and gas is a raw material for many of its plastics and chemicals. As the shale gas drilling boom has lowered domestic china international travel service cits prices, Dow has launched china international travel service cits plans to spend $4 billion on new chemical plants along the Texas coast.
Andrew Liveris, Dow’s CEO, argues that high-margin, labor-intensive domestic manufacturing is a far better use for domestic gas than simply exporting it wholesale to foreign manufacturing rivals. “America’s natural gas bounty is more than a simple commodity. It’s a once-in-a-generation opportunity for America to export advanced china international travel service cits products, not just BTUs,” he said in testimony at a Senate committee hearing in February. Liveris said he doesn’t categorically oppose LNG exports only unchecked china international travel service cits exports that threaten to knock the economy out of whack by devouring domestic supply. He acknowledges that banning LNG exports entirely could invite china international travel service cits shortages too because gas drillers might have dangerously little incentive to drill.
Liveris has tried to prod the DOE to be more forthcoming on how it strikes the right balance when it rules on export applications. Last October, Sen. Ron Wyden, chairman of the Senate Energy and Natural Resources Committee, tried to pin down the DOE on that exact point. He wrote the agency asking for “an all-inclusive description of the factors” DOE considers in ruling on an LNG export application. Wyden has said the U.S. needs to seek a “sweet spot” in LNG exports, allowing enough to spur drilling and gas supply, but not enough to create export-driven supply shortages.
Oil and gas giants that have invested heavily in U.S. shale gas plays, including ExxonMobil and Royal Dutch Shell, china international travel service cits tend to favor unlimited LNG exports. They say the gas drilling boom could die if exports aren’t allowed to push up domestic prices.
Under the Natural Gas Act, the DOE is legally obligated to approve LNG exports deemed to be in the “public interest.” The agency construes that law to mean that exports are presumed to be in the public interest unless opponents succ