Report Opens Door To Liquefaction Approvals

January 2013, Vol. 68, No. 1

The Department of Energy published a report from NERA Economic Consulting which concludes unlimited exports of U.S. liquefied natural gas (LNG) will help the U.S. economy, and the greater the exports, the greater the public good. The DOE automatically approves LNG exports to countries with a Free Trade Agreement with the U.S. But it must find that exports to countries without FTAs are in the public interest. The DOE commissioned the report to help it decide whether to approve additional non-FTA exports.

The only non-FTA export application which has been approved is from Sabine Pass LNG, a subsidiary of Cheniere Energy Inc. Fifteen other applications have been filed including Freeport LNG, Lake Charles Exports and Dominion Cove Point LNG.

Dan Donovan, spokesman for Dominion Cove LNG, says, "We were pleased with the NERA study, but not surprised. There were several independent studies that showed the benefits of LNG exports, and we expected the NERA study to be consistent."

LNG exports have been a controversial issue as U.S. manufacturers dependent on natural gas -- some of them building or adding to facilities here because of cheap shale gas -- have worried that the exports will increase gas costs. Andrew N. Liveris, Dow Chemical's chairman and chief executive officer, calls the report "outdated, inaccurate and incomplete economic data." He adds, "The report fails to give due consideration to the importance of manufacturing to the U.S. economy." He cites over $90 billion in spending and millions of new jobs predicated on abundant and affordable natural gas, none of which were captured in the report.

At least one leading House Democrat also complains that not just manufacturers, but consumers, could be negatively impacted by DOE approval of non-FTA LNG exports. “I am also concerned that the negative impacts on American workers and manufacturing could be vastly underestimated in this analysis because it is based on old data that may understate industrial demand by 30 percent,” says Rep. Edward Markey (D-MA), top Democrat on the House Natural Resources Committee.

The report from NERA Economic Consulting published on Dec. 5 says: "U.S. natural gas prices increase when the U.S. exports LNG. But the global market limits how high U.S. natural gas prices can rise under pressure of LNG exports because importers will not purchase U.S. exports if U.S. wellhead price rises above the cost of competing supplies."

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