An American Petroleum Institute (API) official called for the U.S. Department of Energy (DOE) to approve U.S. liquefied natural gas (LNG) exports 'without delay' Thursday.
By serving international markets through LNG exports, the United States can create economic growth at home through the creation of jobs in the oil and gas industry and boosting tax revenues that could help the nation's trade deficit, API Chief Economist John Felmy told reporters in a conference call.
Given that President Obama has called on the United States to double its export output in an effort to create jobs, reducing or restricting energy exports does not make sense, said Felmy, who commented that restricting U.S. LNG exports would be a ”backward move” that could violate international trade laws.
Proponents of export restrictions feel restrictions are justified because gas is a strategic resource, Felmy commented.
"But if exports are approved, more natural gas could be produced, which would enhance energy security. And by serving friendly European and Asian markets, this would provide competition for gas exports from Russia, which has been charged with using oil and gas to bully other nations," said Felmy, citing the recent study by Deloitte.
"Serving geopolitical interests by exporting gas, agricultural products, chemicals and thousands of other commodities means more jobs and growth and less debt for the United States, key priorities for Americans," Felmy noted.
Felmy noted that the calls to restrict LNG exports are being made by five companies and an industry association that wants to restrict LNG exports to keep gas prices lower at home. However, the DOE study released late last year shows the United States will gain net economic benefits by allowing LNG exports, Felmy commented. Other studies by Deloitte, Rice University's Baker Institute and The Hamilton Project indicate that the U.S. gas price increases that would occur with LNG exports would be small and offset by other economic gains.
Earlier this month, a group of businesses and organizations that includes Alcoa, Dow Chemical, Celanese, Eastman, Nucor, and the American Public Gas Association, launched America's Energy Advantage (AEA), which seeks to keep U.S. shale gas resources at home to "fuel the U.S. manufacturing renaissance."
"Natural gas that is exported benefits the GDP a single time, when it is sold," according to the AEA website. "The energy that powers manufacturing boosts GDP by a factor of eight because of the multiplier effects." AEA noted that manufacturing growth appeared to be slowing, rising 4.3 percent in 2011 after increasing 11.2 percent in 2010.
"According to a 2011 PricewaterhouseCoopers study, it is estimated that high rates of shale gas recovery could result in a million new manufacturing jobs in 2025," AEA commented. "But without shale, there could be one million unrealized jobs in our country by 2025."
Some U.S. politicians also favor restrictions or delays on approving U.S. LNG exports. In November, Sen. Ron Wyden (D-Ore.) said that the policy of automatic approval of natural gas exports to countries that share free trade agreements with the United States was adopted before newly-accessible shale gas became "a strategic asset" for shale gas.
This policy "could harm the nation's ability to achieve energy independence, combat pollution and preserve the environment, and improve the economic competitiveness of American manufacturers," said Wyden in a Nov. 2 statement.
U.S. Representative Ed Markey (D-Mass.) has also spoken out against U.S. LNG exports; earlier this year, Markey introduced a bill seeking to prevent FERC from approving new LNG export terminals until 2025.
Wyden called for a second study Jan. 10, saying in a statement the NERA Economic Consulting study conducted for the DOE is seriously flawed and needed to be updated with new U.S. Energy Information Administration (EIA) projects, more realistic market assumptions, regional impacts of the proposed actual export terminals, and evaluations of the actual impacts on consumers and businesses of exporting LNG.
Felmy told Rigzone that NERA had used 2011 EIA data partly because that was what was available when they began the study, but also because it was the same baseline data that DOE had used in previous analysis, and NERA wanted to use it as a comparison to the EIA's January 2012 study.
While Felmy agreed with Wyden and Markey's arguments that natural gas demand is up considerably, U.S. natural gas supply is up even more. If the analysis was redone with the most recent baseline, it would show a softer market and reinforce NERA's conclusions that gas price increases from LNG exports would be small.
Calls by Wyden for a second study into the impact of LNG exports "is the typical Washington reaction," Felmy noted. "If you don't like the results of a study, you ask for another."
Felmy noted that The Brookings Institute had made probably the best statement on the issue with their recommendation that U.S. policymakers should refrain from regulations that would promote or limit additional exports from the United States.
"Let's let markets work," Felmy commented.
Felmy noted that the oil and gas industry is unified in its support of LNG exports. He also commented that claims on the America's Energy Advantage website are false, and reflect the vested interests in certain companies. Felmy also called questioned the wording of a Jan. 10 America's Energy Advantage survey that showed 80 percent of registered voters surveyed oppose unrestricted natural gas exports.
The National Association of Manufacturers (NAM) reported Jan. 15 that banning LNG exports would hurt U.S. job growth and the economy. NAM said on its blog that its supports open and expanded trade and opposes efforts to limit manufacturers' ability to expand exports overseas.
"Exports have been and continue to be a critical source of growth and opportunity for manufacturers throughout the United States, and LNG exports are no exception," said Linda Dempsey, vice president of international economic affairs with NAM. "Proposals that seek to limit LNG or coal or any other product would have far-reaching negative effects on the United States and should be rejected. Such restrictions limit economic opportunities and stifle job growth rather than provide a source of increased economic growth.
Felmy said API would be doing "a host of things" to address concerns over LNG exports, with a primary focus on educating those with concerns so they can understand the reality of the situation. While discussions over whether the United States should export LNG have been underway for over two years, API decided to step in to the discussion now because the organization felt the discussion had reached a point where action must be taken.
API was concerned that DOE approval of LNG exports would be delayed if Energy Secretary Steven Chu were to step down, which would shift the Obama administration's focus towards finding a replacement, Felmy said.
On Dec. 5, DOE's Department of Fossil Energy posted the final NERA report into the 15 pending export application dockets, with the public invited to comment. The report and resulting comments will be taken into consideration as DOE makes its public interest determinations in each case.
EIA in its January 2012 analysis reported that U.S. LNG exports would increase natural gas prices, but U.S. gas markets would balance in response to increase natural gas exports primarily through higher natural gas production. However, consumers would see an increase in their natural gas and electric bills even while consuming less gas on average.
When asked about higher consumer prices, Felmy commented, "We've got to look at this in a broad framework in terms of jobs and the overall increase in wealth in the United States."
As of Jan. 4, DOE had received 23 applications to export domestically produced LNG from the U.S. Lower 48 states. The total amount of gas proposed for export to countries with whom the United States holds Free Trade Agreements (FTA) totals 31.41 billion cubic feet per day (Bcf/d). The amount of LNG association with non-FTA applications is 24.80 Bcf/d.
Non-FTA export applications for 16 proposed LNG export projects are currently waiting to receive DOE approval. Only one application by Sabine Pass Liquefaction to export 2.2 Bcf/d has had its FTA and non-FTA applications approved.
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