Export approvals pushing U.S. into ‘danger zone’ — manufacturers

Published in E&E News

Hannah Northey, E&E reporter

The Obama administration is approving natural gas exports too hastily to countries that do not have free-trade agreements with the United States and needs to immediately halt such decisions until a legal basis for doing so is made clear, a coalition of large manufacturers said today.

Dow Chemical Co., steelmaker Nucor Corp. and the American Public Gas Association — all members of America’s Energy Advantage — warned that the Energy Department’s approval of four export applications to non-FTA countries is pushing the United States into a “danger zone” where prices could spike and the economy could suffer.

DOE has no legal standards for approving exports and is using a flawed study to support its finding that such projects are in the public interest, the group added.

“Pending development of adequate standards, the Department should suspend its disposition of liquefied natural gas (LNG) export applications and assess the implications of further approvals on the public interest, before lasting harm is done to our economy,” the companies said in a letter to Energy Secretary Ernest Moniz.

DOE routinely approves applications to sell LNG to its free-trade partners, but non-FTA partners rely on individual export facilities to secure a special permit from the agency. DOE is reviewing each application on a “case-by-case basis” and is looking first at projects moving through a prefiling process at the Federal Energy Regulatory Commission, which conducts environmental reviews of the actual terminals.

The administration has voiced its support for exports, with President Obama saying the United States could become a net gas exporter by 2020, but is also moving forward cautiously.

However, manufacturers warned that the amount of gas already approved for exports — 6.6 billion cubic feet per day — exceeds the “low export scenario” laid out in a report DOE commissioned last year through NERA Economic Consulting. DOE concluded from that report that LNG exports would come with broad economic benefits that grow along with export volumes (E&ENews PM, Aug. 7).

“It is very clear that the cumulative impact of these LNG export approvals has, in fact, undermined the public interest,” the groups wrote. “The natural gas marketplace has changed so much that the NERA report’s conclusions — already unfounded — have been rendered obsolete.”

NERA’s report fails to recognize a growing reliance on gas stemming from new U.S. EPA clean air rules and fuel switching in the transportation sector, and DOE is using vague language in approving export applications, the groups said.

But Richard Schmalensee, a professor of economics emeritus at the Massachusetts Institute of Technology’s Sloan School of Management, said the “main pillars” of the NERA study are in place and the United States is not in the business of limiting exports unless it’s for sanctions or national security.

“We don’t restrict exports in the United States,” he said.

Concerns raised in the letter stand in stark contrast to a growing call in both chambers of Congress for DOE to move faster in approving LNG export applications, most recently from a group of bipartisan, bicameral lawmakers from Western states (E&E Daily, Nov. 13).

Export boosters say 34 senators and 110 House members support export approvals, as well as a growing number of governors.

Groups like Act on LNG have dismissed concerns that exports would drive up prices and are calling on DOE to fast-track approvals.