Republicans tout findings of LNG export study

The Republican side of the Senate Energy & Natural Resources Committee said Dec. 5 that a report commissioned by the Department of Energy confirms that exports of liquefied natural gas (LNG) would help the U.S. economy and not dramatically increase domestic gas prices.

“The bottom line is that the study finds that exports are good for the U.S. economy and the more of them there are, the better it is for the economy,” a GOP staff spokesperson said in an email to reporters. “This study confirms what Sen. Lisa Murkowski, R-Alaska, has been saying for some time now – and what other institutions, like the Brookings Institution, have already put forward.”

Murkowski lauded the report in a subsequent statement of her own. “The administration should be commended for commissioning such a comprehensive and transparent review of the potential impacts of exporting natural gas,” Murkowski said.

DOE is required to approve exports to countries with free trade agreements with the United States, but it can limit or block exports to non-FTA countries if it finds they are not in the public interest.

DOE put a hold on reviewing export license applications until two studies on LNG exports were issued. The Energy Information Administration released the first one in January.

Dominion (NYSE: D) is both a power generator with a heavy involvement in the natural gas business. In June filed a request with the Federal Energy Regulatory Commission (FERC) to build LNG export facilities at its existing Dominion Cove Point LNG Terminal located on the Chesapeake Bay in Lusby, Md.

LNG exports won’t cause U.S. gas price surge, report says

Fracking and other advancements in shale gas development in recent years has increased U.S. supplies and driven down fuel prices charged to power plants and residential gas users.

Critics of LNG exports have said that shipping this gas to overseas would only serve to drive up the gas prices available to U.S. power plants and other domestic users. Natural gas producers, however, have said that having an export market would prevent them from having to slashing production when U.S. gas prices get too cheap.

The study drafted by NERA Economic Consulting, “Macroeconomic Impacts of LNG Exports from the United States,” finds that the benefits would far outweigh the negatives.

“Across all these scenarios, the U.S. was projected to gain net economic benefits from allowing LNG exports,” NERA said in a summary of its 228-page report. “Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased. In particular, scenarios with unlimited exports always had higher net economic benefits than corresponding cases with limited exports,” NERA said.

“In all of these cases, benefits that come from export expansion more than outweigh the losses,” NERA said.

LNG exports have net economic benefits in spite of higher domestic natural gas prices. “This is exactly the outcome that economic theory describes when barriers to trade are removed,” NERA said.

“Natural gas price changes attributable to LNG exports remain in a relatively narrow range across the entire range of scenarios,” NERA said.

“Natural gas price increases at the time LNG exports could begin range from zero to $0.33 (2010$/Mcf). The largest price increases that would be observed after 5 more years of potentially growing exports could range from $0.22 to $1.11 (2010$/Mcf). The higher end of the range is reached only under conditions of ample U.S. supplies and low domestic natural gas prices, with smaller price increases when U.S. supplies are more costly and domestic prices higher,” NERA said.

Given that foreign customers would only buy exported U.S. LNG if it is competitive with other gas sources, it is unlikely that domestic gas prices would surge, the NERA report said.

NERA built on the earlier EIA report.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.