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Natural gas: Should America export its surplus?

A new liquefied natural gas export terminal in Louisiana just received federal approval. But the demand for more export permits has some industrial consumers worried they'll pay higher prices.

By Staff writer / April 19, 2012

In this 2008 file photo, a natural gas well pad sits in front of the Roan Plateau near the Colorado mountain community of Rifle.

David Zalubowski/AP/File

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What should be done with America’s natural gas surplus? Use it instead of high-priced gasoline to fuel cars? Export it? Or just sit back and enjoy the lower prices for industrial and private consumers?

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The debate is getting renewed urgency with the federal approval on Monday of a big new liquid natural gas (LNG) export terminal in Sabine, La. – and a conga line of 10 other applicants for their own export permits.

Prominent industrial users of natural gas are rushing to oppose any phalanx of new LNG export terminals, because the result would likely be a significant jump in natural gas prices for them – and for residential consumers, several studies show.

"Rapid increases in export levels lead to large initial price increases that would moderate somewhat in a few years," the Energy Information Administration reported in a study on the impact of various LNG export scenarios in January.

In its analysis, the agency concluded that exports of 12 billion cubic feet of gas each day would raise the price paid by the largest industrial customers in 2018 by 36 percent to 54 percent compared with scenarios in which there were no exports.

As a result, natural gas bills paid by residential, commercial, and industrial consumers would increase by up to 9 percent, and electricity prices would bump up by up to 3 percent, compared with no-export scenarios, the EIA found.

“By anyone’s measure, these are substantial cost increases,” said Paul Cicio, president of the Industrial Energy Consumers of America, in a statement in January after the EIA report was released. Decisions to approve export terminals "must be on an informed basis. Not a rubber stamp approval process," his group said in a statement.

Other private studies have put the increases both far higher – as well as far lower. There would be some domestic benefits from a price rise, some say. Jobs would be created, as large LNG export facilities are built and operated. Price increases would presumably drive new exploration. With today's prices fluctuating under $2 per thousand cubic feet, less than a quarter of where it was when it spiked four years ago – there's little incentive to drill or produce gas, industry officials say.

"There's more gas than we know what to do with," Charif Souki, CEO of Cheniere Energy Partners, which proposed the Sabine export facility, said in a March interview with Energy and Environment Daily television. "There's a number of wells that have not been connected because there's no place to send the gas, so sometimes too much of a good thing is too much."

Even so, the political optics might not support those calling for exports. First, EIA’s projections have already given pause to Department of Energy policymakers, who must determine if natural gas exports destined for nations that are not already signatories of a free-trade agreement with the US are in the public interest, energy analysts say.

"Some policymakers in both parties … do not want to impose new costs on voters or employers," writes Kevin Book, energy analyst at ClearView Energy Partners, a Washington-based energy research firm in a recent LNG analysis. "EIA’s projections may give these policymakers reasons to question or oppose pending DOE export licenses on economic and energy security grounds."

In March, for instance, Sen. Ron Wyden (D) of Oregon, called for a "timeout" on natural gas exports. In February, Rep. Ed Markey (D) of Massachusetts, proposed legislation to ban the export of gas extracted from public lands and freezing new export applications until 2025.

LNG producers say exports would benefit the US.

"We have an overabundance of natural gas supply dwarfing demand," says Bill Cooper, president of the Center for Liquefied Natural Gas, a trade group representing LNG shippers, producers and terminal operators, in an interview. "To allow companies to export that when domestic need for this excess supply is not there, helps our balance of trade, brings wealth into the US, jobs, and dollars to local and state governments. So, yes, our position is that LNG exports certainly are consistent with the public interest."

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