The Debate Over Natural Gas Exports

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The Debate Over Natural Gas Exports

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DOE’s Approval Process is Growing Contentious

The debate over the Department of Energy’s approval of non-licensed exports of natural gas is growing contentious. According to a report from oilprice.com, “Republican leaders on the House Energy and Commerce Committee are urging the administration to hasten the pace at which it approves natural gas exports. So far, the U.S. Department of Energy has approved five applications to export natural gas to non-FTA countries in the past two years. Over 20 applications are said to remain in process.”

As reported in the Natural Gas Export Primer, “A substantial increase in natural gas exports could have a number of effects, including increased natural gas and electricity prices, increased gross domestic product, or GDP, and increased production of natural gas through fracking. A debate is therefore unfolding about whether a dramatic rise in export volumes should be prevented or encouraged.”

Natural Gas Supplies in USA

U.S. Energy Information Administration (EIA) statistics show annual natural gas consumption lessening and technically recoverable resources of natural gas in the U.S. are about 2,203 trillion cubic feet. According to the EIA, as of 2011, the annual natural gas consumption in the country was 24 trillion cubic feet. At this rate, the total technically recoverable resources are enough to meet the requirements of next 92 years.
Growth in natural gas supply due to expansion in shale gas production has helped reduce total net imports. As an example, in 2012, net imports touched the lowest point since 1990 with a reduction of around 23 percent. The United States is expected to become a net exporter of natural gas by 2020.

At the same time, worldwide demand for natural gas is increasing, and American companies are eager to be able to step in and stake a claim in the global market. Currently, the pipeline network provides the natural gas access to only two countries: Mexico and Canada. Export to all other countries will require a conversion to Liquefied Natural Gas (LNG), which occupies less volume than natural gas, and transportation through vessels. This makes Liquified Natural Gas the central focus of the discussion on increased export of natural gas.

Approval of Non-Licensed Countries for LNG Exports

The debate is centered around the issue of approval of non-licensed countries for LNG exports. Under current law, the export of LNG is subject to licensing from the U.S. Department of Energy (DOE). The Natural Gas Act requires the DOE to approve the license for exports to countries with Free Trade Agreements (FTA) with America. However, the major importers of natural gas, i.e. Japan, France, United Kingdom, and Spain, do not have Free Trade Agreements with the United States.

The Natural Gas Act stipulates approval to export LNG to non-licensed countries requires a public comment period, after which DOE may reject or accept the license. This process slows the approval pace substantially and worries proponents of increased exporting of LNG. Their concern is that unless we accelerate the approval process, these potential markets will look elsewhere for alternatives, and the United States could lose out to other countries rich in natural gas resources, like Iran and Russia.

How Much Would Be Exported?

If the projects that have already been approved, or that are in line for approval are implemented, the U.S. will be exporting approximately 6.7 billion cubic feet of natural gas daily. This amount is expected to rise in the future as the applications that have been considered to date are less than one quarter of what the U.S. energy companies are planning to export.

The DOE apparently plans to continue reviewing each of the applications for LNG exports to non-FTA countries on a case-by-case basis. Time will tell how many more of the conditional approvals the DOE will grant— and how quickly the process will move forward.

Is an escalation of these approvals for shipments in the national interest? The debate continues with non-partisan support for both sides.