POWER March 2013 - 6

SPEAKING OF POWER
Should the U.S. Export
Natural Gas?
C
ontroversy concerning natural gas
exports flared the day the U.S. Energy
Information Administration (EIA)
released its estimate that U.S. natural gas
exports could begin in 2021. The EIA's
analysis was revealed in the early release
of its Annual Energy Outlook (AEO) 2012,
made public in December 2011. The EIA's
analysis also found " increased natural gas
exports lead to higher domestic natural
gas prices. " As the saying goes, it's the
second-worst problem we could have.
Surprising many, the recent AEO2013
Early Release (Dec. 5, 2012) adjusted
the EIA's initial date of export estimate,
pushing it up from 2021 to 2016. The
magnitude of natural gas production and
potential export remains staggering, and
proven reserves continue to sharply rise
each year. However, there is a wide gulf
between proven natural gas reserves and
actually building liquefied natural gas
(LNG) export terminals.
Almighty Dollar
On one side are environmentalists, members
of Congress, and even a newly formed
industry group that have come together
to oppose the construction of new export
terminals, although for distinctly different
reasons. The American Public Gas Association,
along with Alcoa, Celanese Corp., Dow
Chemical, Eastman Chemical, Huntsman
Corp., and Nucor Steel recently formed the
coalition America's Energy Advantage. The
lobbying organization's purpose is obviously
to appeal to government to limit natural
gas free trade to protect member markets
and balance sheets. Hypocritically, the
members expect to continue unobstructed
free trade of the chemical and metal commodities
they produce. Jack Gerard, head
of the American Petroleum Institute, called
the coalition " seriously misguided. "
On the other side are developers wishing
to build new export terminals-and
more members of Congress. The Department
of Energy (DOE), under Section 3 of
the Natural Gas Act, must grant a permit
for natural gas exports to countries that
have entered into a free trade agreement
(FTA) with the U.S., like Mexico and
Canada. Those agreements are de jure in
6
the public interest. Projects that involve
non-FTA countries, such as Japan and EU
nations, require the DOE to make a public
interest determination. There are currently
17 applications for non-FTA LNG export
terminals in the DOE review queue, with
only a single project approved so far.
The problem facing the DOE is rationalizing
the process for determining " public
interest. " The DOE began by subcontracting
the analysis to the EIA, its energy
statistics organization. In January 2012,
the EIA released its report, " Effect of Inidentified
the industries that will experience
" serious competitive impacts " as
energy-intensive, particularly those that
compete in global markets, like the members
of America's Energy Advantage. The
DOE declined to endorse the NERA report
results but said its conclusions will be included
as part of its deliberations.
Several senators wasted no time in
commenting on the NERA report conclusions.
Sen. Lisa Murkowski (R-Alaska)
noted, " It's clear from the study that exporting
LNG would be beneficial to the
There is a wide gulf between proven natural
gas reserves and actually building liquefied
natural gas export terminals.
creased Natural Gas Exports on Domestic
Energy Markets. " That report's conclusions,
limited by the lack of a global macroeconomic
model for LNG exports, failed
to answer the question.
Exports Are a Net Beneit
The DOE's second effort was to subcontract
the work to NERA Economic Consulting.
NERA's report, " Macroeconomic Impacts of
LNG Exports from the United States, " released
in early December 2012, focused on
international natural gas market factors and
macroeconomic impacts on the U.S. economy
that result from LNG export expansion.
NERA's study found that under each of
the 63 scenarios studied, the U.S. would
enjoy a net positive economic impact from
LNG exports to non-FTA countries, and
those benefits increase with increasing
LNG exports. " LNG exports have net economic
benefits in spite of higher domestic
natural gas prices, " according to the
report. " This is exactly the outcome that
economic theory describes when barriers
to trade are removed. "
The biggest winners are obviously natural
gas producers that can sell their product
at a higher price on the global market,
particularly where competing natural gas
supply prices are pinned to the market
price of oil, such as in Europe. The report
www.powermag.com
U.S. economy, and the greater the level
of exports, the greater the benefit. " Sen.
Ron Wyden (D-Ore.), incoming chair of the
Senate Environment and Natural Resources
Committee and LNG export skeptic, called
the NERA report " seriously flawed " in a
letter sent to Energy Secretary Steven Chu
on Jan. 10. He also used Dow Chemical as
an example of an impacted company.
The NERA report concluded that job
losses will occur but that they will be
minor and will be absorbed by a commensurate
increase in like jobs in other
parts of the economy (ironically, the same
logic used by " green power " proponents
when speaking of fossil power industry job
losses). Those who depend on government
transfer payments (Social Security and the
like) will always be the most vulnerable to
energy price increases, the report noted.
Bravo to energy companies willing
to invest billions in building the next
generation of LNG export terminals, and
a Bronx cheer to those companies lobbying
for trade barriers to prop up balance
sheets. Exporting natural gas may
kick up the country's GDP and overall
economic activity, but the impact of
importing energy dollars for a change
is priceless. ■
-Dr. Robert Peltier, PE is POWER's
editor-in-chief.
POWER | March 2013
http://www.powermag.com
POWER March 2013

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