Report Bolsters Case for Large U.S. Natural Gas Exports

HOUSTON ? In a finding that could help create a new industry of natural gas exports in the United States, a government study released on Wednesday concluded that the national economic benefits of significant natural gas exports far outweighed the potential for higher energy prices for consumers and industrial users of the fuel.

Brendan Smialowski for The New York Times

To adopt to changing energy needs, Dominion Cove Point LNG in Lusby, Maryland, is being converted from a liquefied natural gas terminal to an export terminal.

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The study prepared by NERA Economic Consulting for the Energy Department, said that domestic prices would not rise sharply as a result of exports and that export revenue would generally help most Americans.

Energy companies have proposed more than a dozen projects to export gas in liquefied form to Europe and Asia, where the fuel is typically three to four times more expensive than in the United States. The Obama administration has been cautious on whether to embrace large exports of gas out of concern that consumers who rely on gas for heating and cooking could see their utility prices rise. Higher exports could also raise costs to manufacturers that now benefit from the nation?s glut of cheap gas, like chemical and fertilizer manufacturers.

But the huge gas export terminals, which cost billions of dollars to set up, would also generate thousands of construction jobs, spur further development of natural gas fields and generate lucrative export earnings.

The administration has only approved one export terminal so far, by Cheniere Energy in Louisiana, saying it was waiting for the results of the economic study before making decisions on the rest of the projects.

Now that the report has been finished, most observers expect more projects to get the green light.

The report found that higher exports would actually generate more economic benefits. Noting that gas exports could produce up to $47 billion in new economic activity in 2020, when many new terminals would be up and running, it said, ?Welfare improvement is highest under the high export volume scenarios because U.S. consumers benefit from an increase in wealth transfer and export revenues.?

Only a decade ago, it appeared that the country?s domestic gas supplies were drying up and that huge amounts of expensive gas in liquefied form would have to be imported from Trinidad, Africa and the Middle East. But over the last few years, a technological revolution has occurred in shale gas fields across the country, driven by hydraulic fracturing and horizontal drilling. That has produced a glut that has driven the price of natural gas down by two-thirds since 2008.

The report, the second Energy Department study this year, was immediately challenged by Dow Chemical, which relies heavily on natural gas for fuel and as a raw material to produce many of its chemicals. The company warned that large-scale exports that raise domestic gas prices would hurt the ability of energy-intensive manufacturers to compete with foreign firms.

?We?re disappointed,? said George Blitz, Dow?s vice president of energy and climate change. ?The report fails to take into account the $80 billion in new spending along with 3 to 5 million new jobs that the industrial sector has already announced predicated on available and low natural gas prices.?

Yet oil and gas companies are eager for exports to bolster the lagging price of natural gas.

?It?s encouraging to see that experts are joining the expectation that we are in a global marketplace and the United States has a huge opportunity to generate economic growth and at the same time reduce our energy costs,? said Rodney Waller, a senior vice president at Range Resources, a natural gas producer.

Shares of companies that have proposed major export projects rose in trading on Wednesday, with Sempra Energy up 3 percent, Dominion Resources up 2.6 percent, and Cheniere up 1.8 percent. Shares of natural gas producers were mixed.

The report is likely to spur a competitive lobbying campaign for regulatory approval of export terminals.

Several powerful members of Congress, including Senator Ron Wyden, the Oregon Democrat who is in line to be the next chairman of the Senate Energy and Natural Resources Committee, have opposed large-scale exports.

Source: http://www.nytimes.com/2012/12/06/business/energy-environment/government-report-bolsters-the-case-for-large-us-natural-gas-exports.html?partner=rss&emc=rss

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