Plan to speed LNG export review process is gaining steam
A plan to accelerate government approvals for liquefied natural gas exports is gaining momentum on Capitol Hill, even as low oil prices weaken the economic case for U.S. LNG.
The Senate Energy and Natural Resources Committee held a hearing to examine the issue Thursday, one day after the House overwhelmingly passed legislation to set a deadline for the Department of Energy to finish reviewing LNG export applications.
The Obama administration has said legislation is not necessary, but on Thursday, Assistant Secretary for Fossil Energy Christopher Smith conceded that regulators could meet a proposed 45-day deadline for acting on LNG export applications.
Under bipartisan Senate legislation, that 45-day clock would begin ticking after a separate environmental review has concluded. The House-passed bill would use the same starting point but give the Energy Department just 30 days to act.
Smith’s testimony to the energy committee suggested the administration prefers the more generous timetable.
“Certainly if this legislation is passed as currently written, the department will be able to accomplish the mission,” Smith said of the Senate bill and its 45-day timetable. “We believe this is a solution we will be able to comply with.”
DOE controls licenses
Under the government’s current practice, there is no deadline for those decisions, though the Energy Department waits to act until after environmental reviews, which are typically done when LNG ventures are scrutinized by the Federal Energy Regulatory Commission.
While FERC reviews the physical onshore facilities that are proposed to liquefy natural gas and ready it for export, the Energy Department controls the actual licenses to send LNG to countries that have no free trade agreements with the United States.
U.S. Rep. Gene Green, D-Houston, said Smith’s testimony “confirms what we already know: that applications can be processed much faster.”
There is broad congressional support for LNG exports, but some critics worry about the effect on U.S. gas prices.
“It will increase the price of gas, and it will increase the price of electricity,” warned Paul Cicio, president of the Industrial Energy Consumers of America. “When that gas goes offshore, it’s gone.”
Fears about recovery
Sens. Debbie Stabenow, D-Mich., and Sen. Angus King, an independent from Maine, stressed that abundant, low-cost natural gas is driving a U.S. manufacturing renaissance.
King said natural gas exports could get rid of “America’s second chance at manufacturing.”
And Stabenow said a pro-exports approach gives China an advantage. I want an “America-first policy,” she said.
But Martin Durbin, head of America’s Natural Gas Alliance, said it’s not an “either-or” scenario – that the U.S. can only enjoy abundant domestic natural gas for manufacturing or can export it. “We can do both,” Durbin said.
The Department of Energy has commissioned a study evaluating the economic impacts of exporting 12 to 20 billion cubic feet per day of natural gas.
Smith confirmed Thursday that federal regulators will continue giving different treatment to proposed LNG exports from Alaska, which are not linked by pipeline to the rest of the U.S. That suggests the department may be willing to award a conditional LNG export license to a proposed project in Alaska expected to cost tens of billions of dollars.
U.S. supply stable
The congressional action comes as oil prices plunge – taking the cost of natural gas in Asia along with it. Many Asian gas-purchase agreements are linked to the cost of crude.
That squeezes proposed LNG export projects in Canada, Australia and the United States, though analysts stress that American ventures have other built-in advantages and better contract terms.
But even low-priced U.S. Henry Hub gas could struggle to compete with oil-linked gas supplies in Asia, once the costs of liquefaction, transportation and revaporization are added in.
Energy experts say potential buyers view U.S.-sourced LNG as a secure supply. Buyers of U.S. LNG also typically enter into tolling contracts where they are committed to buying just liquefaction capacity – not the entire cost of gas and processing, as is the case with most Australian and Canadian LNG deals.