Study sees boost from natural-gas exports

— The United States would score big economic benefits by selling more natural gas to China, Japan and other countries, according to a study released Wednesday that will guide federal decisions on allowing such exports.

The 230-page report commissioned by the Energy Department and prepared by NERA Economic Consulting is a big win for producers eager to sell natural gas in Asian and European markets where it commands prices three to five times higher than domestically.

The report concluded the “U.S. would experience net economic benefits from increased liquefied natural gas exports,” with the projected gains in new economic activity and revenue from foreign sales outweighing modestly higher energy prices and damage to some industries.

“A higher natural-gas price does lead to higher energy costs and impacts industries that use natural gas extensively,” NERA said. But “these costs are more than offset by increases in export revenues, along with a wealth transfer from overseas received in the form of payments for liquefaction services.”

Although federal regulators recently approved Houston-based Cheniere Energy’s plans to export liquefied natural gas from its Sabine Pass terminal in southwest Louisiana, the Energy Department put 15 similar applications on hold pending the study.

The report could provide support for the Obama administration to allow more exports amid concerns that shipping additional gas overseas would raise costs for U.S. consumers and throttle a domestic manufacturing resurgence spurred by low prices for the fossil fuel.

White House energy adviser Heather Zichal previously stressed that the long-awaited and twice-delayed analysis would drive decisions.

But the administration and skeptical lawmakers appeared to be distancing themselves from the analysis.

The Energy Department stressed it would conduct its own review of the study and accept public comments through late January before making any decisions on export licenses on a case-by-case basis. And some congressional critics of exports cast doubt on the data used in the study.

Pending applications filed with the Energy Department seek to export 21.5 billion cubic feet of liquefied natural gas each day to nations that don’t have free-trade agreements with the United States. That amount would represent nearly a third of the natural gas the country produced at the end of last year.

The United States already sells some natural gas to free trade partners, including Brazil, Canada and Mexico. But export advocates say there isn’t enough demand in those nations to keep planned liquefaction terminals humming.

While federal law generally requires automatic approval of gas exports to the free trade partners, the Energy Department is tasked with reviewing proposals to sell to other countries.

According to the Wednesday’s report, natural-gas suppliers would benefit from exports. However, climbing prices caused by steadily increasing exports would squeeze electric utilities, energy-intensive companies and manufacturers that rely on the fuel as a building block to create fertilizers, plastics and other products.

NERA predicted that natural-gas prices could jump as much as 33 cents per thousand cubic feet initially and up to $1.11 per thousand cubic feet after five years of gradually increasing exports. Labor and investment income would fall about $10 billion in 2015 and $45 billion in 2030, according to the study.

LNG exports could bring in annual revenue ranging from $2.6 billion to $32.9 billion and cause the gross domestic product to increase by $4.4 billion to $47 billion in 2020, NERA said.

Export advocates said the report made a strong case for letting companies sell overseas.

But critics, including manufacturers, swiftly attacked the report, with the Industrial Energy Consumers of America saying it had four major ”weaknesses,” including failing to study an export alternative: corralling U.S.-harvested natural gas and leveraging it to create American jobs.

”If we use these resources domestically, it will maximize economic growth and job creation for this country,” the group said.

Business, Pages 66 on 12/09/2012

Upcoming Events