LNG company says concerns are misplaced

Industrial Energy Consumers of America, a trade group representing U.S. manufacturers, says exporting too much domestically produced natural gas to countries that don’t have free-trade agreements with the United States will jeopardize this country’s supply of natural gas and cause prices to skyrocket.

However, curtailing those exports runs counter to the stated intentions of the Trump administration to approve all non-FTA export applications and the wishes of companies planning to build liquefied natural gas export terminals at the Port of Brownsville.

A spokesman for Rio Grande LNG, the largest of those companies, characterized IECA as a special interest group whose criticism is misplaced and ignores the overall economic benefits of increasing LNG exports.

On June 28 IECA sent an open letter to Energy Secretary Rick Perry and Commerce Secretary Wilbur Ross arguing that the policy of approving every application to export U.S. natural gas to non-FTA countries will cause domestic prices to rise and “poses a significant threat” to U.S. manufacturers that consume large quantities of energy.

The effect will be a loss of global competitiveness, especially against non-FTA countries, and will hurt the ability of U.S. manufacturers to create jobs, according to the letter, which claims that “excessive LNG export approvals” run counter to the administration’s “America first” and fair-trade policies.

IECA noted that DOE has approved 20.6 billion cubic feet per day of natural gas exports to non-FTA countries, equal to 170 percent of current residential demand. The letter cites the Energy Information Administration’s 2017 Annual Energy Outlook, which forecasts natural gas demand through 2050 and predicts that — based on only 12 billion cubic feet per day of exports — 56 percent of all natural gas resources will have been consumed by that time.

“The 100-year supply is a myth,” the letter reads. “For companies who build facilities to last 50 years or more, this is of great concern.”

The group claims that LNG export creates far fewer jobs than manufacturing, with the entire oil and gas industry creating 21,000 jobs between 2010 and 2016 compared to 820,000 jobs from the manufacturing sector.

IECA noted that DOE is mandated under the Natural Gas Act to determine whether non-FTA LNG export applications are “in the public interest,” and called for quick implementation of policy recommendations including creation of a national LNG export policy for non-FTA shipments of natural gas; a moratorium on further LNG export approvals to non-FTA countries; and development of a process for monitoring the economic impact of LNG exports, with a trigger for reducing exports if necessary to protect the U.S. economy and consumers.

The group also recommends that DOE condition all existing and new FTA and non-FTA LNG export applications, requiring them seek re-permitting if they are not operational within five years; and that the administration not allow foreign governments to own any part of export facilities or U.S. natural gas resources.

James Markham-Hill, communications manager for Rio Grande LNG parent company NextDecade Corp., said his company takes issue with many of the claims IECA makes in the letter, “as do many others including both industry and independent groups and researchers.”

Rio Grande’s permit application to build a facility at the port is under review by the Federal Energy Regulatory Commission, as are the applications of the other two companies that want to build at the port, Annova LNG and Texas LNG.

Markham-Hill cited a 2012 DOE study showing that increased natural gas production in the United States would cover 60 to 70 percent of increased exports, with Canadian imports helping fill the gap. The study, conducted for DOE by NERA Economic Consulting, concluded that the total benefit to the economy from natural gas exports more than compensates for any increases in domestic natural gas prices, he said.

“A higher natural gas price does lead to higher energy costs and impacts industries that use natural gas extensively,” reads the NERA study. “However, the effects of higher price do not offset the positive impacts from wealth transfers and result in higher (gross domestic product) over the model horizon in all scenarios.”

NERA published an update in 2014 that it said confirmed and extended the findings of its previous study, writing that “LNG exports provide net economic benefits in all scenarios investigated, and the greater the level of exports, the greater the benefits.”

Markham-Hill said the update also alleviates fears that more exports will push domestic natural gas prices higher, quoting NERA’s conclusion that “high levels of exports can be expected only if natural gas is plentiful and inexpensive enough to produce so that prices remain below current levels, even with high levels of exports.”