Prosperity at Home and Strengthened Allies Abroad – A Global Perspective on Natural Gas Exports - Frequently Asked Questions

February 4, 2014

Are the committee’s conclusions about LNG exports applicable to crude oil exports?
As with the policy questions surrounding LNG exports, the committee plans to approach the oil export debate in a transparent and deliberative manner by conducting thorough analysis through oversight of the agencies tasked with overseeing oil exports, and through the development of hearings and reports. The committee understands that oil export policy entails unique issues and requires a separate discussion.

What will granting all the DOE authorizations for LNG exports, as the committee suggests, do for industrial gas prices and competitiveness?
As Dr. Daniel Yergin testified before our committee, the U.S. is demand constrained, not supply constrained, when it comes to natural gas. Larger markets – whether they are in electric power, industrial consumption, transportation, or exports – are required to maintain the investment flow into the development of the resources. LNG facilities are multi-billion dollar projects facing robust global competition, many from geopolitically unstable regions of the world who are eager to capitalize on their political leverage.  While DOE approval of all of the pending U.S.-based projects will not likely lead to all getting built (the FERC siting process is also extensive and costly), history has shown that we should allow the market, not the government, to pick the winners.

What analysis supports the committee’s recommendations for approval?
The committee’s conclusions are in line with the conclusions of the Energy Information Administration and analysis conducted for the Department of Energy. EIA assumes the U.S. will export LNG in the coming years, but predicts a very moderate rise in Henry Hub prices, growing 5.6%, between now and 2040. (AEO 2014 Reference Case).  NERA’s LNG export impact study, done on behalf of the Department of Energy, projected minimal impact on natural gas prices being outweighed with “export revenues, along with a wealth transfer from overseas received in the form of payments for liquefaction services.”  NERA, along with studies from ICF, see very little effect on energy intensive industrial manufacturers.  

Does the current increase in natural gas prices mean exports should slow down?
On the contrary, the bitterly cold winter and short run-up in natural gas prices emphasizes the need to strengthen our energy infrastructure. Exports to non-FTA countries have yet to begin and will not begin for several years, even for projects that have received approval from the Department of Energy. Although natural gas prices nationwide remain well below the average price for the past decade, recent price volatility, especially in certain geographical areas, can be addressed by expanding domestic infrastructure to adequately transport natural gas supplies from where they are being developed to where there are increasing areas of demand. H.R. 1900, which passed the House with bipartisan support, would help address delays in permitting new natural gas pipelines. 

Will increased exports exacerbate current propane supply issues?
According to EIA, the current regional propane shortages are due to a number of factors. Addressing critical shortages in certain areas is a question of logistics—being able to move propane supplies from one area of the country to another. A contributing factor is that propane must compete for space on limited pipeline, rail, and trucking infrastructure. Building the Keystone XL pipeline, for example, would free up space on railroads and trucks that is currently being occupied by crude oil, which could allow propane to be moved more easily. While these infrastructure questions are important (and are a major focus of the committee’s work), it is also important to note that the propane component of natural gas is removed before it is shipped as LNG.

What legislative changes will the committee seek?
We will continue to monitor developments within DOE, making clear that our expectation is for the agency to approve remaining applications by the end of this year. We will also monitor permitting and siting developments within FERC and other federal agencies. If we do not see these agencies acting to take advantage of the limited window of opportunity, we plan to actively consider legislative options as outlined in the report that would help to maximize the domestic and geopolitical benefits. This could include revisions to the Natural Gas Act and a shift in focus away from the recipient nation’s FTA status to whether it is a member of the WTO.  

To view a copy of the committee’s report, “Prosperity at Home and Strengthened Allies Abroad  – A Global Perspective on Natural Gas Exports,” click HERE.

To view a one pager on the report’s findings, click HERE.