U.S. Energy Exports Put(in) a Punch
In a prior post, I mentioned the Arab Oil Embargo of 1973 and long lines at gas stations. The public consternation from this crisis led Congress to enact legislation prohibiting the export of crude oil. This prohibition did not include natural gas. Until recently, the domestic energy supply and demand curve made it more likely to hear about investment in developing facilities for importing energy as opposed to export facilities. Now, with the U.S. leading the world in natural gas production, export facilities are being developed on all three coasts. Bipartisan leaders view this as an opportunity to fuel our economic expansion and support our geopolitical goals.
On March 24, 2014, the U.S. Department of Energy (DOE) issued conditional authorization to Veresen Inc. for the export of liquefied natural gas (LNG) from the proposed Jordan Cove Energy Project in Coos Bay, Oregon. Canadian based Veresen had received a license in 2009 to import gas at the facility but switched plans to export gas in the wake of the shale gas boom. The Jordan Cove Project is expected to cost $7.5 billion and is the seventh LNG export facility to receive DOE approval, joining the Dominion Cove Point $3.4 billion LNG facility in Maryland and the Sabine Pass Terminal in Louisiana where Cheniere Energy is in the process of a $6 billion expansion of LNG export capacity.
The DOE is reviewing applications for over a dozen additional export facilities but Senators Mary Landrieu (D-LA) and Lisa Murkowski (R-AK) are proposing improvements to the regulatory review process to prioritize projects that are commercially viable. They suggest that facilities that have received approval from the Federal Energy Regulatory Commission (FERC) be given priority status since facilities that have successfully navigated the rigorous FERC administrative process are more likely to be built. Senator Landrieu explained that increased U.S. energy production and exports will help meet the needs of the U.S. and its allies thereby promoting the U.S. as an energy superpower and creating thousands of jobs in the U.S. and abroad which will help promote democracy.
While the U.S. is now the world’s largest producer of natural gas, Russia is still the leading exporter of natural gas. President Putin’s recent annexation of the Crimea has raised concerns in Europe and at home about Russia’s use of energy as a political weapon. During his trip to Europe on March 26, President Obama explained to European Union leaders in Brussels that a new trans-Atlantic trade deal would allow the U.S. to supply natural gas to Europe, making them less dependent on Russian imports and potential heavy-handed tactics by Putin. Indeed, on April 1, 2014, Russian owned natural gas producer, Gazprom, annouced it was raising the price of natural gas exported to Ukraine by more than forty percent.
Despite bipartisan support for LNG exports, not everyone supports exporting our natural gas. Texas oilman T. Boone Pickens opposes sending our energy abroad, believing we would be better served by finding more domestic uses for natural gas, such as using natural gas instead of gasoline in the transportation sector. Chemical companies would rather keep natural gas at home so that the expanding supply will decrease the price. The Sierra Club opposes natural gas use at home and abroad since it is a carbon fuel – believing that we should focus on developing renewable energy sources and stop using all carbon energy sources. Interestingly, the Natural Resources Defense Council takes a more practical approach, supporting the export of natural gas to countries like China and India that would otherwise burn coal.
While the debate about the extent to which we should export natural gas will continue in some circles, there appears to be enough bipartisan support to fuel the continued development of domestic natural gas and export of LNG. No doubt this is good news for companies engaged in shale gas exploration and development as well as ancillary businesses and local economies that benefit by the energy renaissance.