DOE releases report on LNG exports' broader economic benefits

Increased natural gas exports would broadly benefit the US economy, a Dec. 3 report commissioned by the US Department of Energy concluded. “Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased,” the report by Washington, DC-based NERA Economic Consulting said.

The new report followed one that DOE’s Fossil Energy Office released in January. This report by the department’s Energy Analysis Office suggested that US LNG exports could lead to higher prices, more production, less consumption, and more imports from Canada. FEO asked for it in August 2011.

It commissioned the second study to determine how LNG exports could affect the public interest, particularly the nation’s energy and manufacturing sectors, FEO said on Dec. 5. It posted the new report into 15 pending LNG export applications DOE is reviewing, and will accept public comments on it until Jan. 24, 2013.

Officials at several organizations responded immediately. “Today’s DOE report highlights the game changing benefits of exporting energy,” said Erik Milito, the American Petroleum Institute’s upstream and industry operations group director. “This is a big opportunity for the administration to bolster job creation and economic growth and to address the backlog of LNG export applications.”

Bill Cooper, president of the Center for Liquefied Natural Gas, said, ”The report’s key finding is that across all export scenarios, the United States will experience ‘net economic benefits from allowing LNG exports’.”

Cooper said, “DOE also finds that LNG exports would increase American households’ real income at a time when millions of families are struggling financially. In addition, and as this latest report from DOE clearly shows, we can export LNG without adversely affecting the availability or affordability of our abundant gas supplies.”

Paul N. Cicio, president of the Industrial Energy Consumers of America, also considered the report an important step and said IECA would analyze it thoroughly. Initially, however, he found four weaknesses:

• There is no comparison of LNG exports and using US gas to create manufacturing and industrial jobs.

• The report relied on demand projections from EIA’s 2011 Annual Energy Outlook, which predicted that demand for gas to generate electricity would decrease by 2010, and there would only be a short-term industrial gas demand increase.

• The report did not adequately address potential impacts from US Environmental Protection Agency and US Bureau of Land Management regulations on domestic gas drilling.

• The report did not address a potential one-third drop in US gas production if Congress and the Obama administration repealed the intangible drilling costs federal tax provision.

“Once export applications are approved, there is no putting the genie back in the bottle,” Cicio warned. “The export application approvals are for 20-30 year time periods, and a lot can happen. For this reason, it is important that policymakers thoughtfully evaluate the implications.”

Contact Nick Snow at nicks@pennwell.com.

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