US DOE to move carefully on LNG export requests, NARUC meeting told

This article was corrected on Feb. 5.

The US Department of Energy plans to move carefully as it considers applications to export LNG to countries that do not have free trade agreements (FTAs) with the US, Christopher A. Smith, deputy assistant US energy secretary for oil and gas in DOE’s fossil energy office, said at a meeting of state utility regulators.

“This is a tremendously important decision,” he told the National Association of Regulatory Commissioners Gas Committee during NARUC’s 2013 winter meeting. “Our approach is to make sure we’ve done all the proper groundwork and analysis to create a transparent process that withstands public scrutiny.”

Federal law stipulates that LNG agreements with countries that are US free trade partners must be processed immediately, but applications involving other nations have to be reviewed to determine if they would be in the national interest. DOE has 16 such applications pending, and recently opened a reply period to comments it received about a general policy, Smith said.

“We received about 30,000 comments,” he indicated. “I thought that was a lot until Gina McCarthy [the US Environmental Protection Agency’s assistant administrator for air and radiation] told me they sometimes get several million. I suggested to my staff soon after that they shouldn’t complain about feeling overworked.”

Smith disputed the idea that Natural Gas Regulatory Activities Office in DOE’s Oil and Gas Global Supply Security Office had out-sourced its LNG export analysis. “We commissioned an independent study from National Economic Research Associates that we are using along with earlier research by the Energy Information Administration and the comments we’ve received,” he said.

An advocate and an opponent debated whether US LNG exports should be permitted after Smith spoke. Diane Leopold, a senior vice-president at Dominion Transmission Inc.—which itself is seeking DOE approval to turn its Cove Point, Md., LNG terminal from an import into an export facility—said NERA’s and other studies show exports would create more benefits than problems.

The US attraction

“It is likely that many—if not most—of the projects that have been announced won’t be built,” Leopold told the committee. “Liquefaction costs here would be high. Countries which would be interested are likely those that want to diversify their sources. They also appreciate our stability and approach to contracts and agreements.”

But Paul N. Cicio, president of the Industrial Energy Consumers of America, said the US needs to be cautious. “When a terminal gets approved, it locks in demand for 20-30 years,” he said. “These are public policies which could affect US supplies during that period. The price risk is being shifted to consumers because we don’t know what actual supplies and demand will be.”

Cicio conceded some increase is needed from the current $3/MMbtu price, but warned that a big jump would discourage additional manufacturing investments.

Some state utility regulators on the committee admitted they were torn on the question. “Low gas prices obviously have brought some manufacturing back to this country,” observed G. O’Neal Hamilton, a member of South Carolina’s Public Service Commission. Todd A. Snitchler, chairman of Ohio’s Public Utilities Commission and co-chairman of NARUC’s Gas Committee, said his state’s oil and gas potential needed to be weighed against its current manufacturing rebound.

The committee also heard from Michael Hightower, a technical staff member at Sandia National Laboratories in Albuquerque, who summarized his presentation a day earlier to NARUC’s Gas Staff Subcommittee about Sandia’s recent LNG vessel safety research.

Contact Nick Snow at nicks@pennwell.com.

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