At a Senate Energy and Natural Resources Committee hearing today, U.S. Sen. Ron Wyden (D-Ore.) piped up on some of the biggest concerns Oregonians have about exporting liquefied natural gas from Coos Bay.
He outlined why people are worried LNG exports will drive up the price of natural gas for Americans – with a visual aid to boot. And he asked a federal energy official pointedly whether the agency would limit new liquefied natural gas export terminals to protect the American public from rising gas prices.
He didn’t quite get the answer he was seeking.
As you may have heard, the U.S. natural gas supply is suddenly booming because of new techniques for extracting gas from shale rock. Companies including Jordan Cove in Coos Bay are quickly changing their plans from importing liquefied natural gas to exporting natural gas.
There isn’t much keeping natural gas companies from turning proposed LNG import terminals into export terminals. Increasingly, it’s looking like a key deciding factor in how much gas will be exported is the Energy Department’s analysis of what is – or isn’t – in the public interest.
Wyden brought a graph illustrating how natural gas prices in Asia are three times higher than they are in the U.S.
“So it’s very understandable why North American natural gas producers would want to build LNG export terminals so they can sell natural gas to Asia at three or four time the price here,” he said. “What’s less clear is how this is going to be beneficial for our consumers and our businesses that are going to have to compete with these prices.”
Earlier this year, the U.S. Department of Energy approved an export permit for the Sabine Pass LNG project in Louisiana and conceded the project would raise gas prices in the U.S. by more than 10 percent in 2015.
Since then, Wyden said, the U.S. and Canadian governments have approved more export facilities that will be able to export a total volume that’s five times the amount planned for Sabine Pass.
“Clearly, the department believes that raising natural gas pries by 10 percent meets the public interest test required by the Natural Gas Act,” Wyden said to Assistant Energy Secretary Chris Smith. “My question is, does the department believe that raising gas prices by five times that amount would be in the public interest?”
Smith was explaining to Wyden that his agency will be using “a more refined model” in the future for looking at the price impact of exporting natural gas. Wyden interrupted:
“My time is short,” he said. “I’m trying to get my arms around where the department is going to draw the line. Given the fact that prices overseas are many times higher than North American prices, my question really deals with how high do you think the price of the natural gas in the United States can go up as a result of these exports and still meet the public interest test?
Is there anything else you can tell me about how the department is going to draw the line so we can tell American businesses and consumers that they’re going to be able to get affordable natural gas as a result of this new export policy?”
Smith told Wyden the agency will be looking at many different factors tied to the price impacts of exporting LNG, but ultimately he said there’s no need to worry about export terminals turning natural gas into a global commodity like oil.
“We’re going to be looking at impact on GDP. We’re going to be looking at jobs. We’re going to be looking at impact on a balance of trade. Some of those factors will be affected by the price itself. So we understand the importance that price holds,” he said.
“We also understand that natural gas at these export levels remains an inherently local domestic commodity. Prices are higher in Asia, but if you compare natural gas with oil, oil is a globally fungible commodity where you have enough transportation infrastructure to move oil from market to market. Whereas the ability to couple prices in the United States with prices in Asia, there simply isn’t the infrastructure that would allow you to do that at this point in time.”
Wyden closed his portion of the hearing by restating his concerns: “Exports in the United States are going to make natural gas like the oil market. That’s why I’m concerned about what these price hikes could mean for our businesses and our consumers.”