POLITICS Updated August 7, 2013, 8:32 p.m. ET
Louisiana LNG Export Proposal Approved
Other Requests Pending Amid Concerns About Sending Gas Abroad
By TENNILLE TRACY CONNECT
WASHINGTON—A third proposal to export U.S. natural gas won a government green light Wednesday, signaling the approval process is on a faster track despite some concerns that greater exports will raise natural-gas prices at home.
The three projects approved by the Department of Energy would have the capacity to ship 5.6 billion cubic feet of gas a day, or about two trillion cubic feet a year. The U.S. produced about 25 trillion cubic feet in 2012.
The latest approval was awarded to Lake Charles Exports LLC, a venture between U.K.-based BG Group PLC and Texas-based Energy Transfer Equity LP that plans to ship up to two billion cubic feet a day from Lake Charles, La. The approval lasts for 20 years and permits sales to countries that lack free-trade agreements with the U.S., including some in Europe and Japan.
Energy companies are seeking to take advantage of increased U.S. natural-gas production and robust demand around the world. More than a dozen export proposals are still pending before the Department of Energy.
Senate Republicans have urged the Department of Energy to move quickly to approve more export permits, in part because allies are lining up to buy U.S. natural gas. Sen. Lisa Murkowski (R., Alaska) said foreign governments “routinely express their concerns over long delays, as well as the uncertainty surrounding the timeline for review.” Asian countries are particularly hungry for U.S. natural gas. Japan, which is seeking alternative fuels to generate electricity after shutting most of its nuclear power plants, has asked the U.S. to expedite approvals.
Although demand is strong, the U.S. is competing with Canada and other nations preparing export plants. Analysts say there is a limited window of opportunity to secure global buyers.
The Lake Charles project still needs permits from another federal agency, the Federal Energy Regulatory Commission. FERC approval requires a review of detailed plans, but it is considered less political.
The Department of Energy has received requests to ship about 30 billion cubic feet of natural gas per day, but many analysts say fewer than 10 billion cubic feet of export capacity will actually be built. One major reason is the multibillion-dollar cost of building export facilities, which cools natural gas to negative 260 degrees Fahrenheit—turning it into liquefied natural gas, or LNG—before shipment.
After issuing Cheniere Energy Inc. the first export approval to non-free-trade-agreement nations in 2011, the Obama administration held off for more than a year as it studied the economic impact of exports. The second green light came in May for a Texas project, and it took less than three months to get to the third approval Wednesday.
Moody’s Investors Service has predicted only four export projects were likely to be built, dictated in part by a company’s spot in the queue at the Department of Energy, which has said it would evaluate projects on a first-come, first-served basis.
The energy company Dominion Resources Inc. is next in line with its Cove Point project in Maryland, which is seeking approval to ship one billion cubic feet of natural gas a day.
Some U.S. manufacturers and their allies on Capitol Hill have questioned the wisdom of allowing unfettered exports, saying the result could be higher prices at home and less competitiveness for U.S. industrial companies that use gas as a feedstock. Several manufacturers—including Dow Chemical Co., Alcoa Inc. and Nucor Corp. —formed a coalition earlier this year to resist the wave of export proposals. “Each permit approval brings us closer to the point that would begin to harm the manufacturing renaissance,” the coalition, known as America’s Energy Advantage, said in response to Wednesday’s approval.
Sen. Ron Wyden (D., Ore.), the chairman of the Senate Energy and Natural Resources Committee, said Wednesday that each new permit raises the bar for the Obama administration “to prove these exports are in the best interests of American consumers and employers.”
A Department of Energy study last year said natural-gas exports would be good for the U.S. economy and that net economic benefits increased as the level of exports increased. “We believe the process established by the department is fair, transparent, and consistent,” Department of Energy spokesman Bill Gibbons said.
—Keith Johnson and Ben Lefebvre contributed to this article.
Write to Tennille Tracy at tenn