DOE-Commissioned Study Endorses LNG Exports, Says U.S. Economy Will Benefit

A little off topic for our Renewable + Law Blog, but since the fate of renewables is often closely tied to developments in the market for natural gas, I thought this post by my colleage Erin Anderson would be of interest:

Liquefied natural gas (“LNG”) exports will benefit the U.S. economy according to a NERA Economic Consulting study commissioned by the U.S. Energy Department (“DOE”). Posted on Wednesday, December 5, the two-part study concluded that the economic benefits of LNG export will outweigh the impact of potentially higher natural gas prices. The DOE said it would take the report and public comments on the same into account in its review of 15 pending LNG export application dockets. Under federal law, grant export authorization to countries without a free trade agreement with the United States can be denied if inconsistent with the “public interest”. Economic factors are an element that must be evaluated in making the public interest determination.

The DOE study assessed a range of different assumptions about global markets, export volumes, pricing points and domestic production costs, and concluded that the US economy will experience a net positive effect after consideration of multiple scenarios. The study does not claim that there is a win-win for all socioeconomic stakeholder groups, however, noting that "[o]verall, both total labor compensation and income from investment are projected to decline, and income to owners of natural gas resources will increase."

The possibility of exporting volumes roughly equivalent to one-third of present U.S. natural gas production has generated opposition among natural gas customers, currently benefitting from a flush market of extraordinarily cheap gas resulting from hydraulic fracking. Some in the manufacturing sector fear that directing large quantities of domestic natural gas out of the US market will drive up domestic supply costs, negatively affecting manufacturing and jobs creation during the fragile economic recovery. The Industrial Energy Consumers of America issued a press release (PDF) on Wednesday challenging the report’s methodology. Dow Chemical has also taken a leading role in raising questions about the report.

Proponents of LNG exports have responded by noting that global LNG consumption will at some point decline as US costs increase beyond those of competing supplies, thus alleviating concerns that the US domestic market will be held hostage to an insatiable global market.

The Department of Energy will be accepting initial comments on the Macroeconomic Impacts of LNG Exports from the United States (PDF) study until January 24, 2012. See the Federal Register notice (PDF) for more details.

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