US carefully mulls whether to okay LNG exports-Chu

Thu Feb 16, 2012 11:40am EST

* US DOE currently studying impact of exports

* Chu says his "mind not made up"

* Lawmakers raising concerns about LNG exports

By Ayesha Rascoe

WASHINGTON, Feb 16 (Reuters) - The U.S. Energy Department will not make a decision on future liquefied natural gas exports until it has weighed the potential consequences of sending U.S. gas abroad, Energy Secretary Steven Chu said on Thursday.

Chu said there was concern that exporting the nation's surplus natural gas could lead to higher prices, but that had to be balanced against the economic benefits of increasing the U.S. exports.

"We're not going to do anything until we make a determination what the impact would be," Chu told lawmakers at Senate energy committee hearing on the Obama administration's budget request.

Natural gas exports to all but 15 countries that have free trade agreements with the United States require the Energy Department's approval.

Advances in drilling techniques have unlocked the nation's vast shale gas reserves, but U.S. demand has not kept up with rapidly expanding gas output.

Plentiful gas supplies have transformed the U.S. energy picture, leading companies to pursue LNG export opportunities, when just a few years ago industry was preparing to import LNG.

The Energy Department has approved one export application from Cheniere Energy for its Sabine Pass terminal, and other companies including Southern, BG, Dominion and Sempra have also requested permission.

The department is conducting a study due out later in the Spring that would analyze the economic effects of allowing more exports.

Still, Senator Ron Wyden, a Democrat from Oregon, raised concerns that Chu had already decided to approve more exports, citing a report that Chu said gas exports would bring wealth to the country.

"There are substantial questions that have to be addressed before our country starts allowing significant natural gas exports," Wyden said at the hearing.

Chu stressed that his "mind was not made up," however.

"Certainly we don't want to see natural gas prices rise dramatically," Chu said.

But,"there's a flip side we have to consider that it does create American jobs, and if prices are kept moderate it does bring money to United States," he added.

Some lawmakers have said they are worried that LNG exports could raise prices for U.S. households and hurt manufacturing industries that rely on natural gas.

Last month, the U.S. Energy Information Administration said exporting surplus U.S. natural gas could add as much as 9 percent a year to prices of the fuel for consumers and industry over the next two decades, if all pending applications were approved.

Democratic Congressman Edward Markey introduced legislation earlier this week aimed at keeping domestic prices low by barring the export of natural gas.

Gas drillers have warned that constraining exports would limit production by making development unprofitable. Already, some companies have begun to cut back on production because of the current gas glut.