UPDATE 2-US industry group campaigns to limit natgas exports

Thu Jan 10, 2013 6:47pm EST

Related Topics

* New group includes Dow Chemical, Nucor Corp

* Unlimited exports would be "disastrous" - Dow official

* Top Senate Democrat also slams DOE export study

* Export supporters say coalition presents "false choice"

By Ayesha Rascoe

WASHINGTON, Jan 10 (Reuters) - U.S. industrial companies whose costs have dropped due to the country's natural gas bonanza launched a campaign on Thursday to promote domestic gas consumption, attacking a recent government-sponsored analysis of the issue that favored more exports.

The coalition of chemical and heavy industrial companies, including Dow Chemical and Nucor Corp, said it wants to ensure the Obama administration hears the voices of consumers and manufacturers as it weighs requests by natural gas producers for permission to ship U.S. gas abroad.

"Unfettered exports would be disastrous for the economy," said Peter Molinaro, vice president of North America government affairs for Dow Chemical, at a press conference unveiling the group.

The drive to export liquefied natural gas (LNG) has become more contentious. Manufacturers worry exports will raise domestic prices, while drillers argue exports are needed to encourage production.

Breakthroughs in drilling technology have dramatically increased U.S. oil and gas output. The country is on track to be a net exporter of gas by as early 2016, according to the Energy Information Administration (EIA).

The new coalition, America's Energy Advantage, said it wants the U.S. Department of Energy to proceed cautiously in permitting LNG exports.

The department's authorization is needed to export natural gas to all but a handful of countries with free trade agreements. More than a dozen export proposals are pending.

"SERIOUSLY FLAWED" STUDY

The Energy Department said it would not decide on new gas export projects until it reviewed a study on economic implications. The study by NERA Economic Consulting was released in December. It concluded that unlimited gas exports would offer net benefits for the U.S. economy including increased real income for U.S. households.

The coalition blasted the study, saying it failed to consider economic benefits from the U.S. manufacturing sector while gas prices remain low.

U.S. Senator Ron Wyden, the top Democrat on the Senate energy committee, also called the report "seriously flawed."

"The shortcomings of the NERA study are numerous and render this study insufficient for the department to use in any export determination," said Wyden, who led the charge in Congress for a pause in the permitting.

Wyden said the Energy Department should not decide about gas exports until it gets more recent EIA data and addresses other issues he raised about the report.

The debate over how to manage the nation's natural gas bounty is likely to have a prominent role in energy policy discussions in Congress this year.

Wyden and his Republican counterpart on the energy committee, Senator Lisa Murkowski, have already agreed to hold a wide ranging hearing on natural gas early in the new session.

"SHORT SIGHTED" EFFORT

Supporters of boosting natural gas exports slammed the coalition's campaign, saying it presented a false choice.

"Short-sighted efforts by a few industrial users to restrict exports in an apparent attempt to control prices would deprive American families of the wider benefits of lower costs and increased job creation," said American Petroleum Institute head Jack Gerard.

Companies such as Dominion, Sempra and Exxon Mobil are among those lined up to get permission to sell gas overseas, where it can fetch much higher prices.

Some export boosters have also raised questions about Dow Chemical's 15 percent stake in the Freeport LNG terminal in Texas, which is now first in line for consideration by the Energy Department to become an export terminal.

Dow had been one of the most outspoken industry advocates for limited exports, even before joining the coalition.

George Blitz, vice president of energy for Dow, said the company owns a stake in the import portion of the terminal and does not to expect any financial gains from the proposed export expansion at this point.

"We've been opposed to it. We're not going to be part of an export facility," Blitz said.

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