US LNG export debate heats up as responses to key report pour in

Thu Jan 24, 2013 6:32pm EST

* Trade groups, lawmakers call for DOE to approve exports

* Dow Chemical calls NERA report "unsound"

* Environmentalists link LNG exports to fracking

By Ayesha Rascoe

WASHINGTON, Jan 24 (Reuters) - The first round of public input on a potentially pivotal report on U.S. liquefied natural gas exports ended on Thursday, with groups on both sides of the issue honing their arguments in the high stakes fight over the future of the U.S. gas bounty.

Only a little more than 600 responses to NERA Economic Consulting study on the economic impact of LNG exports had been posted to the Energy Department's website, with more expected, as the department sifts through a deluge of last-minute comments.

Environmentalists and a contingent of manufacturers lashed out against NERA's rosy conclusion that shipping excess natural gas would be a net benefit for the U.S. economy. Oil and gas drillers and business groups, as expected, argued the report supported the prompt approval of pending applications for gas exports.

How to manage the nation's vast natural gas supplies - unlocked in recent years by advances in drilling techniques - has become an increasingly contentious issue.

The Obama administration commissioned the NERA report after concerns were raised that exports could raise prices for consumers and hurt manufacturers currently enjoying a resurgence due to cheap gas.

In a nod to the issue's complexity, the department has taken the unusual step of accepting replies to the statements submitted in the initial round of comment over the next 30 days.

Companies, such as Exxon Mobil and Dominion, have lined up to sell the surplus gas that has saturated the U.S. market, but they must receive permission from the Energy Department to ship gas to all but a handful of countries that have free trade agreements with the United States.

Without exports to add another source of demand, drillers have warned low prices will curtail some of the nation's booming gas production.

MANUFACTURERS DIVIDED

The issue of LNG exports has led to a split in the usually united front of manufacturers and oil and gas drillers.

Major business groups such as the Chamber of Commerce and the National Association of Manufacturers have backed exports, but a coalition of manufacturers and heavy industrial companies has strongly opposed unlimited exports.

Dow Chemical, one of the most outspoken opponents of unfettered exports, released a 50-page response to the NERA report, calling the study's findings "unsound and incomplete."

"It grossly underestimates gas price increases, price volatility and, in general, economic harm that could result from unchecked LNG exports," Dow said, calling for an official rulemaking to develop criteria for weighing whether exports are in the national interest.

Dow, which recently quit the National Association of Manufacturers over the dispute, outlined a number of defects in the report, including its reliance on Energy Information Administration gas demand projections from 2011.

Even using updated forecasts, the Center for Liquefied Natural Gas argued the NERA study would reach similar conclusions because the latest data projects even higher domestic production and lower gas prices.

"Consequently, the overall impacts to the U.S. economy from LNG exports would be even more positive," CLNG, an LNG trade group, said in its comment.

A large number of responses have also come from environmentalists worried that an increase in LNG exports would lead to unfettered shale gas development and more hydraulic fracturing, or fracking, a controversial drilling technique that critics have blamed for water pollution.

INDUSTRY: FULL SPEED AHEAD

Supporters of exports argued that the NERA study thoroughly rebutted concerns that sending U.S. gas abroad would, on balance, harm the economy.

Dominion, with its plans to export gas from its Cove Point terminal in Maryland, said the study showed that LNG exports would only be feasible with strong international demand or low U.S. production costs.

"These findings demonstrate that concerns that LNG exports would raise domestic natural gas prices to economically harmful levels are unfounded," Dominion said in comments filed with the department.

A bipartisan group of more than 100 lawmakers from the House of Representatives also threw their support behind the report on Thursday.

Led by Democrat Tim Ryan and Republican Bill Johnson, both of Ohio, the group termed the report's finding "reassuring."

"Now is the time to expand domestic exportation of LNG," said the group, which included Republican Fred Upton, chairman of the powerful House Energy and Commerce committee.