* Freeport first project approved since 2011
* Manufacturers concerned about unlimited gas exports
* Still unclear when DOE will act on other projects
* DOE says applications decided on case-by-case basis
* Lawmaker says more debate needed on gas exports
By Ayesha Rascoe
WASHINGTON, May 17 The Obama administration
opened the door to a new era of U.S. energy exports on Friday,
approving the first liquefied natural gas project since the
start of a heated debate over how best to benefit from the shale
The Energy Department's approval of unrestricted natural gas
exports from Freeport LNG's Quintana Island, Texas, terminal
ends nearly a two-year pause in its review of export
applications as the administration addressed concerns that
sending unlimited amounts of domestic gas abroad could harm U.S.
While the approval had been widely expected after growing
signals that President Barack Obama supported exports, the
timing of the decision just one day after the Senate approved a
new Energy Department secretary was a surprise. Many observers
had expected the administration would wait until Ernest Moniz
had settled into his new role before moving ahead.
The green light for Freeport's terminal, which in its first
phase will export the equivalent of about two percent of current
U.S. gas production, offers little clarity on the future of the
more than two dozen LNG projects still awaiting a DOE decision.
The response to Friday's decision was cautiously optimistic
on both sides of the debate. Dow Chemical, a major
consumer of U.S. gas that fears unfettered exports would drive
up prices, said it supported the Freeport decision because it
was a measured and balanced approach to LNG exports.
The American Petroleum Institute called the move a step in
the right direction, but said the rest of the applications need
to be approved swiftly.
Analysts warned that U.S. exporters are racing the clock.
Other countries including Canada and Australia are also building
up LNG facilities, threatening to soak up market share.
"The window of opportunity is closing quickly so the longer
the process takes in getting DOE approval the likelihood that
the U.S. will face steeper competition is increasing," said Teri
Viswanath, an analyst at BNP Paribas.
For a FACTBOX on the other pending projects:
TWO YEAR WAIT
Since the department signed off on exports from Cheniere's
Sabine Pass terminal in 2011, the first project to
apply, a fierce debate over the future of America's natural gas
bounty has swept through Washington and elsewhere.
Rapid growth in shale gas output has placed the United
States in a position to be a major gas exporter, upending years
of expectations that the nation would have to rely increasingly
on imports of gas. Freeport LNG, among the first to realize that
the import terminal it built in 2008 would likely be useless,
moved to revamp it for exports instead.
Some 26 applications have been filed to export natural gas,
but a vocal contingent led by Dow Chemical have argued that
allowing unlimited exports could raise prices and hinder a
resurgence in U.S. manufacturing.
Energy Department authorization is required for gas exports
to all but a handful of countries with free-trade agreements.
Without approval to export to major gas consumers that don't
hold such agreements, including Japan and India, multi-billion
dollar LNG export facilities would likely not be economically
The administration held off on making further decisions in
order to study the potential impact on the U.S. economy, which
is in the midst of an industrial rebirth thanks in part to the
cheap energy offered by an excess of natural gas.
A Energy department-commissioned study by NERA Economic
Consulting released late last year found that the more gas
exports allowed, the greater the economic benefits.
On Friday, natural gas prices for 2015 and beyond were
little moved by the news, trading at around $4.30-$4.60 per
million British thermal units (mmBtu). That is only a little bit
higher than current prices as traders expect the rapid rise in
shale gas production to outstrip demand, including the rise that
is likely to come from LNG exports.
The Freeport project, part-owned by ConocoPhillips
and Osaka Gas Co Ltd, will allow the company to export
up to 1.4 billion cubic feet of natural gas a day for 20 years.
Osaka, Chubu Electric Power Co and BP have already
committed to buying gas from the project.
For a FACTBOX on the project see:
FAVORING FRONT OF THE LINE
The department stressed that going forward, applications
would be reviewed on a case by case basis. Decisions will be
made on the applications in the order in when they were filed
with the department and giving preference to the companies which
have filed with the Federal Energy Regulatory Commission, which
must issue a license for construction of LNG terminals.
Senator Ron Wyden, a prominent skeptic of unrestrained gas
exports, said the department's "measured" approach provides a
"constructive way for this discussion to go forward."
"Based upon my conversations with DOE it is my expectation
that the department will use that process to assess the market
impacts of each export decision after it is announced, to ensure
American consumers are not harmed by large-scale exports," said
Wyden, the democratic chairman of the Senate energy committee.
With critics calling for allowing only a limited amount of
exports, supporters of the gas projects have raised concerns
that the terminals at the front of the line will have an unfair
Freeport was at the top of the queue. Other projects near
the beginning of the line, include terminals backed by Dominion
, Sempra, BG Group and Veresen Inc.
"Everything we've seen to date points to a subset of the
pending applications being conditionally approved, a small first
tranche," said Kevin Book, energy analyst with ClearView Energy
The department's approvals are conditional pending FERC's
decision on a construction license, a separate process that
typically takes months.
MORE DEBATE NEEDED?
Congressman Edward Markey, a prominent critic of gas
exports, called the decision to allow exports from Freeport
"The Department of Energy still doesn't even know what the
impact of natural gas exports will be on domestic businesses and
consumers, but they are approving more exports anyways," Markey
Dow Chemical said it does support exports, but "not too much
Ironically the company owns a 15 percent stake in the
Freeport terminal, which it purchased in 2004 on the assumption
that it would be forced to import frozen gas to use as its
"We've never been against exports, but we've opposed
unfettered exports that risk seeing natural gas prices rise too
fast for consumers," said Dow Vice President George Blitz.
He said the company would not be investing in the export
portion of the terminal.