November 8, 2011 / 4:26 PM / 8 years ago

UPDATE 3-US Congress, Energy Department eye natgas exports

* Lawmakers worry more exports could push up U.S. prices
    * Energy Dept has role in approving natural gas exports
    * Two studies due in Q1 2012
    * South Korea trade deal opens up large market-analyst

    By Roberta Rampton
    WASHINGTON, Nov 8 (Reuters) - U.S. lawmakers urged the
Obama administration to weigh the risk of rising domestic
natural gas prices as it considers allowing more exports,
putting liquefied natural gas in the political spotlight for
the first time in six years.
    The Energy Department last month approved Cheniere Energy's $8 billion, 20-year deal to sell liquefied natural gas
to Britain's BG Group -- the first of several large
projects designed to ship part of the bounty of cheap U.S. gas
into higher-priced Asian markets.
    The Senate Energy Committee held its first hearing on
liquefied natural gas since 2005 on Tuesday. In that time, the
United States has gone from contemplating large imports of the
fuel to now considering exports, a dramatic about face.
    At the hearing, Democratic Senator Ron Wyden held up a
chart showing the gap between Asian and U.S. natural gas
prices, and said he worries prices for U.S. consumers will jump
as exports rise.
    "I'm trying to get my arms around where the department is
going to draw the line," Wyden said.WHERE TO DRAW THE LINE?
    Advanced drilling techniques such as hydraulic fracturing,
or fracking, have unlocked vast U.S. natural gas reserves,
driving down domestic prices and leading to requests for
exports to Asia, where prices are four times higher.
    It's critical to understand how exports will affect
domestic prices, said Jeff Bingaman, the chairman of the Senate
    "U.S. energy security requires reliable and affordable
energy prices, not just reliable supplies," Bingaman said.
    The Energy Department must approve export applications
under U.S. law, but it cannot deny exports to 15 countries that
have bilateral free trade agreements with the United States --
a list soon set to expand when FTAs with South Korea, Colombia
and Panama take effect.
    "If it's a free-trade country, it's a rubber stamp," said
Kenneth Medlock, an energy fellow at the Baker Institute at
Rice University in Houston.
    South Korea is a major LNG importer, and that free trade
deal will open the door to new export opportunities, Medlock
told Reuters.
    Still, prospects for export licenses could be affected by
resource nationalism and environmental concerns, said Kevin
Book, an analyst with ClearView Energy Partners LLC.
    "We remind clients how dramatically sentiment could shift
should the issue gather emotional momentum in the wake of a
price spike," Book said in a research note.
    Exports contemplated by Cheniere Energy's project would
amount to about 3.3 percent of current U.S. domestic
consumption, a senior Energy Department official told
    But the Energy Department is also considering four other
applications. Together, the five export projects would account
for the equivalent of about 10 percent of current U.S. natural
gas use, said Christopher Smith, Energy Department deputy
assistant secretary for oil and natural gas.
    "It becomes a larger and more detailed and more complicated
question," Smith told senators.
    The Energy Department has commissioned the Energy
Information Administration to examine how exports affect
prices, and an external study to weigh the net impact on jobs
and the economy, Smith said.
    The studies, due in the first quarter of 2012, will help
determine whether exports to countries outside of free trade
agreements are in the national interest, Smith said.
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