Is it unpatriotic to export US natural gas overseas?

Opponents argue that exporting the fossil fuel puts the manufacturing renaissance at risk.

By Minyanville.com Apr 11, 2013 4:56PM
Natural gas plant copyright Kevin Burke, CorbisThe main battle within the U.S. natural gas industry has long focused on the dangers of fracking, with environmentalists arguing that the process of extracting natural gas from the ground is environmentally destructive in myriad ways, while those in favor say that natural gas development will be a great job creation force for the U.S.
 
However, a new debate has arisen. With the abundance of natural gas in the country pushing down prices to record lows, the energy industry is pushing for restrictions on natural gas exports to be lifted, while domestic manufacturing companies argue that selling the U.S.' supply of natural gas to markets overseas is detrimental to the interests of the country.
 
Oil and gas giants like Exxon Mobil (XOM) and Chevron (CVX) assert that allowing them to export liquefied natural gas (LNG) would help the U.S. economy. Their claims were boosted by a Department of Energy study released last December, which found that even with the consequence of increase domestic natural gas prices, LNG exports will still provide net benefits to the economy.
 
On the other side of the divide stand industrial companies like Dow Chemical (DOW), Alcoa (AA), Celanese (CE), and Nucor (NUE). All four have joined the lobby group America's Energy Advantage, which says that it is in effect unpatriotic to allow unlimited LNG exports. The group claims that by limiting LNG exports and keeping gas prices low domestically, the U.S. is able to make use of this competitive advantage to drive a manufacturing renaissance, since companies that use natural gas as a raw material can produce goods at relatively lower prices.

"Thanks to the competitive advantage of affordable natural gas, the U.S. has added 530,000 manufacturing jobs since 2010. If gas prices stay at the same level, analysts predict that 5 million more manufacturing jobs will be added by 2020," argues the organization on its site.

Three oil and gas experts Minyanville spoke to were all in favor of lifting LNG export restrictions. Chris Faulkner, founding CEO of Dallas-based Breitling Oil and Gas, an independent oil and natural gas company, said that high domestic prices were actually necessary for the oil and gas industry to thrive.
 
"At first blush, it might seem like a good idea to limit natural gas exports to keep prices down, but artificially low prices will only kill additional exploration and production. With no incentive to continue pouring money into exploration and production, you’ll see American oil and gas companies seeking investments in other countries while production here at home dries up," Faulkner argued.
 
"As an energy executive, I can tell you the industry is not making much money on natural gas production right now. In fact, many operators have had no choice but to flare their natural gas because there’s no way to make a profit at [current] prices. But we have a fantastic opportunity to turn these lemons into lemonade and create an incredible boom for the American economy," continued Faulkner.
 
Similarly, Jason Stverak, president of the conservative-leaning think tank, Franklin Center, said that claiming that exporting natural gas is unpatriotic is a straw-man argument. "I think that with greater economic development and greater utilization of our natural gas resources, you’re seeing more and more companies being started up, more and more manufacturing jobs being created and more and more incredible opportunities being made available for middle-class families," Stverak told Minyanville.
 
As for the question of whether selling gas abroad would increase domestic prices, Alan Herbst, a principal at New York-based energy consultancy Utilis Advisory Group, said that the increase would not hurt domestic demand. According to Herbst, "the current belief is that only 5-6 billion cubic feet (bcf) of LNG a day will be exported from the US. With US natural gas production approaching 30 trillion cubic feet a year, 5-6 bcf per day won’t have that much of a market impact."
 
At most, the exports would cause domestic natural gas prices to rise by $0.25-$0.50 per million British thermal unit (Btu), a slight increase that not only would not destroy domestic demand, but would allow smaller producers to stay in business to compete against giant companies like Chesapeake Energy (CHK) and Hess (HES).
 
Herbst emphasized that limiting exports would not necessarily mean lower prices at home. "It is a fallacy to say that restricting exports will keep natural gas prices below the cost of production. We will either export the massive production surplus of natural gas or producers will reduce production to made the reduced domestic market with massive layoffs," said Herbst.
 
Under current laws, the Department of Energy (DOE) has to grant quick approval to LNG export projects to countries that have free-trade agreements (FTA) with the US. However, for non-FTA countries like energy-hungry countries Japan and China, the DOE decides on a case-by-case basis whether or not to reject or impose limits on exports.
 
One non-FTA project, Cheniere Energy's (LNG) $5 billion Sabine Pass facility in Louisiana, has been given the green light so far, with 16 more still in the DOE queue awaiting approval.
 
However, U.S. lawmakers are now planning a new bill that could possibly impose sharp restrictions on natural gas exports. The bill "could propose a specific limit on exports -- equal to 10% of daily production, for example -- or create a new legal definition for when exports should be blocked because they are no longer in the best interests of the U.S.," noted the Wall Street Journal. Sen. Ron Wyden (D-OR), chair of the Energy and Natural Resources Committee, is looking to introduce the bill after consulting with other senators and various interest groups in May.
 
Wyden has said that he isn’t entirely opposed to natural gas exports. Instead, he wants to find a “sweet spot” on exports where producers could be profitable while domestic prices remained low.

More from Minyanville:
16Comments
Apr 11, 2013 5:43PM
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Freaking has been around for over 40 years. You would think that this type of extraction is new technology listening to the media and liberals.

 

Cranking up the production of oil and natural gas would increase good paying jobs, and the exportation of diesel and natural gas (LNG) would reduce our balance of payments. We would also be helping our allies like the UK and Japan who desperately need cheaper energy. It is a win, win proposition for the US. Opponents cite this phony baloney BS like it is unpatriotic.. Those companies like Dow are worried that their costs might go up a small amount. Too bad for these greedy companies.    

Apr 11, 2013 5:23PM
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Since people in this country seem to keep ignoring the many ways we could use nat gas why not export it. Several major cities in the US are running their city buses and trucks on nat gas but there are so many uses of this cheap and clean fuel that are being ignored. Obama is not using any brains about the so called green energy he wants used. We could easily be energy independent but we have folks in Washington blocking it every way they can.
Apr 11, 2013 8:39PM
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At the end of the day, it is a world economy and this is a commodity product.  limiting exports will not affect pricing other than keeping down production to match the world price.
Apr 11, 2013 5:28PM
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I can see the point of keeping our own natural resources here at home. Everything has a cost attached to it, allowing our internal resources to be subject to an international bidding war is good for producers and big banks and helps boost exports, but often causes higher domestic prices and thus lowered consumer purchasing power. It drags on other sectors of the economy. 

 

I might agree with the concept of international market pricing if commodities were bought and sold only between producer and consumer, but as a procurement professional with 35 years of commodity exposure, I can tell you that big banks and hedge funds can add 35% easily to the cost of any commodity just from the speculative nature of their business. And it's so easy to snooker these Harvard educated weanies with false reports of production shutdowns; they wet their pants and bid the price up every time. The lax regulatory environment in some international markets also adds to the price of commodities that you and I pay for.

 

Keep it at home; up or down, we get a more accurate market price domestically.

 

 

Apr 12, 2013 1:25PM
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We are now having a new problem with global warming-the arctic is so cold the polar bears can't eat anymore so they are killing baby seals just for fun.We must not produce anymore electic cars or an Ice Age may come down on us.

Apr 11, 2013 6:28PM
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if we allow exports prices will rise. Just like oil. We are now a net exporter of oil. Oil companies get rich and they have a different exscuse for rising gas prices. We have so much oil we're exporting it, but prices stay high. Must be great to be  an oil company.
Apr 12, 2013 3:31AM
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With people in this country getting their water from their wells contaminated from bringing that gas out of the ground don't you dare sell it overseas to keep the price up.

Bungholes!!!

Apr 11, 2013 6:38PM
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Isn,t High natural gas prices  what sent Calpine into chapter 11 and all thier investers lost big money I myself lost my life saveings $ 104,000  I think  wall street and the Gov. are all crooks
Apr 11, 2013 5:20PM
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Here we go f----ing up again where are the tea party groups on this one we cannot let our resource rich nation be exploited by other countries,a service oriented economy does nothing to help the overall economy  unless we have a tourist based economy who wants  to come here murder capital of the world. Why not somewhere safer Afghanistan or Syria come to mind.

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