A senior House Democrat welcomed a major Brookings Institution report on natural-gas exports released on Wednesday, but said the findings underestimate the detrimental impact an export trend could have on America’s economy.
The report by Charles Ebinger, director of the Brookings Energy Security Initiative, finds that increased exports of natural gas will not have a major impact on domestic prices, a concern among some lawmakers and manufacturers benefiting from near-record low prices.
“While I believe this report understates the potential negative impacts of natural-gas exports on our economy and especially manufacturers, and overestimates the positive national-security implications, I think any report that thoughtfully adds to this debate is welcome,” said House Natural Resources Committee ranking member Edward Markey, D-Mass. Markey has introduced legislation that would ban exports of natural gas and is among a growing choir of mostly Democrats voicing concern about how natural-gas exports could affect domestic energy prices.
Ebinger told National Journal that “exports will lead to some increase in domestic natural-gas prices, but they are very minimal and will have no impact on petrochemical companies being able to compete in international markets.”
Ebinger has briefed officials at the White House and the Energy Department about the report, which has been in the works for a year. Ebinger was assisted on the report by 17 other experts, including Phil Sharp, president of Resources for the Future, and David Goldwyn, a former State Department energy official in the Obama administration.
While the White House has stayed above the fray in the growing debate over natural-gas exports, the Energy Department is conducting a study of the national implications of increased exports and expects to complete it by late summer. Until then, DOE has said it won’t approve any applications to build export terminals.
DOE has approved only one project, by Cheniere Energy in Louisiana, to export natural gas to countries that are not free-trade partners with the U.S. (which happen to be the countries most likely to import American natural gas).
The Cheniere approval, from DOE last year and the Federal Energy Regulatory Commission last month, is the first in almost a dozen applications seeking to export natural gas for the first time, save for an existing export terminal in Alaska. A growing glut of natural gas, due to recent discoveries of vast shale deposits around the country, has energy companies scrambling to build export terminals for the first time in the United States.
The surplus supply has created near-record-low gas prices, which have benefited manufacturers and petrochemical companies that use natural gas in their production processes, but have hurt producers who need more of an economic incentive to drill for the gas.
Other Democrats, including Sen. Ron Wyden, D-Ore., who is poised to be the top Democrat on the Senate Energy and Natural Resources Committee when Chairman Jeff Bingaman, D-N.M., retires after this year, are also concerned about the potential impact on domestic prices. Wyden has called for a “timeout” on natural-gas exports, a term that raises the eyebrows of energy experts like Ebinger.
“You hear phrases like that, what does that mean?” Ebinger said.
Republican lawmakers, traditional supporters of free-trade policies and less government involvement, are more nuanced in their reaction to increased gas exports. Rep. Cory Gardner, R-Colo., who represents a district with a lot of natural-gas production, said recently, “I think it’s yet to be seen what the impact of exporting will be.” He quickly added, though, that it’s most important to use natural gas at home before exporting it. “The more we build out our infrastructure and our transportation solutions the more we will be using it here.”
Some environmental groups, led by the Sierra Club, are seeking to shut down all proposed export terminals for natural gas. Last week, the organization announced its plan to use a 40-year-old conservation agreement to block an effort by Dominion Resources to convert an existing import terminal to an export facility.
“We’ll have very robust and diversified strategy to defeat each one; whether or not we’ll succeed remains to be seen,” Michael Brune, the Sierra Club’s executive director, told National Journal on Wednesday. The Sierra Club is against gas exports because it would lead to greater use of hydraulic fracturing, a method of producing shale gas that is controversial for its potential environmental impacts.
“Exports are causing us to become more dependent on natural gas because it causes more fracking,” Brune said.
Energy experts say environmental opposition will have an impact on natural-gas exports, but not right away.
“Sierra Club's opposition matters, and it will probably matter more in a second Obama administration, but we regard economic concerns as the primary roadblock to exports,” said Kevin Book, managing director of the consulting firm ClearView Energy Partners. “Economic opposition preceded environmental opposition and precipitated the DOE review of export licenses to non-FTA countries.” Book is among the experts who worked with Ebinger on the Brookings report.