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Energy / ENERGY

Gas Exporter Dismisses Democrats' Concerns

photo of Amy Harder
February 23, 2012

A top executive whose company is poised to be the first exporter of natural gas from the U.S. mainland in more than 40 years is dismissing congressional Democrats’ concerns that the move could trigger a spike in energy prices.

Charif Souki, president and CEO of Cheniere Energy, said in an interview with National Journal on Thursday that Democrats and environmentalists have no real basis to oppose exporting natural gas.

Cheniere is expected to break ground as soon as April on the country’s first export terminal for natural gas since 1969. The terminal would be in Louisiana; the only other U.S. export terminal is in Alaska, but it is primarily used to send gas to the lower 48 states. Energy companies are increasingly looking to export natural gas because vast discoveries of shale gas across the country are glutting the market and pushing prices down to near-record lows.

 

“Our terminal will have absolutely no impact on prices,” Souki said. He argued that there are many factors that go into gas prices, including exports. A big indicator, he said, is the price of oil and its ratio to natural-gas prices. As long as oil prices stay high, the economic incentive will be there to export natural gas; if natural-gas prices do go up, there would be less incentive to export it, he said.

Houston-based Cheniere is spending $10 billion and taking upwards of five years to gain approval and construct its export terminal.

Congressional Democrats and environmentalists who are already concerned with the extraction process to access shale gas — known as hydraulic fracturing — are starting to oppose exports of shale natural gas too.

“We’re sitting in a funny situation where you have congressmen from Northeast states who want to oppose this, but at the same time the issue of flaring [essentially wasting] natural gas instead of doing something cost-effective with it, which is insane,” Souki said.

Souki was referring to House Natural Resources Committee ranking member Edward Markey, D-Mass., who introduced legislation last week that would ban exports of natural gas. Markey also has the support of Energy and Power Subcommittee ranking member Rush Holt, D-N.J. Souki said he will be visiting Washington in the coming weeks and will ask to meet with Markey.

Sen. Ron Wyden, D-Ore., who is first in line to be the top Democrat on the Senate Energy and Natural Resources Committee when current Chairman Jeff Bingaman, D-N.M., retires after this year, also has expressed concerns about exporting natural gas. But he has not introduced any legislation.

Souki said a third of the natural gas being produced in North Dakota is being flared because there is no way to use or ship the gas. He noted similar trends in South Texas and Eastern Colorado. Eastern states like Pennsylvania which have vast resources of natural gas are also not shielded from the glut, Souki said.

“You have 2,000 wells in Pennsylvania alone that have been drilled but have not been connected to a pipeline because there is no place to send the gas,” Souki said. Pennsylvania sits atop the Marcellus Shale formation, which includes other Appalachian states like West Virginia and is considered the second-largest gas field in the world, behind only one spanning Qatar and Iran.

“Those 2,000 wells currently waiting for hookup in Pennsylvania have the ability to satisfy the entire Northeast demand for natural gas,” Souki said.

In May the Department of Energy approved Cheniere Energy’s application to export natural gas out of a terminal in Louisiana, and Souki expects the Federal Energy Regulatory Commission to soon approve its application to allow construction to begin as soon as April.

Cheniere is poised to be the first company — out of at least 10 — to win federal approval to export natural gas for the first time since 1969.

Souki also dismissed challenges against natural-gas export terminals by environmental groups like the Sierra Club, which earlier this month filed its third formal objection to a proposed terminal in Maryland. It has filed one against Cheniere’s project too.

“To be a little more precise, the Sierra Club opposes fracking,” Souki said, referring to the common name for hydraulic fracturing. “Natural-gas exports encourage domestic production, and therefore the utilization of fracking.”

Fracking is used to drill virtually all of the new shale gas being produced in the country right now. Despite environmental opposition, the process has led to the shale-gas boom.

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