America's natural gas Companies are pushing for government approval to export gas overseas for higher profits on the international market

Some companies that control America's natural gas are pushing for government approval to export gas overseas for higher profits on the international market, a move that will significantly drive up prices in the United States because this nation still imports more than 10 percent of its domestic needs.
Among the biggest expected customers for American gas exports: energy-thirsty China, other Asian nations and Europe.
Legendary Texas oilman, corporate raider and natural gas advocate T. Boone Pickens told the Tribune-Review that exporting large amounts of natural gas overseas is a mistake — and a national security issue.
If we do it, Pickens said, "we're truly going to go down as the dumbest generation."
"It's bad public policy to export natural gas — a cleaner, cheaper domestic resource — and import more expensive, dirtier OPEC oil," he said.
The United States produced 61.83 billion cubic feet a day of natural gas last year, according to government figures, and that production continues to grow. Politicians and some companies have trumpeted that production as the key to the nation's energy independence.
On May 20, the Department of Energy quietly gave approval for Cheniere Energy Inc. to export 2.2 billion cubic feet of natural gas per day from its Sabine Pass, La., port terminal — the first time the government granted permission to export American-produced gas overseas from the lower 48 states. The action allows exports to all countries except those to which the United States bans trade, such as North Korea.
No one knows for sure how much exporting will increase domestic prices for natural gas, which will also affect costs to heat American homes, fuel electric power, run manufacturing plants and even food. The amount of supply and exports affects that.
However, citing a consultant's report submitted with Cheniere's permit application, the DOE stated that natural gas prices in the United States will increase up to 11.6 percent when the Sabine terminal begins exports in 2015.
Republican Congressman Tim Murphy, who represents the Marcellus-rich 18th Congressional District in Western Pennsylvania and co-chairs the Congressional Natural Gas Caucus, questions the DOE decision.
"Sending natural gas overseas is the medical equivalent of bleeding a patient in order to cure him," said Murphy of Upper St. Clair. "I fear what this would do to prices."
Lining up
Cheniere told the DOE in its application that declining prices of U.S.-produced natural gas slowed drilling in American fields. Access to international markets, where prices for natural gas are as much as triple those in the United States, would induce more drilling and boost U.S. employment, the company said.
Early last week, U.S. gas futures were worth $4.80 per million British thermal units, compared to nearly $14 on the Asian spot market for liquefied natural gas (LNG).
Two other concerns have requests pending before the DOE to export American gas. Freeport LNG Expansion LP, together with Liquefaction LLC, applied on Dec. 17 to export 1.4 billion cubic feet of natural gas per day from a terminal port near Freeport, Texas. Lake Charles Exports LLC, a subsidiary of British-based BG Group and Houston-based Southern Union Company, applied to DOE on May 6 to export 2.0 billion cubic feet a day from its Lake Charles, La., facility.
If the DOE approves those requests, combined with the Sabine permit, the total 5.2 billion cubic feet a day proposed for export would represent 8.4 percent of U.S. production, a Tribune-Review analysis determined.
It might not end there. At least two other companies have publicly indicated they are mulling applications to export American natural gas.
On Tuesday, San Diego-based Sempra Energy, with terminals in Louisiana and Mexico, announced it might ask to export natural gas. Earlier this year, Dominion Resources, a Virginia-based energy company with transmission operations in Pennsylvania, told the Trib it is consulting with customers about applying to turn its Cove Point importing terminal in Maryland into an LNG exporting facility to send gas from the Marcellus shale formation overseas.
Dominion spokesman Dan Donovan said the company expects that by the middle of this decade its Cove Point, Md., terminal port will transform from an import facility to export operation. On May 27, Dominion asked the government to force its natural gas customers such as Shell and BP to import LNG through Cove Port to keep it operational. The company hasn't received an import since February because of a seasonal lack of demand and said it foresees no voluntary shipments.
If the DOE agreed to allow Sempra and Dominion Resources to export the average of the amount of natural gas requested by Sabine and the two pending applicants, 13.9 percent of America's annual natural gas production could be exported based on 2010 figures, a Tribune analysis determined.
Further, the Barclays Capital investment firm predicts that even more ports could open in the western United States and British Columbia, Canada.
Paul Cicio, president of the Industrial Energy Consumers of America, which represents American manufacturers with annual sales of $800 billion and 750,000 employees, said the DOE did not address the potential "cumulative effect" on U.S. supply and prices from allowing four or more exporting facilities.
Cicio called that impact "absolutely frightening" to American manufacturing.
"This is bad policy," agreed David Schryver, executive vice president of the American Public Gas Association, which represents 700 public gas companies in 36 states.
He said the association is aware of proposed exporters-in-waiting and intends to oppose their DOE applications.
Exports not forecast
The DOE approval of Cheniere Energy's request occurs at a time when the United States must import natural gas, mostly from Canada. Despite vast resources being discovered around the nation and in Pennsylvania in deep underground shale deposits, the United States had to import 2.64 trillion cubic feet or more than 10 percent of its natural gas usage in 2009, according to the U.S. Energy Information Administration, an independent arm of the Energy Department.
The EIA forecasts the United States will continue to import about 10 percent of its natural gas needs by 2015 — the year Sabine is expected to begin American gas exports — and will remain a net importer through 2035.
However, there's one problem with the EIA forecasts: They haven't taken into account the possibility that the United States might export a substantial portion of its natural gas.
Phyllis Martin, who works on the LNG portion of EIA annual forecasts, told the Trib: "We do not at present include the possibility of LNG exports, other than from the long-existing Kenai facility in Alaska, in our model."
Cheniere's consultants based some of its prediction of "moderate price increases" for the U.S. market on these incomplete EIA forecasts.
The EIA will begin to factor exports into annual reports "if the budget allows," Martin said.
Foreign companies certainly recognize the opportunity that American shale formations offer. As the Trib reported on April 10, Chinese, Dutch, Norwegian, South Korean, Japanese, British and Indian companies are buying into American shale plays. Many of those companies are multinationals that sell LNG around the world.
The Federal Energy Regulatory Commission reports that as of February, companies planned to expand or extend nearly 3,800 miles of pipelines to handle 32.47 billion cubic feet of natural gas a day — another indication that exporting gas for higher prices is part of operators' business plans.
Jeremy Carl, a Stanford expert on Chinese and Indian energy matters, said there's little doubt that China — which has surpassed the United States as the world's top energy consumer — would be a destination for any country exporting natural gas. Chinese imports of liquefied natural gas "have grown tremendously in recent years, up about 70 percent last year alone," he said.
Carl said he's not certain the DOE has set off an irreversible chain reaction by approving Cheniere's request, because of potential variability in international market prices and the high cost of building export facilities. Equipment needed to convert natural gas to a liquefied form suitable to put into special tankers can cost billions of dollars, he said.
"It's right to be concerned," he said, "but not apocalyptically concerned."
Still, Carl said, "the Pittsburgh story is particularly compelling. ... First, Pittsburgh lost its steel industry to China. Now it's going to export its natural gas there."
Staff Writer Timothy Puko contributed to this report.
Read more: Natural gas prices set to jump with exports - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pittsburghtrib/s_741745.html#ixzz1P...

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Permalink Reply by mark ayers on June 20, 2011 at 12:09am
http://www.cleanenergyfuels.com/ This is a co. I'm currently invested in. I don't think anyone said this is something only the government can do.
Permalink Reply by Jim Litwinowicz on June 20, 2011 at 4:42am

Great to see a company involved in this.

 

@George Brown;  I agree with everything you posted. I would very much prefer that no tax be passed. But looking at reality, one will be passed.  This state (Pa) is controlled by the heavy population of Philly and the south east quadrant.  They control both houses of the state llegislature and they are not happy that there is no gas in their area.  Thus they are determined to pass a tax and get a piece of the pie.

I feel that when, not if, a tax is passed it would be best for all that part of it goes to enhancing the industry instead of harming it. Helping to convert vehicles statewide to run on CNG helps the industry, the landowners, the workers, the municipalities, and the environment. Everybody wins.

The one problem with leaving it solely up to the private sector like the company that Mark linked to is that municipalities and companies that utilize their service and do the conversion is that the CNG stations almost always end up being off limits to the motoring public. There are many cities that already run their buses on CNG but have filling stations that are for the buses only. We need CNG stations that are open to all so that the average Josephine Six Pack can also use a CNG vehicle. Make it a requirement of any station getting any financial aid through the tax be open to the public. That will encourage other people to go CNG, especially when they see the price per gallon posted at the stations.

 

There are a few CNG stations out there and a few more being built. Honda now has a CNG Civic for sell nation wide. The conversion is coming but it is slow going.  All I am saying is that we give them a boost in getting up and running and do it by making the most of a bad idea.

Permalink Reply by Bill anders on June 22, 2011 at 4:24am

Interesting article written by someone who understands global markets and free trade.  May open the eyes of those of you not understanding why becoming a net exporter is a GOOD thing.  I would attach a simple supply and demand chart from Econ 101, however that may be a little deep.  So give this a shot:

 

http://blogs.forbes.com/christopherhelman/2011/06/21/to-import-less...

Permalink Reply by Jack Straw on January 1, 2012 at 12:02pm

Sadly, the anti-fracers have resorted to lies once again.

Katherine, you must not have read the article; or if you did, you didn’t understand it!

Let me explain some things for you.

 

The U.S.A. is using less gasoline, jet fuel and diesel and heating oil.

There have been some real efficiencies and the sad state of the economy has reduced internal consumption.

Also, due to cheap Natural Gas and expensive oil; more Natural Gas is being used – resulting in an attendant reduction in the need for products refined from oil (heating oil, in particular).

This has resulted in excess refining capacity.

The U.S.A. are importing excess oil; in order to refine that oil – exporting this excess fuel, primarily to Mexico, Central American and South American countries that lack sufficient refining capacity.

 

What does this do for America?

Jobs for American workers.

Turning crude oil into high valued products results in profits for corporations (owned by shareholders – to a great extent pension funds and mutual funds in worker’s IRA’s).

The value added exports result in a significant improvement in America’s Balance of Trade and allows the U.S. Government to borrow money at a lower interest rate.

 

None of this has anything to do with “gas/oil leasing”.

None of this has anything to do with “fracing”.

None of this has anything to do with “manipulating and raping the earth and landowners”.

 

How unpatriotic of those who attempt to distort and twist the truth.
How unpatriotic of those who want to use lies and distortions to eliminate the jobs of American workers.

How unpatriotic of those who want to damage American Corporations who are paying quarterly dividends to American widows and pensioners.

How unpatriotic of those who want to prevent the transition from imported oil to clean/green Natural Gas.

How unpatriotic, shame, shame, shame!

 

Katherine, I would suggest that you read the article whose link you posted.

If you are having problems comprehending its contents, I will attempt to further explain.

 

JS

Permalink Reply by George Brown on January 1, 2012 at 12:08pm

Nothing unpatriotic about free trade.

Permalink Reply by paleface on January 1, 2012 at 12:59pm

The Obama administration should have helped put the infrastructure in place for this a couple years ago,the economy would be benefiting by now.Obama missed a chance to be a great president.

Permalink Reply by Jim Litwinowicz on January 1, 2012 at 3:54pm

Saw the interview of Mr Pickens. When T Boone Pickens said "We may go down as the dumbest generation" he was referring to our lack of determination to convert our transportation system from diesel to nat gas. He was not talking about exporting LNG.

He has long been proposing a national program to convert 18 wheelers to CNG.  It would create jobs, bring revenue to the government, reduce foreign imports, help our balance of trade, stop funding our enemies, and best of all, help clean our environment.

Lacking such a program to convert is the main motivation for exporting of LNG. They have a product with a huge supply at a very cheap price and are searching for markets for it. If we developed a better domestic market for CNG such as our transportation network, the motivation to export the excess production would quickly fade away.

Permalink Reply by Jack Straw on January 1, 2012 at 4:19pm

Boone (of course) is "talking his own book"; his wife is a major stockholder in Clean Energy Fuels Corp. (CLNE).

"Clean Energy Fuels Corp., together with its subsidiaries, provides natural gas as an alternative fuel for vehicle fleets in the United States and Canada. It designs, builds, finances, and operates fueling stations; and supplies compressed and liquefied natural gas. The company also manufactures and services natural gas fueling compressors, and related equipment; and processes and sells renewable biomethane, which could be used as vehicle fuel. In addition, it provides natural gas conversions, alternative fuel systems, application engineering, service and warranty support, and research and development for natural gas vehicles. Further, the company offers design, engineering, construction, and maintenance services for liquefied natural gas and liquefied to compressed natural gas fueling stations. Clean Energy Fuels serves approximately 480 fleet customers operating 21,270 natural gas vehicles in public transit, refuse hauling, airports, taxis, seaports, and regional trucking. As of March 31, 2010, it operated, maintained, or supplied approximately 238 natural gas fueling locations in Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, New York, Ohio, Oklahoma, Rhode Island, Texas, Virginia, Washington, and Wyoming in the United States; and in British Columbia and Ontario in Canada. The company was incorporated in 2001 and is headquartered in Seal Beach, California."

A seond company that would benefit from a transportation transition to Natural Gas would be, Westport Innovations Inc. (WPRT)

"Westport Innovations Inc. provides alternative fuel, low-emissions technologies that enable engines to operate on fuels, such as compressed natural gas, liquefied natural gas, hydrogen, and biofuels. It partners with diesel engine and truck original equipment manufacturers (OEMs) to develop, manufacture, and distribute the Westport's engines to various truck and bus OEMs. The company's Light-Duty division focuses on light-duty automotive systems, components, and engines, including 2.4L engines for industrial applications, such as forklifts and oilfield service. It, through its joint venture with Cummins, sells a range of low-emissions alternative fuel engines for commercial urban fleets, including buses, refuse trucks, and vocational vehicles. The company, through its proprietary development platform, Westport Heavy Duty, engages in the engineering, design, and marketing of natural gas-enabling technology for the heavy-duty diesel engine and truck market. Westport Innovations Inc. was founded in 1995 and is headquartered in Vancouver, Canada."

I do not currently own stock in either company; so unlike Boone, I do not have any skin in the game.

But, I do follow both companies out of general interest.

WPRT makes the engines, CLNE provides the fuelng stations.

These two companies suggest as to what the future might look like.

 

All in my humble opinion.

One size fits most.

 

JS

 

 

Permalink Reply by Jim Litwinowicz on January 1, 2012 at 4:34pm

JS good info but not a surprise. Pickens was promoting wind energy while he heavily invested in turbines and wind farms. There are even more conspiratorial theories (water rights) as to his pushing wind farms in Texas.  He is no doubt an opportunist, looking to profit where he can. I have no objection to that as long as people are aware of his motivations and make policy accordingly.

Permalink Reply by Jack Straw on January 1, 2012 at 6:14pm

Pickens is definitely barking up  the right tree.

Too bad he is viewed by many as a mangy old mutt; not without reason.

 

JS

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