Senate Energy Committee lawmakers search for ‘sweet spot’ on natural-gas exports

{mosads}But some Democrats — including committee Chairman Ron Wyden (D-Ore.) — were skeptical that letting the markets decide would be the best course of action.

“Let’s look before we leap,” Wyden told reporters after the hearing. He was noncommittal on whether hitting the “sweet spot” for exports would require legislation.

Some of the most vocal cheerleaders of increased exports — largely Republicans and some business groups — say shipping more LNG overseas would create jobs, encourage more natural-gas drilling and raise revenue for the federal government.

They say the application process and energy markets will naturally restrain exports by filtering out less serious developers, keeping domestic prices in check.

But Democrats, along with some manufacturers, contend exporting too much LNG would raise domestic natural gas prices. They say that outcome would undercut resurgence in U.S. manufacturing.

“Instead of a manufacturing renaissance, major gas consumers could find themselves hit hard with energy price hikes and forced to sideline job-creating efforts,” Wyden said in his opening remarks.

Currently, DOE reviews all LNG export applications to ensure they are within the public interest. Deals with nations that have a free-trade agreement with the United States get approval more easily than those that don’t.

Those pushing for a lighter touch on exports want to ease restrictions for countries that lack a free-trade agreement with the U.S.

A bipartisan group of senators has backed legislation that would permit LNG exports to all NATO allies and Japan, even if they don’t have a free-trade pact with the U.S.

Republicans and industry groups said Tuesday that several factors would check an unfettered expansion of exports, helping to keep price hikes small.

Oil-and-gas firms say processing costs from converting natural gas into its transportable, liquefied form would eat at profit margins. That will likely subdue much of the initial interest in the sales, they say.

Ross Eisenberg, vice president of energy and resources policy with the National Association of Manufacturers (NAM), noted Tuesday that while DOE is weighing 16 export applications, the next step — going through the Federal Energy Regulatory Commission — is more costly for prospective exporters.

Eisenberg, whose group supports boosting exports, said few applicants would go through that process. That second stage would require developers to strike a contract with a buyer and conduct an environmental impact statement, among other measures.

The natural-gas price gap between the U.S. and Asia also is likely to close in the long term, which should temper some of the export frenzy, according to Kenneth Medlock, a professor at the Baker Institute for Public Policy at Rice University.

Still, Andrew Liveris, chief executive of Midland, Mich.-based Dow Chemical, urged a “cautious approach” on expanding exports.

Liveris’ firm has been at the forefront of advocating export restraint out of concern for price increases. He said Tuesday that lawmakers should be mindful of speculators looking to bank on LNG.

“We should not let the market … set the price domestically,” Liveris said Tuesday.

Wyden said he was looking for an environmental and economic “sweet spot” on exports.

Wyden noted the need to balance the jobs potential of LNG exports with possible domestic price increases and concerns about hydraulic fracturing, or fracking, the drilling method credited with driving the U.S. energy boom.

Fracking involves injecting a high-pressure combination of water, sand and chemicals into shale rock to tap natural gas and oil.

Environmentalists and some Democrats worry about the amount of heat-trapping methane the drilling method releases into the air, and also fear the process contaminates drinking water.

Meeting the demand from boosting natural gas exports would require an increase in domestic fracking, according to the U.S. Energy Information Administration. That has alarmed green groups and some Democrats.

Frances Beinecke, president of the Natural Resources Defense Council, said Tuesday that the U.S. “lacks those safeguards” necessary to protect the public from the risks of fracking.

Industry and many lawmakers contend fracking is safe. They also point to the effect inexpensive natural gas has had on reducing carbon dioxide emissions — a top priority of green groups — as power plants have turned to that energy source rather than coal.

The abundant supplies of natural gas would not be possible without fracking, its backers note. And while many Democrats have pushed for federal rules governing the practice, industry and Republicans want the states to control it.

“NAM believes states should continue to be the main regulators of this industry and is concerned that reactive federal regulation could harm any potential gains resulting from increased exploration of shale oil and gas,” Eisenberg said in written testimony.

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