Mixed response to Sabine Pass approval

04 24, 2012 by POLITICO

The pump is primed for the lower 48 states to get their first liquefied natural gas export facility now that the Federal Energy Regulatory Commission has approved Cheniere Energy Partners’ Sabine Pass project. And similar efforts are waiting in the pipeline.

But even as the U.S. prepares to become a net exporter of LNG, some people doubt it’s wise to sell the nation’s growing abundance of natural gas overseas.

“We are already subjected to and told we are being extorted at the gas pump because we’re in a one-world economy, and we have to pay world price for gasoline and oil,” said Rep. Peter DeFazio (D-Ore.), whose district includes one proposed export facility. “Why subject ourselves to the same thing for natural gas?”

Another skeptic, Rep. Ed Markey (D-Mass.), said approving more export terminals would mean “exporting our manufacturing jobs abroad along with the fuel.”

“America should exploit her competitive advantage with lower natural gas prices to create jobs in the United States, not export natural gas to create more profits for oil and gas companies,” he said.

But keeping all of the growing gas supply for domestic use won’t keep prices low forever, said Marc Spitzer, a former FERC commissioner who is now a partner at Steptoe & Johnson specializing in regulatory and industry affairs.

“You’re creating stability if you allow gas exports because you’re sending signals [to the industry] to continue to produce,” Spitzer said. “To have a healthy, transparent natural gas market, you have to treat natural gas like any other commodity.”

This much is clear: Domestic natural gas is cheap, recently dipping below $2 per 1,000 cubic feet for the first time in a decade — and the U.S. has lots of it. Some estimates say there’s enough gas to power the nation for 100 years at current usage. And with only so much gas needed to heat homes or run power plants, storage facilities are flush from a mild winter.

That gas has got to go somewhere.

The Sabine Pass project will take an existing LNG regasification site on the Texas-Louisiana border and add a liquefaction operation on the same grounds. The liquefaction component will be able to export 2.2 billion cubic feet of natural gas a day. Last week, FERC approved the order under 55 conditions meant to ensure safety.

“It’s significant because it provides the template for others that will follow,” said Bill Cooper, president of the Center for Liquefied Natural Gas, an LNG trade association. “It provides the regulatory certainty for what FERC is looking for in a liquefaction facility.”

Sabine Pass was able to skip the environmental impact statement that environmentalists have demanded because the liquefaction operations will be housed on the property, where the environmental impacts have already been assessed.

Environmentalists have also decried the export applications on the grounds that one of the processes that make the exports possible — fracking — is harmful.

In challenging a similar liquefaction facility in Freeport, Texas, this month, Sierra Club Executive Director Michael Brune said that “exporting natural gas is bad for Texas and bad for America. [It] requires increased natural gas production and more unsafe fracking, making a dirty fuel more dangerous.”

Still, at least seven project applications for LNG exports are awaiting approval. One, the Jordan Cove Energy Project, was originally designed to import natural gas to its facility in Oregon, but FERC vacated that application last week. Instead, the company has reapplied to the Energy Department to begin exporting natural gas.

“It’s obviously a very radical and abrupt turnaround,” said DeFazio, who represents the area where the project would have been sited. “We were told four to five years ago that we’d have to build multiple import facilities to meet the demand, but new drilling technologies have opened up new opportunities.”

Sabine Pass is the first such project to get federal approval. But Spitzer predicted that similar facilities won’t pop up everywhere, because liquefaction projects are expensive and require a lot of upfront capital costs.

“You’re not going to be building it just for the heck of it,” Spitzer said. “People predicted huge numbers of export facilities, and I’m not sure, given the costs and the economic constraints, that is going to happen.”

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