The incoming top Senate Democrat on energy issues is taking a harder line on exports of liquefied natural gas, urging Congress to reconsider the law that limits regulators from blocking exports to any country with which the United States has signed a free-trade agreement.
A 1992 energy law (PL 102-486) amended the World War II-era Natural Gas Act so that exports of natural gas to countries with U.S. free-trade agreements are automatically to be deemed in the “public interest,” which is the test the Energy Department is required to perform for determining whether to allow exports.
Until the shale gas boom of the past half-dozen years, the U.S. was expected to become a major importer of liquefied natural gas (LNG), and the law was changed to make imports easier.
That policy must be reconsidered in light of both the glut of domestic supply that has become a “strategic asset” and the country’s involvement in trade talks with nearly a dozen Pacific Rim states, Sen. Ron Wyden said in a statement.
“It could harm the nation’s ability to achieve energy independence, combat pollution and preserve the environment, and improve the economic competitiveness of American manufacturers,” said the Oregon Democrat, who also chairs the Finance subcommittee with jurisdiction over international trade.
The Trans-Pacific Partnership trade accord could provide the impetus for lawmakers to join Wyden’s call for reconsideration of the law. Although major LNG-importer Japan has not yet formally joined the discussions, it has expressed interest, calling into question the impact that country’s thirst for LNG would have on currently record-low domestic natural-gas prices.
South Korea, another energy-hungry Asian nation, already has a free-trade agreement with the United States.
Sen. Lisa Murkowski of Alaska, the ranking Republican on the Energy and Natural Resources Committee, has argued that opening her state’s expansive natural-gas reserves to Japan would have little impact on prices in the 48 contiguous states. Alaska has seen interest in its supplies from the rest of the country sink since horizontal drilling techniques and hydraulic fracturing have unlocked vast gas supplies that were previously unrecoverable.
Murkowski has met this year with Japanese and South Korean officials and oil industry representatives in an effort to bring her vision to fruition, most recently discussing the prospects for a single export project with major North Slope producers, who, she says, appear to support the concept.
“While Lower 48 markets may be oversupplied because of the shale boom, places like Japan and South Korea are willing to pay a premium for long-term supply contracts,” Murkowski said on Oct. 24 after meeting with industry executives. “But that window of opportunity will not remain open indefinitely.”
The Energy Department is currently studying the potential economic impact of LNG export projects on domestic natural-gas prices. The review is expected to be completed by the end of the year, but dozens of lawmakers have urged the Energy Department to speed up both the study and its review of pending export applications.