We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
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Gas producers want to export liquefied natural gas from processing terminals to ship to other countries. The Department of Energy has given conditional approvals to six liquefied natural-gas terminals and one final approval to a terminal known as Sabine Pass in Cameron Parish, La. It most recently conditionally approved in March the Jordan Cove terminal in Coos Bay, Ore., pending an environmental review.
Colorado lawmakers have sought approval for additional natural-gas export terminals. U.S. Sen. Mark Udall, D-Colo., introduced legislation in June to accelerate the approval timeline for these facilities. The Energy Department does not have a timeline for decisions on natural-gas terminals. U.S. Rep. Cory Gardner, R-Colo., who is vying for Udall’s Senate seat, introduced a similar measure that passed the House of Representatives.
“Expanding foreign markets would help Colorado and our nation’s natural gas industry,” Udall spokesman Mike Saccone said. “This is a way to leverage Colorado’s abundant and clean-burning natural gas resources to not only create jobs here but also promote global stability.”
Experts say U.S. natural-gas exports would help stabilize world markets, particularly in Europe, where tensions between Russia and Ukraine have threatened gas supplies.
Encana Corp. (NYSE: ECA) (TSX: ECA) would welcome liquefied natural-gas exports, which would reduce the U.S. trade deficit, potentially increase employment because of greater gas demand and reduce reliance on coal for electric generation in other nations, spokesman Doug Hock said. Calgary, Alberta-based Encana drills oil and gas wells in Weld County.
Colorado saw gas production of 1.6 trillion cubic feet in 2013. Weld ranked No. 3 in the state for gas production with 302.7 billion cubic feet.
“Encana supports (liquefied natural-gas) export as vital to diversifying markets for North American natural gas,” he said.
The American Petroleum Institute (API) estimates that Colorado would gain almost 11,400 jobs and $1.8 billion in income by 2035 through liquefied natural-gas exports.
Rayola Dougher, senior economic adviser for API, said 60 liquefied natural-gas terminals are being built worldwide, but that bureaucracy has stifled approval of natural-gas export facilities.
“We lose market share if we don’t get this moving in an expeditious fashion,” she said. “I think it’s a lot of government red tape that’s slowing the process.”
Opponents of natural-gas exports cite environmental degradation and increased gas prices among their concerns. Environmentalists contend that exporting gas will lead to increased emissions associated with oil and gas drilling. The Sierra Club said that a super-cooling process that turns fossil-fuel vapor into liquefied natural gas consumes an “immense amount of energy” that makes the gas life cycle as dirty as coal-fired power generation. Large shipping terminals also would plug wetlands and damage river and stream channels, according to the San Francisco-based environmental group.
Companies such as Dow Chemical Co. (NYSE: DOW) have expressed anxiety about the potential for rising gas prices driven by increased exports. The company, whose chemical plants rely on gas, believes rising gas prices would stymie the U.S. manufacturing renaissance.
“It is time for the Department of Energy to listen to American consumers; to articulate their criteria for considering the public interest, as is required by law, and to conduct a rule-making study on the implications of further LNG export approvals on consumer energy prices before approving any further applications,” the company said in a recent statement.
Industrial firms fear that exporting gas will lead to price spikes similar to the 1990s and early 2000s when gas production leveled off, said Pete Stark, senior research director and adviser for Englewood-based analyst firm IHS Inc.
“Users of gas, particularly industrial users, just got waxed in the United States,” Stark said. “A lot of heavy energy-use dependent manufacturers … left the country. They just couldn’t afford to work here anymore.”
Today, chemical companies fear that exports will increase demand for gas, which also commands a higher price in the world market, and ultimately raise prices, he said.
Another concern is that exports would increase natural gas prices for use of gas-fired turbines meant to replace coal-fired power generation and reduce greenhouse gas emissions, Stark said. Consumer groups also fear that a diminishing gas supply because of exports would increase prices.
Natural-gas companies point to a study done by New York City-based consulting firm Deloitte that says prices will see only a minimal increase. A 2011 study by the firm says U.S. gas prices will rise just 12 cents per million British thermal units from liquefied natural-gas exports between 2016 and 2035 assuming 6 billion cubic feet per day in shipments.
“If exports can be anticipated, then producers, midstream players and consumers can act to mitigate the price impact,” the study says.
At the same time, liquefied natural-gas exports would give additional market flexibility to producers extracting natural gas from shale basins, including in the Denver-Julesburg Basin, whose territory includes Northern Colorado, Stark said.
Producers already ship gas to Mexico through pipelines, but liquefied natural gas exports would expand companies’ reach into additional markets, he said.
“Having the LNG (export) opportunity would allow a little bit more balanced and healthier gas production around the country,” said Stark, noting that exports would temper the gas boom-and-bust cycle.
Steve Lynn can be reached at 970-232-3147, 303-630-1968 or email@example.com. Follow him on Twitter at @stevelynnBW.