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Obama Politics: Gas-Export Study Delay Puts U.S. Projects in Limbo for This Year

By Jim Snyder
Sep 18, 2012 2:14 PM CT

The Energy Department’s delay in releasing a report on liquefied natural-gas exports puts in limbo for this year as many as 12 applications including projects backed by Dominion Resources Inc. and Sempra Energy. (SRE)

The department commissioned the study last year to assess the economic impact of exports on domestic energy use after granting Cheniere Energy Inc. (LNG) permission to ship gas from Louisiana. It said future permits won’t be issued until the study is completed.

The first part of the study is complete, and a second portion was scheduled to come out in the first quarter. That date was pushed back to late in the U.S. summer, which ends Sept. 22. A posting on the department website now says it will be “complete by the end of the year.”

“It is really unfortunate, but I don’t think anything happens until we see the results of that report,” said Bill Cooper, president of the Center for Liquefied Natural Gas, which advocates for gas shipments. The Washington-based group includes LNG producers, shippers and terminal operators.

“None of the applicants, I’m certain, want to see a delay in the regulatory process,” Cooper said in an interview.

The study was started after lawmakers led by Representative Edward Markey, a Massachusetts Democrat, and Senator Ron Wyden, an Oregon Democrat, said overseas sales might increase domestic energy prices.

The delay probably will push release of the Energy Department’s report until after the election in November.

‘Complicated Analysis’

“This is a complicated economic analysis assessing a dynamic market,” Jen Stutsman, an Energy Department spokeswoman, said in an e-mail. “We take our responsibility to issue these determinations seriously and want to make sure the necessary time is taken to get it right.”

Investors including Sempra Energy in partnership with Mitsubishi Corp. and Mitsui & Co. Ltd., Freeport LNG with Macquarie Group Ltd., and Dominion Resources, have applied for approvals from the Energy Department.

U.S. permits are required to sell gas to countries that aren’t free-trade partners with the U.S., a group that includes Japan and Spain.

As natural-gas prices soared in the last decade, energy companies sought permission to build import terminals. Hydraulic fracturing, or fracking, for natural gas has opened access to reserves that previously couldn’t be produced economically, driving prices to a decade low and letting companies shift gears and seek overseas buyers for the fuel.

In fracking, oil and gas companies shoot a mixture of water, sand and chemicals underground to crack shale rock formations and free fossil fuels trapped inside.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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LNG EXPORT: U.S. Gas Exports Put on Back Burner

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By TENNILLE TRACY

The Obama administration is telling Japan and other allied countries they will have to wait before moving forward on plans to buy American natural gas, people involved in the talks said.

A dramatic increase in U.S. natural-gas production has led several U.S. companies, including Sempra Energy SRE +0.23% and Dominion Resources Inc., D +0.15% to seek permits from the Department of Energy to export gas to countries that lack free-trade agreements with the U.S. Exxon Mobil Corp. XOM -0.73% Chief Executive Rex Tillerson said Wednesday his company was looking at exporting from the U.S. Gulf Coast and Canada.

Sempra and Dominion are working with Japanese partners that want to import the gas as their country looks for new power sources. The U.S. currently exports relatively small amounts of natural gas via pipelines to Canada and Mexico, but a wave of recent export proposals marks the first time in decades that companies have sought to liquefy U.S. gas and transport it overseas.

But exports have become a hot-button topic for some lawmakers in Washington and have highlighted uncertainty about what kind of energy power the U.S. wants to become as companies unearth huge supplies of natural gas in shale rock.

“We are going to have to answer some basic questions about our role as a producer,” Michael Levi, a senior fellow at the Council on Foreign Relations, said. “The fact that some of these debates have been so difficult stems from their novelty.”

Japan’s prime minister raised the gas-export issue with President Barack Obama at an April 30 meeting, one of several occasions on which Tokyo has pushed the administration.

But the U.S. has told Japan, a leading military ally in the Pacific, it will have to wait, in large part because of the political sensitivities, participants in the talks said.

“I think it’s going to require more people taking a look at it,” an administration official said, adding, “We’re very sympathetic to Japan. They’re in a very difficult situation.”

Following the disaster at its Fukushima Daiichi nuclear plant last year, Japan pulled the plug on all of its nuclear reactors, forcing it to replace a power source that generated about 30% of its electricity. The government is studying whether to restart some of the reactors, but nuclear power is likely to play a smaller role in five or 10 years.

That is when the U.S. natural gas could start arriving, but only if the U.S. grants permits to export terminals that would liquefy the gas for shipping across the Pacific.

Japan isn’t the only country waiting. “The requests come from everywhere,” the administration official said. Natural gas is much cheaper in the U.S. than in Europe and Asia, where the fuel’s value is often tied to the price of oil. Companies importing American gas would be able to reduce costs with contracts tied to the lower U.S. prices.

Mr. Tillerson laid out the case for exports at Exxon’s shareholder meeting Wednesday, saying they would create jobs and help the U.S. trade balance. Sen. Lisa Murkowksi, a Republican from Alaska, asked President Obama in April to expedite permits for natural-gas exports. She said exports could give Alaska a market for gas from its North Slope, which lacks a gas pipeline to the lower 48 states.

Opponents, including Rep. Ed Markey of Massachusetts and some other congressional Democrats, say the U.S. could boost its energy security by keeping its natural gas at home. Oil-and-gas entrepreneur T. Boone Pickens, in an interview, objected to the idea of selling the gas at a discount to global prices. “You’re kind of giving your own stuff away, and it’s stupid to do that,” said Mr. Pickens, who wants U.S. trucks to use natural gas.

Japanese officials said they recognized the Obama administration’s political challenges.

“It is difficult for the U.S. to say yes [to exports] because of the presidential election,” said Hirohide Hirai, director of the petroleum and natural-gas division of Japan’s economy ministry. “There won’t be any deal with any country before November.”

U.S. officials say they are weighing how exports would affect job creation, trade and the domestic price of natural gas. A price spike would hurt consumers and weaken a competitive advantage enjoyed by U.S. manufacturers that use natural gas as a raw material. An Energy Department assessment is due later this year, and an administration official said decisions will follow in a “timely manner.”

—Mitsuru Obe and Isabel Ordonez contributed to this article.

Write to Tennille Tracy at tennille.tracy@dowjones.com

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Sierra Club Challenges Md. Natural Gas Terminal

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WASHINGTON (AP) — The Sierra Club said Thursday it will try to block an energy company’s plan to export liquefied natural gas from the booming Marcellus Shale formation.

Virginia-based Dominion Resources Inc. is seeking to export 1 billion cubic feet per day through a terminal it owns in Maryland.

A previous legal settlement dating to the 1970s gives the Sierra Club the ability to reject any significant changes to the purpose or footprint of the existing natural gas terminal in Cove Point,
Md.

The environmental group says the export project could result in major damage to the Chesapeake Bay and nearby Calvert Cliffs State Park in Maryland.

Dominion says the Cove Point terminal is well-situated to export gas from the prolific Marcellus Shale region, which lies beneath Pennsylvania, New York, West Virginia, Ohio and other states.

“The damage that this project would bring to the Maryland coast as well as the disastrous effects of the fracking boom on communities in states like Pennsylvania make it clear that exporting liquefied natural gas is bad news for Americans’ air, water and health,” said Michael Brune, executive director of the
Sierra Club.

Exporting liquefied natural gas, or LNG, would drive up the cost of domestic natural gas, Brune said, reversing the effects of a natural gas boom that has driven U.S. prices to 10-year lows.

Thomas F. Farrell II, president and CEO of Dominion Resources, said the company intends to go forward with the project.

“We have reviewed the various regulations, agreements and rulings from various regulatory bodies governing the site and are confident that we will be able to locate, construct and operate a liquefaction facility at Cove Point,” Farrell told reporters.

Dominion will design the plant to minimize damage to the environment, Farrell said.

The dispute over the Maryland plant comes as federal regulators have approved the first large-scale natural gas export facility in the United States.

The Federal Energy Regulatory Commission cleared construction of the Sabine Pass LNG terminal in Cameron Parish, La., last week. The facility, owned by Houston-based Cheniere Energy Inc., will chill natural gas into a liquid that can be shipped on tankers, allowing U.S. producers to export natural gas overseas for potentially huge profits. An existing LNG import facility at the Louisiana site will be converted also to handle imports.

The push for exports represents a turnaround from just a few years ago, when U.S. companies were seeking to build LNG terminals that would receive natural gas from other countries.

Those plans changed as improved drilling techniques, such as hydraulic fracturing and horizontal drilling, allowed drillers to gain access to natural gas wells that were hard to reach in the past.

Hydraulic fracturing, also called fracking, involves blasting mixtures of water, sand and chemicals deep underground to stimulate the release of gas. It is often combined with horizontal drilling, which can increase production far beyond a vertically drilled well.

Brune, of the Sierra Club, called on the Energy Department to review potential dangers of fracking. No federal agency has fully analyzed or disclosed such dangers to the public, he said.

Gas companies say fracking has been used safely for decades.

(Copyright 2012 by The Associated Press. All Rights Reserved.)Source

USA: Eight Firms Plan to Develop Wind Farms Offshore Virginia

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As reported by the Associated Press, the potential of the project, aimed at developing wind turbines in the U.S., situated off the Virginia cost and encompassing circa 113,000 acres in the Atlantic Ocean, has been recognized by numerous investors including European ones.

The federal Bureau of Ocean Energy Management, in charge of supervising offshore wind development, published the names of companies that submitted the necessary documentation in order to be eligible for project implementation, those being:

Arcadia Offshore Virginia LLC, New Jersey based branch of Arcadia Windpower, Cirrus Wind Energy Inc., based in Nevada; enXco Development Corp., based in California; Fishermen’s Energy LLC, based in New Jersey; Iberdrola Renewables Inc., an American subsidiary of a Spanish company with offices on the West and East coasts; Orisol Energy US Inc., another Spanish offshoot with American offices in Michigan; Apex Virginia; and Dominion Resources.

The paperwork will be scrutinized by the government regulators, in order to determine what company meets the technical and economic prerequisites in order to be able to push forward with the project implementation.

On March 27, Virginia regulators gave their consent to what might be the first offshore wind turbine built in the United States. Even though the prototype turbine still awaits approval of the U.S. Coast Guard and Army Corps of Engineers, it is said that it will be located in Chesapeake Bay and be able to meet the power needs of 1,250 households. The capacity of the wind turbine will equal to 5 megawatts of electricity and it should be ready for production by the end of 2013.

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Japan: Osaka Gas Eyes U.S. LNG

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Japan’s Osaka Gas is in negotiations to buy liquefied natural gas from Dominion Resources, Sempra Energy and Freeport LNG in the United States, Bloomberg reported, citing Tetsushi Ikuta, general manager of Osaka Gas energy resources and international business development.

He said that Osaka Gas may invest in planned LNG terminals in Maryland, Louisiana and Texas.

Osaka Gas said recently that it plans to purchase 7.19 million mt of LNG during fiscal 2012.

The company also plans to invest 290 billion yen (3.49 billion U.S. dollars) in LNG storage facilities and laying pipelines in five years from fiscal 2012-2016.

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