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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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LETTER: ‘Career Politicians Like Markey are Holding Our Economy Back’

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By Susan Petroni

In a move that further exemplifies why we must redirect our government in order to restore our economy, U.S. Rep. Ed Markey has decided to fight the law of supply & demand. His consistent failure to understand basic economics damages our economy – in this instance, by stifling job creation and energy independence.
In a letter to Energy Secretary Steven Chu, Markey questioned the impact of allowing U.S. companies to export liquefied natural gas with the following statement:

‘I am worried that exporting America’s natural gas would raise energy costs for American consumers, reduce the global competitiveness of U.S. businesses, make us more dependent on foreign sources of energy, and slow our transition away from dirtier fuels.’

This statement is another example of how career politicians like Markey are holding our economy back. Recent advances in natural gas exploration have brought us to the point of oversupply in the U.S. market. This situation provides a unique opportunity to be a net energy exporter for LNG (liquefied natural gas). Being at a point of oversupply means that we have reached our capacity to consume LNG domestically. Mr. Markey’s proposal to artificially inhibit exports  will yield the precise outcome that he allegedly wants to avoid;  namely, reducing the global competitiveness of U.S. businesses.

Last year, in an $8 billion 20-year deal,  the Energy Department approved the first application by Cheniere Energy to export LNG to the UK.  This is a step in the right direction. Other countries will start sending their money to us instead of us sending our money overseas.

Natural gas is cleaner than oil. It is also more abundant than oil in the United States and it provides an excellent vehicle for job creation. As we speak, many LNG import sites across the U.S. largely sit idle as exporters (to the U.S.) shift their LNG supplies to emerging markets that will pay a premium for natural gas. Among the sites built on the anticipation of large LNG imports is SUEZ Energy North America located in Everett.

SUEZ is a natural gas importer and large contributor to Mr. Markey’s campaign.

Now imagine if the Everett LNG import site became an export site. Imagine hundreds of workers becoming employed in the conversion process from importer to exporter. Imagine job growth in and around Boston if it became a hub for energy exports, with every tanker that passes through Boston harbor another reminder of economic growth here in America. This isn’t a far fetched concept.
Right now, Dominion Resources Inc (D.N) is considering plans to build a liquefied natural gas export plant on the site of its existing import terminal at Cove Point, Maryland, by 2015. Southern Union Co. is launching similar plans at their Lake Charles, La., LNG import terminal as well.

What is standing in the way? Rep. Markey.

Career politicians like Markey (who was elected in 1976, the year I was born) are fundamentally incapable of grasping the negative effects of blocking incredible opportunities such as these.
In addition to his myopic view of energy development here in the U.S., Markey is engaged in a serious conflict of interest by sitting on both  the House Energy and Commerce Committee and the Natural Resources Committee, attempting to regulate the energy industry while accepting campaign contributions from its lobbyists.
Besides SUEZ Energy, Markey has accepted contributions from Chesapeake Energy, Interstate Natural Gas Assn of America, Spectra Energy and Washington Gas Light Co., all companies within the natural gas sector.

Accepting contributions from these companies is not illegal, but threatening them with adverse legislation, application delays or public scorn is tantamount to a shakedown. This is just the latest demonstration of Markey’s questionable ethics. There are numerous others, including examples relating to the solar and telecommunications industries.

For the sake of our national economy, and to help  the hard working men and women who are struggling to find a job in Massachusetts’ 5th District and across the country, it is high time that we voted Markey out of office. I look forward to being the candidate to make it happen.

Semon (pronounced Simone) is a candidate for Congress in 5th Congressional District. A graduate of the University of Massachusetts, Amherst – School of Management, Semon is a senior business analyst. He and his wife Nicole live in Lexington and recently had their first child Eleanor in  December.

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Gas Exports Ignite a Feud

Seal of the United States Department of Energy.

Energy Firms Promote Exports, but Manufacturers Fear Their Costs Will Climb

By TENNILLE TRACY

U.S. officials will soon weigh in on a fight between companies that want to export some of America’s fast-growing supply of natural gas and big manufacturers that oppose the exports because they rely on cheap domestic gas.

In the next few weeks, Washington’s number-crunchers are set to estimate whether exports would cause U.S. prices to swell—a finding they will use in deciding the fate of more than a half-dozen projects across the nation.

The battle, which pits manufacturers such as Dow Chemical Co. against energy producers like ConocoPhillips, shows how the boom in U.S. fossil-fuel production is upending markets and forcing policy makers into decisions they didn’t imagine facing just a few years ago.

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Associated Press

Natural gas is pumped at a hydraulic fracturing operation in Pennsylvania’s Marcellus Shale in July.

Once seen as a likely significant importer of natural gas—before the boom in domestic shale-gas production provided enough to meet demand—the U.S. is now emerging as a potential supplier of the fuel to nations overseas thanks to the newly tapped sources in shale.

Companies are setting their sights on markets in Europe and Asia where natural gas fetches three to four times the price in the U.S. According to Platt’s, natural gas in Japan and South Korea fetches more than $16 per million British thermal units, compared with a benchmark price of a little more than $3 per million BTUs in the U.S. The companies are looking to spend billions of dollars on new terminals that could ship out about 17% of U.S. daily production, or about 11 billion cubic feet per day, according to the Energy Department. But Dow Chemical and others say allowing exports will crimp the supply available to U.S. users and drive up prices here.

To send natural gas across the oceans, companies must supercool the fuel to minus 260 degrees and convert it to liquid form so it can be loaded onto tankers. Building massive coastal facilities to make liquefied natural gas requires multiple permits from Washington.

The Energy Department is looking at whether exports will drain U.S. supplies and inflate domestic prices. The Energy Information Administration, part of the department, is expected to deliver its analysis in a few weeks.

If the department finds export terminals will raise the domestic price of natural gas and fail to serve the country’s best interests, it could block applicants from exporting to most nations except those with free-trade agreements with the U.S. That could doom the projects.

GASEXPORT

 

Sen. Ron Wyden (D., Ore.), whose state includes one of the proposed terminals, says he is concerned U.S. consumers and businesses will get “short shrift” if natural gas supplies are shipped abroad.

“If you see natural gas prices go into the stratosphere, it would make it difficult for other industries to create jobs in the United States,” Mr. Wyden said in an interview.

Among those taking a hit would be chemical companies, which use natural gas as a raw material in car parts, bottles, cleaners, mattresses and other products. Dow Chemical, one of the most outspoken critics of the export proposals, says the U.S. would be better off using its cheap natural gas for domestic manufacturing instead of exports.

“When natural gas is used as a chemical raw material, it creates eight times the value compared to other uses, and fuels higher-paying jobs, exports of finished goods and the vitality of the manufacturing sector,” Dow spokeswoman Kasey Anderson said.

Energy companies say there is plenty of natural gas in the U.S. to meet domestic demand and support exports at the same time. They say building the giant export facilities would create construction jobs and boost long-term employment by encouraging a faster rise in U.S. natural-gas output.

“American consumers are best served when markets rather than regulators determine outcomes,” said Cheniere Energy Inc. spokesman Andrew Ware.

While concern over price increases “gets the most airplay,” the Energy Department is also examining potential benefits of exports, such as creating jobs and offsetting the large U.S. trade deficit, said Chris Smith, the department’s assistant secretary for oil and gas.

Cheniere, which wants to start construction in 2012 on an export facility in Louisiana, is the only company to have cleared the Energy Department hurdle on exports. It got approval to export to most nations in May, before opponents had fully geared up to resist such plans. Cheniere has already signed long-term contracts to supply natural gas to the U.K.’s BG Group PLC, Spain’s Gas Natural Fenosa and GAIL (India) Ltd.

Many companies that are seeking permission to export natural gas had planned to import it just a few years ago. Then U.S. production rose 18% between 2005 and 2010, with the bulk of the increase coming from gas trapped in rock formations known as shale.

Import terminals are now gathering dust. Earlier this year, a terminal owned by Dominion Resources Inc. south of Baltimore had to buy a shipment of natural gas from overseas just to keep its equipment running.

With natural gas prices in the U.S. at multiyear lows, power companies can generate electricity more cheaply and pass the savings to consumers.

A study by Navigant Consulting Inc. found three of the export projects the government is studying could together increase domestic prices by 17% in 2020, with the impact declining over time as more natural gas is produced.

Deloitte, which looked at a separate set of three projects, said the long-term rise in prices would be much smaller.

Charles Ebinger of the Brookings Institution says the impact of exports on prices is “virtually an impossible question” because there are so many hard-to-measure variables. One is whether the popular drilling technique known as hydraulic fracturing continues to grow—boosting natural-gas supply and keeping prices down—or gets bogged down in safety questions.

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

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U.S. natural gas exports could surge if DOE approves applications

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By Lou Kilzer, PITTSBURGH TRIBUNE-REVIEW
Wednesday, December 28, 2011

About one-fifth of the United States’ annual natural gas production could be shipped to India, Japan, China and other countries if the Department of Energy approves an increasing number of applications from companies that want to establish export terminals, a senior department official told the Tribune-Review.

Applicants began requesting permission to export American natural gas late last year. The latest and biggest application arrived a week ago, said John Anderson, manager of natural gas regulatory activities at DOE’s Office of Fossil Fuels.

That application, from Gulf Coast LNG Export LLC, asks to export 2.8 billion cubic feet of liquefied natural gas daily to countries with which the United States has no free-trade agreements.

Gulf Coast LNG appears to be a mystery company. The DOE has not posted the application on its docket board, so Anderson told the Trib on Tuesday that he is reluctant to name those involved.

The Gulf Coast LNG application came shortly after one filed on Dec. 19 by Freeport LNG Expansion, L.P and FLNG Liquefaction LLC. The two companies now want to export 2.8 billion cubic feet per day from a Texas port — double the amount of gas the companies had earlier sought permission to export.

The two December applications confirm previous reports by the Trib about an exploding interest in sending American natural gas abroad.

In May, the DOE gave its first and only approval to export natural gas to Sabine Pass Liquefaction LLC. Sabine, with a right to ship 2.2 billion cubic feet a day from a Louisiana port, Sabine has already signed contracts with companies in India, Great Britain and Spain to export American natural gas. In all, nine export applications have been filed.

Anderson said the department will grant no further approvals until two studies it commissioned are completed in the first quarter of 2012 examining the “impact on consumption, the economy, GDP and balance of trade.” The U.S. Energy Information Administration and a private firm are conducting the studies.

Price impact is key, he said, as is “the energy security of the United States.”

Those hoping to export argue that America is awash in natural gas because of hydraulic fracturing and horizontal drilling techniques that revolutionized gas production from deep shale formations. They forecast a small impact on prices and an increase in American jobs.

Dan Donovan, a spokesman for Dominion Resources, which wants to export Marcellus shale gas from Cove Point, Md., said studies show the United States is producing enough gas for domestic use “and limited exports.”

Exports would “support price stability,” he said.

Others, including oil tycoon T. Boone Pickens, argue that America should use its natural gas to produce electricity and power vehicles, thereby reducing the nation’s reliance on foreign oil. Pickens has told the Tribune-Review that if America exports natural gas, “we’re truly going to go down as the dumbest generation.”

Paul Cicio, president of Industrial Consumers of America, an organization representing American manufacturers with more than $700 billion in combined annual sales, told the Trib yesterday that “we’re clearly in unchartered waters here.”

His organization opposes exporting natural gas, in part for the same reason that proponents cite in their support: jobs.

“The possibility of (gas) rate growth is alarming manufacturing consumers,” he said.

Cicio said he believes the need to convert power plants from coal to gas will grow because of the Environmental Protection Agency’s new emissions regulations for plants.

Money is the bottom line: Natural gas prices in some places in Asia are three to four times that of U.S. prices, according to the energy reporting service Platts. That means that even when figuring in the cost of gas liquefaction and shipping, companies potentially could make more profit by exporting, Barclays Capital said this year.

The government estimates daily production of natural gas for 2011 will be 65.6 billion cubic feet a day. The export applications seek to ship a combined 12.51 billion cubic feet a day, or about 19 percent at the 2011 level.

Natural gas is transported in liquefied form by cooling it to minus 260 degrees. At that temperature, it takes up about 1/600 the space of its gaseous state.

A few years ago, energy experts predicted America would become a large importer of liquefied natural gas and companies scrambled to build plants to receive it from overseas. Owners of those ports want to reverse course and turn them into export terminals.

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