U.S. LNG Exports - The Wave of the Future?

The pace of using the hydraulic fracturing ("fracking") technology in the United States has led to surges in natural gas supplies and lower natural gas prices (although prices have climbed slightly during these summer months due to the extreme heat wave washing over the Midwest and Eastern regions of the United States). As a result, a number of current U.S. LNG import terminals are seeking to convert to LNG export terminals. The Federal Energy Regulatory Commission (FERC) in its role as the siting agency approved the construction of the first LNG export facility in April, Cheniere Energy's Sabine Pass in Louisiana, at an estimated price tag of $5 billion. To date, there are eight additional applications pending before the Department of Energy (DOE) which has authority over exports of natural gas. DOE permits are required for U.S. companies to sell to non-FTA (Free Trade Agreement) countries, which include Japan and Spain.

However, there is a snag in the progress of DOE's approval process of the eight applications. DOE has suspended its review of them, pending a second-part study assessing the broader economic effects of increased natural gas exports on domestic energy consumption, production and prices.

The assessments were initiated after complaints from several U.S. lawmakers, including U.S. Representative Edward Markey (D-MA), the ranking Minority Member of the House Natural Resources Committee, and U.S. Senator Ron Wyden (D-OR), the second ranking Member of the Senate Energy and Natural Resources Committee. They are concerned that exporting LNG to foreign markets may result in negative economic and environmental consequences. Markey has introduced two measures to prohibit LNG exports. Conversely, proponents such as House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA), argue that this evolution will beneficially result in the United States becoming a global energy supplier. Issa has initiated a series of hearings on the topic.

Because U.S. natural gas is plentiful today and will likely remain so for the foreseeable future, it is estimated that the eight pending U.S. LNG export projects, if approved, could provide a total of 120 million metric tons of gas per year, compared to the world LNG leader Qatar's production capacity of 77 million metric tons / year.