Will the DOE approve the exportation of Liquified Natural Gas (LNG)?

Currently, natural gas exports to countries that have a free trade agreement with the United States require approval from the federal level. For countries that do not have a free trade agreement with the U.S., approval from the Department of Energy (DOE) is required to grant applications for export. Factors for consideration include economic, energy security, and environmental impacts.[1]
Total U.S. marketed natural gas production in 2011 was about 66 Bcf/day and applications for a total of 28 Bcf/day in LNG exports are pending DOE approval.[2] Different levels of natural gas production and demand has created price discrepancies in natural gas between the U.S. and most of the rest of the world, making LNG exports an attractive business option. The case is stronger for firms that invested in expensive LNG infrastructure with the intention to import natural gas prior to the ramping of shale fracturing drilling practices.

A study performed by NERA Economic Consulting from the request of the DOE found that the U.S. was projected to gain net economic benefits from allowing LNG exports.[2] Furthermore, the study found that net benefits to the U.S. would be highest if the U.S. is able to produce large quantities of gas from shale at low cost, if world demand for natural gas increases rapidly, and if LNG supplies from other regions are limited.[2]

Although natural gas is a relatively clean fossil fuel option and exporting LNG may prove to be a profitable option, much opposition exists. In a recent Q&A session, Texas State Representative Mark Strama expressed concern in allowing LNG exports to occur. In his view, a more viable option would be to export frack drilling technology and services to the countries that pay higher premiums for natural gas. This practice would further secure the U.S. energy independence with respect to natural gas and keep electricity rates low domestically.
As the DOE is in the process of evaluating 15 LNG export applications, it will be very interesting to see which applications get approved and the effects on our economy and energy security.

[1] Department of Energy,http://www.fossil.energy.gov/programs/gasregulation/LNGStudy.html
[2] NERA Economic Consulting, “Macroeconomic Impacts of LNG Exports from the United States”


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