Senate Energy Committee Debates Liquefied Natural Gas Exports

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The Senate Committee on Energy and Natural Resources held a hearing yesterday on Opportunities and Challenges for Natural Gas and heard testimony from a distinguished panel of industry, government, academic, and environmental representatives. The hearing was an important step toward framing and advancing the debate over liquefied natural gas (LNG) exports.

Supporters of LNG exports, including Jack Gerard, the CEO of the American Petroleum Institute, made the case that exports would create jobs in the energy industry, allow markets to function based on market rules, and strengthen the nation’s position as an advocate of free trade. In addition, supporters said exports would present a strategic and national security advantage to the United States in its relationship with its allies, add liquidity to the global natural gas markets in a way that is advantageous to the United States and its allies, and provide significant tax revenues for federal, state, and local governments.

Opponents, including Frances Beinecke, president of Natural Resources Defense Council, argued for an “America First” policy where the United States would use its gas first and address its food security, defense, and unemployment issues before considering exports. They made the case that unfettered exports would develop the energy industry at the expense of other industries, prevent the manufacturing sector from adding value to energy products by a significant multiplier before exporting them, and cause significant development in shale gas production during a time of uncertainty about its safety and its impact on communities. In addition, opponents said exports would link U.S. natural gas prices to global oil prices, which are largely decided by groups of foreign state-owned enterprises, and also would raise energy costs and potentially collapse the manufacturing sector.

Committee Chairman Ron Wyden (D-OR) said he is looking for a “sweet spot” where natural gas can be at an affordable price for a manufacturing renaissance and continue to lower emissions by displacing “dirtier” fuels. Such a scenario would enhance U.S. energy security and self-sufficiency and provide sufficient incentives for producers. The ranking Republican, Lisa Murkowski of Alaska, sounded a more positive note in favor of LNG exports and cautioned against interference in the regulatory process to export natural gas.

It is not clear whether Chairman Wyden plans any legislative action aimed at changing the regulatory framework already in place to review LNG export applications.

If you have any questions, please contact Dena E. Wiggins at wigginsd@ballardspahr.com or 202.661.2225, or Jack N. Semrani at semranij@ballardspahr.com or 202.661.7640.