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- Federal regulations are deterring construction of LNG export terminals
- U.S. possesses a surplus of natural gas reserves
- These cards are in the inherency section
- LNG ports solve US Natural Gas
- US approval of export permits will have immediate effect for LNG dependent nations, but certainty is needed first
- Current U.S. natural gas output is increasing and sustainable
- Multiple European countries would buy US LNG exports
- These are the gov agencies involved
- AT: Exports lead to energy insecurity
- AT: exports lead to int. price volatility
- AT: Exports lead to domestic volatility
- Exports do not lead to price volatility
Solvency1ACDOE Approval process is blocking production – harbor approval solvesRegoli and Polley 14 Natalie Regoli is a partner in Baker & McKenzie's Houston office and a member of the Major Projects Practice Group. Her legal practice focuses on LNG / gas matters and she has experience throughout the lifecycle of LNG / gas projects, petrochemical facilities, and other major capital projects, Brian Polley advises on upstream energy transactions for Baker & McKenzie, with an emphasis on the representation of exploration and production companies in acquisitions and divestitures of producing properties 4/16, “Regulatory uncertainty hampers LNG export projects” http://www.ogj.com/articles/uogr/print/volume-2/issue-2/regulatory-uncertainty-hampers-lng-export-projects.html US brownfield projects require less capital investment than greenfield projects due to existing infrastructure, and therefore these projects are expected to be the first online. Lower investment costs and depressed gas prices at the benchmark Henry Hub enable US exporters to sell LNG for the lowest prices on the global market. The wildcard for these projects is the DOE, in particular, its lack of transparency regarding the criteria used to evaluate exports to non-FTA countries. Another cause for concern is the DOE's post-approval revocation authority, which most concerns Asian investors with ample balance sheets and large appetites for energy. The DOE reserves the power to reconsider approvals of non-FTA exports after those approvals have been granted, which worries investors, owners, and potential offtakers. Compare this to, for example, the regime created by Congress to review the national security implications of foreign investment in the US under the Committee on Foreign Investments in the US (CFIUS), where a clearance of a transaction is a safe harbor, and CFIUS cannot reconsider such decisions unless it finds that the parties misled or withheld critical facts from the committee. This post-approval revocation authority in the LNG export context creates great uncertainty and slows final investment decisions. The slow pace of the DOE's approval process alone is enough to hamper the competitiveness of US projects, especially if the export project is in the middle or end of the queue. A bottleneck at the Federal Energy Regulatory Commission amplifies the problem, with the second filer, Freeport LNG, only expected to receive final project approval in the third quarter of 2014. Federal regulations are deterring construction of LNG export terminalsHouse Committee on Energy & Commerce 14 (US House of Representatives, Committee on Energy & Commerce majority staff, “Prosperity at Home and Strengthened Allies Abroad – A Global Perspective on Natural Gas Exports”, The Policy Paper Series, Vol. 3, Issue 1, February 14, 2014, http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/analysis/20140204LNGexports.pdf) But yet again, federal red tape threatens to get in the way. To be exported, natural gas must be transformed into a liquid at very low temperatures, and loaded onto ships for export. The specialized LNG export facilities that can perform these tasks are an important part of the architecture of abundance, but building and operating them is subject to a very cumbersome federal permitting process. DOE plays a critical role in enabling the U.S. to take advantage of the new era of energy abundance by regulating the trade of natural gas. DOE exercises jurisdiction over the commodity itself (natural gas), whereas other federal agencies, such as the Federal Energy Regulatory Commission (FERC), state, and local bodies have jurisdiction over the facilities used to export the commodity. DOE’s authority arises under the Natural Gas Act, which sets the standard for review of most LNG export applications. Applications to countries with which the U.S. has a Free Trade Agreement (FTA) in effect are granted automatically. The process is much more complicated and uncertain for applications involving the majority of countries, those with which the U.S. does not have a FTA. The Natural Gas Act establishes a rebuttable presumption that a proposed export of natural gas to a non-FTA country is in the public interest; however, the statute does not define “public interest” nor identify the criteria that must be considered. As a result, DOE identified a growing list of factors, including economic impacts, international impacts, and security of supply. In addition, DOE relies on outdated 1984 Policy Guidelines related to the import of natural gas (at the time, it was believed that the U.S. would need to import more LNG) to weigh these factors. Overall, DOE’s standard of review is unpredictable, evolving, and has been slow to reflect the nation’s newfound natural gas abundance and the growing benefits of energy exports. DOE’s adopted procedures, including its role as a cooperating agency with FERC for the purpose of complying with the National Environmental Policy Act (NEPA), present unique challenges, as recently demonstrated in DOE’s order conditionally granting Freeport LNG authorization to export.12 Seemingly new criteria were added, and DOE partially denied the requested volume of natural gas not on the basis of previously stated public interest criteria,13 but because of a discrepancy identified in Freeport’s filing before FERC relating to the size of the facility and the environmental review process. DOE appears to be moving away from the market principles that once guided the process. In its 1984 Policy Guidelines on LNG imports, the agency stated that “the market, not government, should determine the price and other contract terms of imported natural gas … The federal government’s primary responsibility in authorizing imports will be to evaluate the need for the gas and whether the import arrangement will provide the gas on a competitively priced basis for the duration of the contract while minimizing regulatory impediments to a freely operating market.”14 DOE has seemingly abandoned this limited approach in favor of lengthy and comprehensive reviews of each export application under which almost any factor can be fair game. This unsettled review process has led to extensive delays and additional uncertainty, with more than 20 applications currently pending before the agency, some for over a year.15 Among the justifications for DOE’s cautious and case-by-case approach is the concern that if every application for export were approved, the resulting exports would create a substantial draw on domestic supplies of natural gas and cause a significant price increase. However, the previous record for FERC-approved LNG terminals does not bear this out. During the years when the U.S. faced the daunting task of building more import terminals in the face of declining production, there were approximately 33 applications that entered into the FERC application process. However, only five of these onshore import facilities were ultimately constructed.16 The reasons why only five were constructed vary, but given the complexity and costs of LNG projects, variables such as how many projects the market will ultimately support, and overcoming the federal, state, and local regulatory barriers to actually constructing a facility dictate that an approval to export LNG by no means guarantees a facility will be constructed or operational. 17 Whether these regulatory hurdles comply with the General Agreement on Tariffs and Trade and other trade agreements is a matter of considerable dispute.18 As one of the 159 member nations of the World Trade Organization (WTO), the U.S. is obligated to comply with these agreements. Ironically, the U.S. has expressed strong objections when other nations restrict exports of natural resources – such as OPEC’s oil embargo of 1973-‐74 and ongoing efforts by China to limit rare earth exports – yet, DOE may be doing much the same by erecting regulatory barriers to LNG exports through its current interpretation of the Natural Gas Act.19 It should be noted that LNG facilities are multi-‐billion dollar capital investments that take several years to build, so any regulatory uncertainty as to when they will be approved and to whom they are allowed to sell can have a chilling effect on investment. U.S. possesses a surplus of natural gas reservesLandrieu 14 (Mary L., Chair of the Senate Committee on Energy and Natural Resources, “Landrieu: Natural Gas Exports Will Create Thousands of High-Paying Jobs, Support U.S. Allies,” First hearing under Landrieu’s leadership, March 25, 2014, http://www.energy.senate.gov/public/index.cfm/2014/3/landrieu-natural-gas-exports-will-create-thousands-of-high-paying-jobs-support-u-s-allies) “The dramatic growth in natural gas reserves and production in the United States over the past five years has resulted in economic growth, relative reductions in greenhouse gas emissions, and greater energy security. Every credible estimate of our energy future suggests we will have substantial exportable surpluses of natural gas for decades to come,” Mr. Goldwyn testified. “This bounty could enhance our national power by positioning our nation as a reliable supplier of natural gas to regions of the world that suffer from intimidation from their suppliers or simply the economy crushing burden of oil linked prices. The question before us is not whether we have this geopolitical potential, but whether we will realize it in time to help our friends and allies.”¶ “Even before we start exporting liquefied natural gas (LNG) from the lower 48 states, the American shale gas revolution has already made a significant impact on the global LNG market,” Mr. Chow testified. “An indication of the radical change the shale gas revolution caused in the U.S. is Cheniere Energy’s Sabine Pass LNG project. Sabine Pass was completed as a receiving terminal only in 2009 and almost immediately sought to become a bi-directional terminal that can liquefy and export gas as well. It will become the first LNG export terminal in the lower 48 states when it is completed by the end of 2015.”¶ Last week, Russia sanctioned nine U.S. officials, denying them entry into Russia because they hold views in opposition to Russia’s actions against the Ukraine. Sen. Landrieu was among the nine sanctioned officials. Permits Solve ExportsThese cards are in the inherency sectionLNG Permits Solve ExportsMyers, Gordon, and Sperling, 13 [Members of “The Experts”, an exclusive group of industry and thought leaders who engage in in-depth online discussions of topics from the print Report; “Experts: How the U.S. Oil Boom Will Change the Markets and Geopolitics”; http://online.wsj.com/news/articles/SB10001424127887324105204578382690249436084; March 27th, 2013-EW] For four decades, the geopolitical leverage achieved by large petro-exporting states has been a major challenge for the U.S. and its allies. Now, the rapid growth of oil and natural-gas production from unconventional shale resources in North America is rapidly eliminating this threat, with positive geopolitical implications for the U.S in terms of exports. As political uncertainty spreads across the Mideast, rising U.S. shale-oil production may become a more critical touchstone to market stability. In fact, the U.S. shale-oil boom might roll back the clock to the 1960s when a U.S. oil surplus (via the Texas Railroad Commission), put Washington, not Riyadh, as the world's swing producer. In a world where the U.S. will have few, if any, oil imports to replace during a global supply outage, Washington will have more discretion to use the Strategic Petroleum Reserve to help allies in times of crisis or to prevent oil producers from using energy cutoffs to achieve financial or geopolitical goals. U.S. oil and gas exports will also garner closer ties to allies and friendly countries through closer economic relations, especially with development of sustainable LNG. A domestic oil and gas boom will also bring the US back to a stronger economic footing, possibly giving the country back some of the financial sway that previously allowed it to dominate international organizations like the United Nations and the World Bank. U.S. foreign aid and even energy exports could become a stronger counterpoint to continuing Chinese global investment. Beijing might also find soon that its overt policies of aiding problem states like Iran and Syria and thereby tying up the U.S. in conflicts across the Middle East will become more and more counterproductive over time as rising energy costs hit oil-import dependent China harder than an energy self-sufficient America. LNG ports solve US Natural GasVukmanovic and Mcallister,14 [Reuters Article Editors; Bachelors degree in Macro-Economics at the University of Texas and St. Petersburg; “Exclusive: World buyers line up to buy U.S. natural gas” ; Jan. 24th, 2014; http://www.reuters.com/article/2014/01/24/us-lng-sales-idUSBREA0N0XS20140124-EW] Countries across the world have been quietly signing deals in recent months to import natural gas from the United States, revealing a growing appetite for the fuel overseas as domestic output soars from LNG and petroleum. Up to a dozen long-term deals, each worth billions of dollars, have been penned behind closed doors with companies in China, Japan, Taiwan, Spain, France and Chile as global demand spikes, according to company, industry and trade sources. Through the agreements, China in particular has emerged as one of the biggest beneficiaries of cheap American natural gas that in the coming years will be piped to Gulf Coast plants and liquefied for shipment abroad in tankers. The unannounced deals, which amount to about 2 percent of daily U.S. supply, are not the first of their kind, and they depend on U.S. government approval to construct two new liquefied natural gas (LNG) plants. But the number of new buyers, and their global scope, show how the United States is taking steps to becoming a major export hub by stealing ahead of rivals in Australia and East Africa, successfully wooing needy Asian buyers even before projects begin construction. Global competition may squeeze profit margins on some exports of U.S. gas. Companies like Britain's BP (BP.L) and France's GDF Suez (GSZ.PA), already committed to taking LNG from the United States, are now finding multiple buyers willing to take tranches of supply. "As we see more contracts getting signed, it's an indication that the U.S. has really cheap natural gas that will help supply the global market and current conditions are increasing value," said Jason Bordoff, Director at the Center on Global Energy Policy at Columbia University. The United States is producing record amounts of natural gas thanks to a drilling boom, and more than a dozen export projects have been proposed from LNG. But large domestic users of natural gas such as the petrochemical industry are worried that unfettered exports could push prices higher at home. The Obama administration has been approving exports on a case-by-case basis. So far, only four projects are allowed to export across the globe and only one is under construction. Cheniere Energy's (LNG.A) Sabine Pass project in Louisiana, expected to begin shipments late in 2015, has sealed deals with importers in Europe and Asia over the past two years. This latest batch of gas sales will be exported from Sempra Energy's (SRE.N) Cameron LNG plant in Louisiana and the Freeport LNG plant in Texas, sources said. Both plants are expected to begin operations by the end of the decade, pending approvals. Sempra is still waiting on permits to construct the Cameron plant, and to export the gas to countries with which the U.S. does not have a free trade agreement. Freeport has full export approval, but is yet to begin construction. THE DEALS Securing buyers early can make or break an LNG project. Without buyers, a project will not receive financial backing or be built. GDF Suez, which acquired export rights at Cameron last year, has agreed to sell all of its 4 million tonnes per year of capacity to buyers in Japan, Taiwan, China and Chile, according to a review of deals confirmed by industry sources. Japan's Mitsubishi (8058.T) and Mitsui (8031.T), also with export rights at Cameron, have separately targeted major buyers such as Spain's Repsol (REP.MC), France's Total (TOTF.PA) and Japanese utilities. Mitsubishi is to sell a significant chunk of LNG to its own trading arm in Singapore. Sources said Japanese buyers were reluctant to commit to large deals while the fate of its nuclear fleet remained uncertain after the 2011 Fukushima disaster. Mitsubishi is also in talks with Indian Oil Corp. (IOC.NS) to sell 1 mtpa of LNG for its planned terminal at Ennore in southern India, a company executive said. Exact volumes may be adjusted. Sempra hopes to make a final investment decision to build the Cameron plant later this year. Once that decision is made, the deals agreed by GDF Suez, Mitsui and Mitsubishi automatically become formal sales agreements, industry sources said. The San Diego-based company expects to win export approval from the U.S. Department of Energy before April. Meanwhile, BP is in talks to export LNG from the Freeport plant to China National Offshore Oil Corporation (CNOOC), giving the British company a foothold in the world's largest energy consumer. This and older deals with other exporters will soon make China one of the largest importers of U.S. gas. BP has a further deal to supply Japanese utility Tepco with 0.5 mtpa, sources said. BP declined to comment. Mitsui and its prospective Japanese utility customers Kansai Electric and Tohoku Electric also declined comment. For a full list of deals, see table. More than 12 million tonnes per year (mtpa) of LNG would be exported from the United States under the deals, or around 1.5 billion cubic feet per day of gas, though some volumes may alter in final negotiations, sources said. U.S. daily production is about 70 billion cubic feet. "These deals will send a signal that there is still strong demand for U.S. LNG volumes," said Andres Rojas, analyst at Waterborne Energy in Houston. GDF was also in talks with Thailand's PTT but these were abandoned after a failure to agree terms last year, a senior PTT source said. Mitsui also broke off talks with South Korean importer GS Caltex, a source at the company said. HARD SELL Despite these recent deals, sellers have found it harder than expected to find new buyers, and have had to offer favorable terms when they do. A projected LNG supply spike between 2016-2020 from North America, Australia, east Africa, Russia and Asia has empowered buyers to push down the price of long-term deals being negotiated now. This is partly reflected in the low profit margins U.S. exporters stand to make from many of the recently concluded agreements. "The United States is not the only gas producer, so we are competing in a market with countries like Qatar, Malaysia, Australia and potentially East Africa," Bordoff said. "There is not infinite demand. There is only so much supply that the global market can take." In its first long-term LNG deal into Asia, GDF Suez is selling 0.8 mtpa to Taiwan's CPC from 2018 at barely breakeven levels. According to the price formula reviewed by sources, CPC will pay around $12 per million British thermal units for the gas in the first year of the contract, a steep discount to the $16 its pays for LNG prices in Asia linked to oil. Moreover, America's edge over rivals could easily dim should domestic gas prices rise nearer to pre-shale boom levels and crude oil prices simultaneously drop to around $80 a barrel. At those levels, LNG deals linked to oil begin to look globally competitive, handicapping buyers of American gas. Bearing these risks in mind, buyers nevertheless want limited exposure to U.S. LNG primarily as a way of negotiating down prices in oil-indexed, long-term contracts with Qatar and Australia. US approval of export permits will have immediate effect for LNG dependent nations, but certainty is needed firstHouse Committee on Energy & Commerce 14 (US House of Representatives, Committee on Energy & Commerce majority staff, “Prosperity at Home and Strengthened Allies Abroad – A Global Perspective on Natural Gas Exports”, The Policy Paper Series, Vol. 3, Issue 1, p. 12-13, February 14, 2014, http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/analysis/20140204LNGexports.pdf) Our friends and allies around the globe desperately need a more stable, reliable, and affordable supply of natural gas, and American consumers and manufacturers need continued robust demand to bring additional resources into competitive production. The 13 U.S. has the opportunity to be the world’s preferred supplier, and the case for mutually beneficial trade is very strong. However, because of regulatory delays and uncertainty, many nations believe they cannot rely on U.S. LNG. Some of these countries need additional energy in the near term, thus the regulatory delays may force them to pursue less desirable and more expensive options. “[T]here is a window of opportunity here for the next few years which may easily be gone in a couple of years,” said Ambassador Orban of Hungary. It should be noted that approvals of export applications can have an impact well before the LNG actually comes online. Orban added that “the very fact that American LNG could appear on the Central European and the European market would give us a negotiating position vis-a-vis our traditional supplier which would result in immediately lower prices.” Other nations’ LNG import facilities, as with U.S. export facilities, are expensive to build. The nations undertaking these projects cannot move forward without assurances that U.S. LNG will in fact be sold to them and that they will not be subject to years of regulatory limbo. Saroj Thanasunti, Thailand’s Charge d’Affaires, said, “We are seriously considering the potential to import LNG from the United States; however, this would require a huge amount of investment, and that investment needs some levels of certainty and predictability that LNG from the U.S. will be allowed to be exported.” Other nations expressed similar reservations. For these reasons, as well as the domestic benefits outlined earlier, the committee urges DOE to approve all pending LNG export applications by the end of 2014. Doing so would maximize the benefits of natural gas exports, both for the U.S. and for our allies and trading partners. The committee is also considering a range of potential legislative options to remedy the regulatory obstacles. This includes revisions to the Natural Gas Act to require a more certain and timely DOE approval process for natural gas export applications – one that better reflects the new era of natural gas abundance and benefits of energy trade while recognizing that time is of the essence. It may also include a shift in focus away from a recipient nation’s FTA status to the much more inclusive benchmark of whether it is a member of the WTO. Given the scope of potential benefits from LNG exports, and the relatively narrow window to maximize the U.S. energy advantage, it is imperative that the regulatory process be expedited so that these benefits can be realized. The committee will continue to pursue forward-looking policies to help realize the nation's newfound energy potential. The future is bright with the right policies in place. US Nat Gas HighU.S. possesses a surplus of natural gas reservesLandrieu 14 (Mary L., Chair of the Senate Committee on Energy and Natural Resources, “Landrieu: Natural Gas Exports Will Create Thousands of High-Paying Jobs, Support U.S. Allies,” First hearing under Landrieu’s leadership, March 25, 2014, http://www.energy.senate.gov/public/index.cfm/2014/3/landrieu-natural-gas-exports-will-create-thousands-of-high-paying-jobs-support-u-s-allies) “The dramatic growth in natural gas reserves and production in the United States over the past five years has resulted in economic growth, relative reductions in greenhouse gas emissions, and greater energy security. Every credible estimate of our energy future suggests we will have substantial exportable surpluses of natural gas for decades to come,” Mr. Goldwyn testified. “This bounty could enhance our national power by positioning our nation as a reliable supplier of natural gas to regions of the world that suffer from intimidation from their suppliers or simply the economy crushing burden of oil linked prices. The question before us is not whether we have this geopolitical potential, but whether we will realize it in time to help our friends and allies.”¶ “Even before we start exporting liquefied natural gas (LNG) from the lower 48 states, the American shale gas revolution has already made a significant impact on the global LNG market,” Mr. Chow testified. “An indication of the radical change the shale gas revolution caused in the U.S. is Cheniere Energy’s Sabine Pass LNG project. Sabine Pass was completed as a receiving terminal only in 2009 and almost immediately sought to become a bi-directional terminal that can liquefy and export gas as well. It will become the first LNG export terminal in the lower 48 states when it is completed by the end of 2015.”¶ Last week, Russia sanctioned nine U.S. officials, denying them entry into Russia because they hold views in opposition to Russia’s actions against the Ukraine. Sen. Landrieu was among the nine sanctioned officials. Current U.S. natural gas output is increasing and sustainableHouse Committee on Energy & Commerce 14 (US House of Representatives, Committee on Energy & Commerce majority staff, “Prosperity at Home and Strengthened Allies Abroad – A Global Perspective on Natural Gas Exports”, The Policy Paper Series, Vol. 3, Issue 1, February 14, 2014, http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/analysis/20140204LNGexports.pdf) Introduction: From Scarcity to Abundance The House Committee on Energy and Commerce has focused considerable attention on the biggest emerging energy story of this generation – the growth of domestic natural gas and oil production. Long-held beliefs in the inevitable decline of American gas and oil output have given way to the new reality of increasing abundance. These energy sources, along with coal, nuclear, and renewables, can provide the nation with the benefits of a diverse and plentiful energy portfolio for decades to come. The resurgence of natural gas and oil is an extremely important transformation, but it is one for which Washington has yet to adjust. Many outmoded federal policies, based on 3 the old assumptions of energy scarcity and rising imports, are still in force and stand in the way of the opportunities before us. This committee has taken the lead in reviewing these policies and fighting for needed changes. Several hearings have been devoted to various aspects of the nation’s expanding natural gas and oil abundance, with a particular emphasis on the legal and regulatory changes necessary to realize the full potential of these resources. The Subcommittee on Energy and Power began the 113th Congress with a hearing entitled “American Energy Security and Innovation: An Assessment of North America’s Energy Resources.” In this overview of the resource base, the Energy Information Administration (EIA) described the dramatic increases in domestic natural gas and oil production – all the more dramatic given that production had been falling for decades and many in Washington assumed that continued declines were unavoidable. Instead, the U.S. has rapidly reversed the declines and emerged as the world’s largest producer of natural gas and oil in 2013.1 The production increases show no signs of slowing down and should continue in the years ahead. Renowned energy analyst Dr. Daniel Yergin estimates that this energy revolution already supports 1.7 million jobs (making it one of the few employment bright spots in recent years) and could support 3 million jobs by 2020.2 The impressive rise in natural gas output since 2005 has been made possible by American innovations in hydraulic fracturing and horizontal drilling. EIA’s rising estimates of natural gas reserves strongly suggest that American output can exceed domestic needs into the future.3 Specifically, it projects a 56 percent production increase by 2040, remaining well above projected domestic demand.4 U.S. natural gas imports, which had previously been high enough to noticeably impact global supplies, have declined dramatically and are now negligible. However, the federal government has failed to encourage this energy transformation. In fact, due to access restrictions that keep vast areas off-limits5, natural gas and oil production on federally controlled lands and offshore areas has not increased at all. In the case of natural gas, the Congressional Research Service reports that “overall, U.S. natural gas production rose by 4 trillion cubic feet (tcf) or 20 percent since 2007, while production on federal lands (onshore and offshore) fell by about 23 percent and production on non-federal lands grew by 40 percent. The already-impressive net growth in natural gas supplies from state and private lands could be considerably enhanced if federal lands were more fully brought into the mix. Europe Says YesMultiple European countries would buy US LNG exportsHouse Committee on Energy & Commerce 14 (US House of Representatives, Committee on Energy & Commerce majority staff, “Prosperity at Home and Strengthened Allies Abroad – A Global Perspective on Natural Gas Exports”, The Policy Paper Series, Vol. 3, Issue 1, p. 8-10, February 14, 2014, http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/analysis/20140204LNGexports.pdf) While these hearings emphasized the potential economic benefits of LNG exports, they also touched on the tremendous geopolitical benefits. Indeed, many believe that important foreign policy goals can be more effectively advanced through increased energy trade than through diplomacy or foreign aid programs. Further, an increased American contribution to global energy markets can enhance national security by supplanting the influence of the troublesome participants currently dominating those markets, especially Iran and Russia.21 To fully understand the global implications of LNG exports, it is critical to hear directly from those allies and trading partners around the world that are seeking this American energy. By listening to these voices, we can better understand the energy problems they face, and why they see U.S. LNG as an important part of the solution. For this reason, on October 10, 2013, the Subcommittee on Energy and Power hosted a forum, entitled “U.S. Energy Exports: Geopolitical Implications and Mutual Benefits.” The participants, representing the Commonwealth of Puerto Rico and many foreign nations included: • Czech Republic: Joroslav Zajicek, Deputy Chief of Mission, • Haiti: Rene Jean-Jumeau, Minister Delegate to the Prime Minister, Charge of Energy Security, • Hungary: Anita Orban, Ambassador-at-Large for Energy Security of the Ministry of Foreign Affairs, • India: Taranjit Singh Sandhu, Deputy Chief of Mission, • Japan: Yasushi Akahoshi, Minister, Economy, Trade, Industry and Energy, • Lithuania: Zygimantas Pavilionis, Ambassador to the United States and Mexico, • Puerto Rico: Dr. Efrain O’Neill-Carillo, Senior Energy Advisor to the Governor, • Singapore: Ashok Kumar Mirpuri, Ambassador to the United States, • South Korea; Ahn Ho-Young, Ambassador to the United States, and • Thailand: Saroj Thanasunti, Charge d’Affaires. These nations vary greatly in terms of their current energy supply challenges and expected future needs. They also differ in their levels of economic development, national security concerns, environmental policy priorities, and other energy-‐related factors. But they all have one thing in common – they are dependent on energy imports and have expressed a strong interest in LNG from the U.S. AT: Not the FedThese are the gov agencies involvedEbinger 12 Senior fellow and Director of the Energy Security Initiative at Brookings, Charles, “Liquid Markets: Assessing the Case for US Exports of Liquefied Natural Gas,” 5-2-12, http://www.brookings.edu/~/media/events/2012/5/02%20lng%20exports/20120502_lng_exports Companies looking to construct or expand facilities for the export of LNG from the United States need to satisfy a number of federal regulatory requirements. These include the requirement for companies to seek export authorization from the Department of Energy’s Office of Fossil Energy if the importing country is not subject to a free- trade agreement (FTA) with the United States (see Table 2).26 Operators looking to modify existing LNG import terminals must obtain ap- proval from the Federal Energy Regulatory Com- mission (FERC).27 Other federal agencies that have a role in approving LNG export facilities in- clude the U.S. Coast Guard, which, among other responsibilities, provides escort security in and out of port facilities; and the Pipeline and Hazard- ous Materials Safety Administration, which has jurisdiction over all pipelines. Under the National Environmental Policy Act, LNG export facilities may also be subject to environmental reviews in the form of an Environmental Impact Statement, an Environmental Assessment or under the terms of the Clean Air Act, or the Endangered Species Act..28 (See Box 1). AT: Exports lead to energy insecurityNo link and turn – we don’t export enough to trigger the link, but leads to increased drilling, which solvesEbinger 12 Senior fellow and Director of the Energy Security Initiative at Brookings, Charles, “Liquid Markets: Assessing the Case for US Exports of Liquefied Natural Gas,” 5-2-12, http://www.brookings.edu/~/media/events/2012/5/02%20lng%20exports/20120502_lng_exports Aside from the price impact of potential U.S. LNG exports, a major concern among opponents is that such exports would diminish U.S. “energy security”; that exports would deny the United States of a strategically important resource. The extent to which such concerns are valid depends on several factors, including the size of the do- mestic resource base, and the liquidity and func- tionality of global trade. As Part I of this report notes, geological evidence suggests that the volumes of LNG export under consideration would not materially affect the availability of natural gas for the domestic market. Twenty years of LNG exports at the rate of 6 bcf/day, phased in over the course of 6 years, would increase demand by approximately 38 tcf. As presented in Part I, four existing estimates of total technically recoverable shale gas resources range from 687 tcf to 1,842 tcf; therefore, exporting 6 bcf/day of LNG over the course of twenty years would consume between 2 and 5.5 percent of total shale gas resources. While the estimates for shale gas reserves are uncertain, in a scenario where reserves are perceived to be lower than expected, domestic natural gas prices would increase and exports would almost immediately become uneconomic. In the long-term, it is possible that U.S. prices and international pric- es will converge to the point at which they settle at similar levels. In that case, the United States would have more than adequate import capacity (through bi-directional import/export facilities) to import gas when economic. A further gas-related consideration with regard to energy security is the effects of increased pro- duction of associated natural gas with the increas- ing volumes of U.S. unconventional oil. As the primary energy-security concern for the United States related to oil, the application of fracking and horizontal drilling in oil production is reduc- ing U.S. oil import dependence, while simultane- ously producing substantial volumes of natural gas, which, given the relative economics of oil and gas, is effectively delivered at zero (or, in the case of producers who have to invest in equipment to manage flaring and venting, negative) cost. To the extent that associated gas from unconventional oil production is used for LNG export, it can be seen as a consequence of—rather than a threat to—increased U.S. energy security.
Won’t impact international pricesEbinger 12 Senior fellow and Director of the Energy Security Initiative at Brookings, Charles, “Liquid Markets: Assessing the Case for US Exports of Liquefied Natural Gas,” 5-2-12, http://www.brookings.edu/~/media/events/2012/5/02%20lng%20exports/20120502_lng_exports Although it will be important to global LNG mar- kets, it is unlikely that the emergence of the United States as an exporter of LNG will change the ex- isting pricing structure overnight. Not only is the market still largely dependent on long-term con- tracts, the overwhelming majority of new liquefaction capacity emerging in the next decade (largely from Australia) has already been contracted for at oil-indexed rates.108 The incremental LNG vol- umes supplied by the United States at floating Henry Hub rates will be small in comparison. But while U.S. LNG will not have a transforma- tional impact, by establishing an alternate lower price for LNG derived through a different market mechanism, U.S. exports may be central in catalyz- ing future changes in LNG contract structure. As previously mentioned, this impact is already being felt in Europe. A number of German utilities have either renegotiated contracts or are seeking arbitration with natural gas suppliers in Norway and Russia. The Atlantic Basin will be a more im- mediate beneficiary of U.S. LNG exports than the Pacific Basin as many European contracts allow for periodic revisions to the oil-price linkage.109 In the Pacific Basin this contractual arrangement is not as common and most consumers are tied to their respective oil-linkage formulae for the dura- tion of the contract.110 Despite the increasing de- mand following the Fukushima nuclear accident, however, Japanese LNG consumers are actively pursuing new arrangements for LNG contracts.111 There are other limits to the extent of the impact that U.S. LNG will have on global markets. It is un- likely that many of the LNG export facilities under consideration will reach final investment deci- sion. Instead, it is more probable that U.S. natural gas prices will have rebounded sufficiently to the point that exports are not commercially viable be- yond a certain threshold. (figure 11 illustrates the estimated costs of delivering LNG to Japan in 2020.) This threshold, expected by many experts to be roughly 6 bcf/day by 2025, is modest in comparison to the roughly 11 bcf/day of Austra- lian LNG export projects that have reached final investment decision and are expected to be online by 2020. Also, the impact of U.S. LNG exports could be lim- ited by a number of external factors that will have a larger bearing on the future of global LNG prices. For instance, a decision by the Japanese government to phase-out nuclear power would significantly tight- en global LNG markets and probably displace any benefit provided by U.S. LNG exports. Conversely, successful and rapid development of China’s shale gas reserves would limit the demand of one of the world’s fastest-growing natural gas consumers. How- ever, to the extent that U.S. LNG exports can help bring about a more globalized pricing structure, they will have economic and geopolitical consequences. AT: Exports lead to domestic volatilityExports don’t hurt domestic prices or industrial edge – increased demand will increase extractionEbinger et al 12 Senior fellow and Director of the Energy Security Initiative at Brookings, Charles, “Liquid Markets: Assessing the Case for US Exports of Liquefied Natural Gas,” 5-2-12, http://www.brookings.edu/~/media/events/2012/5/02%20lng%20exports/20120502_lng_exports While LNG exports may be practically feasible, they will be subject to approval by policy mak- ers if they are to happen. In making a determi- nation on the advisability of exports, the federal government will focus on the likely implications of LNG exports: i.e. whether LNG exports are in the “public interest.” The extent of the domestic implications is largely dependent upon the price impact of exports on domestic natural gas prices. While it is clear that domestic natural gas prices will increase if natural gas is exported, most exist- ing analyses indicate that the implications of this price increase are likely to be modest. Natural gas producers will likely anticipate future demand from LNG exports and will increase production accordingly, limiting price spikes. The impact on the domestic industrial sector is likely to be marginal: to the extent that LNG exports raise domestic gas prices above the level at which they would have been in the absence of such exports, they will negatively affect the competitiveness of U.S. industry relative to international competi- tors. However, the competitiveness of natural-gas intensive U.S. companies relative to their coun- terparts is likely to remain strong, given the large differential between projected U.S. gas prices and oil prices, which are the basis for industrial feed- stock by competitor countries. Further, LNG ex- ports are likely to stimulate domestic gas produc- tion, potentially resulting in greater production of natural gas liquids such as ethane, a valuable feedstock for industrial consumers. LNG exports are also unlikely to result in an increase in price volatility. The volume of LNG exports is capped by the capacity limitations of liquefaction termi- nals. If liquefaction terminals are running at close to full capacity, an increase in international de- mand will do little to affect domestic demand for —and therefore domestic prices of —natural gas.
Senior fellow and Director of the Energy Security Initiative at Brookings, Charles, “Liquid Markets: Assessing the Case for US Exports of Liquefied Natural Gas,” 5-2-12, http://www.brookings.edu/~/media/events/2012/5/02%20lng%20exports/20120502_lng_exports There is an insufficient amount of data and quan- titative research on the relationship between domestic natural gas price volatility and LNG ex- ports. However, certain characteristics of the LNG market are likely to limit volatility. LNG is bound by technical constraints: it must be liquefied and then transported on dedicated tankers before ar- riving at terminals where a regasification facility must be installed. Liquefaction facilities have ca- pacity limits to how much gas they can turn into LNG. If they are operating at or close-to full ca- pacity, such facilities will have a relatively constant demand for natural gas, therefore an international price or supply shock would have little impact on domestic gas prices. Moreover, unlike oil trad- ing, in which an exporter—theoretically—sells each marginal barrel of production to the highest bidder in the global market, the capacity limit on LNG production and export means that LNG ex- porters have an infrastructure-limited demand for natural gas leaving the rest of the natural gas for domestic consumption. As most LNG infrastruc- ture facilities are built on a project finance basis and underpinned by long-term contracts, this de- mand can be anticipated by the market years in advance, reducing the likelihood of volatility. Directory: file -> view view -> Western Europe after wwii view -> Author study: paul fleischman view -> Qpa1 7ela study Guide view -> Arctic Oil/Gas Neg view -> November 1970 Approximately 150,000-500,000 deaths Bhola Cyclone Bangladesh view -> Grade Level: 6 Unit of Study: Caribbean glce view -> Citation: Duffield, Katy view -> Table of Contents Lesson # view -> Chinese Wind Energy Disad Download 0.9 Mb. Share with your friends:
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