Senate Energy and Natural Resources Committee Hearing
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Chairman Landrieu, Ranking Member Murkowski, and members of the
I plan to address several fundamental questions today.
. What criteria should the
. Are there cost-effective measures that
. Is elimination of the public interest test for proposed LNG export applications an effective policy to assist
MEETING THE PUBLIC INTEREST STANDARD
In the past six years,
Unlike crude oil, there is no world market price for natural gas. Prices vary by nation or region, depending on factors including domestic supplies and transportation costs for exports. For instance, the
The higher natural gas price overseas led companies to submit applications to build and operate LNG export facilities. Under the Natural Gas Act, the
For potential gas importers that do not have a Free Trade Agreement with
Under these criteria, DOE has approved 7 LNG export applications. The
PUBLIC INTEREST DETERMINATION
Unfortunately, this proposed change in the public interest determination process does not ensure that the economic and climate effects become primary criterion for "evaluating the public interest" of LNG export applications. Instead, they remain secondary criteria. n13 An evaluation of the individual and cumulative impacts from approval of LNG export applications for non-free trade agreement nations should explicitly require an assessment of the increase of LNG exports on wages and electricity prices. It is essential that LNG exports do not significantly lower wages, raise rates, or harm manufacturing. In addition, DOE should evaluate the individual and cumulative impact of additional LNG exports on the emission of carbon, methane, and other climate pollutants.
Large LNG exports possible by 2020, leading to a natural gas price hike
Under a business as usual scenario - without significant expansion of LNG exports - EIA projects that the cost of natural gas for domestic electricity generation would rise by 32 percent between 2013 and 2020 and 60 percent between 2013 and 2030. n17
A 2012 EIA study of various levels of LNG exports found that "increased natural gas exports lead to increased natural gas prices." n18 Prices could increase by up to 35 percent by 2018, depending on the supply of shale gas, and speed and amount of exports. n19 EIA also found that "on average, from 2015 to 2035, natural gas bills paid by end-use consumers in the residential, commercial, and industrial sectors combined increase 3 to 9 percent." n20 This would increase electricity bills for end-use customers by "1 to 3 percent." n21
The EIA study determined that "with additional gas exports, consumers will consume less and pay more on both their natural gas and electricity bill." n22 Total average annual electric bills could increase by up to
These EIA estimates assume an increase in natural gas exports of no more than 12 bcf/d. Since the analysis was completed in
The DOE study by the
A significant natural gas price increase could have a severe impact on family budgets for those not employed in the gas industry. EIA reports that the typical household spent an average of nearly
Households in the fifth-lowest income bracket spent 6 percent - or twice that portion of their livelihood - on household fuels. n29
While gas and electricity prices could rise, DOE projects that "total labor compensation" would decline. n30 Its study concluded that "households with income solely from wages or government transfers...might not participate in [the] benefits" of LNG export expansion. n31
Higher natural gas prices could hurt manufacturing
Lower natural gas prices have fueled the recent increase in American manufacturing. Fuel Fix, a Hearst energy publication, reported in March that
An ample supply of cheap natural gas has ignited a U.S. manufacturing surge projected to expand plant payrolls and drive demand for chemicals, machinery and steel through the end of the decade, according to a report released Thursday.
Sinking natural gas prices...are linked to more than 196,000 new manufacturing jobs in major metropolitan areas and a
This growth is at risk if more LNG exports boost natural gas prices, as the aforementioned studies indicate would occur. According to EIA, the industrial sector, which includes manufacturers that use natural gas as a feedstock, would experience a 28 percent price increase in direct natural gas costs between 2013 and 2020. n35 The price boost would be more than a 50 percent increase between 2013 and 2030. n36
LNG exports could reduce net job creation compared to using this gas for domestic manufacturing. A study commissioned by
This is primarily driven by the higher level of investment required to manufacture products using the natural gas than to export it. Natural gas use of 5 Bcf/d in the manufacturing sector requires more than
This study concluded that "the total direct and indirect employment for the manufacturing sector (180,000 annual jobs) is more than eight times the total direct and indirect employment from LNG exports (22,000 annual jobs)." n38
In all of these cases, benefits that come from export expansion would more than outweigh the costs of faster increases in natural gas production and slower growth in natural gas demand, so that LNG exports have net economic benefits in spite of higher domestic natural gas prices. This is exactly the outcome that economic theory describes when barriers to trade are removed. n39
The study also concluded that higher natural gas prices from LNG exports would hurt manufacturing employment. It determined that
Higher natural gas prices in 2015 can also be expected to have negative effects on output and employment, particularly in sectors that make intensive use of natural gas.
The manufacturing sector [is] dependent on natural gas as a fuel and are therefore vulnerable to natural gas price increases. These particular sectors will be disproportionately impacted leading to lower output. n40
An increase in LNG exports could increase climate pollution
It is irresponsible to discuss energy policies without consideration of the potential contributions to climate change. Recent scientific reports continue to sound even louder alarms about the threat to public health and our environment from unchecked carbon, methane, and other climate pollution. On
"Throughout the 21st century, climate-change impacts are projected to slow down economic growth, make poverty reduction more difficult, further erode food security, and prolong existing and create new poverty traps, the latter particularly in urban areas and emerging hot spots of hunger," the report declared. n43
Americans are noticing changes all around them. Summers are longer and hotter, and extended periods of unusual heat last longer than any living American has ever experienced.
Other changes are even more dramatic. Residents of some coastal cities see their streets flood more regularly during storms and high tides. Inland cities near large rivers also experience more flooding, especially in the Midwest and Northeast. Insurance rates are rising in some vulnerable locations, and insurance is no longer available in others. Hotter and drier weather and earlier snow melt mean that wildfires in the West start earlier in the spring, last later into the fall, and burn more acreage. n44
So we must assess the potential impact of LNG exports on U.S. climate pollution. It's well documented that fracking to produce shale gas generates fugitive methane, which is the main component of natural gas. n47 Methane is a potent climate pollutant, which has 86 times more warming potential than carbon dioxide pollution over a 20-year time period. n48 This means that significant additional emissions in the near future could spur much more climate change, extreme weather, and other harmful impacts. n49
Oil and gas production is the second largest source of domestic methane pollution, responsible for nearly 30 percent of it. n50 The administration's "Climate Action Plan Strategy to Reduce Methane Emissions" noted that "methane equivalent to 127 million tons of carbon dioxide pollution was emitted from production, processing, transmission, storage, and distribution of natural gas" in 2012. n51
If LNG exports drive an increase in natural gas production - as many predict -- this could also spark growth in methane pollution unless strict limits are set to reduce it during the production and transportation phases. This concern led the
The U.S. must significantly reduce its methane releases to meet its 2020 climate pollution reduction goal. Later this year, the
Ignoring the potential increase in methane pollution from additional gas production driven by LNG exports won't make climate change go away - it will only make its impacts more deadly, destructive, and expensive.
DOE, too, must also assess the potential increase in methane pollution when reviewing pending LNG export applications. This evaluation should factor in the cumulative increase in natural gas production from all of the LNG export applications already approved, as well as the impact of the growth in gas production due to additional exports.
Some proponents of additional LNG exports argue that they would benefit the climate by replacing dirty coal-fueled electricity produced in
Exporting LNG would convert a relatively clean fuel to one with similar emissions levels to coal. At a time when we must sharply reduce climate pollution, we can little afford such a result. LNG export proponents cannot claim that more exports will lower overseas climate pollution because NETL debunked this notion.
Save natural gas, create jobs, cut pollution
One way to lower consumer prices and cut climate pollution is to make our natural gas distribution system much more efficient. A report by Sen.
Gas distribution companies in 2011 reported releasing 69 billion cubic feet of natural gas to the atmosphere, almost enough to meet the state of
Gas companies have little incentive to replace these leaky pipes, which span about 91,000 miles across 46 states because they are able to pass along the cost of lost gas to consumers. Nationally, consumers paid at least
Together, these bills would begin to plug natural gas pipeline leaks, create jobs for workers to repair them, save consumers money due to less wasted gas, and cut climate pollution. Most importantly, they would identify and repair the most hazardous pipelines to reduce the likelihood of another tragic gas explosion, such as the one in Harlem in March.
Companion bills were introduced in the
USAID PROGRAM ACHIEVED COST-EFFECTIVE EFFICIENCY IN
Municipal energy assessments, development of municipal energy plans, development of legal and technical specifications for metering equipment, implementation of energy efficient technologies, and monitoring results. n61
By 2013, the project achieved substantial results. For instance, through 2012 "on average, the implementation of heat metering and control systems resulted in 18.7 % savings," according to an Alliance to Save Energy draft report. n62
* 380 million cubic meters of natural gas saved;
* 676,000 tons CO2 emissions reduction;
* 25 Municipal Energy Plans with appropriate local budget support;
* 5 Regional Training Centers established;
* 34 energy efficiency/improved heating demonstration projects; and,
* 3,160 people (including 1,760 women) directly trained in energy efficiency subjects. n63
The MHR project was relatively inexpensive. The first three years cost a total of
EFFICIENCY CAN PROMPTLY HELP
The Obama administration recently delivered some cost effective aid to
A coalition of 35 Ukrainian mayors...urgently requesting assistance in increasing the energy efficiency of their buildings, district heating systems, and transportation networks in order to reduce dependence on imports of natural gas from
S. 2433 would provide
EFFICIENCY IS FASTER AND CHEAPER THAN LNG EXPORTS TO AID
Legislators are understandably concerned about
Many members of
There is legislation to fast track approval of additional LNG export applications by eliminating or truncating DOE's public interest review of proposed exports. n72
Additional approval of LNG exports threatens to further hike natural gas prices and pollution, but would do little to help
None of the other approved LNG terminals have even begun construction.
Oil executives understand that the approval, construction and operation of LNG export terminals is a lengthy process.
"L.N.G. exports are not about snapping your fingers and making them happen," said
The Times concluded that "
The bottom line: rushing to approve more LNG exports will not provide immediate or prompt relief for embattled
Rather than eliminate the public interest review of proposed LNG export facilities,
A decades-old decision by the
This four decade disregard of the Energy Policy and Conservation Act of 1975 could halt approval of additional export applications, and provides a potent legal argument to those challenging the applications already approved by DOE. n79 The
The huge increase in domestic shale gas production provides many benefits to
Likewise, the approval of additional LNG export applications should occur only if they do not cause electricity price spikes that would harm middle- and low-income families and business budgets, lower wages, or impair the recent manufacturing resurgence. Additionally, such exports must help reduce - rather than increase - climate pollution. The cheapest, fastest, most economically beneficial step to meet energy needs in
n3 Platts, "Spot LNG Prices for June Delivery Fell 8.0% on Low Demand," Press release,
n10 Cheniere, "Sabine Liquefaction Project Schedule," available at http://www.cheniere.com/sabine_liquefaction/project_schedule.shtml (last accessed April 2014).
n11 "Proposed Procedures for Liquefied Natural Gas Export Decisions,"
n44 U.S. Global Change Research Program, "National Climate Assessment Overview," available at http://nca2014.globalchange.gov/downloads.
n57 Pipeline Modernization and Consumer Protection Act, S. 1767, 113th Cong., 1s sess. (
n62 Alliance to Save Energy and the
n64 A. Delgado and
n73 Cheniere, "Sabine Liquefaction Project Schedule."
Read this original document at: http://www.energy.senate.gov/public/index.cfm/files/serve?File_id=67cd5d40-32b3-40cc-8c5c-a431621709d8
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