A Study Commissioned by The US Department of Energy on LNG Exports Is 'Seriously Flawed'

A key Democratic senator on Thursday reiterated his concerns that a study commissioned by the US Department of Energy on LNG exports is "seriously flawed" and should not be used by the agency to grant permits to companies wishing to ship domestically produced natural gas to countries that do not have free trade agreements with the US.

Senator Ron Wyden, an Oregon Democrat who is the incoming chairman of the Senate Energy and Natural Resources Committee, said in a letter to Energy Secretary Steven Chu the study uses outdated data that contradicts more recent projections by the Energy Information Administration on future US energy consumption.

The study, conducted by NERA Economic Consulting and released in December, found that such LNG exports would be a boon to the US economy and would not cause any major adverse effects on US household wealth, employment or industrial competitiveness.

"The shortcomings of the NERA study are numerous and render this study insufficient for the department to use in any export determination," Wyden wrote. "The NERA study would need to be updated with new EIA projections, more realistic market assumptions, regional impacts of the proposed actual export terminals, and evaluations of the actual impacts on consumers and businesses of exporting LNG."

DOE could not be reached for comment.

Wyden has long been opposed to expanding LNG exports to non-FTA countries, saying they could cause domestic gas prices to rise and hurt consumers.

DOE has said it may use the study as the basis for ruling on 20 export permit applications to non-FTA countries beginning in February, once it finishes reviewing public comments submitted in response.

By law, DOE must quickly approve exports to countries that have free trade agreements with the US, but the department can limit or block exports to non-FTA countries if it finds they are not in the public interest. Companies have applied to export 22.6 Bcf/d of gas as LNG to non-FTA countries.

Proponents of expanded LNG exports say allowing them would be a major boost to the US gas industry and create jobs. Domestic gas production has soared in recent years, as advances in horizontal drilling and hydraulic fracturing have enabled developers to tap previously inaccessible or uneconomic shale gas reserves.

Wyden said in his letter that even with the current US gas boom, the NERA study failed to consider significant domestic demand growth that many experts project will occur over the next decade.

For example, he said, natural gas may be increasingly used as a transportation fuel, and Dow Chemical has estimated that nearly 100 manufacturing and chemical facilities are in planning stages, as a result of relatively cheap domestic natural gas.

The study also does not take into account the potential impact of Canadian LNG exports on US prices, Wyden wrote.

He said DOE needs to establish clear criteria for approving LNG export applications.

"Proper, transparent mechanisms must be in place to effectively evaluate all LNG export applications -- prior to their approval -- to gauge whether each application is in the public interest," he wrote. "The inadequacies of the NERA study only underscore the need for the department to establish those criteria and procedures in a transparent and accurate manner informed by data that most accurately reflects the world today."