A manufacturer trade group and other opponents of U.S. LNG exports re-upped their call for the U.S. government to restrict shipments of natural gas to world markets despite few signs that the White House is amenable when allies are facing potential gas shortages.
The Industrial Energy Consumers of America, or IECA, said Jan. 25 that surging LNG exports harm domestic consumers and that U.S. President Joe Biden should rein them in. The group was joined by the Institute for Energy Economics and Financial Analysis.
"What [the U.S. Energy Department] has put in place is an extreme LNG export policy, and it is anti-consumer," IECA President and CEO Paul Cicio said.
For years, the IECA has asked the Energy Department to order U.S. LNG producers to throttle back exports of the fuel. The U.S. gas industry has pushed back on such requests, arguing that restricting exports would erode the status of the U.S. as a reliable trading partner, upend global gas markets and undermine billions of dollars worth of infrastructure investments when LNG exports are not solely to blame for domestic price increases.
Arguments over exports
Cicio criticized federal permitting of new projects and extensions of export licenses. The CEO said the regulatory action "shifts the supply risk and the price risk from the exporter to the domestic consumer."
The IECA has called for a new Natural Gas Act to revisit how the U.S. government determines whether exports are in the public interest and the creation of a "consumer safety valve" that would allow the U.S. to roll back exports in the event of significantly higher domestic prices.
The trade association for U.S. LNG exporters, the Center for Liquefied Natural Gas described the IECA argument for restricting exports as a "tired claim" that "turns a blind eye and deaf ear to world events causing significant disruptions to our allies and trade partners who so desperately are in search of energy security."
"The reality is we have more than enough gas here in the United States to meet the demands of those domestic customers and provide LNG to those abroad," Center for Liquefied Natural Gas Executive Director Charlie Riedl said in an email. "All of this is confirmed by the market and natural gas prices. U.S. LNG demand has been setting records and the Henry Hub price has remained near flat."
The IECA, which represents large manufacturers of chemicals, steel, aluminum, plastics and other products, asked the DOE in September 2021 and again in November 2021 to suspend "all existing, pending, and prefiling permits and approvals" for LNG export facilities in the Lower 48 until the agency reviews whether the facilities are in the public interest. The group has long advocated for controls on LNG exports, but the wrinkle in recent months was a run-up in U.S. gas prices during a time of tight global supply and rising demand as the U.S. economy rebounds from the coronavirus pandemic. The IECA also cited a series of announcements of long-term supply deals reached between buyers and U.S. exporters such as Cheniere Energy Inc. and Venture Global LNG as a reason for immediate DOE action.
US LNG exports hit highs
Total feedgas deliveries to the six major operating U.S. LNG export terminals were about 12.7 Bcf/d on Jan. 25, close to the record highs reached in late 2021, according to S&P Global Market Intelligence pipeline flow data.
The high volumes of natural gas deliveries to the U.S. LNG terminals showed that operators have been pushing their facilities to produce extra cargoes to capitalize on high global gas prices, sector analysts said. Flows to the facilities are poised to continue rising as new liquefaction units come online. A seventh terminal, Venture Global's Calcasieu Pass LNG terminal, is undergoing commissioning.
"More exports are going to mean higher prices for domestic consumers, and that's just the way it is with commodity markets," said Clark Williams-Derry, energy finance analyst at the Institute for Energy Economics and Financial Analysis.
During a Jan. 19 U.S. House Energy and Commerce Committee hearing, Deputy Energy Secretary David Turk told legislators that the Biden administration is not considering an LNG or oil export ban. "I've certainly talked to a range of companies and understand the need for contractual certainty and the certainly that provides not only our companies but our partners abroad as well," Turk said.
The groups opposing exports argued that limiting U.S. LNG exports would have a muted impact on the global market. Over the winter, surging demand supported U.S. LNG terminals running at close to full capacity. Domestic gas prices have touched about $6/MMBtu, but spot prices in destination markets in Asia and Europe have reached several times that amid a global gas crunch.
"There's a lot of volatility in these markets," Williams-Derry said. "It's hard to say in that context whether small changes in U.S. policy are going to have much of an impact when we're talking about much larger volumes from other LNG traders."
The U.S. is set to become the world leader in LNG export capacity in 2022, according to the U.S. Energy Information Administration.
In a briefing with reporters, officials from the IECA and the Institute for Energy Economics and Financial Analysis struggled to articulate how export restrictions, if implemented during the past winter per the IECA's request, might have played out in the global market. But Cicio said IECA had not taken a position on how the U.S. should respond to tensions between Russia and Ukraine and the potential for European gas shortages.
"My own personal view is that if Europe needs gas, the U.S. should be there to supply our allies," Cicio said. "Do we have capacity to supply our allies? Absolutely. But maybe we don't have capacity to ship to China. We need to be sensitive to the political crisis. It's a real, serious thing."