Industrials group again pushes US DOE on LNG exports, seeks ‘consumer safety valve’
A group of industrial manufacturers wrote US Energy Secretary Jennifer Granholm Nov. 22 to offer 12 reasons why it believes a “consumer safety valve” is needed before more LNG exports flow to non-free trade agreement countries.
The letter continues ongoing pressure from the Industrial Energy Consumers of America, which seeks to limit the scale of LNG exports.
Seizing on higher natural US gas prices expected this winter, the group in September urged DOE to take immediate action under the Natural Gas Act to prevent a supply crisis by requiring LNG exporters to reduce export rates.
Now, with a focus on non-FTA countries, IECA is arguing it is “prudent to reduce LNG exports” to a level that would assure a surplus supply that benefits the domestic market.
“The public interest, both as to domestic prices and national security, is protected only when domestic production and pipeline capacity is robust enough to meet domestic demand: exports must be limited to surplus supply of natural gas,” IECA wrote.
It asked DOE to put on hold all permits and approvals in the Lower 48 states to non-FTA countries and conduct a review of whether they are in the public interest. In this go-around, IECA highlighted increasing US LNG exports to China, arguing Chinese subsidies of energy and other costs for its manufacturers make it hard for US manufacturers to compete.
IECA also pointed to the difficulty siting pipelines in the US as another changed circumstance and reason to curb exports.
According to S&P Global Platts Analytics forward curve data, Henry Hub winter strip most recently averaged $$4.74/MMBtu. And the US Energy Information Administration’s Short-Term Energy Outlook has estimated the Henry Hub spot price will average $5.53/MMBtu from November through February.
The recent requests from IECA come as global gas and LNG prices have been on a tremendous upward trajectory over the past six months, with the JKM spot price hitting an all-time high of $56.33/MMBtu in early-October, but since declining to $34.01/MMBtu as Asian LNG demand has tempered. The JKM rally was, in part, predicated on critically low gas storages in Europe that pushed the Dutch TTF gas price to a record-high of $39.48/MMBtu around the same timeframe, but that has since retreated to $30.30/MMBtu.
Despite the requests from IECA, the Biden administration has not shown signs it will alter its approach on LNG or intervene in LNG export markets, and instead has emphasized the role of LNG in meeting global supply shortages. DOE officials did not immediately reply to a request for comment Nov. 23.
The US LNG sector has pushed back on IECA’s efforts. For instance, in a Sept. 24 letter to Granholm, the Washington-based Center for Liquefied Natural Gas argued that limited exports could upend gas markets and undermine billions of dollars worth of infrastructure investments.
In an interview Nov. 23, CLNG Executive Director Charles Riedl argued IECA was off base in blaming LNG for higher natural gas commodity prices.
“They’re trying to use LNG as a scapegoat to pin those higher prices on, but the argument that they’re making is completely flawed,” Riedl said. The 1.2 Bcf/d year-over-year increase US LNG exports is barely 1% of the total US demand, he said.
In addition, Riedl criticized the notion that a for-profit business should produce a surplus of a product, rather than respond to demands of the market, regardless of where they come from.
“It’s akin to asking manufacturers to make extra products on the off chance that a foreign market might buy them,” he said.
Higher energy prices this winter have generated more attention from some US lawmakers long critical of LNG exports. Senator Angus King, Independent-Maine, has raised concerns about impacts to US competitiveness in recent Senate hearings, noting he plans to propose legislation that would require the Department of Energy to account for the national interest and consider domestic price impacts before approving new LNG exports. The legislation would eliminate the presumption that exports of gas to certain nations is in the public interest.