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Trade Implication of U.S. Energy Policy and the Export of Liquefied Natural Gas (LNG)

Trade Implication of U.S. Energy Policy and the Export of Liquefied Natural Gas (LNG)

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Daniel J. Weiss, Senior Fellow and Director of Climate Strategy at the Center for American Progress, testifies before the Committee on Ways and Means, Subcommittee on Trade.
Daniel J. Weiss, Senior Fellow and Director of Climate Strategy at the Center for American Progress, testifies before the Committee on Ways and Means, Subcommittee on Trade.

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Published by: Center for American Progress on Apr 24, 2014
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1 Center for American Progress |  Testimony on “Trade Implication of U.S. Energy Policy and the Export of Liquefied Natural Gas (LNG)”
 Trade Implication of U.S. Energy Policy and the Export of Liquefied Natural Gas (LNG)
 Testimony before Committee on Ways and Means, Subcommittee on Trade
Daniel J. Weiss Senior Fellow and Director of Climate StrategyCenter for American Progress April 9, 2014
Chairman Nunes, anking Member angel, and members o he rade Subcommitee, hank you or he opporuniy o esiy on he “rade Implicaions o U.S. Energy Policy and he Expor o Liquefied Naural Gas (LNG).” Te quesion has aken on greaer urgency his winer due o an increase in domesic naural gas consumpion, he approval o seven LNG expor applicaions, and ussia’s ratling is naural gas sabre o inimidae Ukraine.
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I plan o address several undamenal quesions oday. Wha crieria should he Deparmen o Energy use o evaluae wheher a proposed LNG expor projec is in he public ineres? Are here cos-effecive measures ha he Unied Saes can underake in Ukraine,  which would save naural gas, creae jobs, and reduce polluion?Is eliminaion o he public ineres es or LNG expor aciliies an effecive policy o assis Ukraine or oher naions hreaened by poenial high naural gas prices or supply reducions?
 
2 Center for American Progress |  Testimony on “Trade Implication of U.S. Energy Policy and the Export of Liquefied Natural Gas (LNG)”
Meeting the public interest standard
In he pas six years, he Unied Saes experienced a dramaic increase in naural gas producion, primarily rom shale gas generaed rom improvemens in hydraulic racur-ing󲀔or racking󲀔and horizonal drilling.
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 Under he Naural Gas Ac, he Federal Energy egulaory Commission, or FEC, mus approve a proposed LNG expor or impor erminal. For projecs ha will expor gas o one o he 18 naions wih a ree rade agreemen wih he Unied Saes, he projecs are auomaically deemed “wih he public ineres.
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 Tese 18 naions include Canada, Mexico, and he epublic o Korea.
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For naions ha do no have a ree rade agreemen wih he Unied Saes, he Deparmen o Energy, or DOE, mus deermine wheher he “proposed exporaion or imporaion will no be consisen wih he public ineres,” as required by Secion 3(a) o he Naural Gas Ac.
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 Depuy Assisan Secreary o Energy Paula Gan recenly esi-fied beore he House Subcommitee on Energy and Power ha “DOE/FE [Office o Fossil Energy] has idenified a range o acors ha i evaluaes when reviewing an appli-caion or expor auhorizaion. Tese acors include economic impacs, inernaional consideraions, U.S. energy securiy, and environmenal consideraions, among ohers.”
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Under hese crieria, DOE has approved seven LNG expor applicaions. Te Sabine Pass aciliy in Louisiana is he firs one under consrucion.
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 Is compleion could occur in he ourh quarer o 2015.
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National interest determination
In our view, i is essenial ha beore DOE finds ha any more LNG expor erminals are in he public ineres, i mus include he ollowing crieria in is public ineres evaluaion. Wha is he impac o addiional LNG expors on naural gas prices and elecriciy coss? Wha impac would higher naural gas prices have on U.S. manuacuring?Mos sudies predic ha more LNG expors would increase shale gas producion.  Wha impac will ha have on he climae?Can we enhance energy securiy wih means oher han drilling or racking?
 
3 Center for American Progress |  Testimony on “Trade Implication of U.S. Energy Policy and the Export of Liquefied Natural Gas (LNG)”
Large LNG exports possible by 2020, leading to a natural gas price hike
Beore Congress passes legislaion o accelerae or eliminae he public ineres review process, i is essenial o noe ha DOE has already approved LNG erminals ha could expor 13 billion cubic ee per day, or Bc/d, o naural gas󲀔abou 18 percen o oal domesic producion projeced in 2020.
9
 Te Energy Inormaion Adminisraion, or EIA, noes ha LNG expors will increase by 14-old beween 2013 and 2020 under a “business as usual” scenario.
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 Tere would be anoher ourold increase in expors  beween 2020 and 2030.
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Under hese projecions, he cos o naural gas or domesic elecriciy generaion  would rise by 32 percen beween 2013 and 2020, according o EIA.
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 And he price  would nearly double beween 2013 and 2030.
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EIA also ound ha naural gas expors will increase gas prices.
 Increased naural gas expors lead o increased naural gas prices. Larger expor levels lead o larger domesic price increases, while rapid increases in expor levels lead o large iniial price increases ha moderae somewha in a ew years. Slower increases in expor levels lead o more gradual price increases bu evenually produce higher aver-age prices during he decade beween 2025 and 2035.
14
 A price increase could have severe impacs on amily budges. EIA repors ha he ypical household spen an average o nearly $2,000󲀔or 2.7 percen o heir house-hold income󲀔on household energy uels in 2012.
15
 Te households in he lowes fifh income bracke spen more han wice his porion󲀔6 percen󲀔on household uels.
16
Higher natural gas prices could hurt manufacturing
Lower naural gas prices have ueled he recen increase in U.S. manuacuring. “Fuel Fix,”
 
a Hears energy publicaion, repored in March ha:
 An ample supply o cheap naural gas has ignied a U.S. manuacuring surge projeced o expand plan payrolls and drive demand or chemicals, machinery and seel hrough he end o he decade, according o a repor released Tursday.Sinking naural gas prices … are linked o more han 196,000 new manuacuring  jobs in major meropolian areas and a $124 billion boos o sales or energy-inensive  producs like abricaed meals and plasics, according o a U.S. Conerence o Mayors repor on he naion’s indusrial growh.
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