http://www.dcbureau.org/201304228396/natural-resources-news-service/obama-administration-says-no-to-full-environmental-study-of-lng-exports.html

By Peter Mantius, on April 22nd, 2013
Natural Resources News Service

The Obama Administration is blocking a comprehensive environmental study on the impact of exporting massive quantities of liquefied natural gas, or LNG, on the grounds that new gas drilling induced by the exports is not “reasonably foreseeable.”

Meanwhile, the U.S. Department of Energy is resisting calls by Dow Chemical and other manufacturers for a more clearly defined and transparent DOE process for determining whether proposed LNG export projects serve the “public interest.”

Both the DOE and the Federal Energy Regulatory Commission face mounting pressure to evaluate the economic and environmental consequences of licensing LNG export facilities. Since the agencies licensed an LNG export terminal in Sabine Pass, La., in 2011, 19 other applicants have lined up with licensing requests.

Sensitive to the potentially huge cumulative impact those projects could have on the U.S. economy, the two agencies suspended approvals pending a two-part economic study by the Energy Information Agency and a private contractor, NERA Economic Consulting.

Both analyses are now finished, and Christopher Smith, a deputy assistant secretary of DOE for oil and gas, testified March 19 that LNG export applications would be considered on a “case-by-case basis” in light of their economic conclusions, which have been sharply criticized.

Consideration of the toll LNG exports have on the environment is still up in the air. “I will be unable to comment today on Š the appropriate scope of environmental review,” Smith added.

Independent studies predict that unfettered LNG exports will drive up the domestic price of natural gas, spur a boom in fracking shale formations and cause a major transfer or wealth from consumers and energy-dependent industries to the natural gas industry and its investors.

While NERA, the DOE’s private contractor, has not disputed those points, its December 2012 report asserts that aggressive LNG exporting would be a net positive for the U.S. economy. “Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased,” NERA wrote in its policy-driving report.

Response to NERA’s conclusions have been broad and intense. Potential LNG exporters applaud it, but many of the 188,000 comments it triggered were negative.

For example, John Detwiler, an engineer from Pittsburgh, wrote that none of NERA’s scenarios “take a realistic view of the swings in gas supply, demand and pricing in the real world.” Detwiler also charged that NERA has a “consistent public record of advocacy against environmental protections and promoting denial of climate change” and that its lead author, W. David Montgomery, has publicly opposed carbon emission controls and DOE investments in green energy.

While NERA concluded that LNG exports would slightly boost gross domestic product, researchers from Purdue University found the exports would slightly depress GDP. But the two conclusions on GDP were not far apart and were not nearly as important, the Purdue team said, as the wealth-shifting and environmental effects of LNG exports.
“Using the natural gas in the U.S. is more advantageous than exports, both economically and environmentally,” the Purdue report concluded.

While the DOE has listed the environment as one factor it may consider when evaluating the “public interest” of a proposed LNG export project, FERC takes the lead in applying the National Environmental Policy Act (NEPA). In February, FERC granted Cheniere Energy authority to build the Creole Trail Pipeline to connect to its already-approved LNG export terminal in Sabine Pass, La.

The Sierra Club is suing to block the project, alleging that FERC’s failure to require a comprehensive environmental impact statement, or EIS, violates the NEPA law. It argues that FERC’s stance that LNG export-induced gas drilling is not “reasonably foreseeable” collapses in the face of detailed models prepared by the Energy Information Agency. The EIA predicts that an average of 63 percent of exported LNG will come from new gas drilling. Deloitte and other private analysts agree that LNG exports and new gas drilling go hand in hand.

The NEPA law requires a formal EIS whenever there is a “substantial question” about a project’s potential to harm the environment. Since export-induced gas drilling is a given and the preferred modern method of drilling – high-volume hydrofracking – has a controversial environmental record, the FERC staff had no authority to waive a formal EIS, the Sierra Club argument goes.

In fact, the environmental advocacy group claims an LNG-export induced fracking boom would be a calamity for the nation’s water and air quality, and it would exacerbate climate change.

Cheniere responded to the Sierra Club legal challenge April 9, writing: FERC “has previously explained that ‘projections of the locations and amount of future (gas drilling) production would be very speculative if attempted on the basis of’ the Creole Trail Expansion Project. Sierra Club’s mere disagreement with the commission does not entitle it to a stay.”

Cheniere is in favored position. It is the only company recently licensed by FERC and the DOE to export LNG to countries that do not have a free trade agreement with the United States (aside from a small facility in Alaska that has been exporting to Japan for decades). Virtually all of the world’s leading LNG importers are non-free trade agreement countries, including Japan, China, India and most of Europe. (Licenses to export to countries with a free trade agreement with the U.S. are routinely granted and are far less valuable.)

Cheniere, which plans to complete export terminal construction at its Sabine Pass facility by early 2017, recently signed a contract to deliver LNG to the United Kingdom.

Special thanks to Richard Charter