Trump LNG export policy sparks clash between big energy users and gas industry

by John Siciliano |  Washington Examiner

Large energy users are set to clash with the natural gas industry over President Trump’s plan to increase liquefied natural gas exports as part of his pro-growth “energy dominance” plan.

Trump and top Cabinet officials made increasing LNG exports a central theme of the administration’s America First energy agenda during “Energy Week” ahead of the July 4 holiday. Trump said he wants the nation to enter into an era of energy dominance where it is self-sustaining and able to export.

But big energy users are warning the administration that shipping more natural gas abroad is problematic for growing businesses and jobs domestically and ultimately could hurt the president’s economic agenda.

“Excessive LNG export approvals by the U.S. Department of Energy to countries with which the U.S. does not have a free-trade agreement is inconsistent with President Trump’s ‘America First’ and ‘fair-trade’ policies, and poses a significant long-term threat to energy-intensive trade-exposed industries’ competitiveness and jobs,” said Paul Cicio, president of the Industrial Energy Consumers of America, in a Wednesday letter to the secretaries of energy and commerce, Rick Perry and Wilbur Ross, respectively.

Cicio’s group represents large industrial users of energy such as the chemical and steel industries, in which natural gas is a key commodity. His members want to ensure natural gas supplies remain stable and the price low.

The letter was sent ahead of Trump’s energy address on Thursday to cap Energy Week, where he emphasized that the U.S. has become self-sufficient in natural gas production. The shale natural gas boom has made the U.S. a top producer of the gaseous fossil fuel, and the federal government projects the U.S. becoming a net exporter before the end of the decade.

But Cicio is injecting doubt about supplies continuing indefinitely. The 100-year supply of natural gas is a “myth,” if the rate at which natural gas is slated to be exported is achieved, he argued in the letter, citing recent Energy Information Administration projections that supported only 12 billion cubic feet per day of natural gas exports through 2050.

One major export terminal is operating in Louisiana, so far, but six other facilities are slated to open in the next three years. All LNG terminals must be licensed by the Department of Energy before exports can begin.

The projection “demonstrates that 56 percent of all natural gas resources will be consumed in that time frame,” Cicio wrote. “For companies that build facilities to last 50 years or more, that is of great concern.”

But for natural gas drillers and the LNG industry, those claims are no longer relevant, said Charlie Riedl, executive director of the Center for Liquefied Natural Gas. Cicio’s arguments are even more baffling when considering that the exports are based on a natural gas surplus that won’t draw down supplies for manufacturers, Riedl said.

“What we are talking about exporting is still a surplus of gas, and that is the projected plan moving forward,” Riedl said. “The administration seems to understand that. And I think that works so well with the America First policy.”

Riedl said the Trump administration “understands we’ve got enough supply,” while enough available infrastructure remains “to deliver gas to the manufacturing states like Michigan, Ohio, Indiana and the Midwest, where so much manufacturing happens.”

On top of that, natural gas prices have declined to about $3 per unit and that price is “projected to stay flat,” he said. Most of the Midwest manufacturers are close enough to the shale natural gas regions in Ohio and Pennsylvania “that getting cheap gas to those facilities isn’t going to change by exporting gas to other countries.”

Riedl also pointed out that the administration has been consulting with some of the largest users of natural gas, such as chemical giant Dow, which told Commerce Secretary Wilbur Ross in May that it had no problems with increasing LNG exports. Fve or six years ago Dow was one of the leading critics of LNG exports, he said.

Riedl told the Washington Examiner on the sidelines of Energy Week that Ross resolved the issue in making the announcement with China earlier this year that it is encouraging U.S.natural gas companies to enter into long-term export deals with the Chinese.

“There is a direct quote when they made that announcement … that Dow gave assurances that increasing exports of natural gas was not going to harm industry or consumers,” said Riedl. That makes Cicio’s argument “a bit perplexing,” he added.

Dow agreed that exports wouldn’t harm the U.S. economy as long as LNG sales didn’t exceed 30 percent of production.

Riedl also found Cicio’s letter misleading by basing his arguments on “proven reserve numbers, rather than actually recoverable assets.”

Cicio’s argument makes “the assumption that we’re only going to produce the current level of gas … when in fact the reserves are substantially higher,” Riedl said.

“You’ve got a company like Dow saying to the secretary of commerce that LNG exports aren’t going to harm U.S. businesses and it’s not going to be a problem, and their stance from five or six years ago when they were an outspoken critic of LNG exports … they have come to accept which is the amount of gas that we have here in the states doesn’t make this a zero-sum game.”

Nevertheless, the Trump policy on LNG exports is evolving, Riedl said, based on conversations he is having with the administration.

“The short answer is we have been talking to folks in the administration … and the longer answer is I think it’s an evolving policy,” he said. “But I think they are beginning to recognize … that LNG checks a lot of boxes” in meeting the president’s campaign promises. Energy exports help job creation, state and local revenue creation, balancing trade deficits, helping countries improve greenhouse gases and lessen pollution, he said.