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In bipartisan call, House members urge speedier OK for gas exports

Only a few years ago people in the city of Fall River and surrounding towns in Massachusetts were fighting to block the Hess Corporation from building a terminal for importing liquefied natural gas (LNG).

Among their concerns: the risk of an explosion that might endanger them, depress property values, and deter development of Fall River’s waterfront. In a sign of the demand for imported natural gas, five LNG import terminals were built across the United States from 2005 to 2010.

But today, thanks to the shale gas boom in Pennsylvania and other states, the political struggle is over LNG exports, not imports.

A liquefied-natural-gas (LNG) tanker, leaves a berth in Yokohama City, Kanagawa Prefecture, Japan.

This is not the flashy politics of campaign ads, veep selection, and opinion polls, but the less theatrical inside-Washington politics of regulation.

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A bipartisan group of 44 House members from Texas, Oklahoma, Louisiana, and Arkansas sent a letter Tuesday to Energy Secretary Steven Chu urging him to speed up approval of LNG exports.

In a dramatic reversal from 2006, when natural gas supplies in the U.S. were tight, prices were high, and LNG imports were economically sensible, today there’s so much domestically produced natural gas that prices are low.

“This surplus of natural gas has produced very low prices for producers and an absence of market opportunities for natural gas, leading to many well just being shut in," said Rep. Gene Green, D-Texas, and Rep. James Lankford, R-Okla., in a letter joined by 42 other House members. They said the Energy Department’s approval process for more LNG exports “does not seem to have a set timeline for decisions or a sense of urgency.”

Among the reasons they cited for federal regulators to allow more LNG terminals to be built: job creation and the fact that exporting LNG would reduce the U.S. trade deficit as consumers abroad paid for U.S.-produced energy.

Under federal law, export of LNG and construction of LNG terminals require authorization from the Department of Energy and from the Federal Energy Regulatory Commission.

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As of now, there’s only one U.S. terminal exporting LNG, in Nikiski, Alaska.

The Energy Department and FERC have given their approval to a new LNG terminal in Sabine Pass, La. But other proposed projects are in limbo while the department awaits a macroeconomic study being done by an outside contractor.

“As part of the Department’s statutory responsibility to determine whether natural gas exports are in the public interest, the Energy Department is assessing the economic impacts of increased natural gas exports,” said Jen Stutsman, spokesperson for the Energy Department. “This includes a two-part study analyzing the macroeconomic impacts of proposed U.S. LNG exports on the U.S. economy. When completed, the study will help inform the Department in its review of the pending applications.”

Bill Cooper, president of the Center for Liquefied Natural Gas, a trade association of LNG producers, shippers, and terminal operators, said his group thinks “the regulatory framework that’s already in place is proper for a judicious decision” on pending applications that will “not only advance the economic interests of the country but will protect consumers as well.”

He added “We don’t like to see a moratorium in place, which is what we have now, a de facto moratorium, while everybody waits for this macroeconomic study.”

Cooper said the Energy Department gave the Sabine Pass facility its OK in less than nine months, so he said, regarding the current pause in LNG approvals, “there must be other factors at work beyond the regulatory process.”

One pending project is Dominion Energy’s Cove Point site at Lusby, Md., on the Chesapeake Bay. The firm is seeking to make the site capable of handling both LNG imports (as it now is) and LNG exports. The Cove Point facility could draw on Marcellus Shale gas supplies from Pennsylvania and other states.

In a conference call for industry analysts last week, Dominion Resources chairman and CEO Thomas Farrell said “All the signals that have been coming out of the administration indicate that they do not intend to stand in the way of exporting this product (LNG). We should have some indication hopefully by the end of the summer from some of these outside studies that have been done. And I expect that DOE will move forward fairly rapidly with its permitting as soon as those are issued.”

But some in the gas industry say the Energy Department is slowing the process until after the Nov. 6 election due to concerns from the Sierra Club and other environmentalists that more U.S. gas production will lead to more hydraulic fracturing or “fracking,” which some think leads to water contamination.

Obama administration officials "want to wait until after the elections because a decision to export LNG … will enrage an already disenchanted Left Wing of the Democratic Party," analyst Zach Allen told the industry newsletter SNL Daily Gas Report in June.

The Sierra Club has opposed the Sabine Pass project as well as the Cove Point facility and another proposed LNG terminal in Oregon.

In a report last year the Congressional Research Service said, “Within the next five years, the United States may become a large exporter of natural gas for the first time in decades.”

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If all the proposed U.S. LNG export projects were now operating, the United States would rank second behind Qatar in global LNG export capacity, the CRS report said. “However, U.S. LNG exports will face competition in the global LNG market. Global liquefaction capacity is projected to almost double by 2020, with many projects much further along than the U.S. projects.”

The CRS study noted that natural gas consumers argue that “higher natural gas prices abroad could eventually lead to higher prices in the United States, and possible supply shortages, as producers seek to maximize profits by diverting more and more U.S. natural gas to overseas markets.”

But Cooper said there is “overwhelming evidence that we have an abundant supply of natural gas that will more than meet domestic growth needs well into the future and still allow for exports to happen at some small scale.”