Following the approval of the third LNG export application under review at the Energy Department, Margo Thorning, Ph.D., senior vice president and chief economist with the American Council for Capital Formation (ACCF) and director of research for its public policy think tank, released the following statement:
“Despite it taking 823 days to review, we welcome the Department of Energy’s approval of the Lake Charles Exports LLC application and urge DOE’s immediate approval of the remaining 19 applications under review.
With 63 projects in various stages of development worldwide, the slow permitting process at the Energy Department is jeopardizing the U.S.’s ability to contribute our abundant natural gas resources to the global market.
The U.S. has a historic opportunity to reduce our trade deficit, increase American jobs and growth, and contribute new tax revenue to state and local communities through LNG exports.
We urge Secretary Moniz to enable the market to determine which projects will clear local permitting, financing, and environmental reviews and approve all the remaining projects without delay.”
ACCF recently released a paper on the impact that DOE bureaucratic delays for LNG export permits are having on the economy. The paper is the first-of-its-kind to track and compile the backlog of submissions to the DOE’s export application docket. It also provides a sketch of the complex 8-step approval process to export LNG from the U.S. and quantifies that up to $73.6 billion in annual economic activity and up to 452,000 jobs are not being realized with the permitting delays. A new report from the McKinsey Global Institute, the business and economics research arm of McKinsey & Company, released in July echoes the findings of the ACCF study and points to LNG exports as one of 5 game changer’s for America’s economy.
The United States has 2,384 trillion cubic feet (Tcf) as of year-end 2012, according to the Potential Gas Committee. Due to abundant supply, America’s natural gas prices are significantly lower than international prices. According to the EIA, the spot prices at Henry Hub averaged $3.75/MMBtu during the first half of 2013 whereas monthly average prices of liquefied natural gas for August delivery in Asia peaked in March at $19.139/MMBtu and remain significantly higher than U.S. natural gas prices. It makes little sense why the United States is not capitalizing on this vast price differential and exporting more liquefied natural gas to non-Free Trade Agreement countries like Japan, where demand is high and supply is scarce.