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LNG boom leads to higher gas prices in US, Australia

A group representing some of the largest manufacturing companies in the United States warns that rising natural gas prices for consumers might be linked to recent U.S. federal approval of five liquified natural gas (LNG) terminals to export methane from the nation's rapidly depleting shale gas fields.

In a Dec. 2 press release, the Industrial Energy Consumers of America reported that "prices of natural gas have increased by 35.6 per cent since August 2012, when the first LNG export terminal was approved."

The group, which represents companies such as Dow Chemical, have long argued that the U.S. shouldn't export surplus methane supplies created by the shale gas boom without first considering the impact on consumers and industries dependent on cheap feed stocks of natural gas.

Added the press release: "The Department of Energy (DOE) is failing in its legal responsibility to do the quality of 'public interest determination' that considers critically important factors that dictate what will happen to domestic prices. Among other things, OPEC indexed LNG prices should not dictate domestic natural gas prices."

The controversial American shale gas boom has operated like a feverish gold rush, discounted environmental liabilities and temporarily flooded domestic markets with cheap methane. But the collapse in methane prices has created an epic battle between two powerful wings of U.S. industry: manufacturers and oil and gas producers.

The manufacturing base, which has capitalized on cheap methane prices, is opposed to LNG exports, while the natural gas industry, now suffering from a gas glut, is pushing for LNG terminals in order to garner higher global prices in Asian markets.

The U.S. Department of Energy, which promotes natural gas exports as a driver of economic growth, recently explained in a letter to U.S. Senator Ron Wyden (Oregon) that it will not modify or rescind LNG approvals and that the department has a policy to protect "the capital investment of LNG terminals."

In response, the Industrial Energy Consumers of America dubbed the policy "anti-manufacturing" and said that, "We do not believe that LNG export facilities should have greater investment protection than the domestic manufacturing sector, and we respectfully request a full review of this policy."

Senator Wyden's interest in LNG terminals reflects his constituents vocal concerns about the developments. In Oregon, coastal citizens, environmental groups and landowners are actively fighting two proposed LNG terminals and accompanying pipelines in that state.

The IECA represents a diversity of high-energy spending industries with annual sales of $1 trillion. They include firms producing chemicals, plastics, steel, iron ore, aluminum, paper, fertilizers, insulation, glass, industrial gases, pharmaceutical goods and cement.

Australia, which invested nearly $200 in a LNG export boom in the last six years, has experienced rising natural gas prices for consumers as well.

A recent report on that nation's natural gas supply shows the average price of gas in the east coast of Australia could rise from $3 a gigajoule to as high as $12 a gigajoule due to expanded exports and poor data on natural gas reserves.

A business commentary in The Australian lamented "that it makes no sense that a dramatic increase in supply should coincide with a sharp rise in price and evident suppression of local demand."

Given that the British Columbian government is actively pushing as many as a half dozen LNG terminals and fragmentation of northern landscapes with 50,000 shale gas wells on the basis of poor natural gas supply data, the issue of rising gas prices could soon dominate public discussions in this province too.

Andrew Nikiforuk is an award-winning journalist who has been writing about the energy industry for two decades and is a contributing editor to The Tyee.

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