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LNG Exports Pose a Threat to Domestic Jobs, Warn US Manufacturers

Meanwhile, Australia rattled by its LNG-triggered energy crisis.

By Andrew Nikiforuk 25 Apr 2017 | TheTyee.ca

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. His award-winning book, Slick Water, documents the Jessica Ernst case and the history of fracking. Find his previous stories here.

Plans to increase the export of liquefied fracked gas in the United States pose a direct threat to jobs and manufacturing competitiveness, says a powerful trade group that represents some of the largest manufacturers in the U.S.

In a blunt letter to the Trump Administration, the Industrial Energy Consumers of America (IECA) said the U.S. Department of Energy had approved so many LNG terminals that the export industry created “significant risk to domestic manufacturers” by eliminating a secure and cheap supply of natural gas.

“If LNG exports reach the level of already approved applications, the U.S. will be in a deficit of natural gas,” warned the letter.

But the Trump administration wants to go in the opposite direction and make the U.S. the largest gas exporter in the world.

Gary Cohn, the director of the White House’s National Economic Council and former Goldman Sachs executive, recently told the Institute of International Finance that the U.S. “could be and should be the largest exporter of LNG in the world. We’re going to permit more and more of these LNG plants."

Currently the U.S. has only one LNG export site, Cheniere Energy in Louisiana, but there are half a dozen approved projects under construction and many more awaiting approval. 

The IECA, a non-partisan association of leading manufacturing companies, represents over 2,300 manufacturing businesses nationwide that employ 1.4 million workers.

The group views cheap natural gas prices and abundant domestic supplies as key to the vigour of local industrial economies.

The letter to Trump’s secretary of energy, Rick Perry, cites a study by Charles River Associates that found that the benefits of using methane for manufacturing at home far outweighed the benefits of exporting LNG abroad.

That study concluded that using methane for manufacturing created eight times more jobs and added twice the direct value to the product. In contrast, exporting LNG increased domestic methane prices and killed manufacturing jobs in the chemical and plastics industry.

The IECA’s letter also criticizes claims made by the Centre for Liquefied Natural Gas, an industry lobby group, that has asked the Trump administration to expedite LNG exports.

Doing so would accelerate the volume of fracking of shale reserves throughout the U.S.

Fracking, a brute force technology to shatter rock underground now used at 90 per cent of all oil and gas wells, has already industrialized rural landscapes, cannibalized water supplies and raised greenhouse gas emissions due to methane leaks.

However, LNG proponents claim that the industry will create up to half a million U.S. jobs by 2035 and pour billions into government coffers.

But the IECA says none of those claims have been independently verified. Moreover, LNG is a capital-intensive industry that, after construction, produces few jobs. LNG terminals only require a couple of hundred employees.

According to U.S. Bureau of Labor Statistics, the oil and gas industry directly employed 180,000 workers in 2016 while the U.S. manufacturing sector employed 12 million people.

The IECA has asked the U.S. government “to establish a moratorium on further LNG export approvals until the definition of public interest is fully explored, vetted and agreed upon.”

The group also noted in its letter that the three top buyers of LNG, China National Offshore Oil Corporation, South Korea’s KOGAS and Japan’s Jera recently signed a memorandum to exchange information and cooperate on the buying of LNG. 

“This agreement would be illegal in the U.S. Each of these buyers are backed by their government and have automatic cost pass-throughs,” warned the letter, which means LNG buyers are not as price sensitive as U.S. homeowners or manufacturers.

In other words, LNG buyers will pay what they need to in order to keep their countries operating. 

Issues raised by the letter now dominate headlines in Australia, where multinationals spent hundreds of billions of dollars building a large LNG sector supported by the massive fracking of agricultural lands and offshore gas without any consideration of the impact on local energy prices. 

Because coal seam fracking projects never produced the amount of methane predicted by LNG proponents, Australia now faces a methane supply shortage that has tripled domestic gas prices as well as electrical prices in the last two years.

A February report by the Australian Industry Group noted that “unprecedented LNG developments had placed a strain on both the gas market and the cost and availability of gas-fired electricity generators” and had skyrocketed electricity demand due to the energy intensity of the cooling and pumping of LNG gas. 

LNG exports have so inflated domestic prices — among the highest in the world for methane — that “even Japanese customers are able to buy gas on spot markets for well below the prices being offered to Australian customers today,” said the group.

The Australian Industry Group, which represents 60,000 businesses employing one million people in manufacturing, transport and other sectors, has demanded restrictions on Asian exports and called for a public interest test to ease the nation’s energy crisis created by massive LNG exports and falling production from fracked coal seams. 

“Essentially a national interest test provides that relevant export developments will proceed unless the Government or a delegate body determines that they are not in the national interest,” said the AIG.

In addition the Australian Workers Union urged Prime Minister Malcolm Turnbull to “act decisively and rationally in the national interest” to ensure a portion of Australia’s natural gas is saved for domestic use because the unrestricted export of Australian gas by companies had driven up prices, closed businesses and destroyed jobs.

“Australia finds itself in the bizarre situation where despite producing a record amount of gas, we are paying some of the world's highest prices at home,” said the union’s letter to the Australian prime minister.

The government of British Columbia has long supported a push to develop an LNG industry based on questionable gas supply estimates with as many as 19 proposed export terminals. Due to a global gas glut, none are under construction.

To date, neither the federal government nor B.C.’s provincial government have formally studied the economic and supply issues raised by the IECA or Australian business groups.

According to David Hughes, one of the nation’s top energy analysts, the National Energy Board has increased what it calls “marketable” resources of Canadian gas by four-fold since 2011 “based on three very-thin studies containing a lot of assumptions — and fine print that says no economic analysis has been done to see if they might actually be economically extractable.”

In addition, B.C.’s minister of natural gas has further inflated B.C. resources by eight-fold, as Hughes pointed out in a 2015 Vancouver Sun op-ed.  [Tyee]

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