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Paul Cicio's picture
President & CEO Industrial Energy Consumers of America

The Industrial Energy Consumers of America is a nonpartisan association of leading manufacturing companies with $1.1 trillion in annual sales, over 4,200 facilities nationwide, and with more than...

  • Member since 2018
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  • Sep 20, 2021
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The DOE should take immediate action under the Natural Gas Act (NGA) to prevent a supply crisis and price spikes for consumers this winter by requiring LNG exporters to reduce export rates in order to allow U.S. inventories to reach the 5-year average storage levels. U.S. consumers, the health of the economy, and national security should take priority over LNG export profits. Secondly, a hold should be placed on all existing, pending, and prefiling permits and approvals on LNG export facilities in the lower 48, and to conduct a review of whether these facilities are in the public interest under the NGA. 

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Matt Chester's picture
Matt Chester on Sep 20, 2021

by requiring LNG exporters to reduce export rates in order to allow U.S. inventories to reach the 5-year average storage levels. 

This sounds like a drastic step-- is there precedent for this type of federal intervention? I know the LNG export market is still somewhat young in the U.S.

Larry Kauf's picture
Larry Kauf on Sep 20, 2021

Natural Gas, A runaway Freight Train!
For the last 4 years, the US has been Energy Independent; that is, we produce more Natural Gas and Oil than we use. With the advent of Fracking, and the Shale boom, the US has been awash with Natural Gas. Producers expanded their facilities to well, as much gas as possible. Oil companies in remote areas, couldn't even capture the Gas byproduct and had to flare it off, as it was too expensive to capture.

Enter Cheniere Energy (LNG) who borrowed from Investors, Banks, Funds and anyone that would give them money to build out a State-of-the-Art LNG export Facility, in the Sabine Passe. $33 Billion dollars was invested and now after 4 years, the chickens have come home to roost. Over those 4 years, they have made deals with pipelines to get Natural Gas to their facilities for Liquification and Export.

For the last 20 months Natural Gas prices have been depressed and Producers that spent all that money on new wells had to keep producing simply to service debt. Barely breaking even over that period, production was finally reduced to support prices. Last winter we saw a weather event that certainly wasn't predicted when subzero temperatures blanked most of the country. Huge amounts of Gas were withdrawn from National Storage. At the same time, Infrastructure 'froze up’ causing pipelines not weatherized to shut-in sending prices to levels not ever seen.

The State of Texas, in the face of subzero temperatures was shut down for several weeks, as Gas could not get to the Generating Stations for electric. Windmills not winterized stopped producing electric and prices skyrocketed to $900/Kwh for several hours as the Grid tried to balance the system. Water was not pumped and rolling blackouts occurred.

So here we are today. All Summer long, meager double digit injections of Natural Gas into National Storage have been reported during a time when that Storage needs to be refilled for the coming winter. Production has been flat which has increased prices to more than DOUBLE what they were in just April 2021.

Cheniere Energy with their long term deals, is Exporting MORE GAS than is going into Storage weekly, because they can get top dollar in Europe. Europe (which relies on a significant Wind presence) has no wind right now, needs the Gas. Producers are holding back simply trying to recoup their losses for the last 20 months.

This winter has been forecasted to be even longer and more brutal than last year. The last time we saw sustained prices over $5.00/MMbtu on the NYMEX, was in 2008, with the exception of Jan/Feb 2010. So who is to blame?
Do you really want to point the finger at the LNG Exporter for risking Billions by looking ahead at potential recoup of debt and turning a profit?, which just recently happened. Do you want to blame the Producers for scaling back to support prices and avoid going under?

I believe a Balance should be achieved and rather than the DOE taking "immediate action" against anything, they should be working with Producers and guiding HOW MUCH gas should be Produced to satisfy all needs both Domestic and Export. There is plenty of Gas to go around from all sources. It may be a little late in the game this year but NOW is the time to put a plan in place.

Lets get Oil companies the resources to capture flared Gas or require them to spend a little money as a Partnership with the DOE and under the Climate Change Act. How about the DOE roll up their sleeves, work with the EIA and figure out what's needed to meet the goal and then work with Industry to make it happen, instead of penalizing anyone that wants to make a reasonable ROI.

Paul Cicio's picture
Paul Cicio on Sep 21, 2021

Matt,
Prior to now, there has never been a need to seek a pull back on exports. It sounds dramatic but it is common sense. Doing so supports jobs and consumers in the US. Exports support other countries. When there is not enough gas for exports and domestic demand, the choice is logical. Going forward, the problem is that the DOE has approved additional export volume five times what is being exported today. So, unless domestic production can substantially increase and, that new pipeline capacity occurs, domestic consumers are going to pay dearly.
Paul

Paul Cicio's picture
Paul Cicio on Sep 21, 2021

Larry,
We have the natural gas resources. Drilling is down significantly. Pipeline capacity is greatly needed. Exporters have locked up pipeline capacity that would normally be used for domestic consumers.

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