Advocates See US Gas Exports Spurring Major Job Growth

MNI ^ | JUNE 24, 2014 | Jon Hurdle

[thackney]

The United States plans to export abundant supplies of liquefied natural gas could generate tens of thousands of new jobs in industries that supply producers of the fuel, according to industry participants and a new study.

But critics claim that increased demand from energy-hungry overseas customers would drive up domestic natural gas prices, causing manufacturers' costs to rise, and deterring job creation.

As Congress considers bills that would speed government approval of applications to build LNG export terminals, a trade association representing manufacturers and others that service the shale gas industry projected that the construction and operation of the multi-billion-dollar terminals would add many new jobs to an already booming industry.

The Energy Equipment and Infrastructure Alliance, in a report issued on June 19, applied earlier calculations in a study by the IHS consultancy on the economic effects of shale-gas development to include the impact of LNG exports - an area not covered by the earlier report.

On the basis of an IHS projection that 10,000 jobs would be created for each 1 billion cubic feet per day of natural gas production capacity, the trade group said that "tens of thousands more" jobs could be generated by the approximately 40 export-terminal projects that have either been approved or are under consideration by the U.S. Department of Energy.

If all were approved and constructed, the terminals would have a total capacity of around 36 bcf/d, said EEIA President Toby Mack. He declined to speculate on how many terminals might become a reality, but said that if even half of those currently proposed are built, 180,000 jobs would be created in the industries that supply LNG production, based on the IHS ratio.

"Few people expect all of that capacity to be built," Mack told MNI.

But he predicted that LNG exports will still "supercharge" the already strong growth in jobs. The shale gas supply chain already supports some 600,000 jobs, he said.

In Salt Lake City, Wheeler Machinery Co., a dealer in Caterpillar tractors for the Utah oil and gas industry, is likely to benefit from LNG exports, said Paul Campbell, the company's executive vice president.

"Exports of natural gas would have a positive development on our company and on our economy here locally," Campbell said.

He cited a 2009 study projecting 27,000 jobs would be created by the state's oil and gas industry over 30 years, without including the effect of exports. Adding exports to the mix would have "a really big impact on growth," he said.

Campbell said domestic prices are likely to rise if the U.S. starts exporting significant quantities of LNG but he predicted the economic benefits would outweigh any negative effect of higher prices.

"The offset of job creation and economic growth would be greater than the increase in gas prices," he said.

According to the IHS report, the shale gas industry is expected to add 150,000 jobs as it increases production from 44 bcf/d in 2015 to 60 bcf/day in 2020. The report was released in 2012 and did not include the effects of LNG exports.

Among the applications received by DOE, seven have so far been approved, and only one, the Sabine Pass project by Cheniere Energy in Louisiana, has been given the final go-ahead by the Federal Energy Regulatory Commission. The project is due to begin operation in 2015 and will have a capacity of 2.2 bcf/d.

DOE scrutiny should be a lot quicker than it usually is, advocates say, because U.S. companies risk losing customers in lucrative overseas markets where natural gas prices are much higher than in the U.S., which enjoys abundant supplies thanks to the controversial extraction process of fracking.

Companion bills in the House and Senate call for applications to be processed in 45 days of an environmental review being complete, as opposed to a year or more under existing procedures. The legislation would also allow for an expedited judicial review if the DOE does not make a decision within 45 days, and would require the DOE to declare the countries to which the LNG will be exported.

The House's version is expected to be voted on and passed in the week beginning June 23, although the fate of the Senate bill is less clear, Mack said. "The measures are very much on the front burner in Congress," he said.

Meanwhile, opponents of expediting the approvals process argue that too many LNG exports would drive up domestic prices from near-record lows that have boosted industrial energy users since the shale boom began in 2008. Higher prices would reduce the competitiveness of U.S. manufacturing, and cut its ability to create jobs, the critics say.

The Industrial Energy Consumers of America, a nonprofit that represents manufacturers, argued that rising natural gas prices will result in declining manufacturing employment. It said 40,000 U.S. manufacturing facilities closed when natural gas prices rose by more than 200% from 2000 to 2008.

IECA President Paul Cicio predicted that Henry Hub gas prices will rise by 89% from current levels by 2025 - faster than the 76% predicted by the U.S. Energy Information Administration - after the EPA's new greenhouse gas regulations and coal-plant shutdowns are taken into consideration.

Cicio told MNI that DOE should continue its current procedure, which he said will show that allowing LNG exports is not in the public interest - the standard by which the department evaluates projects that would export to countries that do not have a free-trade agreement with the United States.

In Australia, domestic natural gas prices have tripled since the country began exporting LNG in 1989, and are expected to rise further next year when more export terminals come on line, according to the IECA.

Cicio declined to say how many jobs might be lost if the government continues to approve applications but argued that there is a negative correlation between natural gas prices and manufacturing jobs.

"When natural gas prices rise, manufacturing jobs fall," he said.

For trade unions, the prospect of more jobs supplying export terminals is clouded by the risk of higher prices.

David Mallino, legislative director of the Laborers International Union of North America, welcomed two projects - Jordan Cove in Oregon and Cove Point in Maryland, that have been approved by DOE, plus another in Oregon that is under review - and said they would together create "millions of hours" of work for union and non-union workers.

"They are mega-projects, and we like mega-projects," he said.

But he argued that exports should not be allowed to rise to the level at which domestic prices become damaging for industry.

"We don't think that every export terminal needs to be built," he said. "We think there needs to be a very systematic review of each of these facilities before they get approved, and the approval of these facilities needs to be pegged to keeping the price of natural gas affordable for both individual and industrial consumers."

The U.S. Labor Department is scheduled to release June employment data at 8:30 a.m. eastern time on July 3.