The more natural gas America exports, the greater the economic benefits for the country, according to a federally backed study released Wednesday that could be key in whether the government issues export permits to gas companies clamoring for them.
The news of the study’s conclusions cheered gas companies but raised concerns among manufacturers and consumers who could pay higher prices if exports gobble more of a plentiful supply of gas.
“Once (gas companies) get a new market with higher prices, it certainly benefits them,” said Bill Stewart of the Keystone Energy Forum, which the American Petroleum Institute funds. “I think what they’ll do is invest in more drilling. They have a ton of acreage under lease that they haven’t touched yet.”
The question of whether to allow large-scale natural gas exports has been a flash point between American drillers who want to sell more gas and American manufacturers and consumers who want a cheap supply. The federal government delayed decisions on more than a dozen requests for export permits in part while it waited for the results of the Department of Energy-commissioned study.
Dominion Resources Inc. touted the study as a sign that benefits will be disproportionately high in Maryland and the Middle Atlantic states. The company owns a terminal on the Chesapeake Bay that is on the list of export permit requests and says exporting will help spur jobs there and at drill sites in and around Pennsylvania connected by the company’s transmission pipes.
“That was our logic all along. We’re just glad the study confirmed that,” Dan Donovan, the company’s Pittsburgh-based spokesman said. “It’s a significant landmark.”
The economy would benefit from any level of exports, and unlimited exports would represent the best scenario, the 215-page report from NERA Economic Consulting found. Americans would benefit from cash coming in from overseas buyers and increased payments to landowners who own and lease their gas rights, the report said.
The downside of exporting gas would be an increase in price, estimated at between $0.22 to $1.11 per thousand cubic feet after five years of exporting. That would depress wages and cause investment losses, but the foreign investment and the increased drilling that exports would drive would more than offset those declines, the report said. Wednesday’s market price per thousand cubic feet was $3.70.
Based on Pennsylvania Public Utility Commission usage estimates, the average family would pay about $15 per month more for every $1 increase in the price per thousand cubic feet.
“It would increase the drilling activity in Pennsylvania if we had sustainable, higher gas prices,” said Michael Snyder, president of MDS Energy Inc., a drilling service company in West Kittanning. A price increase of a dollar or two to somewhere between $4 and $6 per thousand cubic feet would be ideal for the companies, he said. With that kind of price increase, “I would think the sky’s the limit because our state has so much gas.”
Manufacturers are picking the study apart. Its biggest problem is that it doesn’t compare the effects of exporting with the effects of using more gas domestically, according to a statement from the Industrial Energy Consumers of America, a Washington-based group representing manufacturers.
Some experts consider exports as inevitable because that’s relatively easy compared to converting the nation’s fuel consumption more toward natural gas.
Others say the country should forgo exports and use newfound supplies of gas from shale formations such as Pennsylvania’s Marcellus and Utica as a transformative resource: It can fuel transportation and ensure energy security for decades if the country spends billions to make that a priority, some energy experts contend.
“The best solution to our abundant supply is greater use domestically and Congress should carefully look at the barriers to that end,” the Industrial Energy Consumers of America said. “… Short-term impacts to price are (also) understated. For sure, there will be extraordinary new demand by the industrial sector” through 2020, increasing prices.
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