WASHINGTON – America’s newly minted energy secretary, Ernest Moniz, said Thursday that he hopes to quickly begin assessing more than two dozen outstanding applications to export U.S. liquefied natural gas — a pledge that has implications for Canada if it means a significant uptick in American exports.
In his first appearance before Congress since his Senate confirmation hearings in April, Moniz was peppered with questions by the House of Representatives’ energy and commerce committee on an array of topics ranging from climate change to TransCanada’s Keystone XL pipeline.
He wouldn’t share his opinion of Keystone XL other than to say the energy department provides “technical analysis” of the project to the State Department, adding the ultimate decision is in the hands of Secretary of State John Kerry.
When pressed, the former physics professor at the Massachusetts Institute of Technology said his only advice to Kerry would be “to evaluate all the factors in the public interest” on the pipeline.
Much of Moniz’s testimony focused on the energy department’s recent decision to end its two-year freeze on evaluating liquefied natural gas (LNG) export applications. It has also approved gas exports to all countries — not just those with free-trade agreements with the U.S. — from the Freeport LNG terminal in Texas, one of only two such facilities in the country.
Exporting gas to countries without free-trade pacts with the U.S. currently requires the green light from the Energy Department, where applications for authorization have been piling up. Energy companies are keen to cash in on America’s ongoing shale boom, and Asian countries that include Japan and India are clamouring for natural gas.
“We’re getting ready to begin evaluating the dockets on a case-by-case basis,” Moniz said, adding he was “absolutely” committed to further decisions on export applications this year.
The two-year freeze has angered some in the American energy sector, who have accused the Obama administration of dragging its feet due to concerns about hydraulic fracturing, or fracking, the controversial method used to extract oil and gas from shale.
Moniz said issues surrounding fracking in shale formations are manageable, adding that many of the problems associated with the practice are due to poor well design.
“We know what to do,” Moniz said.
North of the border, Canadian natural gas companies are watching America’s LNG situation carefully, concerned that U.S. companies will soon eat into their market share.
The Japanese, the world’s biggest LNG importers, are poised to invest billions in natural gas infrastructure in western Canada in a bid to secure a major supply of the energy source in order to phase out nuclear power.
Malaysia’s state-owned energy giant, Petroliam Nasional, said this week it’s prepared to invest $20 billion in an LNG project in British Columbia. It’s one of a dozen LNG terminals being considered for the Canadian West Coast aimed at capitalizing on Asia’s growing appetite for the energy source.
However, only three of the projects have so far obtained export permits from Canada.
And pipelines — a political hot potato in B.C. just as Keystone XL is south of the border — still must be constructed to transport the product from natural gas fields in the northeast reaches of the province, through its pristine interior to the Pacific coast.
“A year ago, Canada was looking like we were ahead of the United States on natural gas; now it appears that the U.S. will be catching up or even moving ahead,” said Reynold Tetzlaff, the Canadian national energy leader for PwC, a global professional services firm.
“There’s only so much opportunity to obtain these sought-after contracts with countries like Japan and China. So if the U.S. is stepping up its game, it will make it more difficult for Canada to obtain those contracts, and it could also affect the price we’re able to obtain from Asian countries if the U.S. gets there first and establishes prices.”
However, there’s also a potential benefit for Canadian LNG producers, Tetzlaff said.
“If the U.S. starts exporting more gas to the Pacific basin, they may require more of ours — they’ll need reasonably priced gas. So they may become larger importers of Canadian gas just so they can export their own.”
Some legislators and manufacturers have called for the Obama administration to tread carefully in terms of LNG exports, arguing that an export bonanza could boost the price of gas at home and result in an economic slowdown.
Contrary to dragging its feet on LNG exports, Tetzlaff said, the U.S. is trying to ensure there’s a “balance” of exports and natural gas for domestic use.
“They’re being quite careful and figuring out how much they can export versus how much do they want to keep in North America.”