INTRODUCTION II. HOW WE GOT HERE A. The U.S. is becoming a Net Exporter B. Higher LNG Exports Drive U.S. Natural Gas Exports III. Political Obstacles A. The New Administration will play a Pivotal Role in Modernizing the U.S. Energy Policy IV. WHAT THIS MEANS FOR LNG? V. THE IMPORTANCE OF UPDATING THE ENERGY POLICY WITH THE ENRA A. The ENRA has the Potential to Increase Revenue for the U. S. B. Environmental Concerns are addressed in the Senate's ENRA C. The U.S. has Ample Natural Gas Reserves and Infrastructure to Supply for LNG Exporting D. Benefit of Modern Energy Policies: The Ability to supply Energy to Global Markets VI. CONCLUSION I. INTRODUCTION
Progress is impossible without change, and those who cannot change their minds cannot change anything. (1)
As the United States transitions in the post-Obama era, so too will the country look to revamp its outdated energy policies. (2) With a country that seems divided by partisan lines, it appears that the term "energy" when mentioned also brings with it a dividing line among American citizens, U.S. businesses, and elected officials. Since the passage of the Energy Policy Act of 2005, (3) the United States has progressed from fearing oil and gas shortages to becoming a world leading producer of both fuel sources. (4) The use of wind and solar power is increasing its market share as they become less expensive than fossil-fuels in some parts of the country. (5) President Obama's environmental regulations reformed energy usage as electric utility companies have closed coal-fired power plants and supplanted them with alternative sources, such as natural gas, but the nation's energy infrastructure has not kept pace with those changes. (6) With the abundance of shale gas in the U.S. and the possibly lucrative nature of exporting liquefied natural gas (LNG), it is imperative that the U.S. modernize its energy policies in order to both optimize its potential and bridge the partisan divide through the Energy and Natural Resources Act (ENRA). (7)
On April 20, 2016, the Senate passed by a vote of 85-12 a bipartisan, broad-based energy bill, the Energy Policy Modernization Act (EPMA). (8) The EPMA focused on numerous forms of energy production and policies, including new rules intended to expedite the electric transmission infrastructure and both speed up and streamline the permit process for LNG terminals. (9) Just prior to the Senate bill, in December of 2015, the House of Representatives passed the North American Energy Security and Infrastructure Act of 2015 (H.R. 8), by a highly partisan vote, a substantial energy policy bill. (10) Both bills attempted to expedite the approval process for LNG export terminals. (11) However, the bills differ in many ways and the House bill was adversely split down partisan lines. (12) The two houses held caucuses between their respective energy committees to try and come to a resolution on the EPMA. (13) Ultimately, the two houses could not come to a resolution and the EPMA was not passed before the 2016 presidential election. Conversely, on June 27, 2017, the Senate Energy and Natural Resources Committee introduced the EPMA"s successor, the ENRA, for expedited consideration in the Senate. (14) The new bill builds on the EPMA and adds additional considerations derived from previous progress within congress. (15)
This article explores the potential final product of the ENRA and its effects on the U.S. energy infrastructure, with a keen focus on the future of exporting LNG in the United States. Part II of this Article discusses the current state of the U.S. Shale gas and LNG markets and walks through the historical aspects of how the U.S. natural gas market has been shaped over the last few decades to arrive at the present state of the U.S. energy structure.
Part III will analyze the political challenges facing the ENRA and its final version by comparing and contrasting the act from the EPMA and the House bill, The North American Energy Security and Infrastructure Act (H.R. 8). (16) This article will review an anticipated conference between the House and the Senate committees for the ENRA and what it will take for Congress to come to a resolution. (17) Part III will then analyze what awaits the final policy in the form of executive branch approval and how the new administration effects a final policy enactment.
Part IV addresses the streamline approval provisions in the ENRA for LNG exporting and evaluates what the provisions necessitate along with how it affects LNG trade markets currently and into the future. Part IV will also analyze what the ENRA should employ to insure a good working product that benefits the global energy market and the U.S. energy infrastructure as well as U.S. interest, including a review of existing and future trade agreements.
Lastly, Part V will review the obstacles awaiting the ENRA's deployment by reviewing its many impediments such as the U.S. pipeline infrastructure, the ENRA's effect on the environment and its possible lasting effect on oil and gas commodity prices in both local and global markets. Just as with every bill before it, the ENRA will have its proponents and its opponents, its pros and its cons. Part V will analyze these issues and give possible scenarios, outcomes, and ways the ENRA can rectify and, in some ways, avoid these obstacles.
At this point the ENRA is a living document, meaning it has not made its final approval rounds and stands to be ever-evolving. (18) Compounded with the fact that the executive branch, led by the 45th president, Donald Trump, changed at the beginning of 2017, this article has to make assumptions and set control points, based on current forms of the bill, previous outcomes, and industry standards. (19) This article takes a long term look at the effects of the ENRA as it relates to LNG and concludes with a view of the future that the ENRA can create in the industry.
HOW WE GOT HERE
The discovery of shale gas in the U.S. is arguably the reason for the necessary change in U.S. energy policies. Historically, the U.S. has been highly dependent on foreign oil and gas production in order to satisfy its vast infrastructure and energy consumption. (20) Shale discoveries have changed America's approach when it comes to maintaining its energy needs. (21) Shale gas is natural gas that is found trapped within shale formations. (22) Generally, this type of gas was economically insufficient to work within the gas marketplace, but with the introduction of hydraulic fracturing, shale gas has become a very lucrative source of gas. (23) Shale gas has become an increasingly important source of natural gas in the United States since the start of the century. (24) For instance, in the year 2000 shale gas accounted for only 1% of the U.S. natural gas production; however, by 2010 it accounted for over 20%. (25) The U.S. government's Energy Information Administration (EIA) predicts that by 2035, 46% of the United States" natural gas supply will come from shale gas. (26) A byproduct of shale gas abundance is the push towards exporting the gas via LNG. (27) LNG is natural gas that has been cooled to approximately 161[degrees]C, at which point the gas condenses to its liquid form which allows it to be shipped by a LNG cargo tanker anywhere around the globe. (28) Since many natural gas reserves are usually not located near key demand markets, LNG offers an significant solution for the global gas markets by moving natural gas in its liquid form to markets where it is most needed. (29) The move to exporting LNG as opposed to importing LNG is a big shift in U.S. philosophy as it concerns oil and gas commodities, and is why the ENRA is of importance. (30)
Only a few years ago, natural gas production in the United States was declining and prices were increasing, which led to the construction of terminals for the importing of LNG. (31) However a paradigm shift has occurred in recent years with the discovery of shale gas reserves. (32) U.S. natural gas prices have fallen drastically, which has caused an increased effort to export LNG from the United States to other demand countries. (33) Companies such as Cheniere, who have traditionally imported LNG have now reversed course to exporting LNG. (34) This shift, of course, has its proponents and its opponents. (35) A compromise will be needed to usher in the new "golden age" (36) of shale gas and LNG exporting.
Other countries have adjusted their approach to their energy consumption needs. (37) The shift in approach is evident in countries such as Japan. (38) After the March 2011 nuclear crisis, Japan moved to more utilization of natural gas in its power generation needs. (39) China has also increased its natural gas demand as detailed in the country's 12th Five-Year Plan. (40) Climate change has also played a role in the increased utilization of natural gas. (41)
At the UN climate change talks in Cancun in 2010, global leaders agreed to a target of limiting temperature increase to two degrees Celsius. (42) To achieve this goal, global leaders had to look at the long-term use of greenhouse gases in the earth's atmosphere. (43) The IEA states that natural gas is the cleanest burning fossil fuel. (44) The benefit in natural gas emissions has resulted in an increased share in the global energy mix. (45)
The U.S. is becoming a Net Exporter.
According to a report by Standard & Poors Global Platts, the U.S. is emerging as a net exporter. (46) This event was driven by higher exports and lower imports which also benefits the U.S. natural gas midstream and transmission infrastructure and could also drive an increase in drilling activity in the U.S. (47) U.S. natural gas exports totaled approximately 202 billion cubic feet (bcf) by the end of September 2016, which was 42% higher than the previous five-year average of approximately 142 bcf. (48) Conversely U.S. natural gas imports totaled 237 bcf which was 2% lower than the previous...
THE ENERGY AND NATURAL RESOURCES ACT: UPDATING THE U.S. ENERGY STRATEGY FOR THE NEW AGE OF LNG.
|Position:||Liquefied natural gas|
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