LNG

Democrats face tricky balancing act as export debate grows louder

This story was updated at 4:01 p.m. EST Jan. 16.

Second in an occasional series.

Democrats balancing calls to export more natural gas with the risks of sacrificing the shale boom's domestic benefits are poised to face new political pressure this year from national environmental groups digging into an anti-fossil-fuel infrastructure campaign patterned after the Keystone XL pipeline.

At issue are almost two dozen ongoing federal reviews of projects that would ship a portion of the United States' current daily supply of 86.48 billion cubic feet (bcf) of gas to energy-hungry allies and neighbors. Republicans are mostly united in cheering the Energy Department's approval of five proposed facilities so far -- representing about 6.7 bcf per day in exports to countries that do not have a free-trade agreement with the United States -- while Democrats must openly reckon with competing interests in their individual communities.

Democrats are "not being torn in two directions, but arguably three," said Christi Tezak, managing director of research at ClearView Energy Partners LLC. "They've got environmental concerns and an environmental constituency urging them to be cautious; they've got a domestic manufacturing industry that is pushing them to keep domestic energy prices low and trap the gas here; and some of them have a third constituency, when they represent regions that would directly benefit from the jobs and tax revenues generated by successful LNG export projects."

On the West Coast, Senate Energy and Natural Resources Chairman Ron Wyden (D-Ore.) is a Capitol Hill veteran when it comes to the three-way juggling act. Wyden has not taken a position on the contentious Jordan Cove export terminal along Coos Bay in his state, which has drawn the ire of environmentalists. But he has said the project should be reviewed in a timely manner.

Another case in point is Sen. Debbie Stabenow's (D-Mich.) potential rare hold on Christopher Smith, President Obama's pick to head the Department of Energy's fossil fuel research efforts, over fears the agency is approving LNG exports too quickly. The Senate did not vote on Smith's confirmation by year's end, and now the Energy and Natural Resources Committee must consider his nomination again. Stabenow said Monday she's still considering a hold.

Sources said the senator's concerns likely stem from Michigan-based Dow Chemical Co., which has joined other large industrial users of natural gas in asking the Obama administration to freeze LNG export approvals. Dow parted ways last year with the diverse membership of the National Association of Manufacturers, an industry group that has thrown its support behind fast-tracking LNG exports.

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LNG politics are also rattling Democrats on the East Coast, where national environmental activists are wading into the debate.

"Usually the sides are pretty clear, but here you've got unions talking about jobs and you've got a lot of your constituents out of work, and at the same time you have the environmentalists," said Rep. Elijah Cummings (D-Md.). "And I'm pro-union and pro-environmentalist. The question is how do you balance all of it."

The Chesapeake Climate Action Network (CCAN) has recently enlisted the muscle of 350.org -- one of the loudest voices against the proposed Keystone XL oil pipeline from Canada -- to fight Dominion Resources Inc.'s $3.8 billion plan to export domestic gas from its Cove Point plant on the Chesapeake Bay in Maryland to Asian markets. Mike Tidwell, CCAN's executive director, said the fight has become the "third stool" of a national climate battle, following KXL and coal exports in the Pacific Northwest.

"Obama hasn't made a decision on Keystone XL, but that's a major issue in the progressive fight. Powder River Basin coal exports out of the Pacific Northwest, that's not going anywhere because of major resistance," Tidwell said. "The next big leg of that stool is gas."

Sen. Ben Cardin (D-Md.) said in an interview that he fully supports the Cove Point export terminal and development of a global market for gas, a concept at the center of Obama's Climate Action Plan issued last year. Obama called for doubling down on using natural gas as a "bridge fuel" to replace dirtier fossil fuels in the United States and abroad.

But Cardin quickly showed a nuanced approach befitting the complexity of the issue, saying he would feel more comfortable with LNG exports in conjunction with a national energy policy centered on energy independence -- something the United States currently lacks.

"Exporting of LNG, there's nothing inherently wrong with that as long as it's consistent with an energy policy that promotes energy independence and a clean energy economy," Cardin said. "If we have enough energy locally, it's in our economic interest to find the right market."

'Big, big battle'

Ground zero for tricky political footing when it comes to LNG exports appears to be Maryland -- Congress' backyard -- where national activists hope to spark a broader climate debate around Dominion's proposed Cove Point terminal.

Bill McKibben, founder of 350.org, said the Old Line State battle exposes the hypocrisy of the Obama administration's asserted goals of lowering carbon emissions while supporting exports, and he indicated Maryland could be the battle front for raising that debate.

"I think this Cove Point [project could] become a big, big battle," McKibben said. "This thing is 65 miles or something from D.C., it's a gargantuan project, it would run Maryland's CO2 emissions through the roof."

The environmentalists are targeting Virginia-based Dominion's proposal to export gas from its terminal on the Chesapeake Bay in Lusby, Md. Dominion received DOE approval last year to export gas from the facility -- an average of 770 million cubic feet per day -- but the project still requires approval from the Federal Energy Regulatory Commission and hinges on an ongoing court battle.

Dominion has said the terminal will support an additional 75 full-time positions and 3,000 construction jobs, and emit the same amount of greenhouse gases as a new midsized, natural-gas-fired power station. The project, according to the company, would also bring in $1 billion annually in local, state and federal revenues; potentially reduce the nation's trade deficit by up to $7.1 billion annually; and provide a clean fuel source for Japan and India, two U.S. allies.

The project enjoys wide bipartisan support, including backing from House Minority Whip Steny Hoyer (D-Md.), who represents the area in Congress, and powerful state Senate President Thomas V. Mike Miller Jr. (D), as well as unions, including locals whose leaders traveled to Annapolis last week to meet with state legislators to remind them of Cove Point's potential contributions to jobs and tax revenue growth. Rep. Chris Van Hollen (D-Md.), who has solid environmental credentials, has said the project could bring "substantial economic benefits" but called for a "robust" environmental analysis.

But challenges loom.

CCAN has joined the League of Women Voters of Maryland Inc., Earthjustice, Pacific Environment, and Interfaith Power and Light in calling on FERC to conduct a more in-depth environmental impact statement (EIS) on Cove Point that reviews upstream effects, rather than a streamlined assessment that draws on the facility's previous analysis before construction began for its LNG import capacity. The groups have also said the project could increase the use of hydraulic fracturing across Appalachia as more gas is drawn from the Marcellus Shale and raise greenhouse gas emissions in the state.

The Sierra Club is also fighting the project in the Maryland Court of Special Appeals, arguing that a 1972 legal agreement it signed with Dominion barred expansion of the site near Calvert Cliffs State Park beyond a limited area. The agreement, which was revised in 2005, also forbade Dominion from changing the terminal's current use to allow LNG exports, the Sierra Club has said.

Dominion said the Sierra Club is simply opposed to using natural gas and in a letter to Maryland lawmakers explains that the project is subject to rigorous environmental reviews -- including 50 permits -- and will have a small footprint and limited environmental effect.

But the debate is now trickling into the 2014 Democratic primary to succeed term-limited Maryland Gov. Martin O'Malley (D).

One of the three candidates, Del. Heather Mizeur, who is trying to become the state's first female and first openly gay governor, is the most outspoken gubernatorial contender opposing Cove Point and LNG exports. Mizeur is calling on FERC to conduct a full EIS of Cove Point and agreed that the battle in Maryland highlights the Obama administration's hypocrisy in claiming to fight climate change while supporting LNG exports.

Mizeur, who also serves as a Democratic National Committee member from Maryland, is running against Democrats who have taken a more middle-of-the-road approach. State Attorney General Doug Gansler stopped short of recommending a full environmental impact study for the project in letters to FERC, and Lt. Gov. Anthony Brown has said he would not oppose the terminal if environmental concerns were mitigated (EnergyWire, Dec. 16, 2013).

"It's the last stand, really, in Maryland on climate change issues -- we can't credibly claim to fight climate change and support Cove Point in the same breath," Mizeur said, adding that environmental degradation would offset any gains in jobs. "I really think there are better alternatives to create jobs for Marylanders, like in the alternative energy sector, and continue us on a path to a clean energy environment."

But Mizeur said her position has had political consequences, arguing that she lost the backing of state unions keen on securing jobs through the Cove Point project.

"It's not without risk, for as many people as I'm potentially pleasing with this position, I'm also angering," she said.

'Sweet spot'

Underlying the congressional debates are myriad opinions on how the United States should use its newfound glut of natural gas, with activists calling for a fossil freeze and manufacturers warning that any restriction on energy exports would violate international trade agreements.

Export proponents have argued shipping the fuel overseas would secure stable markets for natural gas producers and reduce price volatility for consumers, while helping the U.S. balance of trade and boosting the economy. Critics, led by Dow and energy-intensive industries like chemicals and metal production, have countered that exporting large volumes of LNG would threaten a "manufacturing renaissance" sensitive to the price and availability of raw materials like natural gas.

The central question is exactly what the United States will decide to do with its carbon boom: whether the priority is on domestic capture to displace oil use and produce cheaper prices for consumers -- or a global geopolitical strategy of exporting LNG to certain strategic allies, said Paul Bledsoe, a senior fellow on energy at the German Marshall Fund and former Clinton White House climate aide.

"The truth is, it's somewhere in between those two," Bledsoe said.

Some estimates suggest a middle ground exists, including a recent market forecast from the U.S. Energy Information Administration that found U.S. LNG exports could ramp up to 9.5 bcf per day by 2040.

But it's unclear whether a meeting of the minds on Capitol Hill is possible.

On the Senate Energy and Natural Resources Committee, Wyden has repeatedly called for finding a political and economic "sweet spot" to support the country's ongoing shale boom without jeopardizing domestic manufacturing, jobs or clean energy opportunities -- while ranking member Lisa Murkowski of Alaska, a strong supporter of boosting fuel exports, has called for faster DOE approvals.

It's unclear how that dynamic would change if Sen. Mary Landrieu (D-La.), a proponent of gas exports, were to take the helm of the committee, said Salo Zelermyer, a former senior counsel to DOE during the George W. Bush administration who now works for the Washington, D.C., lobbying firm Bracewell & Giuliani.

"Some folks have theorized that there was some level of commitment from Energy Secretary Ernest Moniz and the administration to Wyden that they'd approve these facilities, but take it slow," Zelermyer said.

Another question is whether DOE would continue approving LNG export applications every six to eight weeks or longer, or change its approach under a new Senate Energy Committee leader, he said. "As of now the applications are still being approved, albeit slowly; hopefully that will continue," Zelermyer added.

Sen. Ed Markey (D-Mass.), who has warned that exporting U.S. LNG could force the country to bring in imports from "unsafe or unstable" regions, said debates have only begun. "It's a huge [issue] that we're going to debate nationally; we're at the very beginning of this," he said.

On the House side, the lines of debate are more clearly drawn amid growing support for LNG exports.

Rep. Peter DeFazio (D-Ore.), an outspoken opponent of LNG exports, unsuccessfully introduced language last year to block exports of gas produced on public lands.

He warned of a point at which high enough exports could subject U.S. gas prices to those of the global oil markets. But DeFazio said those concerns, which he recently raised with Moniz, are dismissed by the GOP.

"Republicans are for unfettered exports, even if it has a detrimental impact on our economy or our consumers," DeFazio said. "I don't see them wanting to actively engage on the issue in any way."

Energy and Power subpanel Chairman Ed Whitfield (R-Ky.), on the other hand, said countries like Japan, Hungary, Bangladesh and Lithuania are asking Congress to help facilitate faster LNG exports to avoid costly alternatives. The House, he noted is poised to release a report this month gauging the pace of DOE's activity.

But Bledsoe believes a middle ground is more feasible than it seems. LNG exports could become less contentious, he said, if leading Democrats and the Obama administration more actively encouraged the consumer benefits from gas and development of new domestic markets, including displacing costly heating oil in the Northeast or diesel fuel for long-haul trucks and buses.

Bledsoe suggested tax incentives for certain gas-consuming vehicles or expediting FERC's permitting process for gas pipelines.

"The thing that bothers people is the sense that we're exporting a commodity that has a cost to production -- environmentally -- and yet we're not reaping the full domestic benefit," Bledsoe said.

Reporter Amanda Peterka contributed.

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