U.S. Natural Gas Exports: New Opportunities, Uncertain Outcomes

Michael Ratner
Soecialist in Energy Policy

Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

Linda Luther
Analyst in Environmental Policy

Ian F. Fergusson
Specialist in International Trade and Finance

As estimates for the amount of U.S. natural gas resources have grown, so have the prospects of rising U.S. natural gas exports. The United States is expected to go from a net importer of natural gas to a net exporter by 2020. Projects to export liquefied natural gas (LNG) by tanker ship have been proposed—cumulatively accounting for about 41.4% of current gross U.S. natural gas production—and are at varying stages of regulatory approval. Projects require federal approval under Section 3 of the Natural Gas Act (15 U.S.C. §717b), with the U.S. Department of Energy’s Office of Fossil Energy and the Federal Energy Regulatory Commission being the lead authorizing agencies. Pipeline exports, which accounted for 98% of all exports of U.S. produced natural gas in 2012, are also likely to continue rising.

What effect exporting natural gas will have on U.S. prices is a central question in the debate over whether to export. A significant rise in U.S. natural gas exports would likely put upwards pressure on domestic prices, but the magnitude of any rise is currently unclear. There are numerous factors that will affect prices: export volumes, economic growth, differences in local markets, and government regulations, among others. With recent natural gas prices relatively low compared to global prices and historically low for the United States, producers are looking for new markets for their natural gas. Producers contend that increased exports will not raise prices significantly as there is ample supply to meet domestic demand, and there will be the added benefits of increased revenues, trade, and jobs, and less flaring. Consumers of natural gas, who are being helped by the low prices, fear prices will rise if natural gas is exported.

Electric power generation represents potentially the greatest increase in natural gas consumption in the U.S. economy, primarily for environmental reasons. Natural gas emits much less carbon dioxide and other pollutants than coal when combusted. Other types of consumption are not likely to increase natural gas demand domestically for a long time. Use in the transportation sector to displace oil is likely to be small because expensive new infrastructure and technologies would be required. There is discussion of a possible revival of the U.S. petrochemicals sector, but the potential extent of a change is unclear.

Getting natural gas to markets where it can be consumed, whether domestically or internationally, may be the industry’s biggest challenge. Infrastructure constraints, environmental regulations, and other factors will influence how the market adjusts to balance supply and demand. Environmental groups are split regarding natural gas use, with some favoring increased use to curb emissions of certain pollutants, while others oppose expanded use of natural gas because it is not as clean as renewable forms of energy, such as wind or solar. The use of hydraulic fracturing to produce shale gas has also raised concerns among environmental groups particularly concerned with its possible impacts on water quality.

The possibility of a significant increase in U.S. natural gas exports will factor into ongoing debates on the economy, energy independence, climate change, and energy security. As the proposed projects continue to develop, policymakers are likely to receive more inquiries about these projects. Proposals to expedite and expand LNG exports have been raised in the 113th Congress, including in S. 192 and H.R. 580. Two other bills, H.R. 1189 and H.R. 1191, would reform the DOE’s process for determining the public interest regarding LNG exports and prohibit exports of natural gas produced on federal lands.


Date of Report: September 17, 2013
Number of Pages: 31
Order Number: R42074
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Energy and Water Development: FY2014 Appropriations

Carl E. Behrens, Coordinator
Specialist in Energy Policy

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), for the Department of the Interior’s Bureau of Reclamation (Reclamation), the Department of Energy (DOE), and for a number of independent agencies.

FY2013 Energy and Water Development appropriations were considered in the context of the Budget Control Act of 2011 (BCA, P.L. 112-25), which established discretionary spending limits for FY2012-FY2021. On March 26, 2013, the President signed H.R. 933, the FY2013 Defense and Military Construction/VA, Full Year Continuing Resolution (P.L. 113-6). The act funds Energy and Water Development accounts at the FY2012 enacted level for the rest of FY2013, with some exceptions. However, under BCA, an automatic spending reduction process, consisting of a combination of sequestration and lower discretionary spending caps, went into effect March 1, 2013. The effect of these reductions on the budgetary resources that will ultimately be available to an agency at the account level remains unclear until further guidance is provided by Office of Management and Budget as to how these reductions should be applied.

President Obama’s FY2014 budget request for Energy and Water Development was released in April 2013. The request totaled $34.4 billion. On June 26 the House Appropriations Committee reported a bill, H.R. 2609, with a total of $30.4 billion; the bill passed the House, with amendments, on July 10. The Senate Appropriations Committee reported out a bill, S. 1245, on June 27, with a total of $34.4 billion.

For FY2014, as in previous years, the level of overall spending will be a major issue. On March 21, 2013, the House passed H.Con.Res. 25, setting FY2014 spending at $2.77 trillion. On March 23, the Senate passed S.Con.Res. 8, with a spending level for FY2014 of $2.96 trillion. On June 4 the House Appropriations Committee issued budget allocations for the individual subcommittees (H.Rept. 113-96). The suballocation for Energy and Water Development programs was set at $30.4 billion. On June 20 the Senate Appropriations Committee announced subcommittee allocations for FY2014; the Energy and Water Development suballocation was $34.8 billion.

In addition to overall funding levels, issues specific to Energy and Water Development programs include 

• the distribution of appropriations for Corps (Title I) and Reclamation (Title II) projects that have historically received congressional appropriations above Administration requests;

• alternatives to the proposed national nuclear waste repository at Yucca Mountain, Nevada, which the Administration has abandoned (Title III: Nuclear Waste Disposal);

• proposed FY2014 spending levels for Energy Efficiency and Renewable Energy (EERE) programs (Title III) that are more than 50% higher in the Administration’s request than the amount appropriated for FY2012; and,

• funding for the nuclear weapons program and other defense activities, which make up half of the total Department of Energy budget.

Date of Report: September 13, 2013
Number of Pages: 70
Order Number: R43121
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The Northeast Home Heating Oil Reserve and the National Oilheat Research Alliance

Anthony Andrews
Specialist in Energy Policy

During the winter of 1999-2000, the price of home heating oil virtually doubled in some Northeastern states while storage levels of middle distillate stocks—the range of home heating oil and diesel fuels—sharply declined. The situation attracted lawmakers’ attention and concern. Of the U.S. households that use heating oil to heat their homes, 69% reside in the Northeast. The Northeastern states continue to rely on heating oil as a source of home heating, but at a reduced level of dependency compared to 2000. The Northeast demand for home heating oil has declined by 47% since 2000, from nearly 7 billion gallons to 3.6 billion gallons in 2011. However, the price of heating oil has increased more than 2½ times from roughly $1.50 per gallon beginning in 2000 to just over $4.00 gallon in early 2013. The price increase reflects the trend in the price of crude oil.

Both population and housing occupancy rates ostensibly drive heating oil demand. Both increased in the Northeast over the past decade. At the same time, improved insulation and more energyefficient heating systems in newly constructed homes may have offset demand. As a percent of overall domestic demand for natural gas, the Northeast region has remained nearly steady, varying between 20% and 22%, and recently returned to a level barely above 2001-2002 demand. Natural gas, electricity, bottled propane, and wood can substitute for heating oil. Natural gas demand in 2011 barely exceeded the 2000 demand. While natural gas production in the Northeast has increased because of unconventional gas shale development, the existing pipeline distribution system has not expanded in the New England States. Retail electricity sales have increased in New York and Pennsylvania, the two most populous states in the Northeast, while sales in the New England states remained nearly level. While the Energy Information Administration (EIA) does obtain volume data on residential propane sales, it does not publish this data. However, U.S. propane residential prices did rise from $1 per gallon in 2000 to over $2.80 per gallon in 2012. Residential use of kerosene has also declined.

In response to the 1999-2000 heating oil price spike and supply shortage, the United States Congress authorized the Northeast Home Heating Oil Reserve (NHHOR) in the Energy Policy Act of 2000 (P.L. 106-469). As a two million barrel emergency stockpile of government-owned heating oil, NHHOR was intended to meet roughly 10 days of demand by the Northeastern states at the time it was created. Congress also authorized the National Oilheat Research Alliance (NORA) to develop projects for the research, development, and demonstration of clean and efficient oilheat utilization equipment; and to operate programs that enhanced consumer and employee training.

Middle-distillate range petroleum products can serve as a heating and transportation needs. In its 13-year history, NNHOR has only released fuel for use by federal, state, and local emergency responders during natural disasters and not for retail sales during market dislocations. While the release demonstrated the utility of maintaining a distillate stockpile, the authorizing legislation had only anticipated a heating oil supply shortage during market dislocation. The recent change out of NHHOR stocks with ultra-low sulfur distillate increased its utility as a transportation fuel. In the absence of NHHOR, residential consumers have the recourse of substituting ultra-low sulfur diesel fuel for their heating needs.

Date of Report: September 19, 2013
Number of Pages: 24
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Energy Policy: 113th Congress Issues

Carl E. Behrens
Specialist in Energy Policy

Energy policy in the United States has focused on three major goals: assuring a secure supply of energy, keeping energy costs low, and protecting the environment. In pursuit of those goals, government programs have been developed to improve the efficiency with which energy is utilized, to promote the domestic production of conventional energy sources, and to develop new energy sources, particularly renewable sources.

Implementing these programs has been controversial because of varying importance given to different aspects of energy policy. For some, dependence on imports of foreign oil, particularly from the Persian Gulf, is the primary concern; for others, the indiscriminate use of fossil fuels, whatever their origin, is most important. The contribution of burning fossil fuels to global climate change is particularly controversial. Another dichotomy is between those who see government intervention as a positive force and those who view it as a necessary evil at best.

Energy policy was an important issue in the 2012 presidential campaign, and there were sharp differences between the positions of President Obama and Republican candidate Mitt Romney, and between most Republicans and Democrats in Congress. The Obama Administration has vigorously pushed energy efficiency and renewable energy initiatives, at the same time claiming to encourage development of oil and natural gas resources. President Obama has declared global climate change a major issue. The Romney campaign argued that the Obama Administration has blocked oil and gas development, and declared that so-called green technologies are too expensive to compete in the market. Alternative energy funding, according to Romney, should be concentrated on basic research. On global climate change, Romney acknowledged that human activity contributes to global warming, but claimed there is no consensus on its extent or severity. He opposed unilateral measures that do not include actions by developing countries.

The 112th Congress did not take up comprehensive energy legislation, but numerous bills were considered on specific energy issues. The most significant action was extension of energy tax incentives, including the Production Tax Credit (PTC) for wind energy, to January 1, 2014, as part of P.L. 112-240, The American Taxpayer Relief Act of 2012. In the 113th Congress, a number of issues, some of which drew attention previously, have been taken up in proposed legislation. The Energy Savings and Industrial Competitiveness Act of 2013, S. 1392 and H.R. 1616, would promote energy efficiency in buildings and industry by encouraging adoption of uniform building codes and authorize a grant program for state energy efficiency programs. The bill was reported out by the Senate Energy and Natural Resources Committee on May 13, 2013.

H.R. 3, the Northern Route Approval Act, would declare that a presidential permit would not be required for construction of the Keystone XL pipeline from Canada to the Gulf of Mexico. The bill passed the House on May 22, 2013, by a vote of 241-175. The issue of approving the Keystone XL pipeline is deeply involved in the question of global climate change, since opponents argue that Canadian oil sands production contributes excessive amounts of greenhouse gas emissions. The issue of global climate change is due for hearings before the House Energy and Commerce Subcommittee on Energy and Power on September 18, 2013.


Date of Report: September 3, 2013
Number of Pages: 12
Order Number: R42756
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