COOS BAY — Allowing unlimited exports of natural gas will drive up domestic natural gas prices and depress wages — and that’s just fine, economists said Wednesday in a report commissioned by the U.S. Department of Energy to help the department decide whether to allow the exports.
Although domestic households and industries would pay more for gas, so would overseas consumers, and the increased value of those exports would raise the “welfare” of Americans as a whole, said analysts for NERA Economic Consulting, whose report was made public Wednesday.
After a 45-day comment period and a 30-day response period, the Energy Department will begin reviewing 15 applications for LNG export facilities, including the one proposed by Jordan Cove Energy Partners for the North Spit of Coos Bay.
The department delayed review of the applications for six months while NERA prepared the report at the request of the Obama administration, which said it wanted to know whether allowing exports would have a public benefit.
Determination of such a benefit would pave the way for the use of eminent domain in projects such as the proposed Pacific Connector Gas Pipeline that would serve the Jordan Cove facility.
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NERA analyzed 16 scenarios incorporating different assumptions about U.S. natural gas supply and demand and different export levels.
NERA’s report builds on a U.S. Energy Information Agency study of how LNG exports would affect U.S. gas prices.
That study said exports would raise domestic prices, but didn’t consider how the value of those exports would affect the economy in other ways.
Among the NERA findings:
- “The market limits how high U.S. natural gas prices can rise under pressure of LNG exports because importers will not purchase U.S. exports if the U.S. wellhead price rises above the cost of competing supplies.”
- “(Higher costs to consumers) are more than offset by increases in export revenues along with a wealth transfer from overseas received in the form of payments for liquefaction services. The net result is an increase in U.S. households’ real income and welfare.”
- Households with income from investments in gas-related companies would benefit from exports. But households with income solely from wages would see a decline in their income.
- Businesses that depend on natural gas would suffer decreased output and employment because its price would rise, but businesses involved in the production and transport of natural gas would benefit.
- U.S. exporters would be leaving money on the table if they surrendered title to the gas when it was pumped aboard the ship, as all current export applications specify. The nation would benefit if they got into the business of shipping gas and selling it abroad, rather than leaving that to their foreign customers.