As Head of DOE, Perry Would Favor Policies That Increase Natural Gas Prices

Jan 23, 2017

Former Gov. Rick Perry faces a confirmation vote in the Senate on Tuesday for his nomination to lead the U.S. Department of Energy. Among all the questions Perry’s appointment has raised, one that’s gotten little scrutiny is what it might mean for natural gas prices.

The Energy Department is one of the agencies that decides how much liquefied natural gas (LNG) the U.S. can export. But there’s a catch, as Maine Sen. Angus King explained at Perry’s Senate hearing last week.

“For the DOE to issue a permit it has to be in the public interest,” he said.

So what does that mean? There are environmental and natural security implications to exporting. Environmental groups say it increases pollution and exacerbates climate change. Those in favor of exports think it gives the U.S. more leverage in foreign affairs.

The Energy Information Administration says natural gas prices will rise over the next two years.

But what King was talking about was domestic economic impacts. When natural gas is cheaper here than overseas, many U.S. companies can make money exporting it.

Gurcan Gulen, a research scientist at UT’s Bureau of Economic Geology says over the last several years “many, many companies wanted to do this, and they had to get permits.”

The economic activity generated by exports may have a marginal benefit on the economy, according to this analysis. But keeping cheaper gas in the country also brings benefits in the form of lower prices for factories, power plants and ratepayers.

That’s what King was getting at when he questioned Perry.

“My request of you is to be sure that the public interest definition includes affect on domestic prices," he said. "Will you give me that commitment?”

Perry, in a nutshell, said no.

“If we produce it in America … it makes abundant good sense to sell it to the world,” he said.

So, would exporting natural gas raise its price domestically?

A U.S. Energy Information Administration analysis says yes. As gas exports increase, so do gas bills here. And the agency expects LNG exports to rise over the next couple years.

But UT’s Gulen doesn’t believe they’ll rise dramatically.

“Right now, the global LNG market is a little bit oversupplied,” he said.

He added that could change if the global economy starts to pick up steam.