Facedwith rising natural gas demand and perceived limitations in North American gas production, manyin government and industry are encouraging greater U.S. imports of liquefied natural gas (LNG). Recent activities by Congress, the Federal Energy Regulatory Commission, the Department ofEnergy, and other federal agencies to promote greater LNG supplies have included changingregulations, clarifying regulatory authorities, and streamlining the approval process for new LNGimport terminals. While forecasts vary, many analysts expect LNG to account for 12% to 21% oftotal U.S. gas supply by 2025, up from approximately 3% in 2005. Recent measures before Congress seek to encourage both domestic gas supply and newLNG terminal construction. 311c) among other provisions. Other proposals inthe 109th Congress, including H.R. 4318 , H.R. 3918 , and H.R. 3811 would lift federal restrictions on natural gas exploration and production on federal submergedlands of the Outer Continental Shelf. (5) 
Specific questions are emerging about the implications of greater LNG imports to the UnitedStates. Political relationships among countries inthe LNG trade may also change as LNG becomes increasingly important to their economies. This report will review the status of U.S. LNG imports, including projections of future U.S.LNG demand within the growing international LNG market. In addition to gas field development costs,a new liquefaction plant costs approximately $2-$3 billion, and an import terminal costs $500million to $1 billion. In 2005, Congresspassed and President Bush signed the Energy Policy Act of 2005 ( P.L. 109-58 ). Along with expansions at fourexisting terminals, six to ten new import terminals would be needed. At issue is where theseterminals would be built, how they would be integrated into the nation's existing gas infrastructure,and how they might be secured against accident or terrorist attack. LNG terminals may affect pipeline infrastructure in two ways. Because U.S. LNG terminalsprocess large volumes of LNG, the potential for one facility to bottleneck supply might not berecognized. (59)
The future sensitivity of U.S. natural gas markets to LNG terminal disruptions is difficult to forecastand will be driven by factors such as supply diversity and pipeline development. But the long-term effectiveness of LNG in moderating gas prices will besignificantly influenced by global LNG supply, the development of an LNG spot market, andpotential market concentration. (61) Based on these figures,there appears to be sufficient interest among existing and potential exporters to meet both short-termand long-term global LNG demand projections. Spot Market Growth. In an integrated global LNG market, individual country energy polices may significantlyaffect LNG price and availability worldwide. interests." Is expanding LNG imports the best option for meeting long-term natural gasdemand in the United States? What future role, if any, should the federal government play in facilitating theongoing development of LNG infrastructure in the United States and abroad? How might Congress mitigate the risks of the global LNG trade within thecontext of national energy policy?
Liquefied natural gas (LNG) imports to the United States are increasing to supplementdomestic gas production. Recent actions by Congress and federal agencies have promoted greaterLNG supplies by changing regulations, clarifying siting authorities, and streamlining the approvalprocess for LNG import terminals. Were these policies to continue and gas demand to grow, LNGmight account for as much as 21% of U.S. gas supply by 2025, up from 3% in 2005. Congress isexamining the infrastructure and market implications of greater U.S. LNG demand.
There are concerns about how LNG capacity additions would be integrated into the nation'sgas infrastructure. Meeting projected U.S. LNG demand would require six to ten new importterminals in addition to expanding existing terminals. Twelve new terminals, most in the Gulf ofMexico, are approved, but public opposition has blocked many near-to-market terminals whichmight save billions of dollars in gas transportation costs. New LNG terminals can also require moreregional pipeline capacity to transport their supply, although this capacity may not be available inkey markets. Securing LNG infrastructure against accidents and terrorist attacks may also be achallenge to public agencies. Since import terminals process large volumes of LNG, a breakdownat any facility has the potential to bottleneck supply.
LNG's effectiveness in moderating U.S. gas prices will be determined by global LNG supply,the development of a "spot" market, potential market concentration, and evolving tradingrelationships. There appears to be sufficient interest among LNG exporters to meet global demandprojections, although some new export projects may not be built. An LNG spot market, which mayhelp U.S. companies import LNG cost-effectively, is also growing. Although some analysts believea cartel may influence the future LNG market, the potential effectiveness of a such a cartel is unclear. Whether exporters cooperate or not, an integrated global LNG market may change trading andpolitical relationships. Individual country energy polices may affect LNG price and supplyworldwide. Trade with LNG exporters perceived as unstable or inhospitable to U.S. interests mayraise concerns about supply reliability.
Recent measures before Congress seek to encourage both domestic gas supply and new LNGterminal construction. The Energy Policy Act of 2005 ( P.L. 109-58 ) includes incentives for domesticgas producers and grants the Federal Energy Regulatory Commission "exclusive" authority toapprove onshore LNG terminal siting applications, among other provisions. Other proposals in the109th Congress, including H.R. 4318 , H.R. 3918 , and H.R. 3811 would lift federal restrictions on natural gas development on the Outer Continental Shelf. AsCongress debates U.S. natural gas policy, three questions emerge: (1) Is expanding LNG imports thebest option for meeting natural gas demand in the United States? (2) What future role, if any, shouldthe federal government play in facilitating the development of LNG infrastructure domestically andabroad? (3) How might Congress mitigate the risks of the global LNG trade within the context ofnational energy policy?
This report will be updated as events warrant.