LNG Exports: An Opportunity for America | Commentary
Last week, in a welcome display of bipartisan achievement, the House Energy & Commerce Committee reported HR 6, the Domestic Prosperity and Global Freedom Act, to the House floor. The bill, as amended by the Committee, demonstrated significant compromise, and the Committee’s bipartisan action sends a message to the rest of the world of growing Congressional support for the United States re-emergence as a global energy leader. In light of the mounting support for accelerated liquefied natural gas (LNG) exports, the House and Senate must now take action on this bill to accelerate the permitting of LNG export applications.
As the crisis in Ukraine continues to unfold, the U.S. can take an immediate and substantive step to support our allies by approving applications to export of U.S. LNG. The latest development in the crisis has seen natural gas prices in Ukraine nearly double, instilling doubt about the security and reliability of future gas supplies for which that region is so dependent. With the right policies in place, the U.S. stands poised to provide LNG to the global market, while also creating thousands of domestic jobs. In order to reap these economic and geopolitical benefits, the U.S. must not shy away from our role as a global energy leader.
Unfortunately, the U.S. Department of Energy has approved only seven LNG exports permits since 2011. Twenty-four applications remain pending. President Barack Obama, Secretary of State John Kerry and leaders of the European Union have stated on the record that additional global supplies of liquefied natural gas will “benefit Europe and other strategic partners.” The U.S. State Department recently reiterated that point by stating, “[T]he United States is taking immediate steps to assist Ukraine, including the provision of emergency finance and technical assistance in the areas of energy security, energy efficiency, and energy sector reform.” The president now has the opportunity to match rhetoric with action by telling DOE to cut through the red tape and expedite the review of pending LNG export applications. Seventeen of the 24 applications awaiting review need nothing more than DOE consideration to receive authorizations.
If action from the administration is not forthcoming, the good news is Congress is poised to address the situation. Legislators from both chambers and parties realize the U.S. has much to gain from exporting natural gas.
According to the U.S. Energy Information Agency’s Annual Energy Outlook 2014 Early Release, domestic natural gas production capacity is projected to rise 56 percent from 2012 to 2040, while domestic consumption is projected to rise 23 percent over that same period. These projections, alongside findings from numerous other authoritative studies, demonstrate that the United States has the natural gas supplies and the economic ability to provide our allies with reliable sources of energy, without losing our competitive edge in domestic prices. Allowing the sale of our natural gas abroad will also bring money back to the U.S. and create more jobs along the natural gas value chain while providing significant tax revenue to our local, state, and federal governments.
While Europe’s dependence on Russian gas presents a serious challenge, this difficulty should not cause inaction. By approving U.S. LNG export applications, consuming nations will have more optionality, giving them greater negotiating power over long-term gas supply contracts and lower prices. A 2013 Deloitte study on the global impacts of U.S. LNG exports found that even moderate LNG exports from the U.S. could result in a wealth transfer of up to $4 billion from Russia to European consumers, simply through reduced contract prices and market share. This is exactly what competition in the marketplace produces, and helps prevent the threat of future supply disruptions.
While often overlooked, it is important to note that Europe has the existing infrastructure to import LNG and more LNG receiving terminals are currently under construction in Lithuania, Poland, Belgium and Italy. Additional facilities are planned in Ukraine, Latvia, Estonia and Croatia. Passing legislation would send a strong signal to the European gas market, helping to accelerate the construction of this gas infrastructure to receive and distribute the supplies from the global market.
The latest study by NERA Economic Consulting, completed in 2014, found that LNG exports will in no way hinder our chemical and manufacturing industries. In fact, major manufacturers and business groups including the U.S. Chamber of Commerce, Caterpillar and General Electric have been vocal in their support for LNG exports and, equally important, in their opposition to harmful trade restrictions. Also, the National Association of Manufacturers has stressed that export restrictions, including specifically for LNG, would “have far-reaching negative effects on the United States and should be rejected.”
The facts are clear: LNG exports are in the public interest. In the midst of continued bureaucratic delay, Congress should follow the House Energy & Commerce Committee’s lead and take action to expedite the approval of LNG export applications.
Bill Cooper is president of the Center for Liquefied Natural Gas.