Expanded Exports of Liquefied Natural Gas would Lift the US Economy | Commentary
Sen. John Hoeven and Energy Secretary Ernest Moniz’s recent discussion about liquefied natural gas exports legislation is about further expanding opportunity, investment, and jobs in an industry that has undergone and continues to undergo a dramatic transformation. And make no mistake, lawmakers’ hammering out a smooth LNG export approval process is about growth and benefits our nation’s small businesses.
The U.S. has been in the midst of an energy revolution over the past decade — shifting from a nation of energy dependence to a nation of energy abundance. Consider that the U.S. became the world’s top natural gas producer in 2010, and the largest combined oil and natural gas producer in 2013. These remarkable gains have come about thanks to private-sector investment, innovation and efficiencies.
And this has been a story of small and medium size businesses across our nation flourishing, even as the overall economy has suffered through recession and a poor recovery.
In the Small Business & Entrepreneurship Council’s recent report titled “Benefits of Natural Gas Production and Exports for U.S. Small Businesses,” we measured the substantial growth in jobs and the number of businesses, especially among small and medium size enterprises, as a result of increased natural gas production. The results were astounding.
While U.S. employers across all sectors of the economy shed more than 378,000 jobs from 2005 to 2012, employers in five critical energy industries added more than 293,000 jobs. And keep in mind, those only are direct jobs, and do not count indirect jobs that ripple out from these industries.
And it is important to recognize that these new jobs created by natural gas investment are largely generated by small to medium sized businesses. In fact, each energy sector is overwhelmingly populated by small businesses with fewer than 20 employees. In fact, in each energy sector examined, more than 90 percent of business had fewer than 500 employees, clearly indicating the boon in energy production is fueled by smaller business.
For good measure, while the number of U.S. employer firms overall declined by 299, 122 from 2007 to 2012, the number of employer firms in the five energy industries mentioned in the paper increased by 2,758.
The numbers and growth among these businesses debunks the myth that the benefits of natural gas investment are all about so-called “Big Oil” companies. The reality shows that small business and U.S. workers stand to see significant gains if production increases.
There’s more good news, as this boom is projected to grow. Last year’s domestic natural gas production hit an all-time high of 25.62 trillion cubic feet, and the U.S. Energy Information Agency’s 2014 Annual Energy Outlook projects a 56 percent increase in total natural gas production from 2012 through 2040. Yet, a major factor needed to keep the investment in our domestic production alive is growth outside of U.S. markets via LNG exports.
Recent analysis produced by the U.S. Energy Information Administration found that in all scenarios, “the U.S. was projected to gain net economic benefits from allowing LNG exports.” Such data supports the analysis of our report, that is, more production of natural gas will continue to drive U.S. jobs, including U.S. manufacturing jobs.
Some critics claim that exports will trigger large, damaging price increases. But the demand for natural gas overseas is very high and basic economics teaches us that increased demand stimulates growth in investment, production, gross domestic product, income and employment.
In June, Japan paid an average of $15.58 per million BTUs for shipments of LNG, which has been estimated at nearly 50 percent higher than what Japan would pay to import U.S. natural gas. This is due to the explosion in U.S. natural gas production from 2005 to 2013, which drove down the annual average price of domestic natural gas by 57 percent. American businesses would have a competitive advantage in the international market, and this would attract further domestic investment, which would lead to further increases in production and jobs across the U.S.
It is clear that the U.S. has greatly benefited from the investments that the energy sector has produced to date, and expansion of U.S. LNG exports will stimulate further small business, economic, and employment growth here in the United States.
Congress and the administration must quickly expedite the approval of LNG export licenses to provide certainty to this crucial industry, and allocate more investment at home.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of a new report titled “The Benefits of Natural Gas Production and Exports for U.S. Small Businesses.”