Support for lifting restrictions on U.S. energy exports is gaining momentum in Congress. Recently, members of the House Energy and Commerce Committee put their support behind the growing chorus to lift restrictions on U.S. energy exports. They join Senators Murkowski and Landrieu, the ranking member and now-chair of the Senate Energy and Natural Resources committee.
In a report spearheaded by Rep. Ed Whitefield, the Committee points out that modernizing outdated trade policy will sustain the U.S. energy boom, benefit America’s economy, and boost the United States’ geopolitical standing in Asian and elsewhere. The report also “urges DOE to approve all pending LNG export applications by the end of 2014.”
This latest push to expand energy exports draws a particular focus on natural gas. Due to developing technologies and vast shale reserves, domestic production of natural gas has increased more than 50 percent since 2008. As a result, U.S. prices have dropped to historic lows and supplies have stockpiled.
Although sitting on a wealth of supply, current policies prohibit U.S. producers from shipping natural gas to countries with which the United States does not share a free trade agreement (FTA). The Department of Energy must approve permit applications, and although Secretary Ernest Moniz committed his staff to streamlining the process, so far only five licenses have been approved. More than two-dozen are still pending.
As U.S. suppliers trudge through the bureaucratic slow dance, many energy-hungry allies tire of waiting – an ill omen that does not bode well. Forced to turn to other energy powers like Russia, these countries pay upward of five-times U.S. prices. Last fall, delegates from 10 countries including Japan, Singapore and India urged lawmakers to increase LNG exports to bring the United States into competition with other world leaders, drive down prices, diversify markets and strengthen international relations.
There is an economic urgency to act. The United States’ window of opportunity is closing. In the absence of access to global markets, natural gas prices will fall, leaving developers less incentive to pursue new opportunities. The obvious consequence, growth, will stall. Innovation that sparked the domestic energy boom will sputter. Continued delay by the Department of Energy will cede the United States’ competitive advantage to other countries ready to compete on the global stage and exploit our short sightedness.
Sen. Debbie Stabenow, a member of the Senate Energy and Natural Resources Committee, has argued that relaxing trade restrictions will increase production costs for U.S. manufacturers. That’s not the case. The costs of liquefying and shipping the gas will put an upper bound on prices, and experts from NERA, Deloitte, and Brookings agree the effect on consumers here at home would be insignificant. Instead, broader demand will establish equilibrium and minimize fluctuations, thereby creating greater certainty. Indeed, if we employed Senator Stabenow’s logic more broadly the United States’ would have to stop exporting beef, corn or any other commodity.
Others, like Sen. Ed Markey, claim only oil and gas companies will profit from expanding energy exports. In reality, the energy industry has been a pillar of strength in an otherwise sluggish economy. Oil and gas added about 600,000 jobs to the economy in the past two years. The industry employs more than 9 million Americans. Analysts predict LNG exports alone will add as many as 450,000 jobs and generate upwards of $73 billion in GDP per year between 2016 and 2035 if exports bans are lifted.
In Alaska alone, there’s a proposed LNG processing project, both facility and 800 miles of new pipeline, that will cost at least $45 billion. For the first time in 40 years, Alaska is poised to see development of its vast gas reserves. There’s finally alignment from state and producers, due to the economic opportunity of LNG. While the price tag is eye-opening, Alaska is just one example of how natural gas and the potential for LNG exports have upended the energy status quo.
Like most products, market economics should determine where the United States sells its natural gas resources. Energy officials would be smart to approve all backlogged trade permits and allow market forces to determine which export facilities are viable. Authorities have an obligation to abandon policies, anchored in a decades-old paradigm of increasing scarcity and of meeting our neighbors’ needs, before countries like Russia or Iran fill the space.
America’s historic energy surge has put our nation at a crossroads and the world is watching. The Department of Energy can send a clear message that talk about free trade is more than rhetoric and that U.S. energy production will be a global business. This is the American way.