A bipartisan coalition of senators on Thursday advanced a plan to swiftly guarantee exports of U.S.-harvested natural gas to Japan and other American allies, amid complaints that the Obama administration is dragging its feet on proposals to sell more of the fossil fuel overseas.
When it comes to natural gas exports, the legislation would put Japan and the 28 members of NATO on the same footing as nations that have free-trade agreements with the United States. The Energy Department is required to approve applications to sell U.S. natural gas to those free-trade partners under current law, but exports to other countries aren’t automatic.
The Energy Department has stalled reviews of more than a dozen applications for licenses to sell liquefied natural gas to Japan, Taiwan and European nations, while it reviews a study of the economic effects of increased foreign sales. That report, issued in December, concluded that even unlimited natural gas exports would result in a “net economic benefit” for the United States, though a resulting domestic price increase could hurt manufacturers who rely on the fossil fuel to power plants and fashion into other products.
Before granting any applications, the Energy Department would have to consider public comments and determine that the export plans are in the public interest.
Republican Sens. John Cornyn of Texas, John Barrasso of Wyoming and James Inhofe of Oklahoma spearheaded the new bill, along with Democrats Mark Begich of Alaska and Heidi Heitkamp of North Dakota.
Cornyn said expediting exports “to our friends and allies . . . will yield important strategic opportunities to enhance our national security interests while continuing to grow our economy at home.”
The legislation would require the Secretary of Energy to approve exports of natural gas to NATO allies and Japan, which is hungry for natural gas to replace nuclear power after the 2010 Fukushima accident. It also would require approval of natural gas exports to any other country where the secretaries of Defense and State determine they would promote the United States’ national security interests, such as by blunting the ability of unfriendly nations to use their own natural gas resources as political leverage.
The measure faces some big obstacles on Capitol Hill, including Sen. Ron Wyden, D-Ore., the head of the Senate Energy and Natural Resources Committee. Wyden isn’t eager to relax the standard for approving LNG exports; he has said the current practice of automatically allowing exports to free-trade nations itself needs review.
Wyden also has argued that the economic impact study is so flawed it should be redone before the Energy Department considers any more LNG export applications.
Although the Energy Department has already approved one LNG export license, for Houston-based Cheniere Energy, analysts generally do not expect any more decisions on pending permit applications until the second half of this year.
A group of chemical companies and manufacturers warn that too many overseas sales could cause the U.S. price to spike, blunting their current competitive advantage. Companies that use natural gas to power their plants or as a building block for creating other chemicals are wary of paying a global price for the fossil fuel, which costs three to four times as much in Japan and some European markets.
But natural gas producers say the relatively low U.S. price — driven by the surge in domestic production — is not high enough to sustain current drilling. Kinder Morgan’s chief executive stressed the value of exports.