Guest Commentary: Natural gas exports would halt US manufacturing comeback

By Daniel R. DiMicco

For the last decade, media headlines in the U.S. have reported on closed factories and the loss of millions of manufacturing jobs to facilities located overseas.  How times have changed.  Today there is hope that these trends, once thought irreversible, could be changing.

But why?

Abundant, low-cost supplies of U.S. natural gas provide an opportunity to bring manufacturing jobs back to America and rebuild our middle class.  The gas is creating new jobs.  It is as simple as that. There is a little-noticed but hugely important natural gas policy decision our government is about to make. If we are not careful with our natural gas export policy, we could squander this opportunity by allowing unchecked natural gas exports.  We cannot let that happen.

The Department of Energy (DOE) is evaluating 16 applications that seek to export liquefied natural gas (LNG) to countries that do not have free trade agreements with the U.S., like China.  The growth in U.S. natural gas supplies has spurred this interest in additional LNG exports.  As it considers these applications, the DOE needs to evaluate how we can best use our natural gas resources to create the greatest economic benefits for Americans.

Abundant natural gas supplies are already resulting in new manufacturing investments in this country.  Low natural gas prices and a reliable supply are a primary reason Nucor chose to locate a direct reduced iron (DRI) facility in Louisiana.  This project, currently under construction, is a $750 million capital investment that is employing over 600 construction workers and will create 150 permanent, high-paying jobs.

We are not alone.  New industrial projects in the U.S. totaling more than $100 billion have been announced.  Using domestic natural gas to grow our manufacturing sector and export more value-added products will create a much stronger U.S. economy than will exporting LNG alone.

A recent study by Charles River Associates confirms this, finding that increased manufacturing from cheap natural gas creates twice the direct value for our economy and eight times as many jobs as LNG exports. The study also shows how easily this opportunity could be lost.  It projects high volume LNG exports would double prices from today’s levels, driving them to $8-10 per million Btu. Should this happen, much, if not all, of the $100 billion of manufacturing investment mentioned above will be at risk, and the millions of jobs those investments expect to add in this country will never materialize.

U.S. natural gas demand will increase with these new manufacturing projects and expansions, benefitting domestic producers even without large-scale LNG exports.  The Charles River study shows, based off of current announced industrial projects, that natural gas demand from the industrial sector is expected to grow by 4.8 billion cubic feet per day (Bcf/d) over the next decade.  Another 13 Bcf/d in natural gas demand growth is expected over the next 20 years as coal plants are shut down in response to economics and federal environmental regulations.

Supporters of unlimited LNG exports label those advocating a pragmatic, thoughtful approach to exports as protectionists.   They talk about the global energy market as though it is a virtuous example of the theory of free trade at work.  That is absurd.  Global energy reserves are mostly controlled and abused by either governments, like Russia, or cartels who have manipulated the price of energy to their benefit for decades.  In addition, European governments have made the political decision to ban hydraulic fracturing, thereby leaving sizeable shale gas reserves in the ground that would make them less reliant on Russia for natural gas.  As a result, the U.S. is expected to export LNG to Europe to save them from both their own political decision to forgo energy production and the energy price manipulation they experience from Russia.  Supporters of LNG exports overlook the protectionist trade practices that are occurring in global energy markets.

Allowing unlimited exports could stifle our economic recovery.  Natural gas is giving us a major competitive advantage to help drive our global competitiveness and create high-paying jobs here at home.  U.S. natural gas supplies are a game-changing opportunity that will, in part, according to Boston Consulting Group (BCG), create up to 5 million jobs by end of the decade.

We have a unique opportunity to put our country on the road to long-term economic prosperity.  But for that to happen we have to realize the interplay between energy and manufacturing policy.  Adopting an unlimited export policy that sends large amounts of our domestic natural gas resources overseas would put this economic opportunity and its benefits at risk. Nothing less than our nation’s energy security, its manufacturing base, and a chance for up to 5 million jobs are at stake.

Daniel R. DiMicco is Executive Chairman of Nucor Corporation, a manufacturer of steel products.  Nucor Corporation is a member of America’s Energy Advantage (AEA), a coalition of businesses and organizations dedicated to raising awareness of the emerging renaissance in American manufacturing made possible by our country’s new abundant and affordable supplies of natural gas.


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