Posted October 3, 2016
Some members of Congress have written to Energy Secretary Ernest Moniz questioning DOE’s pace in approving applications to export liquefied natural gas (LNG) while expressing concern that LNG exports could harm domestic industries using natural gas, increase consumer prices and negatively affect the environment. These are well-worn claims that simply don’t square with the facts or broad, bipartisan analysis.
Before looking at the lawmakers’ concerns in detail, we’ll say this: America’s energy renaissance – featuring surging production of cleaner-burning natural gas – is giving the U.S. an unprecedented opportunity to be a world leader in setting and driving global energy policy. It’s an opportunity that argues strongly for expedited LNG export approvals by DOE.
As is the case with any tradable commodity, selling U.S. natural gas outside this country promotes domestic jobs and economic growth. Expanding demand for U.S. natural gas in global markets through LNG exports will result in increased domestic investment, enhanced GDP growth, rising incomes and more well-paying jobs. At the same time, U.S. LNG exports will expand global natural gas markets – enhancing U.S. influence to encourage transparency and fair market rules while strengthening relationships with our allies.
Now, to the points raised by the lawmakers. First, manufacturing.
Revitalization of U.S. industrial activity is the result of an abundant and affordable natural gas and natural gas liquids (NGL) supply. Exporting natural gas through LNG exports is an important tool in maintaining the U.S. manufacturing industry’s influence, both at home and in the global market. Permitting LNG exports drives demand for U.S.-produced dry natural gas and continued investment in overall production. Ultimately, this helps preserve low NGL and natural gas prices. This improves the competitiveness of U.S. industries that use NGLs as a feedstock – such as chemicals, fertilizers and plastics – and energy-intensive industries like steel and paper.
Next, price concerns.
Since 2011, a number of analyses – including two DOE-commissioned studies, here and here, and ICF International – have examined the price impacts of LNG exports on domestic natural gas prices. The consensus is that at the likeliest levels of natural gas exports, we’ll see very modest increases in the domestic price of natural gas while enjoying net economic benefits.
In its 2015 report to the president, the White House Council of Economic Advisors found that LNG exports would bring economic and national security benefits to the United States. The report also found that increased U.S. LNG exports, and the resulting price changes, would have a number of mostly beneficial effects on natural gas producers, employment, U.S. geopolitical security and the environment.
Further, increased demand for U.S. LNG would stimulate increased domestic production. We will not simply be relying on the amount of natural gas that was produced in 2015 to meet our domestic demand and exports in the future. We have enough natural gas to meet the needs of our allies abroad without sacrificing any of our domestic advantage.
As for the environment, U.S. energy-related carbon dioxide emissions were 12 percent below the 2005 levels – mostly because of the increased use of natural gas by power generators. Natural gas is the cleanest-burning fossil fuel. Exporting U.S. LNG also will help reduce global greenhouse gas emissions (GHG). ICF International estimates that exported LNG will have GHG emissions 43 to 52 percent lower than the dominant fuel where it is used. Further, DOE’s study concluded that U.S. natural gas consumed in Europe or Asia has lower life cycle GHG emissions than power generation from locally sourced fossil fuels. Encouraging the use of natural gas around the world can reduce emissions both at home and abroad.
In their letter to Moniz, the members of Congress questioned levels of exports suggested by DOE’s approvals. The cumulative export capacity from DOE applications is irrelevant. The market will determine the appropriate number of facilities to build, and once built, the market will decide the appropriate volumes of LNG to export from those facilities.
If domestic prices were to increase above a certain threshold, U.S. LNG exports will not be competitive in the world market because they would be more expensive than other suppliers. Further, to assume that all projects that are approved will be built and export at full capacity around-the-clock is an unreasonable assumption and does not reflect the reality of global market dynamics.
Again, the market will decide which facilities are most viable based on both financial and fundamental commodity conditions. All markets have cycles. The ability to capture value from these business cycles lies in the resources and infrastructure we have available to us as a nation. If our government peremptorily chooses not to build LNG export facilities on U.S. soil, then our country will be surrendering the option to capture the many domestic benefits associated with U.S. LNG exports.
Skyrocketing U.S. natural gas production using safe hydraulic fracturing is at the heart of an energy renaissance that’s making America stronger economically and more secure in the world – while offering a golden chance to positively impact global markets and help friends abroad. Exporting U.S. LNG is bringing overseas wealth into this country and helping to stimulate production here at home. Expediting the export approvals process is critically important to supporting the domestic industry and enhancing the competitiveness of this U.S. commodity on the global market. API President and CEO Jack Gerard:
“As the world’s leading natural gas producer, the United States has a valuable opportunity to grow our economy, create jobs, reduce greenhouse gas emissions, and enhance security for the U.S. and our allies by exporting our abundant natural gas supplies. … Our competitive advantage as the world’s leading natural gas producer could all too easily be squandered by an inefficient export approval process.”
ABOUT THE AUTHOR
Mark Green joins API after spending 16 years as national editorial writer in the Washington Bureau of The Oklahoman newspaper. In all, he has been a reporter and editor for more than 30 years, including six years as sports editor at The Washington Times. He lives in Occoquan, Virginia, with his wife Pamela. Mark graduated from the University of Oklahoma with a degree in journalism and earned a masters in journalism and public affairs at American University. He's currently working on a masters in history at George Mason University, where he also teaches as an adjunct professor in the Communication Department.