LNG Exports Are a Win For All Concerned

Bipartisanship in Washington is not quite dead. Republicans and Democrats both praised the Department of Energy's approval of two new liquid natural gas export projects. With Russian gas exports to Europe slowing, and Russia solidifying its hold on eastern Ukraine, more approvals should be in the pipeline. But bureaucratic red tape from the Federal Energy Regulatory Commission and the Environmental Protection Agency result in two dozen pending applications for natural gas exports, some from 2011.

America has enough gas for itself and for export. About a third of natural gas in North Dakota is wasted. The U.S. spot price for natural gas is about $3.90 per million British Thermal Units, compared with $9.14 per million BTUs for Europe. The differential has been higher in the past, making exports worthwhile.

Last week the Department of Energy allowed Sempra U.S. Gas & Power's Cameron LNG to export 1.7 billion cubic feet of natural gas per day to non-Free Trade Agreement countries. Cameron's application was filed on December 21, 2011. At the same time, Carib Energy was granted permission to export a far smaller volume, 40 million cubic feet per day, to Central and South America. Carib's application was filed on October 20, 2011.

Both Senate Energy and Natural Resources Committee Chair Mary Landrieu and Ranking Member Lisa Murkowski issued statements praising the approvals.

Landrieu said, "Cameron LNG will create thousands of high-paying jobs in Southwest Louisiana, open new markets for American producers, and position the United States as an energy superpower. Today's decision means we can put shovels in the ground immediately and begin exporting this game-changing resource around the world." 

According to Murkowski, "I have long advocated for expediting federal approval of increased natural gas exports. The economic and energy security benefits of exporting LNG to our friends and allies are straightforward and irrefutable."

Two days after the Energy Department approvals, the Wall Street Journal reported that central and eastern Europe are anticipating energy shortages because Russia is reducing the flow of gas. Russia has cut off gas supplies to Ukraine, so Ukraine is taking gas from supplies intended for Europe.

Europe is substantially dependent on Russian gas. Germany gets 37 percent of its gas from Russia, and Poland gets 59 percent. Finland, Lithuania, Latvia, and Estonia are completely dependent on Russian natural gas. Testifying before the Senate Energy and Natural Resources Committee last March, Lithuania's Minister of Energy Jaroslav Neverovič said, "At present, we are completely-100 percent-dependent upon [a] single supplier of natural gas and, as a result, are forced to pay a political price for this vital energy resource....The United States, with your enormous natural gas resources and highly developed infrastructure, has the kind of liquid market that Europe is trying mightily to achieve."

Neverovič explained that the European Union has 22 LNG import terminals that are now only minimally-used. Lithuania is building the first large-scale import terminal in Klaipėda on the Baltic Sea that will be completed at the end of the year. The terminal will be able to be shared by neighbors, including Latvia and Poland, when supplies of natural gas come from the United States.

Where is the natural gas? U.S. companies have to get approval from the Energy Department to export natural gas to countries with which America does not have a Free Trade Agreement. About two dozen applications to export national gas to non-Free Trade Agreement countries are at the Energy Department, waiting for approval. In August the process was speeded up, so that DOE issues a final rather than a conditional ruling on whether the project is in the public interest after the Federal Energy Regulatory Commission has completed an environmental review.

The FERC process is slow and convoluted. At its core is an Environmental Impact Statement that requires approval from multiple agencies, including the Environmental Protection Agency, the Energy Department, the Army Corps of Engineers, and the National Oceanic Atmospheric Administration. The application by Freeport LNG to build an export terminal in Texas to export 2 billion cubic feet of natural gas per day has an Environmental Impact Statement approved in July 2014 that stretches to 594 pages. The original application was filed in August 2012. Companies can pay up $100 million for these statements, which are required by the National Environmental Policy Act, signed into law by President Richard Nixon on January 1, 1970.

Once FERC has produced the statement, the Energy Department can issue its final rulings on whether exports are in the public interest. Freeport LNG will likely be the next project to be approved.

Surely we can do better. These delays are weakening the American economy and leaving our allies out in the cold. A 2014 study by NERA Economic Consulting, Updated Macroeconomic Impacts of LNG Exports from the United States, concludes that competition from U.S. natural gas could reduce Russia's natural gas export revenues by 30 percent in 5 years, and by 60 percent over the long term.

David Montgomery, a senior economist at NERA and an author of the study, concluded in testimony before the Senate Energy and Natural Resources Committee in March that "However rapidly LNG exports actually grow over the next few years, a strategy of maximizing U.S. oil and natural gas production by removing unreasonable constraints and obstacles and of pre-authorizing exports without any quantitative cap will have a long run effect of weakening the Russian economy. "

Speeding up exports would be a win for America and a win for Europe.