Energy issues always seem to spark a debate in Congress or between Congress and the Administration in power. Currently, that is taking place over the export of LNG. Since the natural gas renaissance, there have been a series of legislative proposals to break the gridlock over LNG exports. The latest is HR-6, which would provide for expedited approval of exports to WTO countries. Currently, exports are limited to only countries to which we have Free Trade Agreements. Export permits to other nations are based on a DOE determination that they were in our “national interest.” That should be a slam dunk!
Two years ago, the late James Schlesinger, former Secretary of Energy and also Secretary of Defense, CIA Director, and Atomic Energy Commission Chair, was asked to grade government energy management: “ a high D+…We’re sometimes on the verge of achieving a C, but never quite get there.” He was reflecting on 40 years of energy policy in which the government continued to meddle with market forces and subsidized alternatives that made no economic sense and weren’t commercially viable without government support.
The current debate is taking place because the Obama Administration and some in Congress believe that they have the knowledge and capability to determine which energy related actions are in our nation’s best interest and the economy long term. 40 years of history is compelling evidence that they don’t.
DOE has commissioned studies to examine the economic consequences of unrestricted exports. One by NERA, a pre-eminent economic consulting firm, concluded that exports would only slightly increase natural gas prices, which already are well below global prices. NERA found exports would stimulate domestic investment in production, distribution, storage, facility construction and operation, and improve our balance of trade as money from foreign purchases flowed into our country. One example, is a planned facility in Louisiana—Cheniere Sabine Terminal. It represents an $11 billion investment that would employ 3000 workers during construction and create about 150 permanent jobs in a community of 6800. That is only one of at least 20 projects.
Support for LNG exports comes from organizations that span the political spectrum– the Brookings Institution to the Heritage Foundation. The reason for broad and strong support is that the economic benefits to the US are compelling. Opposition comes from politically active groups that don’t like any fossil energy, that are obsessed with climate change, and rent-seeking companies that find it easier to seek profit from regulation than from competition. Ironically, these companies actually make the case for exports. If they can’t compete without government’s indirect price controls, they will be weak competitors in the global marketplace. Experience with price controls in the 1970s demonstrated that they do not work and impose significant economic harm.
The opposition of politicians to natural gas exports and the way in which politicians have handled energy policy over the past 40 years brings to mind the observation of politics by Groucho Marx: “the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.”
The US is the world’s leader in natural gas technology and shale gas production. Globally, the demand for natural gas is increasing as nations seek lower cost fuel and lower emissions. We have the capability and opportunity to lead the way in meeting that demand and in the process strengthen our foreign relations, especially in Europe, and create a large number of good-paying jobs that are sorely needed to give our economy an important boost. A recent ICF International study projects significant employment gains from LNG exports for both natural-gas producing states (60,000 to 155,000 jobs in 2035) and non-producing states (30,000 to 38,000 jobs).
We can either lead the parade or stand on the sidelines while others pass us by and reap the economic benefits of LNG exports.