LNG tanker arrives in Boston, MA, 2005. Photo Credit Flickr user lightgraphs
With the release of DOE’s report examining the impacts of allowing natural gas exports to move forward, there is understandably a lot of attention on the subject lately. The main conclusions of the report, written by NERA Economic Consulting, found that permitting natural gas exports will have only a marginal impact on domestic prices, which in any event, will be outweighed by the economic benefits of selling natural gas overseas.
The findings have given momentum to supporters of natural gas exports, and many believe the report will give DOE the political cover it needs to move forward with permits in the coming year. Exporting natural gas currently requires a permit from the Federal Energy Regulatory Commission (FERC) if exports are heading to countries with which the U.S. does not have a free trade agreement.
However, a new bill from outgoing Senator Richard Lugar (R-IN) would, if passed, make it unnecessary to need to obtain a FERC permit to export natural gas to America’s European allies. Named the “Liquefied Natural Gas (LNG) for NATO Act,” the bill would extend to all NATO members the status that free-trade countries already have – no FERC permit would be needed to export LNG to them. This means that the natural gas industry could begin exporting LNG to several key allies in Central and Eastern Europe.
Sen. Lugar noted that allowing LNG exports to NATO allies will reduce their reliance on Russia for a source of energy, mitigating their exposure to political whims from the Kremlin. Russia has demonstrated in the past its willingness to use energy as a political tool, and as the dominant supplier of natural gas to Europe, it holds considerable leverage.
However, the “Shale Gale” in the United States has already diminished Russian influence, even though the U.S. has yet to export a drop of LNG. Once expected to be a major LNG importer, the surge in domestic natural gas production now has people talking about LNG export facilities instead of import terminals. Shale gas has freed up LNG around the world, contributing to global supplies. Andrew Holland explored this topic in a previous blog post last year.
By allowing American natural gas to be exported to its strategic allies, Sen. Lugar argues, will further undermine Russia’s grip over the region. As reported by Ben Geman in The Hill, Sen. Lugar stated, “Now is the time to dramatically shift gas markets to blunt the temptation for political manipulation of supplies by Russia and Iran.” A link to Sen. Lugar’s bill can be found here.
The debate over allowing natural gas exports will no doubt continue into next year, but thus far it has centered the effects on domestic prices. The opposition says that we should fuel a manufacturing renaissance with the newfound bounty, not squander our competitive position by exporting it abroad. Supporters argue the opposite: exporting natural gas will be an economic windfall.
What the debate is missing is the effect on geopolitics. Many of the U.S.’s allies around the world lack indigenous energy resources. Some are trying to roll out renewable energy or nuclear power, but many are still dependent on major suppliers of fossil fuels like Russia and the Middle East. Sen. Lugar’s bill is intended to change this equation by allowing American LNG to reach global markets.
