Energy & Environment

A new year, a new opportunity for liquefied natural gas exports

The case for expediting export permits for U.S.-produced liquefied natural gas (LNG) has moved from logical to compelling. That is a reality the 114th Congress must face, due to Department of Energy delays, when it convenes in January with Republican leadership in both houses.

The logical case has been in place for at least five years and it is deeply rooted in the law of supply and demand. Improvements in horizontal drilling developed here have made the U.S. a world leader in producing oil and natural gas. And the cleaner burning fossil fuel — natural gas — is in high demand overseas, but the U.S. is still barely a player in the LNG export market because of lingering bureaucratic barriers to exports.

The logic of allowing free-market forces to benefit the U.S. in the areas of jobs and consumer prices has led the Obama administration to begin lifting restrictions on the export of U.S. crude oil. Eliminating trade barriers has escalated from economic common sense to an economic need due to startling changes in the global energy market.

{mosads}The massive increase in U.S. energy supply, coupled with international dynamics, has driven prices down, and is now starting to drive down U.S. employment opportunities. According to Reuters, most recently, a terminal project that was expected to start exporting liquefied natural gas by 2018 in Texas is being put on hold.

Heavy domestic investment by energy companies has been an essential driver of the U.S. economy, as the Progressive Policy Institute pointed out in their 2014 “Investment Heroes” report. According to the report, the top 25 American companies invested more than $152 billion in the U.S. last year. Ten of the 25 were energy companies contributing 37 percent of the total investment. As The Wall Street Journal recently reported, “U.S. oil and gas companies have been an engine of growth through much of an otherwise lackluster economic expansion, providing steady employment, solid wages and fierce competition for workers across wide swaths of the country.”

The biggest investment plans for the U.S. energy industry today are for multibillion-dollar LNG export terminals. Companies committed funding for these projects in the belief that the federal government would end its foot-dragging on issuing natural gas export permits. An LNG export terminal without an export permit is like having a Mercedes parked in the driveway with no gas in the tank — a useless and expensive luxury.

Moving quickly to expedite LNG export permits would be the best way to maintain the domestic benefits of energy investment and job creation.

Blocked access to the LNG export market by our own government causes cutbacks in U.S. energy production and investment, and the damage will not be limited to mega energy companies. Energy production is much more of a small-business industry than most Americans would guess. According to a study released in December by the Small Business and Entrepreneurship Council, from 2005 to 2012 employers in five critical energy industry sectors added more than 293,000 jobs. Ninety percent of the companies creating those jobs were small businesses with less than 500 employees.

The latest legislative solution to force a speed-up in the export permit and terminal construction approval processes has been on the table since July when Sen. John Hoeven (R-N.D.) introduced S. 2638, the Natural Gas Export Certainty Act. As recently as November, Hoeven was quoted as saying that Energy Secretary Ernest Moniz was expressing conditional support for the bill.

Liquefied natural gas export certainty deserves the secretary’s unwavering support. America’s proven natural gas reserves jumped to a new record of 354 trillion cubic feet last year. Our ability to sustain vigorous exports is not in doubt.

Yet, just last week 100 environmental activists served Moniz with a letter demanding that he reject any effort to accelerate LNG exports on the spurious grounds that exports would somehow contradict the Obama administration’s pledge to reduce greenhouse gas emissions. Never mind that our prime potential export customers are overseas power companies anxious to replace coal with much cleaner natural gas.

The environmentalists’ argument against expediting LNG exports is unfortunately based on politics rather than science. I examined the realities of this situation in a detailed study that shows we must not fall prey to interest groups who are attempting to propagate untruths and block U.S. energy momentum.

Given the compelling economic implications of letting America realize its potential as an LNG exporter, we do not have time to waste on faux environmental arguments. The stakes are too high. The time is too short. And the best possible outcome would be passage of language similar to Sen. Hoeven’s S. 2638 early in the new year.

Thorning is the vice president and chief economist for the American Council for Capital Formation.

Tags Department of Energy Ernest Moniz John Hoeven Liquefied natural gas LNG
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