DOE’s decision to allow Freeport LNG to export liquefied natural gas to countries that do not have a Free Trade Agreement(FTA) with the U.S. is to be commended. However, in order to ensure that the U.S. receives the maximum benefit from our vast supplies of natural gas, DOE and FERC should rapidly approve the remaining 20 export applications.
New research shows that allowing larger amounts of LNG to be exported will generate an average of 73,100 to as many as 452,300 new jobs in the U.S. over the 2016-2035 period, thus a slow DOE/FERC approval process will hinder economic recovery (see http://www.api.org/news-and-media/news/newsitems/2013/may-2013/~/media/Files/Policy/LNG-Exports/API-LNG-Export-Report-by-ICF.pdf
Furthermore, by moving slowly in reviewing permit applications, the U.S. is likely to reduce its global influence and share of natural gas markets since our potential customers abroad may seek other suppliers. In addition, U.S. companies seeking export permits face increased uncertainty and higher hurdle rates for the large investments in export facilities required if permits are not approved expeditiously since global natural gas markets can change rapidly. Finally, the language of the DOE order (see page 7 at http://energy.gov/fe/downloads/fe-docket-no-10-161-lng) suggests that DOE may monitor natural gas prices as it considers export applications rather than letting markets determine how much LNG is exported. Such a policy would interfere with the ability of market forces to efficiently allocate resources and negatively impact GDP and job growth.
The Obama administration should capitalize on our abundant supply of natural gas and the increased global demand for it. Estimates show that approval of liquefied natural gas could grow our economy by nearly $74 billion annually from 2016-2035
While some express concerns over what exports could mean for pricing and supply for domestic users of natural gas, DOE notes that the U.S. has a robust 100-year supply of the resource at today’s consumption level, which is more than adequate to meet the needs of manufacturers and utilities. Our supply of recoverable shale gas is thought to be over 2.2 trillion cubic feet, and by some estimates, could meet energy demands for the next century.
These vast new reserves have pushed gas prices here down to a 10-year low.
It’s important to note that the drop in U.S. natural gas prices in the past three years has caused the number of rigs drilling for gas to fall sharply, for example there were 811 rigs drilling for gas in 2011 but only 439 at the beginning of 2013. At current natural gas price levels, employment and output of the U.S natural gas industry will continue to decline.
The ACCF Center for Policy Research recently released a special report with highlights from a roundtable discussion on Free Trade and LNG Exports. Columbia University’s Jagdish Bhaghwati, Ph.D., MIT’s Richard Schmalensee and Michael Levi of the Council on Foreign Relations offer their expert views at this critical time as DOE finalizes review of nearly 200,000 comments on its own LNG study and congressional LNG hearings are also taking place. The ACCF Special Report can be downloaded here.
The Administration and Congress should allow free markets to determine how much LNG is exported and allow free trade of this valuable resource to aid our recovering economy. From corn to cars to wheat, exports have proven to be a net positive boost for the U.S. economy and LNG exports shouldn’t be treated differently.