Last week the Department of Energy released a report prepared by a consulting firm that took a look at the possible benefits of exporting natural gas. The study concluded that overall allowing firms to export natural gas would be good for the economy. For whatever reason, companies must ask the government for permission to export energy products, so firms are still seeking approval from the Department of Energy. But first, the backstory:
Not long ago, the U.S. was facing the prospect of spending billions to import pricey natural gas from overseas to heat our homes, fuel electrical generation and run our city buses. The industry was furiously building terminals to handle what was sure to be enormous ship traffic from places like Qatar and the United Arab Emirates.
Now — as a result of the ‘fracking’ revolution — the federal government is considering 15 applications to build huge facilities to liquefy natural gas from U.S. shale deposits and send it overseas.
The ability to tap natural gas from unconventional sources has quickly made the U.S. one of the world’s leading producers. But success has a downside. The price of gas domestically is near historic lows. In some places, companies are pulling back exploration because it just doesn’t pay.
That’s why the industry is anxious to open up the export market; in particular, countries that don’t have free trade agreements with the U.S. In many of them, the price is 3-5 times what we are now paying at home.
As of less than a decade ago, the United States was building terminals to import natural gas from other countries. But thanks to the miracle of hydraulic fracturing, we have the cheapest natural gas on the planet and will soon be exporting it to other countries. This helps our trade deficit (as we still import lots of oil). Even The New York Times supports it:
Exporting natural gas is a controversial issue, with powerful forces on both sides. But we are persuaded by the report’s core finding that the benefits of selling gas to other countries would more than offset the modestly negative impact of higher prices for domestic users of the fuel.
The United States has traditionally maintained tight control over the export of natural gas, a fuel that it once imported, allowing it to be sold only in cases deemed to be in the “public interest.” But those restrictions have become anachronistic.
Production from shale gas fields has swelled American reserves and driven down prices by two-thirds since 2008. American natural gas is now among the cheapest fuels anywhere in the world and costs as little as one-fourth of what the fuel sells for in Europe and Asia.
While The Wall Street Journal, said ‘duh‘:
America’s shale gas boom is so promising that it has some people discombobulated—including, naturally, our politicians. The same folks who complain about America’s trade deficit now want the U.S. government to ban the export of liquefied natural gas (LNG). This is one way to ruin what has been a very rare piece of good U.S. economic news.
Unlike oil, which is a global commodity sold at a global price, the world natural gas market is fragmented by limits on supply. Gas has to be liquefied before it can be loaded on ships and transported. But with the natural gas price in the U.S. ($3.70 per million BTUs) so much lower than it is abroad ($17 in Japan, for example), suddenly LNG exports from the U.S. look like a potentially good investment.
And it’s no surprise that is precisely what a report commissioned by the Department of Energy and released this week concludes. The experts at NERA economic consulting suggest that LNG exports would produce net economic benefits for the U.S. across a range of possible natural gas price changes. In all cases benefits increased as LNG exports increased.
But of course, the radical environmentalists and their cohorts in Congress are trying to stop this, because they hate fracking and exports will ensure that we continue to frack more gas:
The industry couldn’t be happier about the findings. Bill Cooper, of the Center for Liquefied Natural Gas, told Fox News, “What we’re talking about is selling a valuable resource that we have in abundance that we can provide to other countries at a cost that brings valuable investments back into the United States – money into the United States that grows our economy.”
At the same time, an unusual alliance has emerged in opposition to exports. It includes Democratic Sen. Ron Wyden, Rep. Ed Markey (D-Mass.), the Sierra Club and Dow Chemical, which uses huge amounts of natural gas as feedstock and fuel for its factories.
The environmental arguments are what you would expect – that exports would increase the amount of fracking and production of greenhouse gases.
Thankfully, their views seem to be in the minority on this issue. Yet, for all their extreme views, they still influence Congress on a number of issues.