The US must seize the LNG opportunity

In February of 2016, the first large-scale shipment of liquefied natural gas (LNG) from the lower 48 states departed Cheniere’s Sabine Pass export terminal, opening a new chapter in American energy. Dominion’s Cove Point LNG terminal in Southern Maryland just joined Sabine Pass as the second major terminal to ship U.S. LNG to the global market. These two terminals, and others set to join them, are reshaping the global natural gas calculus right before our very eyes.

U.S. LNG exports are proving to be an engine for economic growth, critically important to global climate efforts and a potent geopolitical tool.

{mosads}When President Trump visited China last November, U.S. LNG took center stage. LNG has become a key part of China’s plan to reduce its choking reliance on coal. Beijing is now moving swiftly to invest in U.S. export capacity and expand its own import capacity.

In Europe, U.S. LNG is already playing an outsized role in strengthening U.S. foreign policy. More robust LNG trade and access to reliable and affordable U.S. natural gas is helping strengthen the energy security of close allies and loosen Russia’s grip on the European gas market.

But despite strong evidence that U.S. LNG exports are a win for U.S. workers, diplomacy and global climate efforts, there remains a small but vocal minority of politicians and manufacturers that would like the U.S. Department of Energy (DOE) to restrict exports to non-free trade agreement (NFTA) nations. This misguided stance rests on the argument that U.S. LNG exports – should they reach high enough volumes – would raise domestic natural gas prices, hurting U.S. energy consumers and damaging the competitiveness of energy-intensive manufacturers. This sentiment relies on dated statistics and cherry-picked soundbites.

The facts tell a far different story. Our natural gas reserves continue to grow and U.S. gas production continues to rise. The shale revolution, still considered in its early stages, is now benefitting from significant leaps forward in process optimization, manufacturing efficiency and the penetration of big data into production. The rub: more prolific wells that are drilled faster and at lower cost. There is more than enough natural gas available to meet the needs of domestic consumers and exporters.

Studies have already shown increased demand for U.S. natural gas from exports will be met almost entirely by additional production, not current production. Exports will drive increased investment and job growth in the shale fields. In the unlikely scenario that the price of U.S. natural gas does rise significantly, so will the price of U.S. LNG and exports will fall. If importers can find lower-cost supply with other exporters, such as Australia, Qatar or Russia, they will. The global LNG market is highly competitive and will determine how much or how little U.S. LNG makes its way overseas.

If we were to artificially restrict exports, falling prey to protectionist impulses, we would undermine our own commitment to fair trade and, according to recent analysis from ICF International, deny ourselves as much as $73 billion in new investment and 452,000 additional jobs by 2040. Government intervention to limit exports would be a painful own goal, with Russia, Australia and Qatar celebrating in the stands.

We should not only reject calls to limit exports to NFTA countries but take steps to streamline our export permitting process. The first six LNG projects approved by DOE each took roughly two and a half years to complete the federal permitting process. We can and should do much better.

There is a clear opportunity to streamline permitting and legislation currently under consideration in Congress would do just that. It deserves our full support. Doing so will provide developers with confidence in the regulatory process and allow them to more quickly challenge international competitors.

LNG exports represent a remarkable, multi-dimensional opportunity for the U.S. to grow our economy, restore our balance of trade, promote the use of a cleaner fuel and strengthen the energy security of partners around the world. Every effort should be made to ensure we seize the opportunity before us.

Charlie Riedl is executive director of the Center for Liquefied Natural Gas.