Is exporting natural gas key to dealing with Russia?

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Michael Bastasch Contributor
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How can the U.S. break the Russian energy cartel that can hold Europe hostage on a whim? By exporting natural gas, say federal lawmakers and energy experts.

Exporting American energy to gas-reliant Europeans could burst Russia’s energy bubble.

The Russian invasion of Ukraine has reignited European fears that they could have one-third of their natural gas supply cut off if they oppose President Vladimir Putin’s meddling in the Crimea. While there may not be a short-term solution to the problem, calls have gone up for more energy exports.

In the U.S., federal lawmakers are calling on the Obama administration to fast-track the approval of liquefied natural gas (LNG) terminals that could get fuel to markets in Asia and Europe, reducing reliance on Russian gas.

“Natural gas has created a job boom across this country, but exporting also has the potential to strengthen relationships with certain of our allies who are still at the mercy of Russia’s virtual energy monopoly,” Louisiana Republican Sen. David Vitter told The Daily Caller News Foundation.

LNG export terminals must be approved by the Energy Department. But while Department-commissioned studies found that allowing LNG exports would benefit the economy on the whole, Obama administration has moved slowly to approve terminals — so far only approving six export terminal applications.

“Cheniere Energy’s LNG Terminal in Southwest Louisiana is already approved, but I’ll continue to push for final approval of additional facilities to get other cutting-edge liquefied natural gas projects through the cumbersome federal regulatory process so American resources and workers can help alleviate geopolitical concerns for our allies,” Vitter added.

While the Obama administration moves slowly on terminal approvals, Congress pushed the issue as a way to boost the economy and serve U.S. national security interests. By sending LNG to Europe and Asia, we can lower the high prices those regions pay for Russian gas.

Colorado Democratic Sen. Mark Udall and Texas Republican Rep. Ted Poe have both introduced bills to make it easier to export natural gas to Ukraine and other countries. Wyoming Republican John Barrasso is pushing a bill that would give Ukraine and other NATO members easier access to U.S. LNG.

“Our allies in Europe are eager for a reliable partner to enter the marketplace as a stable, secure source of natural gas, and American industry is ready to make that happen,” said Erik Milito, director of upstream and industry operations at the American Petroleum Institute. “Thanks to the U.S. energy revolution, America is now the world’s leading producer of natural gas, which means that our LNG exports could significantly strengthen the global energy market against crisis and manipulation.

But just because Ukraine’s crisis is making LNG exports look more strategic does not mean that opposition to energy exports has withered. Environmentalists and business interests have been the primary opponents of shipping natural gas abroad.

Environmentalists argue that exporting natural gas would increase drilling operations in the U.S. and raise carbon dioxide emissions while doing “nothing to address our country’s energy challenges,” says the Sierra Club.

“The industry claims natural gas is the key to America’s energy independence, yet they want to export almost half of daily U.S. production, leaving our communities polluted while the gas industry profits,” says the Sierra Club’s anti-natural campaign.

On the other side of the anti-export crowd is a coalition of chemical and industrial businesses – including Dow Chemical, the country’s largest steel producer Nucor and the world’s leading aluminum producer Alcoa. These companies argue that exporting gas would cause U.S. prices to rise, hurting domestic manufacturing.

Congressional Democrats have also weighed in on the issue, urging the Obama administration to hold back on approving export terminals, saying such actions could harm consumers.

“It could harm the nation’s ability to achieve energy independence, combat pollution and preserve the environment, and improve the economic competitiveness of American manufacturers,” said Oregon Democratic Sen. Ron Wyden in a statement.

Price increases rises may happen as more gas is shipped to abroad to take advantage of higher prices, but international markets will help to mitigate this, according to a study commissioned by the U.S. Energy Department. The DOE’s study found that the U.S. economy would benefit from natural gas exports.

“In all of these cases, benefits that come from export expansion more than outweigh the losses from reduced capital and wage income to U.S. consumers, and hence LNG exports have net economic benefits in spite of higher domestic natural gas prices,” reads the study. “This is exactly the outcome that economic theory describes when barriers to trade are removed.”

“Unfortunately, the slow pace of federal approval for U.S. LNG export facilities has stalled the construction of infrastructure, weakening our competitive position,” Milito said. “Accelerating that regulatory process would not only reduce our trade deficit and create jobs here in the U.S., it would bolster the geopolitical power of the U.S. and provide security to our allies.”

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