Energy & Environment
The Politicization of Natural Gas Exports
The world has a complicated relationship with non-renewable resources. Large chunks of these resources are controlled by just a few countries. The United States has long worried about its ability to help our allies obtain these resources. One proposed way has been to pass the Domestic Prosperity and Global Freedom Act. Read on to learn about the underlying energy crisis, and the arguments for and against this legislation.
Background of the Domestic Prosperity and Global Freedom Act
As the Ukrainian crisis continues to wage on, the question of oil dependence has emerged as a relevant and pressing issue that could impact geopolitical events. Currently, Russia provides one third of Western Europe’s natural gas, and an even higher percentage of Eastern Europe’s, leaving countries such as Ukraine locked under the power of Russian oil prices. As oil and gas prices rise as a result of political tensions in the region, these countries will look to import their natural gas from other sources, hoping that wider options in the market will drive prices down for their manufacturing and private sectors.
Meanwhile, the United States currently has large reserves of natural gas that amount to more than enough for domestic consumption for the foreseeable future. The natural assumption here would be to export US natural gas to these countries seeking independence from Russian energy. However, in order to export natural gas, it must be processed and liquefied at cryogenic temperatures, creating a liquid that can be shipped. The application process for creating export facilities that create Liquefied Natural Gas (LNG), which must pass through both the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC), is convoluted and delayed; only seven applications have been approved since 2011, with 24 applications still pending.
The Domestic Prosperity and Global Freedom Act, approved by the House Energy and Commerce Committee and through the House in full, would remove these restrictions by federal agencies and expedite the process for approving applications for the construction of LNG export facilities. However, fierce opposition has risen against this bill. Opponents argue that the bill will inadvertently raise domestic oil and gas prices while providing funding to energy production methods that wreak havoc on natural environments.
What’s the argument for the legislation?
The goal of the act is clear: provide Ukraine with American natural gas, thus breaking their dependence on Russia for energy and balancing the scale of global power in region. Until former satellite nations are able to break their dependence on Russian energy, many argue, Russia will be able to economically, and therefore politically, control these countries. The U.S. State Department recently announced, “The United States is taking immediate steps to assist Ukraine, including the provision of emergency finance and technical assistance in the areas of energy security, energy efficiency, and energy sector reform.” This, in short, is an announcement that US natural gas reserves will be shipped to Ukraine in order to regulate the balance of power that has tipped in that region.
Exporting US natural gas to these areas would, advocates argue, create a number of benefits for the United States and its citizens, in addition to benefits for Ukraine. The act would make the US the world’s top producer of natural gas, thus reinstating America’s dominance in energy production and improving its trade deficit. Shipping natural gas overseas requires the construction and operation of natural gas liquefaction installations, which could create roughly 450,000 jobs by 2025. The main impediment to the export of natural gas, which the bill addresses, is the application process for constructing these new facilities. Both the DOE and FERC have to sign off on any natural gas liquefaction projects, where environmental factors, the LNG buyers’ Free Trade Agreement status, public interest, and a number of other factors must be taken into account. During the FERC phase of the approval, over 20 government agencies become involved in the review process, creating a bottleneck effect in the long line of applications. Advocates argue that this act, designed to expedite this review process and enable LNG buyers to begin exporting American natural gas, will strengthen both America’s economy and the economy of nations such as Ukraine that are heavily dependent on Russian energy.
What’s the argument against the legislation?
Opponents, however, argue that the infrastructure required to ship gas to Ukraine has not yet been built, making it years before any gas would actually reach Ukraine (which, coincidentally, does not have any LNG import facilities, as it gets almost all of its natural gas via pipeline from Russia). Approving applications now to construct LNG export facilities, opponents state, is a long-term solution to an immediate problem. Many believe that exporting natural gas reserves would also negatively impact the US economy in a number of ways, creating more economic problems than the current geopolitical situation is worth. Some experts believe exporting America’s natural gas reserves will increase domestic gas prices, which have been kept low, internationally speaking, by its abundant reserves. Exporting natural gas and creating scarcity would drive up domestic oil and gas prices, hurting commercial interests and everyday consumers. This would also stifle what many refer to as the “American manufacturing renaissance” that has been occurring as a direct result of these gas reserves.
The great quantity of easily accessible natural gas has drawn energy-intensive companies to the U.S. to invest in manufacturing facilities across the country. Recently 97 energy-intensive chemical manufacturing companies invested roughly $72 billion in the U.S., spurring job growth and economic strength. Opponents argue that it is this type of economic growth that America must seek, instead of distant, fleeting profits from the sale of our natural gas. Were America’s natural gas to be exported, rising energy prices and a growing scarcity of domestic energy would smother the manufacturing renaissance and would place economic growth in the unstable hands of the oil and gas industry, instead of the diversified and profitable chemical manufacturing industry.
Lastly, opponents have been joined by environmental advocates who have voiced their concern over the environmental impacts of increased drilling and exportation of American natural gas. If the demand for natural gas export increases, opponents argue, then the demand for natural gas would also increase, which would lead to expanded drilling projects using controversial methods such as fracking to extract more natural gas. The construction of LNG export facilities and expanded drilling projects would also place more wildlife areas at risk that environmentalists have struggled to protect. The pressure for more natural gas recovery would also lead to increased carbon emissions and higher risks of spills and accidents that could dramatically damage an ecological area. Instead, many economic experts argue that the US should export drilling technology and raw materials to countries such as Ukraine to enable them to produce their own natural gas and free themselves from the bonds of Russian energy. In this way, the US could immediately profit from international trade and provide economic aid to its ally, the Ukraine.
The Domestic Prosperity and Global Freedom Act passed the House this summer, and now is waiting in the Senate. While the bill is subject to much debate, it does begin to deal with the question of how nonrenewable resources are transferred internationally, and the political implications that accompany such transfers.