By American Public Gas Association
October 2, 2014 at 5:05 am ET
The export of U.S. liquefied natural gas (LNG) continues to be a hot topic in Washington, D.C., particularly after the Department of Energy (DOE) approved two new export applications to non-free trade agreement (FTA) countries in September, which increased the total amount of approved exports to 11.55 Bcf/day. Proponents tout LNG exports as a panacea with improved security for American allies, a lower trade deficit, more domestic jobs, and greater U.S. energy security. Unfortunately, the saying “if it sounds too good to be true, it probably is,” applies to LNG exports. What LNG exports really mean for Americans is a wealth transfer from the pockets of home and business owners to natural gas producers and exporters, a lost opportunity for enhancing energy security, no impact on Russia’s control of European gas markets, and a squandered U.S. manufacturing renaissance.
This wealth transfer from LNG exports is demonstrated in the DOE-sponsored study by NERA Economic Consulting titled, Macroeconomic Impacts of LNG Exports from the United States. This study was used by DOE as the economic justification to allow exports to go forward and is currently used by export proponents as the reason to export. The study claims to show that there are net economic benefits for the U.S. from LNG exports. However, basic free trade theory and the study itself show that the real winners are natural gas producers and exporters and the losers are every other sector of the U.S. economy. The study shows that wage income, return on capital investment, and employment for just about every sector of the U.S. economy—other than producers and exporters—decline in almost every export scenario examined. To APGA, a policy choice that picks producers and exporters as the winners and everyone else as the losers is unwise and ultimately lacks public support.
Exports will also harm America’s best chance to enhance energy security through natural gas vehicles (NGVs). NGVs are available right now and are generating fuel cost savings of $1-$2/gallon versus gasoline or diesel, which enables economically viable payback periods. Moreover, NGVs are fueled by secure American natural gas and therefore reduce the need for imported oil, which accounts for about $165 billion worth of the $471 billion U.S. trade deficit.
Yet, the export of LNG would impair the opportunity for NGVs to continue to be a viable and competitive alternative. The price of compressed natural gas (CNG) is currently low due to abundant shale gas resources and the fact that the natural gas market is largely limited to North America. If the large-scale export of LNG occurs, natural gas prices will rise and the fuel cost savings between CNG and gasoline/diesel will shrink, thus making NGVs less competitive. By making NGVs less economical, the transportation system will remain dependent upon foreign oil.
Moreover, despite recent claims from export proponents about how U.S. LNG exports can free Europe from Russia’s domination of natural gas, the reality is that U.S. exports will not affect Russian control over European gas markets. A recent study done by Columbia University’s Global Center for Energy Policy concluded that, “Despite the recent rhetoric, US LNG exports are not a solution to the current crisis in Ukraine and will not free Europe from Russian gas. Europe will remain dependent on Russia for the majority of its gas supplies with or without US LNG.” The report notes that U.S. exports are still several years away from significantly contributing to the world market, and that Central and Eastern European LNG infrastructures ensure that Russian gas will be dominant due to the fact that Russian gas will remain cost-competitive, and that U.S. exports will displace other higher cost LNG, rather than Russian gas.
Finally, LNG exports also threaten the U.S.’ burgeoning manufacturing renaissance. Since 2010, affordable natural gas has created 530,000 manufacturing jobs, reversing a long decline in employment. The outlook for manufacturing is now so robust that companies have announced approximately $120 billion in private investment in new or expanded manufacturing facilities, which, if gas remains affordable, could create an additional 5 million new jobs by 2020 according to a study by the Boston Consulting Group. However, if large-scale LNG exports occur, the domestic price of natural gas will rise anywhere from 10-45 percent, which will harm global manufacturers’ competitiveness. In turn, this could lead manufacturers to halt construction or expansion of new facilities and move those facilities offshore, potentially undermining millions of new jobs.
U.S. energy policy is at a crossroads. Clean, abundant, and domestic natural gas can help revive our economy, improve our energy and national security, and improve air quality. To achieve these goals, policymakers must prioritize the domestic use of natural gas in transportation, manufacturing, and in homes and businesses instead of choosing to enrich producers and exporters. APGA sincerely hopes that policymakers will choose the wise course and put the brakes on the export of LNG.
APGA is the only not-for-profit trade organization representing America’s publicly owned natural gas local distribution companies (LDCs). APGA represents the interests of public gas before Congress, federal agencies and other energy-related stakeholders by developing regulatory and legislative policies that further the goals of our members.