By Fred Hutchison
November 18, 2016 at 5:00 am ET
Sometimes on the public policy battlefield it makes sense to lay down your non-lethal weapons (such as bulleted one-pagers and email-tracked vehicles) and declare victory. However, with regard to the liquefied natural gas (LNG) legislation, that time has not yet come (despite last week’s electoral results).
For reasons outlined below, the U.S. LNG export community and America’s allies — especially in Central and Eastern Europe — continue to urge the 114th Congress to “soldier on.”
Observers of global natural gas markets could logically ask: Why bother? Haven’t U.S. LNG exports already started? And, hasn’t the federal government already sanctioned several large export projects?
Yes, it is true that LNG cargoes have been flowing from Cheniere Energy’s Sabine Pass liquefaction project since February, and five other projects are now under construction. It is also true that the Federal Energy Regulatory Commission and the U.S. Department of Energy have been working methodically through applications to build LNG projects (FERC jurisdiction) and export U.S. natural gas (DOE jurisdiction).
The principal problem with the present situation is that it is “open-ended” and therefore lacks the certainty that a statutory deadline would impose. As a result, final LNG decisions at DOE are taking five to eleven months longer than otherwise necessary.
Legislation to set such a deadline (and expedite judicial review of LNG decisions) has passed the U.S. Senate and House of Representatives and awaits final resolution during the lame duck session. And, the current administration has said that it could/would be able to live with such changes to current law.
U.S. LNG exporters support the pending legislation for the obvious reason that it would streamline and shorten a regulatory process that is expensive, time-consuming, and (in most instances) an absolute prerequisite to obtain final project financing.
America’s allies continue to support the legislation for a less obvious reason. They understand that nearly all of the liquefaction capacity at the six U.S. projects under construction was sold several years ago to major (mostly Asian) utilities and large international commodity traders.
It is the next phase of U.S. projects—those still awaiting their regulatory approvals—that represent an opportunity for gas consumers in Central and Eastern Europe (and elsewhere) to buy U.S. LNG under the most favorable long-term conditions.
This explains why ambassadors from Poland, Czech Republic, Slovakia, Hungary, Lithuania, Latvia, and Estonia wrote to the congressional leadership on Nov. 14 saying that “legislative action to expedite LNG exports to America’s European allies remains a timely and significant issue,” and expressing their hope. “That the bipartisan effort, which has been gaining momentum steadily over the past few years, will see final resolution [in 2016].” Congress should heed their plea.
The United States stands on the threshold of becoming a true energy superpower. As a result of the shale energy revolution, we have tremendous quantities of low-cost natural gas.
How much is “tremendous?”
The 2016 Annual Energy Outlook (AEO), just released by the U.S. Energy Information Administration, estimates that the U.S. natural gas supply “is adequate to meet growth in both export and domestic markets,” through 2040, with prices “remaining relatively low,” i.e. $5 per million Btu or less (in constant 2015 dollars), over the next quarter century.
Other studies (e.g. Potential Gas Committee, 2015) have also found that we have enough low-cost natural gas to meet our domestic needs for many decades and sufficient excess to supply nations in Central and Eastern Europe that—as the seven ambassadors noted—are located in “a region long dominated by an external state-controlled gas supplier, ready to use energy as a political weapon.”
By expediting and maximizing LNG exports, we can create thousands of good paying American jobs and help our European allies increase their energy security.
This is truly a win-win window of opportunity, and the logical next step is to enact the LNG legislation as America’s allies and the U.S. LNG export community have long advocated.
Fred H. Hutchison is executive director of LNG Allies and Our Energy Moment. Both organizations support establishing a statutory deadline on U.S. LNG decisions.
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