The shale revolution has put the United States in a position to become one of the great power players in world energy markets, generating tremendous economic and national security improvements. Yet a major obstacle must be removed first. Surprisingly, it was not thrown up by Russia or China or Iran, but by our own government.
The United States has been the world’s top natural gas producer since 2011, when we bumped Russia to the No. 2 spot. With the U.S. Energy Information Agency projecting world natural gas consumption to grow by 69 percent between 2012 and 2040, the United States is poised to greatly enhance our security and strengthen our economy by becoming a top supplier to nations dependent on natural gas imports.
However, these gains are already being thwarted by the ill-conceived Natural Gas Act of 1938 (that date is not a typo). By requiring an expensive and lengthy approval process before liquefied natural gas (LNG) can be exported to countries that have not entered into a free trade agreement with the United States (which includes many of our closest allies), the law has already impeded the growth of U.S. LNG exports and the numerous benefits these exports would provide.
The need to swiftly remove these foolish restrictions is obvious. With worldwide natural gas consumption rising so quickly, we have a unique opportunity to begin supplying growing markets with American energy. We have a limited window of time in which to beat our geopolitical rivals to these markets.
In short, we can exert American influence in parts of the world that are of growing strategic importance, or we can let Russia and the Middle East squeeze us out.
The top five LNG importers last year were Japan, South Korea, China, India, and Taiwan. They were followed by the United Kingdom, Spain, Turkey, France, and Italy. The United States has free trade agreements with only one of these countries — South Korea.
While U.S. natural gas producers wait for federal approval to export LNG to the countries that need it the most, those countries seek new supplies. For instance, Japan’s largest gas company wants to build a natural gas pipeline to Russia, something Russia has sought for years. If the United States lets Russia, Qatar, and other major natural gas exporters dominate in these markets in the coming years, we will have made a major strategic mistake.
In Europe as in Asia and Africa, we have a tremendous opportunity to increase U.S. influence at the expense of Russia. “Any future American cargoes would further erode Gazprom’s pricing power in Europe, and erode the Kremlin’s political leverage,” The Daily Telegraph of London’s international business editor wrote of U.S. LNG exports last year.
As U.S. LNG exports expand U.S. influence globally, they will simultaneously boost the U.S. economy. “Economic gains generally increase with the amount of added LNG exports,” concluded a U.S. Department of Energy report from last fall.
An ICF International study concluded that LNG exports could add between 73,100 and 452,300 American jobs by 2035.
President Obama’s Council of Economic Advisors reported last year that LNG exports would “increase our GDP, create jobs, promote cleaner energy around the globe, all while maintaining a competitive cost advantage for U.S. manufacturers who thrive off cheap domestic natural gas.”
The good news is that Washington recognizes the problem and is taking some steps to alleviate it. The Senate and House have approved different versions of energy legislation which would expedite the review of LNG export terminal applications, and House Democrats and Republicans have named representatives for the joint conference committee that will merge the two bills. But though these developments remain promising, it is imperative these differences are worked out quickly so that U.S. LNG exports are no longer stuck in red tape while other nations hurry theirs along.
If Congress fails to remove this bureaucratic obstacle that prevents the United States from realizing its potential as a global energy exporter, we will suffer strategically and economically for decades. It would be like sending shiploads of money and power directly to OPEC. Washington can choose to make America stronger or weaker. The right choice is clear.
George David Banks is Executive Vice President of the American Council for Capital Formation.