Two Months Between Decisions is Too Long

Today, May 24, marks the two month anniversary of the last natural gas export application approved by the U. S. Department of Energy (DOE).

At this rate (about six decisions per year) and assuming that the next decision is imminent, it will take DOE at least four more years to dispose of the 24 applications now sitting in the queue for a license to export liquefied natural gas (LNG) to nations with which the United States does not have a free trade agreement (FTA).

DOE’s project-by-project “public interest” review process has become redundant (and thus largely nonsensical) given that: (1) America has far more natural gas than it can consume; (2) numerous studies by DOE and others have consistently concluded that LNG exports will have net positive benefits for the United States and, in fact, the greater the exports the greater the benefits; and (3) these studies found that even high levels of LNG exports would have only minor effects on U. S. gas prices.

That there is not more discussion within the administration about changing direction on the LNG export issue is surprising since many senior officials seem to grasp the difficulties and contradictions with the status quo:

  • Vice President Biden and Secretary of State Kerry know (from dozens of meetings with presidents, ministers, and ambassadors) that America’s allies in Central and Eastern Europe desperately want the administration to speed up its LNG export decisions. These foreign officials understand that U. S. natural gas cannot flow quickly to Europe. But, as Lithuania demonstrated in recent negotiations with its current exclusive gas supplier (Gazprom), the mere prospect of a bona fide alternative may lead to short-term price relief.
  • White House climate counselor John Podesta knows that restricting natural gas exports but not coal exports means that countries around the globe will consume ever-greater quantities of U. S. coal when using U. S. natural gas is the more “climate-friendly” alternative. (This is particularly ironic since the White House is about to release its long-awaited draft regulations to reduce carbon dioxide emissions from existing U. S. coal-fired powerplants.)
  • Energy Secretary Ernest Moniz knows that not all 31 LNG projects covered by existing licenses and pending applications will be built. After all, construction permits must also be obtained from the Federal Energy Regulatory Commission and state / local agencies and billions of dollars in project financing secured.
  • U. S. Trade Representative Michael Froman knows that the administration’s “go slow” approach to LNG export licenses advantages industrial U. S. gas users over consumers in other nations, which is exactly what the USTR accused China of doing in the rare earth metals case recently decided (in favor of the United States) by a World Trade Organization tribunal.
  • Carlos Pascual, the State Department’s Special Energy Envoy, knows that the United States has been strongly urging the European Union to diversify its gas supplies, buy LNG from America, and “step up” its efforts to create a continent-wide, fully-integrated, and fully-functioning natural gas market. (Pascual knows this because he’s the one who’s been doing most of the urging!)

Clearly, many senior officials within the administration understand the problems, subtleties, and implications of the status quo. What they seem unwilling and / or unable to do is to convince the man in charge to change direction when change is obviously in order.

Given the continued reticence of the White House, it is no wonder that bills to speed up the LNG export review process are gaining bipartisan traction in both house of Congress. Those of us who object to the current “slow-as-molasses” situation must continue to encourage members of Congress to enact legislation to speed things up.

However, it’s the president who will ultimately have to sign such a bill, and so the power to expedite U. S. natural gas exports remains where it has been all along—in the hands of the man who occupies the Oval Office.

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