The People of America's Oil and Natural Gas Indusry

The Geopolitical Strength of U.S. Energy

Mark Green

Mark Green
Posted March 5, 2014

Politico reports (sub req'd) that the Energy Department plans to stick with its “case-by-case” approach to approving natural gas export projects – even as some policymakers say speeding up the process would send a strong signal that the United States is  a leader in global energy markets, expanding its ability to broaden supply options and defuse energy-related standoffs like the one playing out between Russia and Ukraine. Politico:

… export supporters say speedier approvals would show that the U.S. is ready to give Europeans an alternative to the gas pipelines through Ukraine that Russia has choked off in two previous disputes. … The department “remains committed to an expeditious and reasonable process” regarding gas exports, spokesman Bill Gibbons said by email. “We continue to make public interest determinations on a case-by-case basis, carefully considering economic, energy security, environmental and geopolitical impacts, among other factors.”

The United States is the world’s leading producer of natural gas but not yet a leader in the rapidly-developing global liquefied natural gas (LNG) market. If it were, the U.S. would have a stronger economic hand to counter the kind of energy pressure Russia is applying to Ukraine and could apply to others in Europe who depend on Russian natural gas. House Speaker John Boehner:

"We should not force our allies to remain dependent on Putin for their energy needs. One immediate step the president can and should take is to dramatically expedite the approval of U.S. exports of natural gas."

Since 2011, Reuters reports, the Energy Department has conditionally approved six LNG export projects to non-free-trade-agreement countries. More than 20 U.S. projects await full federal approval. House Energy and Commerce Committee Chairman Fred Upton told Reuters:

"Now is the time to send the signal to our global allies that U.S. natural gas will be an available and viable alternative. [DOE's approval process is] "unnecessarily putting our allies at the mercy of Vladimir Putin."

The U.S. Chamber of Commerce’s Institute for 21st Century Energy has released its second index of Energy Security Risk, which notes the U.S. shale natural gas surge is lowering global supply risks – even in advance of U.S. LNG exports hitting the market. The Chamber’s Sean Hackbarth writes in this blog post:

Karen Harbert, president and CEO of the Institute for 21st Century Energy … added, “Sending a market signal” like speedy approval of liquefied natural gas (LNG) export facilities “will have a calming market effect." "Democratic [oil and natural gas] molecules from the West" will reduce volatility and improve energy diversity and security for both a Europe reliant on Russia for gas, and a Japan who has become less energy diverse following the Fukushima reactor disaster in 2011.

Diana Furchtgott-Roth writes for Real Clear Markets:

Last fall, in a forum hosted on Capitol Hill, Zygimantas Pavilionis, Lithuanian Ambassador to the United States and Mexico, said, "An ability to import natural gas from the U.S., even very small amounts by U.S. standards, would make a huge impact on the Lithuanian gas market and allow the nation to develop a reliable alternative to Russian gas." And according to Jaroslav Zajicek, the Czech Republic's Deputy Chief of Mission, "We have already seen examples where the Russian negotiating position during contract-renewal talks was weakened thanks to decreasing prices on the markets in Western Europe."

It’s a poor argument to say that the Ukrainian situation wouldn’t be affected by expediting LNG export approvals from the Energy Department. When you’re talking about the years it takes to develop oil and natural gas, the best time to get the process started is always yesterday or last year. Yet, as we see, even the mere signal that the United States will become a leading LNG supplier on the global market impacts those markets – and works to lessen the leverage of other suppliers.

The Energy Department should drop its current approach and swiftly grant approvals to the remaining LNG export applications. API President and CEO Jack Gerard:

“When you look at the Ukraine situation it’s a wake-up call for the U.S. Part of that wake-up call is driven by the fact that it reminds us of our role in energy and more specifically that natural gas plays in this situation. Currently in the United States we’re having a conversation about should we allow for the export LNG, and yet when we see the way that dynamic’s playing out in the Russian-Ukrainian relationship, it reminds us that energy policy matters in this country because it impacts on a geo-political basis the rest of the world. … It’s a reminder to us as a major energy producer that what we do does impact the rest of the world.”

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.