The Case for Expediting LNG Export Approvals

Mark Green
Posted September 21, 2016

With environmentalists attacking a provision in pending energy legislation that would boost the competitiveness of U.S. liquefied natural gas (LNG) exports, now’s a good time to review the reasons to expedite federal approval of this country's LNG export projects.

Reason #1: Trade

The U.S. is the world’s leading producer of natural gas and oil and should be a leader in LNG exports. Unfortunately, we’re not competing in the global marketplace as vigorously as we could because of the federal government’s plodding approach to approving new export facilities. While a few LNG export facilities have started shipping U.S. LNG overseas, 29 applications for approval to export are pending before the U.S. Department of Energy, many of which submitted in 2014 or earlier.

The energy bill now in Congress would expedite the approvals process – providing certainty to investors, operators and the entire domestic natural gas supply chain. This will help ensure that U.S. LNG can reach the global market and meet demand that’s finite and time-sensitive because other countries are actively working to capture it. Removing unnecessary, bureaucratic delays is imperative to U.S. competitiveness. API President and CEO Jack Gerard:

“As the world’s leading natural gas producer, the United States has a valuable opportunity to grow our economy, create jobs, reduce greenhouse gas emissions, and enhance security for the U.S. and our allies by exporting our abundant natural gas supplies. … Our competitive advantage as the world’s leading natural gas producer could all too easily be squandered by an inefficient export approval process.”

The current process is too uncertain, which hurts America’s ability to compete in the world LNG market and chills the potential investment of billions of dollars needed to build an LNG export facility.

Currently, DOE waits for the Federal Energy Regulatory Commission (FERC) to conduct an environmental review and issue an order before deciding on an application. Yet, DOE not only waits for FERC’s review and order but also for any rehearing of FERC’s order. Worse, while FERC is supposed to decide rehearing requests within 30 days, it also can extend its deadline for deciding indefinitely, which it has done in every case to date. With environmental activists asking for a rehearing in every LNG export case and the agency taking unlimited time to consider those requests, FERC and DOE bureaucracy adds months or years to the process. Bottom line: Red tape is unnecessarily impacting the competitiveness of U.S. LNG exports and should be cut.

Reason #2: Environmental Benefits

This should interest environmentalists who are objecting to the LNG provision in the energy legislation. Increased use of natural gas here at home is the chief reason the U.S. leads the world in reducing energy-related carbon emissions. U.S. emissions were 12 percent lower last year than they were in 2005, according to the U.S. Energy Information Administration (EIA).

Given those results, it follows that advancing U.S. LNG exports by expediting federal approvals would help increase global natural gas use and reduce global emissions as other countries choose cleaner-burning gas for power generation. That’s what DOE found in this 2014 study.

Reason #3: Economic Benefits

A number of studies have estimated the economic benefits that would accrue to the U.S. from exporting natural gas.

DOE-commissioned studies in 2012 and 2015 both found the U.S. would see a net economic gain from LNG exports and that in every market scenario analyzed the benefits increased as levels of exports increased. DOE’s 2015 study:

“The overall macroeconomic impacts of higher LNG exports are marginally positive, a result that is robust to alternative assumptions for the U.S. natural gas market.”

An ICF International study found that solving America’s self-imposed restrictions on LNG exports would create more than 450,000 new U.S. jobs and add up to $73.6 billion in economic activity by 2035.

Reason #4: Geopolitical Benefits

Growing U.S. LNG exports will give friends and allies abroad energy and energy supply choices that will help counter some countries’ use of energy as a political weapon. President Obama, in a joint statement with European leaders at a 2014 summit:

“We welcome the prospect of U.S. LNG exports in the future since additional global supplies will benefit Europe and other strategic partners.”

U.S. Energy Deputy Secretary Elizabeth Sherwood-Randall at a European forum earlier this year:

“With respect to energy security the most important point is that we need to have diversity of sources – that is our allies and partners need to have options for where they get their resources from, what the fuel mix is and what the pipeline routes are and the infrastructure that receives the resources. As you look at the decisions that have been made by the European Union over the last few years and our coming together in the G7 to set forth principles of energy security … what we’ve really focused on together is the importance of this diversification of routes, fuels and of suppliers.”

Greater availability of U.S. LNG is, in fact, what a number of nations seek. Jaroslav Neverovic, Lithuania’s energy minister at a 2014 congressional hearing:

“I am … here to plead with you and your colleagues to do everything within your power to help us achieve that objective by expediting the release of some of your abundant natural gas resources into the world market, especially to those nations beholden to a monopolistic supplier. The United States, with your enormous natural gas resources and highly developed infrastructure, has the kind of liquid market that Europe is trying mightily to achieve.”

The State Department’s Robin Dunnigan, deputy assistant secretary for energy diplomacy, at a forum earlier this year:

“The U.S. will be a reliable, market-based supplier to global markets, and that’s not only good for our energy security, it’s good for the energy security of our partners and allies around the world. So I’m very much looking forward to U.S. LNG being part of the diversification solution in Europe and in other countries around the world.”

Advancing U.S. LNG exports and fully harnessing the above benefits hinge on the United States competing as strongly as possible in the global market place. Expediting the process by which US. export facilities come online is critically important to robust trade and its full benefits.