The battle over natural gas exports is heating up after a group of senators announced a bill Thursday designed to streamline and expedite shipments of U.S. natural gas to American allies such as Japan.
The move steps up the fundamental debate over whether the country should pursue large-scale exports of its newfound abundance of natural gas. Proponents say it would create thousands of jobs, reduce the trade deficit, and enhance national security. Opponents argue shipping large amounts of natural gas abroad could cause price hikes for consumers and manufacturers, many of which have benefited from cheap natural gas prices.
The proposed legislation would require the Department of Energy to approve natural gas exports to friendly nations such as Japan, NATO countries, or any other country the Defense and State Departments deem beneficial to U.S. national security interests. Under current law, the DOE typically approves applications to export natural gas to countries with which the U.S. has a free-trade agreement. For nations without a free-trade agreement with the U.S., the DOE must determine whether export plans are in the nation's public interest before approving permits.
Despite an economic impact report released by the agency in December that found even unlimited natural gas exports would result in a "net economic benefit" for the country, many applications to export natural gas to energy-hungry nations such as Japan and Taiwan are awaiting review and approval.
"[Expediting] the process for companies wishing to export liquefied natural gas to our friends and allies...will yield important strategic opportunities to enhance our national security interests while continuing to grow our economy at home," Republican Sen. John Cornyn of Texas, a cosponsor of the bill, said in a statement.
But the prospect of large-scale exports of natural gas has ruffled more than a few feathers, particularly from big U.S. manufacturers and chemical companies, who say exports will drive up the cheap natural gas their businesses have benefited from in recent months. Consumers could also face higher electricity bills if natural gas prices rise, critics argue.
"The current abundant supply of natural gas is helping keep utility bills affordable and the price of natural gas will rise if large-scale exports are approved," Dave Schryver, executive vice president of the American Public Gas Association, said at a luncheon announcing the survey results. "The price of natural gas will rise if exports are approved."
The bill could also face challenges from Democratic Sen. Ron Wyden of Oregon, who has been skeptical in the past about a major increase in natural gas exports.
But with countries such as Japan, already the world's largest natural gas importer, itching to get a hold of more natural gas, proponents of exports say the benefits are hard to resist. In the wake of the March 2011 earthquake and tsunami, almost all of Japan's nuclear reactors remain offline, which has further boosted its demand for outside energy supplies, including U.S. natural gas.
The benefit of using exports to enhance diplomatic relationships outside NATO member countries also exists, says Bill Cooper, president of the Center for LNG Exports.
"Think of former Soviet Union states or even Middle Eastern countries such as Kuwait that are importing natural gas," he says. "It might be geopolitically in our interest to enhance ties with those countries for whatever reason," and this bill gives the Defense and State departments the flexibility to make that call.
Still, expedited permits or not, a host of other obstacles stand in the way of large-scale natural gas exports to Asia and Europe, not least of which are expensive pipeline and export terminal infrastructure. According to some estimates, new export facilities cost about $20 billion dollars and the water-borne tankers needed to ship the liquefied natural gas to markets abroad run about $200 million per ship.
Time is also an issue, especially with nations such as Japan, whose surging energy needs are very real and present. In a recent press briefing, Republican Sen. Lisa Murkowski of Alaska estimated it would take eight to 10 years to build the infrastructure in her state capable of handling the desired volumes of natural gas. The picture is less clear in the lower 48 states. While the DOE has already approved one natural gas export permit for Houston-based Cheniere Energy's Sabine Pass (slated to be operational in 2015), additional decisions on pending permit applications aren't expected to be made anytime soon.