The discovery of massive deposits of natural gas in shale formations across the United States has turned the nation's energy discussion on its head—policymakers are no longer frantic to find new import sources, but instead are now mired in heated controversy over what to do with all the excess supply.
But beyond the economic benefits touted by domestic gas producers—job creation, improvement of the trade balance—there are also broader national security and climate benefits to large-scale exports of natural gas, according to a study released by the American Security Project.
For starters, a more diverse pool of natural gas export sources has the potential to reframe many of the tenuous geopolitical relationships across the globe centered on energy supply. Europe remains highly dependent on Russia for its natural gas, a country that is no stranger to using energy as a political tool, says Nick Cunningham, policy analyst and author of the ASP report.
"Over the past couple of years, Russia has shut off pipelines to Europe several times ostensibly over pricing disagreements," Cunningham says. "But the underlying motive is to send a signal to Europe that [Russia] has leverage over them."
Essentially, European countries are more or less beholden to a key energy supplier that can be described as unreliable at best, Cunningham adds.
But if the U.S. is allowed to export to Europe, that dynamic could change as countries such as the Czech Republic, Hungary, and Greece gain access to alternate, more stable sources of natural gas, loosening Russia's vice grip on the European natural gas supply. Incidentally, the U.S. has already played a role shifting the relationship between energy suppliers and importers in Europe, according to Cunningham. The shale gas revolution, which has dramatically increased domestic supplies of natural gas in the United States has all but eliminated the need for imports. That, in turn, has rerouted supplies originally headed for U.S. ports to Europe, helping to ease price pressures there.
U.S. exports of natural gas could also play a role in increasing the bite of sanctions levied on Iran over its nuclear program. Turkey currently depends on Iran for 20 percent of its natural gas imports. But as with Europe, if new sources of gas imports are made available, Turkey could reduce its reliance on Iran. That would, in turn, cut into the revenues reaped by the Iranian regime.
In Asia, exporting natural gas to energy hungry allies such as Japan and South Korea could help solidify diplomatic relations. In the wake of the Fukushima Daiichi nuclear disaster, Japan—already the top importer of natural gas—has shut down nearly all of its reactors, making the country much more dependent on fossil fuels such as oil, coal, and natural gas. With high natural gas prices in Asia, Japan is looking for anything cheaper. At rock bottom prices at home, U.S. suppliers can beat the international prices and make a good profit even with expensive liquefaction and shipment, says Dr. Jack Rafuse, principal of the Rafuse Organization, which advises government agencies, policy centers, and businesses on energy, trade, and national security issues.
"Japan stands out very clear—we can obviously help a major trade ally while exporters make a good profit," says Rafuse, also a former White House energy adviser.
The climate benefits of greater natural gas exports are a little foggier. A greater supply of natural gas could help push down high prices in Asia and Europe, making cleaner natural gas more competitive with cheap but dirty fuels such as coal.
"Japan is a good example because they've closed virtually all of their nuclear plants," Rafuse says. "They have to start burning something besides atoms, and natural gas is the most logical thing economically and environmentally."
But while natural gas is certainly cleaner than fuels like coal—natural gas releases 44 percent less greenhouse gases than coal and 30 percent less than oil—with more development of shale gas and oil to export, experts warn that more methane, a greenhouse gas 20 times more potent than carbon dioxide, could be released. And because the climate equation is global, emissions reductions in Japan through reduced coal use mean little if methane emissions skyrocket in the United States, experts say.
Critics have also challenged the purported economic benefits of natural gas exports, arguing that shipping large amounts of the fuel could jack up prices for consumers and manufacturers. In testimony given before the Senate Committee on Energy and Natural Resources in February, Dow Chairman and CEO Andrew Liveris argued that unfettered exports of U.S. natural gas would have disastrous consequences for the economy.
"It is easy to see why everyone else wants our gas—to relieve the pressure they feel on their prices," Liveris said in prepared remarks. "And that is why unchecked gas exports will create a massive imbalance between supply and demand in North America."
But others, including Cunningham and Rafuse, aren't so sure limiting gas exports is the answer. In fact, there's reason to believe the export opportunity is actually much smaller than is usually perceived, mostly because there are other countries besides the United States—Australia, Canada, Russia, Mozambique—that are vying for gas markets in Asia and Europe.
Because export facilities are immensely expensive to construct, most companies require long-term contracts with customers. That means even with increased demand from countries such as Japan, the overall universe of natural gas demand isn't likely to increase dramatically fueling the kind of large-scale exports some critics say could drive up domestic prices in the United States.
"Even after the first of those contracts fades away, exports would probably only build slowly," Rafuse says.