Exports Key to Sustaining US Gas Boom

Unlike oil, the price of natural gas is set in the domestic market. Right now, American consumers and businesses are reaping a windfall from the lowest natural gas prices in 10 years. Cheap gas has reduced heating and electric bills for millions of households, while industries using natural gas as a feedstock or boiler fuel have realized huge production cost savings. But at the same time $2.00 gas at the wellhead has caused many drilling companies to reduce production and move their rigs to more profitable oil plays.

Because of America’s large and growing reserves of natural gas, potential supply will exceed anticipated domestic demand for many years to come. But there is a huge unmet demand in other parts of the world. For example, with Japan retreating from nuclear power after last year’s Fukushima accident, the demand for gas to generate electricity has grown exponentially. But since Japan produces less than 4 percent of the gas it consumes, it must import the rest. With Germany also planning to phase out nuclear power over the next decade, that country’s need for natural gas will escalate rapidly. China and Korea are also expected to be huge gas importers for the foreseeable future. Assuming federal and state permitting issues are not a hindrance, we can export a portion of our excess gas capacity in liquefied form to Asia and other regions of the world.

Some politicians and industries are objecting to LNG exports. For example, Congressman Ed Markey of Massachusetts has introduced a bill that would prohibit the export of gas and oil from wells drilled on federal lands, arguing such exports will push up prices, reduce the competitiveness of U.S. business, and slow the transition away from dirty fuels. Some chemical companies, who are clearly benefiting from cheap gas, contend America would be better off keeping its “cheap” natural gas at home to boost domestic manufacturing. However recent studies by Navigant Consulting and Deloitte conclude the impact of exports on domestic gas prices would be minimal.

A number of environmental activists, such as the Sierra Club, are opposed to LNG exports because, they claim, the liquefaction process results in air and coastal water pollution while endangering wildlife. They also argue, with little basis in fact, that processing plants and LNG tankers are inherently unstable and prone to explosions. But their real objective is to prevent any undertaking that results in more global fossil fuel consumption.

As an energy-abundant nation, America should logically be a major energy exporter. This is already the case with coal, and there is no reason we can’t become one of the world’s largest gas exporters as well, with all the attendant job creation that will entail.