From The Wall Street Journal:
A Gas Export Strategy
Opponents don’t understand energy markets or price expectations.
The latest excuse for not exporting America’s domestic energy resources to reduce Vladimir Putin‘s political influence is that it’s too late to save Crimea. The anti-fossil-fuel left always has a reason not to drill, but their argument this time defies economic logic.
The U.S. oil and gas revolution has handed President Obama a powerful policy tool, and one way to wield it would be for the Energy Department to approve immediately the 25 applications for liquefied natural gas (LNG) export terminals. Opponents, including the White House, claim the timing is wrong because the first U.S. LNG export facility isn’t due online until next year; others are even further off; Ukraine doesn’t have a facility to receive and convert LNG back to gas; and U.S. LNG exports are most likely destined for Asia in any event.
Asked how the U.S. could liberate Europe from Russian gas, White House press secretary and geostrategist Jay Carney opined that exports are a “complicated process and more of a long-term proposition.” For people who don’t understand markets, supply and demand expectations may be complicated. For anyone else, this is easy.
The growth of LNG—which can ship internationally—has created a more global natural gas market. That market is forward-looking, and any clear signal that the U.S. intends to boost its exports will contribute to expectations about lower future prices. Even if some U.S. gas flows to Asia, the global supply will increase.
This is especially important to the many European nations that are currently dependent on Russia for 70% to 100% of their gas. Jaroslav Zajicek, deputy chief of mission for the Czech Republic, told a House hearing last year that his country has found that even the decline in U.S. gas imports in recent years has freed up more gas for Europe, lowered prices, and thus “weakened” the “Russian negotiating position during contract-renewal talks.”
Europe has an extensive pipeline network, which means that U.S. gas making it to any port of entry would reduce overall European dependence on Russia. Spain has an LNG receiving terminal that can add fuel to the European pipeline, while countries like Lithuania (100% dependent on Russian gas) are racing to get a floating LNG import terminal online by the end of the year.
The ambassadors of Hungary, Poland, the Czech Republic and Slovakia recently wrote to House Speaker John Boehner with a plea for more gas, noting that technology allows them to reverse gas flows back to Ukraine. In 2013 alone, Ukraine imported from Poland and Hungary almost two billion cubic meters of gas. With Russia unilaterally raising gas prices on the Ukraine, the more ability Europe has to undermine those price hikes, the more limited the Russian influence.
Another excuse for doing nothing is that even if Energy approves all 25 applications, the projects must still endure federal and local environmental and safety reviews. True enough. Yet this misses that blanket approval would let the market sort which facilities are best positioned for an efficient regulatory review, project financing and contracts. The Energy bureaucracy’s current approach—plodding through each application on a first-come-first-serve basis—means that the best projects may be at the end of the queue.
Blanket approval would have an equally important psychological impact. The Russian economy—and Mr. Putin’s political cronies—are highly dependent on petro dollars. His gas stranglehold has also given Mr. Putin enormous political leverage over former Soviet satellites. Every dollar of U.S. gas that flows to the world market is one less dollar flowing to Mr. Putin’s economy and his energy blackmail racket. Mr. Putin would get the message that even if he can swallow Ukraine, his future leverage will decline.
Martin Dempsey, as dovish a Chairman of the Joint Chiefs as America has had, told a House hearing last week: “An energy independent [U.S.] and net exporter of energy as a nation has the potential to change the security environment around the world—notably in Europe and in the Middle East. And so, as we look at our strategies for the future, I think we’ve got to pay more and particular attention to energy as an instrument of national power. And because it will very soon in the next few years potentially become one of our more prominent tools.”
Mr. Obama has been told all this by his military advisers, American CEOs, foreign leaders and Members of Congress. He knows more gas exports are in the U.S. national interest. The case is so overwhelming that the White House “timing” excuse can only be explained as cover for the President’s unwillingness to offend his green money-men who hate fossil fuels. He is letting partisan politics interfere with U.S. economic and strategic interests.