U.S. Subcommittee on Energy and Power examined H.R. 6, the Domestic Prosperity and Global Freedom Act. The bill will accelerate approvals of U.S. LNG exports to American allies.
The legislation facilitates automatic approvals of all export applications that have been noticed in the Federal Register and modifies the process moving forward so that exports to U.S. allies are no longer subject to unnecessary delays. For future export applications, the legislation would shift the benchmark for expedited review from Free Trade Agreement (FTA) countries to World Trade Organization (WTO) members. To date, this administration has approved seven export applications, while at least 24 applications are still awaiting action.
“While the world waits for natural gas from America, a backlog of applications to export languishes at the Department of Energy. H.R. 6 cuts the red tape, approves the pending applications, and provides future applicants with a much more reasonable process,” said Chairman Ed Whitfield. “Geopolitics is not the only issue. Experts have indicated the reasonable export of LNG will stimulate our economy and reduce the nation’s trade deficit.”
The crisis in Ukraine and Russia’s continued aggression has brought increased attention to the need for faster LNG export approvals to increase global energy supplies and competition. “The near monopolistic control Russia has on the LNG market in Europe has given them immense power and reforming the LNG export process would send an immediate signal to the rest of the world that would help check Russia’s aggression. Aside from its natural gas and oil production and exports, Russia has a third world economy that is no match for our industrial know-how and ingenuity. It is this American ingenuity that discovered there is enough natural gas to use domestically, and export to our allies across the globe,” said Rep.Cory Gardner.
Hungarian Ambassador-at-Large for Energy Security Anita Orban explained how U.S. LNG exports would help liberate Central and Eastern European countries from Russia’s control by offering an alternative source of energy. She stated that allowing LNG exports “would immediately change the business calculus of infrastructure investments and send an extremely important message of strategic reassurance to the region which currently feels more threatened than any time since the Cold War… In short, by liberalizing LNG exports, by eliminating the legal and administrative obstacles to the free trading of this vital, domestically produced commodity, the United States would provide fast and long-lasting protection for its allies against the most important dangers of natural gas dependency.”
Former member of Congress and Chairman of the Appellate Body of the World Trade Organization James Bacchus explained that DOE’s current restrictions on LNG exports violate WTO trade rules. “Fortunately, HR 6, introduced by Congressman Cory Gardner of Colorado, and currently under consideration by this Committee, would eliminate this potential legal concern by providing that natural gas exports to all other members of the WTO would be deemed to be in the ‘public interest,” said Bacchus.
Witnesses also explained the benefits LNG exports would bring to the domestic economy. A study conducted in 2012 for the Department of Energy by NERA Economic Consulting concluded LNG exports would result in net benefits to the American economy. An updated analysis was completed earlier this month, and results showed that the economic benefits and job gains from LNG exports were even greater than initially expected. W. David Montgomery, Senior Vice President at NERA Economic Consulting, testified today on NERA’s conclusions, stating,“We found no sweet spot that would justify government interference with our obligations under the WTO to allow free trade in commodities like natural gas. In every scenario we investigated, higher levels of LNG exports led to larger economic benefits to the U.S.”
Rep. Gardner questioned DOE Deputy Assistant Secretary for Oil and Natural Gas Paula Gant about the positive impacts of LNG exports on American job creation and energy security.
Full committee Chairman Fred Upton concluded, “Overall, U.S. natural gas exports truly offer a win-win scenario. The U.S. has the chance to sell a product we have in abundance and other nations need, and at the same time provide a lifeline to our allies in that region for many years to come. I look forward to working with Cory Gardner and all of my colleagues to see H.R. 6 become law.”
I don’t expect this go anywhere (though I’m no expert on the politics) given the US Department of Energy plays a key role in balancing energy and manufacturing interests. But it does appear that the Crimean situation has tilted the playing field towards further gas export approvals for North Asia and Europe.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.