Should the U.S. export its natural gas? A debate flares.

at 04:24 PM ET, 01/04/2012

Last year, fuel was America’s #1 export. But not everyone’s so keen on watching the United States ship out all that energy to the rest of the world. Case in point: On Wednesday, Rep. Edward Markey (D-Mass.) fired off a letter to Energy Secretary Steven Chu asking him whether it was really such a swell idea for the United States to be exporting its newly abundant natural gas resources all over the globe. Some experts, after all, have raised concerns that such exports could have unexpected downsides.


The liquified-natural-gas (LNG) Elba Island terminal near Savannah, Ga. (Stephen Morton/Bloomberg)
On the surface, there’s an alluring logic in exporting natural gas. The United States has been flooded with cheap gas thanks to its newly exploitable (and potentially large) shale resources. And gas prices are higher in many other countries. So why not ramp up exports, turn a profit, and reap the gains from trade? That explains why various producers are asking the Energy Department to green-light new export facilities, such as Cheniere Energy’s just-okayed Sabine Pass Liquefaction terminal in Cameron Parish, La., which will ship out two billion cubic feet of gas per day by 2015. Seven more projects are awaiting approval.

In his letter, however, Markey notes that such plans could lead to unintended consequences. For starters, natural gas isn’t as fungible as oil — partly because it’s harder to store and ship — which means the price isn’t the same everywhere in the world. If the United States ships natural gas abroad, then U.S. consumers could face higher energy prices at home. One consultant report, for instance, estimates that the Sabine project could hike U.S. natural gas prices by 11.6 percent by 2015.

And that’s not all. As the Council of Foreign Relations’ Michael Levi has argued, boosting natural-gas exports could have both ups and downs. On the beneficial side, the United States could strategically use its gas to help Europe wean itself off its dependence on Russian exports. What’s more, other countries might find better opportunities to displace oil with natural gas than the United States can, which, in turn, could put much-needed downward pressure on world oil prices.

On the minus side, Levi notes, making U.S. natural gas more expensive could also make it harder for the United States to tackle climate change at home — after all, cheap natural gas is expected to displace some 9 percent of U.S. coal demand by 2035. That, in turn, would make it even less likely that the United States plays a crucial leading role in averting drastic climate change.

Meanwhile, Michael Muro of Brookings emphasizes the potential risks of gas exports to America’s domestic industries. Cheap natural gas prices in the decades ahead have the potential to help the United States attract and promote industrial concerns like chemicals, fertilizers, metals, paper, glass and food products. “It would be premature,” Muro says, “for DOE to conclude the United States now has so much gas that it can afford to export it overseas without risking domestic price dislocations.”

Now, to be clear, none of these people are arguing that the Energy Department should ban or limit natural gas exports now and forever — just that it’s worth thinking through the consequences a bit more fully before moving ahead with a flurry of new export terminals.

 
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