An Approval on LNG Exports: More Needed

By at 21 May, 2013, 9:06 am

by Raymond J. Keating-

The U.S. Department of Energy just took a long overdue step forward on U.S. natural gas exports.

The DOE must approve export licenses to sell liquefied natural gas (LNG) to nations with which the U.S. does not have free trade agreements. On May 17, the DOE granted such approval to Freeport LNG, a terminal nears Freeport, Texas.

According to a Houston Chronicle reported, “The move is the first of its kind since the government granted a similar export license to Houston-based Cheniere Energy in April 2012 but then halted reviews of pending applications to study the economic effects of broadly selling domestic natural gas overseas.”

The U.S. has undergone a dramatic transformation in recent years regarding domestic energy production. In fact, this revolutionary change is captured by the recent history of the Freeport LNG facility. The Washington Post noted, “The permit marks another step in the sudden reversal of fortune in the natural gas business. Less than five years ago, anticipating a worsening shortfall in domestic supplies of natural gas, the Freeport terminal on Quintana Island began operations as an import facility. But advances in hydraulic fracturing techniques have unlocked new supplies of natural gas from shale rock. Freeport, like other import terminals, now wants to spend $10 billion to retool the terminal so it can send gas abroad in liquefied form.”

As noted in SBE Council’s new report titled “The Benefits of Natural Gas Production and Exports for U.S. Small Businesses,” expanded domestic natural gas production has meant increased jobs and small business growth in the energy sector. For example, while U.S. total employment fell from 2005 to 2010, jobs grew by 27.6 percent in the oil and gas extraction sector; by 15.1 percent in the drilling oil and gas wells sector; by 38.5 percent in the support sector for oil and gas operations; by 47 percent in the oil and gas pipeline and related structures construction sector; and by 62 percent in the oil and gas field machinery and equipment manufacturing sector.

The same contrast held in terms of the number of small businesses. While total employer firms declined from 2005 to 2010, the number of employer firms with less than 20 workers grew by 2.5 percent in the oil and gas extraction sector; by 4.7 percent in the drilling oil and gas wells industry; and by 24.5 percent in the oil and gas operations support sector.

No sound economic reasons ever existed for these approvals to stop in order to assess the effects of exports. As in any other industry, increased export opportunities means expanded domestic investment and production, new and growing businesses, and stepped up job creation. That, of course, is exactly what this country needs.

Pressures to limit U.S. LNG exports are all about special interest politics, namely, certain chemical firms that use natural gas as an input. Ironically, as the Post reported, “Dow Chemical, one of the leading voices opposing widespread exports, also owns a share of the Freeport terminal through a subsidiary. On Friday, it issued a statement calling the Freeport permit ‘a prudent step in pursuit of a measured and balanced approach’ to LNG exports while adding that it ‘will adopt a wait and see approach regarding further approvals.’”

So, Dow Chemical has been leading the way in advocating limits on LNG exports, except, that is, LNG exports from a facility that they partially own. It’s hard to make this stuff up.

Let’s hope the DOE lays aside the absurd politics of limiting U.S. energy exports, and instead subscribes to sound economic policy by granting approvals for the remaining 19 LNG export applications.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating has written two new books titled Root of All Evil? A Pastor Stephen Grant Novel, and An Advent for Religious Liberty: A Pastor Stephen Grant Novel.



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