LNG Exports: A Win for the U.S. Economy

Mark Green
Posted January 17, 2013

Highlights from API Chief Economist John Felmy’s opening statement to reporters during a conference call to discuss the export of U.S. liquefied natural gas.

America’s newfound abundance of natural gas resources is a boon to the nation.  It is creating jobs, reducing home heating and electric bills and lowering energy and raw materials costs for businesses. … And the opportunity to do more is before us – to produce more natural gas, spur additional economic activity and create even more jobs – by serving international markets as well as American ones.

Allowing natural gas exports would increase investment in U.S. natural gas development by many billions of dollars annually.  This would lead to new hiring in the natural gas industry and across the economy … This upsurge in development also would boost revenues to the government, and exports would reduce our nation’s trade deficit.

Allowing our oil and natural gas companies to supply other markets through exports is indisputably in our national interest, and the U.S. Department of Energy should approve pending applications for authorization to export natural gas without delay.

Restricting exports of energy makes no more sense than unnecessarily restricting the export of chemicals, agriculture products or cars, and such a backward move could violate international trade rules. Nevertheless, a few industrial users want to restrict natural gas exports, believing such restrictions would lock in low prices for themselves.  But these companies, which export their products and feedstocks, should realize we cannot and should not build a wall around the United States.

Restricting trade to control prices is bad for the economy: It could result in lower investment and production here, harming U.S. consumers and businesses, and cost jobs and economic growth. …

One company advocating restrictions on natural gas exports has a 15-percent ownership interest in an existing facility that is next in line to be considered by the Department of Energy for an export authorization.   By supporting restrictions on exports this company, in effect, is encouraging denial of authorizations for exporting LNG from facilities that potentially would compete with its own.

… Let me quote a 2012 NERA study issued by the Energy Department: “Across all scenarios, the U.S. [is] projected to gain net economic benefits” by allowing exports of natural gas.  “In particular, scenarios with unlimited exports always had higher net economic benefits than corresponding cases with limited exports.”

Multiple analyses from the Brookings Institution, Deloitte, the Baker Institute, and the Hamilton Project as well as from NERA also conclude that any price increases from allowing exports would be small, and offset by other economic gains from greater production spurred by U.S. producers serving wider markets.

Proponents of restricting exports maintain that restricting exports of natural gas is justified because natural gas is a “strategic resource.”  Yet, if exports were allowed, more natural gas would be produced.  Greater production capacity would enhance our energy security, not lessen it.

Furthermore, by serving friendly European and Asian markets, our exports would compete with supplies from Russia, which has been charged with using trade in oil and gas to bully other nations.  The Deloitte study found that U.S. natural gas exports would strengthen energy security globally and serve American geopolitical interests.

In short, allowing the export of LNG is a win for the U.S. economy in the same way exporting our agricultural products, industrial machinery, pharmaceuticals, electronic equipment, chemicals, and thousands of other commodities and products is a win.