The House and Senate are moving in lockstep to put legislation speeding approval of natural gas exports on President Obama’s desk, an effort with bipartisan support that would provide a test of how vigorously Obama will use his veto pen the next two years.
The House passed legislation Wednesday, 277-133, drawing support from nearly a quarter of Democrats, that would give the Energy Department 30 days to approve applications for exports to nations that lack a free-trade agreement with the United States. The Senate Energy and Natural Resources Committee will consider a similar bipartisan bill Thursday, though it calls for a 45-day deadline.
Democratic and Republican supporters of sending natural gas abroad say doing so would break the stranglehold Russia has over energy supplies in Europe. They also have noted that federal studies have shown exports would raise domestic prices marginally — which could encourage more production, as prices are too low in some areas to be profitable — while yielding benefits such as increasing federal revenue and reducing the trade deficit.
“It’s an opportunity to export an American product, help our balance of trade, help get people back to work in this country, undermine [Russian President] Vladimir Putin, allow our friends overseas to buy our product, and we’re hoping that the president will sign that,” Sen. John Barrasso, R-Wyo., the lead sponsor of the Senate bill, said at a Tuesday press conference in the Capitol.
But it appears the White House is nearing a veto.
“The Department of Energy has already taken steps to modernize the [liquefied natural gas] export approval process and ensure applications are looked at efficiently and expeditiously. This process is working well, and we don’t believe that legislation is necessary,” a White House official told the Washington Examiner.
The comment refers to the department’s termination of conditional approvals, which the industry said kept more shovel-ready projects from being evaluated before earlier applicants with proposals unlikely to get built.
While the White House has taken a dim view of congressional efforts, Energy Secretary Ernest Moniz has been working with Sen. John Hoeven, R-N.D., a cosponsor of the Senate bill, on the timeline included in the legislation. The administration also has touted that the aid exports would provide allies. Following Russia’s annexation of the Ukrainian state of Crimea last year, Obama administration and European Union officials met to discuss energy security issues.
“The situation in Ukraine proves the need to reinforce energy security in Europe and we are considering new collaborative efforts to achieve this goal. We welcome the prospect of U.S. LNG exports in the future since additional global supplies will benefit Europe and other strategic partners,” the White House said after the March meeting.
Exports to non-free trade nations face higher federal scrutiny under federal law. Several European countries, such as Hungary, Slovakia, the Czech Republic and Poland, have openly lobbied the administration to speed approvals.
While U.S. natural gas wouldn’t necessarily go to Europe, it would put more on the market and free up supplies elsewhere. That in turn would put pressure on Putin’s government, which gets more than half its budget from oil and gas revenues.
Marty Durbin, president of America’s Natural Gas Alliance, said the Energy Department has been “moving in the right direction” by ending the conditional approvals. Still, he said legislation to shorten the review process would be helpful. That’s because building the facilities is costly and time consuming. The easier method involves converting existing natural gas facilities to export, rather than import, and it takes at least three years and costs billions of dollars.
“We think it’s really important that Congress make a strong statement,” he said at a Wednesday event in Washington.
Some Democrats, however, have raised concerns that sending too much abroad would cause a spike in natural gas prices, raising costs for consumers and energy-intensive manufacturers. They contend the Energy Department evaluation is essential to ensure costs don’t balloon. The department has approved 10.56 billion cubic feet per day of exports to non-free trade nations, which is about 15 percent of daily U.S. production.
Permitting likely isn’t the biggest threat to U.S. natural gas exports anyway, said Adam Sieminski, who heads the U.S. Energy Information Administration, the Department of Energy’s independent statistics arm, noting the roadblock the department cleared by eliminating conditional approvals.
Sieminski said prices will be the driving factor for exports. Natural gas prices posted their largest declines in five years and the smaller price spread makes exporting less attractive, he said.
“It is really not the permitting process that is going to drive these decisions,” he said Wednesday at a Washington event, adding later, “I have a feeling that the level of investment could slow down.”
Still, companies are likely to take the long view on natural gas exports, Sieminski said. Projections show robust global demand for the next several decades.
Many of the U.S. export projects are also somewhat insulated from those price shocks, noted Bill Cooper, president of the Center for Liquefied Natural Gas.
That’s because they operate as a sort of tolling station for their international buyers. They lease out capacity for liquefying natural gas that is produced in the U.S., rather than producing and marketing it themselves. Given that U.S. natural gas prices are low due because the country is the world’s top producer, U.S. export terminals are in a better position than international competitors.
“The recent volatility has probably caused some developers to take note of it and come up with a strategy to deal with it in the short term, but I don’t think it’s given them pause because they’re dealing with such a long-term project,” Cooper told the Examiner in a recent interview.
