The Ukraine-Russia crisis has Congress rushing to consider legislation to accelerate exports of natural gas, which will increase U.S. natural gas and electricity prices. This is despite the fact that the U.S. will not have any liquified natural gas (LNG) export terminals ready to ship until 2015, and that Ukraine does not have an import facility. The justification for such drastic and reckless action does not add up. So what is driving congressional action that could threaten manufacturing jobs?
Even though the U.S. Department of Energy (DOE) has already approved shipments of LNG equal to Qatar, the largest LNG exporter in the world, Congress is pushing ahead to export volumes over three times that size. Natural gas prices have already increased almost 20 percent in 2014, and the U.S. Energy Information Administration (EIA) is forecasting a 42 percent rise by 2019. The concern is that high energy prices could stop the manufacturing renaissance that has created so many new jobs.
On April 9, 2014, the U.S. House Subcommittee on Energy and Power voted on H.R. 6 the “Domestic Prosperity and Global Freedom Act,” a bill that would approve all LNG export applications. H.R. 6 passed by a vote of 15 to 11. Almost identical legislation has been introduced in the Senate.
The real reason is that the oil and gas industry is pushing Congress to accelerate exports so that it can increase natural gas prices here. Two DOE reports confirm that LNG exports result in increased domestic natural gas prices.
This is exactly what happened in Australia, which has been exporting LNG for over a decade. Now, natural gas prices have tripled and manufacturing companies are being asked to pay the higher LNG export price and are closing their doors. On March 27, 2014, ABC news reported that families are going without food and medicine to pay their energy bills. The report states, “The irony is that Australia is producing more gas than ever, and is on track to become the world's largest exporter of gas, with contracts to supply fuel-starved Asian markets prepared to pay triple the prices Australians do for energy.”
The U.S. should aid our Ukrainian and NATO allies by helping them drill for natural gas, and U.S. companies are in a prime position to do so. According to the EIA, Ukraine has 39 trillion cubic feet (Tcf) of proved natural gas reserves, and at a 2012 consumption rate of 1.8 Tcf, they have a 21-year supply. This compares favorably to U.S. proven reserves of 318 Tcf, or a 12-year supply at the 2013 consumption rate of 26 Tcf. The problem is that Ukraine only produces 1 Tcf of gas. EIA reports that the EU has 799 Tcf of technically recoverable natural gas resources, but in 2011 production was only 10 Tcf.
The old adage of “give a person a fish and feed him for a day or teach him to fish and feed him for a lifetime” still applies. Drilling in Ukraine would create needed jobs, economic growth and energy independence. Exporting U.S. natural gas simply makes them dependent upon us rather than Russia.
This logic seems completely lost on some in Congress that are determined to change existing law in order to accelerate exports of natural gas and remove protections for U.S. consumers. Congress should not accelerate LNG exports and risk higher energy costs for homeowners, farmers and manufacturers.
Paul N. Cicio is president of Industrial Energy Consumers of America (IECA), www.ieca-us.org. A version of this piece was previously published at Star-telegram.com.