NCPA - National Center for Policy Analysis

The Case for Natural Gas Exports

August 22, 2012

Data released last month indicates that natural gas has joined coal as the top source of electric power. The abundance of natural gas has spurred debates over how to proceed in electricity production around the country. Proponents argue that natural gas should be harnessed and exported around the globe, while opponents argue that it harms the environment or that it should only supply domestic demands, says Michael A. Levi, a senior fellow for energy and the environment at the Council on Foreign Relations.

Many companies have applied for permission to export liquefied natural gas to countries that the United States does not have special free trade agreements with. However, under federal law, the U.S. Energy Department has to deem the exports in the national interest before these companies are granted permission. The United States can derive many benefits from exporting liquefied natural gas.

  • First, it can reduce dependence on two major providers of natural gas in the status quo: Russia and Iran.
  • Second, American firms could make up to $3 billion per year.

Additionally, loosening restriction on the exportation of liquefied natural gas would benefit American trade.

  • For example, it would hurt the United States' credibility if it were to restrict access to an energy source as it is filing trade violations against China for restricting access to rare earth minerals.
  • Furthermore, it would require restrictions on Canada and Mexico, which would put the North American Free Trade Agreement at risk.
  • Finally, U.S. negotiators can use the export of gas as a bargaining chip with partners like Japan who want unrestricted access to U.S. gas.

Critics raise valid concerns, but none that outweigh the benefits from exporting natural gas.

  • First, extracting natural gas does post some environmental harm. However, a recent report from the International Energy Agency signals that cheap options exist to strengthen safeguards that would mitigate such risks.
  • Second, opponents argue that natural gas can be used domestically as a fuel source for cars. Conversely, restricting natural gas use domestically will likely reduce demand and create less incentive to extract the natural gas.
  • Lastly, exports would marginally raise natural gas prices for domestic consumers, as much as $50 annually on electricity bills for low-income households. However, those that are most vulnerable can take advantage of the Low Income Home Energy Assistance Program to keep electricity costs low.

Source: Michael A. Levi, "The Case for Natural Gas Exports," New York Times, August 15, 2012.


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