Foreign markets offer rich potential for natural gas

THE U.S. oil industry is going like gangbusters, as evidenced by the news this month that the country had again become the world’s leading producer of crude oil. But let’s not lose sight of natural gas, which has the potential to give the United States even more geopolitical clout.

Mark P. Mills, a faculty fellow at Northwestern University and a senior fellow at the Manhattan Institute, uses a recent report to advocate for federal policies that would help U.S. natural gas meet the growing global demand.

The United States, already the world’s top producer of natural gas, is also the fastest-growing producer and exporter of the energy source, Mills writes in “The Real Fuel of the Future: Natural Gas.” However, he says, “The biggest energy wild card on the near-term horizon is how much and how quickly U.S. export capability might yet grow.”

And grow it must — Mills says global consumption of natural gas is nearly 200 percent greater than it was in 1990, and is expected to double again in the next two decades.

He notes that tremendous amounts of capital are needed to build the facilities that turn natural gas into liquefied natural gas and make it available for shipping. The country’s first operating LNG export terminal, Sabine Pass on the Gulf of Mexico, cost $18 billion, and an expansion will push it to $30 billion.

It’s likely Sabine Pass will generate over $100 billion in export revenues over a 30-year operating life, Mills writes, but the Department of Energy took five years to approve the project. The country’s second LNG terminal, at Cove Point in Maryland, waited four years for the green light.

He says there are many potential investors in U.S. LNG export infrastructure, but that, “given the magnitude of the up-front costs, reducing uncertainty is always critical for investors, domestic and foreign.”

Mills recommends two regulatory reforms to help make LNG export investments more attractive.

The first is to revoke the requirement that companies get permission from the DOE to sell natural gas overseas. This rule has been in place about 40 years, Mills says, from a time when there were concerns about the long-term availability of natural gas.

DOE retains the authority to determine if it’s in the “national interest” for a producer to export natural gas. “This constraint is unnecessary,” Mills says. “Natural gas exports are now de facto in the national interest for economic and geopolitical reasons.”

The second recommendation is to streamline the environmental review needed to acquire building permits. The 13 current LNG export applications require environmental impact statements that can drag out the review process for five years or more.

Mills also suggests that more of the country’s offshore acreage be opened for production. As it is, roughly 90 percent is off limits.

America “remains gratuitously hobbled in both the long-term pursuit of its resources, and, critically, in the near-term acceleration of massive LNG export opportunities,” Mills writes.

The number of countries importing LNG has grown from a dozen two decades ago to more than 40 today. That total will grow considerably in the next 20 years. Our policies should help, not hinder, the domestic natural gas industry’s ability to tap into these markets.