Ukraine crisis fuels gas debate

The Ukraine crisis is intensifying Washington’s debate over lifting tight restrictions on exports of liquefied natural gas (LNG).

Europe’s reluctance to impose sanctions on Russia following its military takeover of Crimea is focusing attention on Europe’s dependency on Russian energy and giving ammo to those demanding fast approval of transatlantic sales of U.S. energy.

{mosads}“This just gives them one more reason why the U.S. government should do it,” Ed Chow, a senior fellow at the Center for Strategic and International Studies said, adding, “It adds a geo-political and foreign policy dimension to what has been up until now mostly a domestic debate.”

Ambassadors from Hungary, Poland, the Czech Republic and Slovakia wrote to Speaker John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.) on Saturday asking that Congress fast-track natural gas exports to Central and Eastern Europe.

“The presence of U.S. natural gas would be much welcome in Central and Eastern Europe, and Congressional action to expedite LNG exports to America’s allies would come at a critically important time for the region,” the ambassadors wrote.

They joined Boehner in criticizing U.S. rules that limit exports of natural gas to countries that lack a free-trade deal with the U.S. That excludes their countries, which are known as the Visegrad Group.

“With the current shale gas revolution in the United States, American companies are seeking to export gas, including to Europe. But the existing bureaucratic hurdles for the approval of the export licenses to non-FTA [free-trade agreement] countries like the Visegrad countries are a major hurdle,” they said.

But energy experts say the real problem for the U.S. isn’t a slow approval process. It’s that the U.S. doesn’t yet have the infrastructure to liquefy the natural gas for shipping overseas.

“The government hurdles are not the major barrier at this point,” said Richard Newell, professor of energy economics at Duke University. “The biggest barrier is the lack of existence of these liquefaction facilities. We already have six applications that have been approved, but only one of them is under construction.”

Trevor Houser, a fellow at the Peterson Institute for International Economics, says all six companies that have received approval to build liquefaction facilities can have them running by 2020, which would make the U.S. one of the world’s biggest natural gas exporters.

All six would have approval to export to Europe, and their capacity would be up to 8.5 billion cubic feet per day, an Energy Department official said.

 Cheniere Energy owns the Sabine Pass facility in Louisiana, which is the export terminal closest to coming online.

“Calls to rubber stamp LNG exports ignore the fact that expediting approvals won’t get gas to the Ukraine any faster,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) told The Hill in an email.

He argued that the 8.5 billion cubic feet already approved exceeds what most analysts believe is the international market for U.S. natural gas.

“Further, unless Congress directed exports to go to Ukraine, the gas would go to the country paying the highest price, which would likely be in Asia,” he said.

Getting approval to export LNG is a long process. A company must first get approval from the Energy Department. If a country has a free-trade agreement with the U.S., Energy’s approval is straightforward, according to sources.

But if it does not, the department considers the issues of energy security, and the environmental and geopolitical impact.

This can take a year, but to build a liquefaction and export terminal, a company must get approval from several other agencies. Chief among them is the Federal Energy Regulatory Commission (FERC), which must sign off on the construction and placement of onshore and near-shore facilities.

That three-phase process can take 18 months, as FERC collects public feedback and conducts an environmental review, agency spokeswoman Tamara Young-Allen said.

“They don’t just get built tomorrow,” she said. “There’s conditions in order to mitigate any adverse affects on the environment.”

It can then take years to build the facilities.

Thirteen proposals now await approval by FERC. Plans are in the works for a dozen more projects, though formal applications have not been filed, the agency says.

There are also fears that prices will rise sharply in the U.S. if natural gas exports create new overseas demand.

This fear is dismissed by David Spence, a professor of business and energy law at the University of Texas in Austin. Spence said Energy Department analysis suggests that, once all six terminals are exporting, domestic prices would rise to $5-$6 per 1,000 cubic foot range from about $4 now.