On the last day of December 2013, former U.S. Department of Labor chief economist Diana Furchgott-Roth outlined 10 economic opportunities the nation had missed during the previous year. For example, by not tapering quantitative easing, pursuing reasonable pension reform or approving the Keystone XL pipeline, Ms. Furchgott-Roth said the Obama administration had missed a chance to “substantially increase our GDP growth rate, enriching Americans and lowering our unemployment rate.”
Also on the list of overlooked opportunities was reforming the “complex permitting process” that is hamstringing the export of American liquefied natural gas to an energy-hungry world.
Since 2000, global LNG demand has grown an estimated 7.6 percent per year. And that rate is expected to increase: Ernst & Young predicts that by 2030 global demand will reach 500 million metric tons, doubling 2012 levels.
At the same time, because of the surge of natural gas from American shale, the United States is awash in the stuff, with domestic natural gas production increasing 41 percent in the past decade alone.
Ten years ago we were an LNG importer. Today we’re the world’s largest natural gas producer.
And with the amount of technically recoverable natural gas in the United States 100 times greater than our current consumption, we have a boon to the economy that is expected to contribute up to 665,000 net jobs and $115 billion to GDP by 2035. We are expected to have enough gas to meet our own needs while also helping to satisfy staggering demand in places like Japan, Korea, India, China and Taiwan.
Clearly, this is an opportunity we don’t want to miss. But a protracted, redundant and expensive approval process could put it just out of reach.
Unlike for American crude oil, there’s no ban on LNG exports from the U.S. to our free-trade-agreement partners. It’s even possible for American companies to get permission to export to non-FTA countries.
The problem is that LNG producers have to obtain permission from both the Department of Energy and the Federal Energy Regulatory Commission before they can build an export facility.
In recent years, more than 30 U.S. companies have applied for the necessary permits and licenses. So far, only four projects have gotten full approval. And it took up to four years for consent to be granted.
Consider the case of Dominion Resources’ project in Cove Point, Md., which will export LNG from natural gas produced in Pennsylvania’s Marcellus Shale.
The Marcellus has been an economic game changer for large parts of the Keystone State. And while Pennsylvania lags much of the nation in job, income and population growth, counties where Marcellus drilling is taking place are making impressive economic strides.
For example, between 2008 and 2014, Marcellus Shale counties experienced employment growth of 8.7 percent compared to 0.6 percent growth in counties without Marcellus activity. The disparity in terms of wage growth is equally telling: In Marcellus Shale counties, average wage growth was 29.9 percent; in non-shale counties, it was less than half that amount.
But getting the nod to open overseas markets to Marcellus LNG wasn’t easy. Dominion spent more than two years in regulatory review, finally obtaining more than 60 approvals and permits, and meeting 79 environmental conditions, before construction could begin late last year. Production won’t get underway until late 2017.
Delays like this become more significant as other LNG-rich countries are much more agile and able to get their products to market with considerable speed. One example is Australia, which exported 47 percent of its LNG production in 2013.
Although the Energy Department has improved its permitting procedures, FERC’s foot-dragging continues to hamper the process.
But a bill passed by the House in January may help move things along. Sponsored by Rep. Bill Johnson, R-Ohio, and co-sponsored by more than 10 U.S. representatives from Pennsylvania, the bill calls for an expedited federal approval process for LNG exports and is currently sitting in the Senate Committee on Energy and Natural Resources.
“The window of opportunity for LNG exports will not remain open indefinitely, so it’s important that Congress act immediately,” Mr. Johnson argues.
And he’s right.
Removing the barriers to exporting LNG will help sustain or grow production in the Marcellus, contributing to the financial health of Pennsylvania and the United States.
With all that stands to be gained from speeding the LNG export approval process, it’s imperative that Congress move quickly to pass this bill and make the powerful economic opportunity to export LNG one we don’t miss.
Dan Eberhart is managing partner of Eberhart Capital and CEO of Denver-based Canary LLC, a privately owned oil-field service company.