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Congress' election-year trick won't wean Europe off Russian natural gas

June 24, 2014, at 9:44 AM
 
Tanks at the Cove Point liquid natural gas terminal at Cove Point in Calvert County, Maryland.

Tanks at the Cove Point liquid natural gas terminal at Cove Point in Calvert County, Maryland. Photo: (AP Photo/Dominion Resources)

The world, President Obama and other presidents have noted, is a very complicated place. And Congress tends to see things in black and white. This is one reason why the administration really doesn't need Congress to mess around with sanctions against Iran when they're trying to forge a nuclear agreement, one that will inevitably come together, if it ever does, after fits and starts. Aside from the budget and treaties, Congress has little power to influence the direction of United States foreign policy.

So when they try to, it's often an occasion to take a closer look.

On Russia's hot cold war with the Ukraine, there are many reasons why the United States and Europe don't see eye-to-eye. One reason is that European countries depend on Russia for a cheap supply of liquefied natural gas. A House bill, one that the body is spending a considerable amount of time on this week, would accelerate the Department of Energy's approval process for exporting liquefied natural gas by curtailing or expediting certain environmental reviews. The big sell is that the U.S. could help Europe reduce their dependence on cheap Russian gas in the long term, which would allow Germany, say, to be willing to confront Russian aggression more aggressively. There are many reasons why Germany and the U.S. differ on Russia, but Germany's reliance on Russia for about half of its biggest energy source is one of them.

If there was a way to transport U.S. natural gas to Europe....

Well, it seems there is! It is called the "Domestic Prosperity and Global Freedom Act." (!) The House will take a vote on the bill tomorrow.

The jettisoning of environmental regulations aside, the bill looks like a decent and creative way to advance U.S. interests.

But upon closer examination, the bill turns out to make sense for the liquefied natural gas (LNG) industry inside the U.S. and for a Republican congressman running for Senate. Even if it passed the House, went to the Senate, and was signed into law tomorrow, it would not help solve Russia's geopolitical extortion of Europe.

One reason: the Federal Energy Regulatory Commission has a separate permitting process for LNG export terminals. The bill does not address that permitting process. That's a big problem, because those export terminals are the only way the stuff gets out of the country, save for a non-existent pipeline to Europe. Doesn't matter how much LNG you "approve" for export if you can't get it out of the country easily.

Processing LNG for export is also really hard. The gas has to be turned into a liquid so it can be shipped in containers and sent abroad. But liquefaction is an energy-intensive process that requires separate power plants that, themselves, are subject to all sorts of reviews and impediments, generally.

As a potential source of domestic energy, natural gas has potential. But the U.S. is in no position to become a major exporter overnight — not to mention over the next decade, by which point Kiev could be a protectorate of Northern Crimea.

But let's put that aside. Let's say that the bill actually magically transforms the U.S. energy market. Even if we look to Europe, we're looking at a 2018-2019 timeframe when the increased exports authorized by this bill would begin to hit the market. And again, that time frame is probably a decade too generous.

The world market would probably ensure that any LNG sold would go East, to Asia. There's an LNG shortage in Asia, and prices are highest in Japan, India, and South Korea. And that's a problem, because if we really want to draw our allies off of Russian LNG, it will take a prolonged process, one where the U.S. market establishes itself. Again — years and years.

Why, then, is the House considering this "Ukraine" bill that really has nothing to do with the Ukraine?

Election year politics!

It looks good to have an energy bill.

And Rep. Cory Gardner (R), running for Senate against Mark Udall (D) in Colorado, represents a state that has a multi-billion dollar LNG industry, one that would surely benefit in the short term if regulatory reviews were curtailed. Udall, in fact, has a slightly different bill in the Senate. His staff, too, is talking up the global policy aspects of the legislation.

 

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