America's Natural Gas Lever

The news that the Obama administration wants to use America’s new natural gas abundance as a lever against Russia offers a chance to change a long-term dynamic in Europe, which allows an undemocratic petrostate to dictate terms to our closest allies.

This won’t happen overnight, and it won’t be of use in the current crisis. But by accelerating the process now, we can give our allies freedom to respond to future aggressions like the one in Crimea. And we will increase our capacity to shape coalitions that manage a resurgent and aggressive Russia.

Europe imports 15 billion cubic feet of gas per day from Russia. This dependency has emboldened and financed the Russian government while hampering Europe’s ability to respond. America faced this dilemma six years ago as it struggled to confront Russian aggression in Georgia. But that was before horizontal drilling and hydraulic fracturing unleashed America’s shale gas.

At present, the United States lacks the capacity to ship any of this natural gas overseas. But an export terminal capable of supplying three billion cubic feet of gas per day in liquefied form is under construction in Cameron Parish, La., and numerous others are in the planning and permitting stages. These vast projects hold the potential for a long-run solution to problems like the one in Ukraine.

The hitch is that these projects are bedeviled by a complex and uncertain permitting process, especially in order to sell their gas to countries, like those in the European Union, that haven’t signed a free-trade agreement with the United States. As a result, each project must petition the Department of Energy for a finding that exporting gas to our European allies is in the “public interest.” Events of the past week show that the energy security of our closest allies is decidedly within the public interest of the United States.

The president can help to accomplish this by issuing an executive order finding that liquefied natural gas exports to our allies meet the legal standard. The president should also direct the Federal Energy Regulatory Commission and the Energy Department to expedite the complex permitting process for these terminals, consistent with state and federal safety and environmental laws.

In doing so, Mr. Obama should make clear that the intent of such action is to give Europe flexibility, not to cut Russia out of its European gas business.

The truth is that today, gas suppliers in both the United States and Europe would choose to ship their gas to Asian markets, where it is most valuable. But global markets evolve. As more natural gas export capacity comes online, this price differential should erode and European utilities could find American natural gas an attractive option.

Having that option in a crisis is valuable. Even if Europe is not the normal destination for American natural gas, it might welcome it under extraordinary conditions. Diverse energy supplies also prevent crises by removing the incentive to use energy as a tool of geopolitics.

Those who oppose gas exports are rightly worried about the economic and environmental consequences. Both are real concerns, but the former is an acceptable cost and the latter can be managed with tougher environmental rules.

Some fear that gas exports may cause gas prices to rise in the United States. The laws of supply and demand suggest that they are right to some degree. The Obama administration should acknowledge this policy cost and its impact. But the crisis in Ukraine illustrates why this is a price worth paying.

Others fear that gas exports will encourage further hydraulic fracturing for natural gas, which can cause local air and water pollution. Here, the administration can offer a deal to companies profiting from shale gas resources. In exchange for facilitating access to foreign markets, the federal government should set minimum national environmental standards. Production of additional gas, under stringent regulation, is in the national interest. But local communities should not have to pay the price of unacceptable air or water quality.

Some in the environmental community also worry about the impact of higher gas prices on greenhouse gas emissions: Gas exported may mean more coal burned at home. Here, the rules the administration is developing to regulate fossil-fuel-fired power plants should blunt any impact. Also, environmental advocates can take comfort from the fact that lower-cost gas in Europe would reduce the competitiveness of dirty power plants in Europe. Lastly, Mr. Obama should redouble efforts to regulate methane leaks from gas extraction and transport infrastructure.

There will be costs to breaking the codependent relationship between Russia and Western Europe. But these costs are a price worth paying to eliminate Russia’s ability to flout international norms with impunity.

Michael Wara is an associate professor at Stanford Law School.

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