House votes to expedite US natural gas exports

The US House voted on Wednesday to speed up applications for the export of US liquified natural gas. Supporters of the bill cited positive economic impact for the country, as well as potential benefits for its allies.

Thanks to horizontal drilling and hydraulic fracturing (or fracking), the US is currently faced with a significant excess of gas supply. The most recent figures provided by the US Energy Information Agency indicate that natural gas supply in North America could exceed demand by 2016.

Accordingly, energy producers are eager to liquefy that surplus North American gas for export and invest in what would be capital-intensive projects.

The bill, which passed on Wednesday by a comfortable margin of 266-150, would allow for liquified natural gas (LNG) exports to non-Free Trade Agreement countries – including Ukraine – to be expedited. The legislation requires the US Department of Energy to clear applications within 30 days, following an environmental review of LNG infrastructure.

Though the political appetite to ease limits on LNG has been building in the past few years, proposed legislation has gained impetus in the last few months, in large part due to the situation in Ukraine. Citing a willingness to help Western European allies ease their dependency on Russian-supplied energy, several prominent US politicians have tied LNG export to helping its allies.

Speaking from the House floor, the latest bill’s sponsor, Rep. Cory Gardner (R-Colo.), urged colleagues to support the reduced time frame for export approvals.

"The economic impacts alone make natural gas exports a winning policy, but the geopolitical impacts are an incredible benefit as well and have been ignored for far too long. Allies around the world have told us that they would greatly benefit from American LNG," Gardner said.

"It is time to help our friends abroad. It is time to create jobs here at home," he added.

In March, hearings took place before the US Senate and House Energy Committees to review whether expediting several dozen export applications would potentially assist US allies in reducing their dependence on Russia for natural gas exports.

"The last thing [Russian President Vladimir] Putin and his cronies want is competition from the United States of America in the energy race," said Senate Energy Committee Chairwoman Mary Landrieu at one of those hearings.

Concerns by European countries regarding energy supplies heightened as the situation in Ukraine unraveled. Lithuania’s energy minister, Jaroslav Neverovic, urged lawmakers in March to allow allies to bypass what can amount to a lengthy federal review process by designating exports in the national interest.

"It would strengthen buyers so that we don't have to attach ourselves to these long-term (Russian) contracts because there will be gas in the market," said Neverovic.

Ukraine saw its gas supply from Russia cut following the expiration of a payment deadline on June 16. Ukraine currently owes Russian energy conglomerate Gazprom over US$4.4 billion for fuel deliveries in November, December, April, and May.

Ukraine currently holds “a few months” worth of natural gas reserves, according to Bank of America Corp estimates cited by Bloomberg. The country depends on Russia for over half of its energy needs, while it currently transits some 15 percent of Europe’s Russian gas supply through its pipelines.

Still, expedited LNG export applications do not mean that energy would be immediately available for shipment. Several years would be required to prepare the installations necessary for export. Legislation to fast-track energy exports may not amount to much more than window dressing in the end, as the Obama administration has defended the standing process for the approval of LNG export, noting that facilities would not be prepared to ship before 2018, reports The Hill.

Accordingly, Rep. Henry Waxman (D-Calif.) has questioned the real impact of legislation to expedite approvals.

"Rushing the DOE review is not going to speed up the construction of these projects. We need the construction of the infrastructure for the export of natural gas," Waxman said.