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C. Boyden Gray: Shale Gas And America’s Winston Churchill Moment

C Boyden Gray, The Washington Times

Thanks to America’s vast, unexpected new natural-gas supplies, the nation faces a once-in-a-lifetime choice. Not since 1911, when Winston Churchill, then Britain’s first lord of the Admiralty, decided to convert the Royal Navy from coal to oil power has a nation seen such an opportunity to choose a new “master resource” (as the economist Julian Simon put it), and in so doing chart a new economic and strategic course.

But the British had Churchill. America’s energy future, by contrast, may well be decided by a combination of politically powerful industry groups and environmental activists determined to impede the nation’s development of cheap, clean natural gas reserves. This seems like an odd team — the environmentalists want to prevent the natural gas from being developed at all; manufacturers and other industry players want the gas out of the ground but kept in the U.S. for their exclusive use. Either way, the result is the same — no exports.

Most recently, these forces criticize the Department of Energy’s new economic and environmental analysis of possible liquefied natural gas (LNG) exports, and calling on DOE’s Energy Information Administration to do the entire 16-month study over. And they demand that the overhauled study incorporate assumptions more conducive to the critics’ bottom line — namely, to block LNG exports and, in turn, shale gas development.

They argue that natural gas must be kept in the U.S. in order to keep domestic natural gas prices low; this, they assert, will promote the expansion of manufacturing and other gas-intensive activities at home.

Some critics may actually believe this argument, but too many current critics are utter cynics: If they truly wanted lower natural gas prices, then they would have pushed just as hard in the past decade to import natural gas, in New England and elsewhere. Instead, many of those critics vigorously opposed LNG exports for years, long before shale gas turned us into a prospective exporter. They opposed projects approved by the independent Federal Energy Regulatory Commission, projects that could have brought vast economic benefits to New England and other regions.

As the new Energy Department report shows, LNG exports will not threaten the domestic economy; as the Council on Foreign Relations’ Michael A. Levi summarizes, the study “projects consistently limited natural gas price impacts,” even if we eventually export “massive” volumes of LNG. Indeed, the Energy Department’s findings echo the findings of a study produced by the liberal-leaning Brookings Institution’s Hamilton Project.

To be clear, we do need natural gas at home — for cleaner power generation, for more American manufacturing, and for cleaner cars on the road. (Indeed, the EPA’s greenhouse gas emissions rules for cars and trucks place far too much burden on the switch to compressed natural gas cars.) But exports do not undermine that goal; rather, global demand offers a great incentive to get even more gas out of the ground, with little or no price increases at home.

And the benefits are not just economic. As I have written before, U.S. exports of LNG to Europe, expedited by a U.S.-EU free trade agreement, would have a dramatic geopolitical impact. Nowhere would this be more important than in Europe, where we could break Russia’s leverage over the European economy.

This all can be accomplished safely and efficiently. What we need isn’t deregulation (as shale gas’s critics falsely accuse), but smart regulation: a forward-leaning approach that looks for the safest possible way to produce, process and transport the gas — not instinctive opposition to innovation.

This time, the stakes are too high for us to succumb to blunt reactionary opposition. We can achieve both economic growth and energy preeminence — these goals are not mutually exclusive.

Finally, there is no reason to exempt gas from the economic principles of comparative advantage that support free trade. Why not restrict agricultural exports for the benefit of American food processors? Exports restrictions make no more sense for energy than they do for agriculture.

C. Boyden Gray has served as White House counsel, U.S. ambassador to the European Union, special envoy for Eurasian energy and special envoy for European Union affairs.

The Washington Times, 25 December 2012