U.S. Push For Natural Gas Exports To Help Ukraine Won't Actually Help Ukraine

U.S. Push For Natural Gas Exports To Help Ukraine Won't Actually Help Ukraine

WASHINGTON -- As much of the world focuses on Ukraine's political turmoil and Russia's military response, those at the top of the K Street influence tower see an opportunity to shape oil and gas legislation now moving through Congress with alarming speed.

Led by the powerhouse lobbying of the American Petroleum Institute, a coalition of Fortune 500 energy companies are using the Ukraine crisis to spur Congress to approve a key policy goal: Easing regulations on the export of U.S. natural gas.

Despite a decade-long boom in U.S. natural gas production, very little of America's vast gas reserves are exported.. That's because strict regulations on the transfer and storage of gas have made it impossible to profitably ship out of the U.S.

Oil and gas companies have paid Washington lobbyists millions in recent years to challenge the strict export rules -- to no avail, until now.

As Russian troops occupy Crimea and more mass on Ukraine's border, President Barack Obama and other Western leaders seek ways to apply diplomatic and economic pressure on Russia. Their goals are to support Ukraine's shaky new pro-European government in Kiev, and to weaken Russia's grip on its former Soviet satellite.

Natural gas is key to both objectives. Russia's natural gas pipelines run straight through Ukraine. These pipelines provide gas to meet Ukraine's energy needs, while also supplying Washington's European allies. Over the past five years, however, the price and availability of Russian gas in Ukraine has become increasingly politicized. Russia has cut off the flow of gas to Ukraine twice in the past 10 years.

In Washington, Russian saber-rattling lends urgency to the oil and gas industry deregulation bills long pressed by lobbyists. This time, the bills have a bigger, eager audience on Capitol Hill. For lawmakers, easing restrictions on natural gas exports is a good way to look tough on Russia, and at the same time to tout jobs for the U.S. energy sector.

No fewer than six bills have been introduced in Congress in the past two weeks aimed at speeding permits required to export liquefied natural gas, or LNG.

The lead legislation in the Republican-controlled House was handed to Rep. Cory Gardner (R-Colo.). Gardner recently announced a challenge to freshman Sen. Mark Udall (D-Colo.) that cleared the Republican primary field in the Senate contest. By handing Gardner the export bill, Republicans aim to give the congressman a winning issue of concern to his home state and to burnish his international credentials. Udall introduced a similar bill the same day.

"We certainly like the fact that the Ukraine has essentially elevated the debate over the LNG exports," said Marty Durbin, CEO of America's Natural Gas Alliance, the biggest U.S. trade group of independent gas companies.

At first glance, all six bills look like emergency relief measures, crafted to help balance Russian President Vladimir Putin's power over Ukraine. But that's not what's going to happen.

"Expediting liquefied natural gas exports from the U.S. to weaken Russia's standing is a red herring," Athan Manuel, senior director for the Sierra Club, an environmental group opposed to gas exports, told The Huffington Post in an email. "As Energy Secretary [Ernest] Moniz said last Wednesday, the United States doesn't have the physical capacity to export LNG, nor can we determine where LNG exports go. Exporting LNG is no quick fix to this international crisis."

If you listened to members of Congress in the last week, you'd be forgiven for thinking that American gas exports would be enough to save Ukraine. They're not. They wouldn't even leave American ports until 2015, long after Ukraine's revolution government either will have established itself or failed.

Industry leaders and energy experts concede that American LNG exports are not ready to flow to Ukraine or its European allies. There are no operational LNG export sites in the continental United States that can ship to non-free trade countries, although a few companies have been cleared to begin the permitting process, which can take up to five years.

Nonetheless, K Street is playing the crisis card -- whether it helps the Ukrainians, or not.

Current regulations require a special permitting process for gas exports to countries that don't have free trade agreements with the U.S. The legislation in Congress would speed the process of exporting gas to NATO allies and to other countries, including Japan and India, by waiving the permitting process and expediting permits for 24 LNG export sites in the U.S. awaiting Department of Energy approval to ship gas to those countries.

Passage of the legislation would "send a very strong signal," according to Durbin, that the U.S. would be "able to help our allies and minimize the ability of any country out there to abuse energy as a weapon."

"Our allies in Europe are eager for a reliable partner to enter the marketplace as a stable, secure source of natural gas, and American industry is ready to make that happen," Erik Milito, API's director of upstream and industry operations, said in a statement.

To help push the legislation, the oil and gas industry employs more than 760 federally registered lobbyists and has distributed more than $150 million in campaign contributions since 2007, according to the Center for Responsive Politics.

API and ANGA have spent even more on advertising aimed at voters to soften their views of hydraulic fracturing, energy regulations and other industry priorities. The two groups combined spent $245 million on advertising promoting oil and gas from 2011 to 2012, often targeted in states with important elections. API has already run ads using the names of seven vulnerable Senate Democrats ahead of the 2014 election.

The rush to weaken regulation of gas exporters in the name of helping Ukraine is not without opposition. Environmental groups have been joined by chemical manufacturers, the steel industry and power producers. Electric utilities and chemical makers fear increased gas exports will lead to higher domestic gas prices, cutting into profits.

Dow Chemical, the de facto leader of the export opposition, launched the anti-gas export group America's Energy Advantage with other major manufacturers. The group was founded after Dow quit the National Association of Manufacturers to protest NAM's endorsement of a Department of Energy study finding exports have little effect on domestic gas prices.

America's Energy Advantage has called the push to speed gas exports in light of the Ukraine crisis to be "a false hope."

Dow's vocal opposition to easier exports is not shared by the American Chemistry Council, the chemical industry's trade association, which counts Dow as a member. Dow gave more than $1.3 million to ACC in 2012. ACC states that its membership lacks a "clear consensus" on gas exports to non-free trade countries, so the group supports "further study."

Dow argues that an increase in gas exports would coincide with new pollution regulations for coal-fired power plants. Switching power plants from coal to natural gas while boosting exports of gas would increase the domestic cost of natural gas, according to the chemical industry.

Domestic gas prices have fallen rapidly as drilling and production have expanded in recent years with new technology, including fracking. According to a study last year by the pro-export Small Business and Entrepreneurship Council, natural gas prices have declined 55 percent since 2005, which experts largely attribute to the increase in supply.

Studies by independent energy experts and the Energy Department have found little evidence that gas exports would increase the domestic gas price.

The Senate Foreign Relations Committee will consider Ukrainian aid legislation on Wednesday and at least one senator has offered an amendment to ease gas export regulations.

"It's going to take through this week and maybe over the break that they have to kind of settle out where they want to go here," ANGA's Durbin said about Congress. "Our hope and where we're going to engage is we can see some proposal that has some likelihood of moving through that will expedite the [export] process."

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