Hands Off: Why The Free Market Should Control the Valve to US Natural Gas Exports
By Michael J. Economides
This week, Dow Chemical CEO Andrew Liveris penned a piece in the Wall Street Journal advocating for the United States to put an arbitrary limit on the amount of natural gas our country exports to its allies. In Mr. Liveris’ own words, the U.S. should do this “by adopting a measured approach to natural-gas policy” rather than allowing our economy to reap the full benefits gained from maximizing our export potential: to jobs, to manufacturing, to this country’s trade deficit, and to investment in American projects.
Recent talk of these “measured approaches” are simply code for phrases first coined during a recent Senate Environment and Natural Resources Committee hearing held on issues related to natural gas. While the hearing did not garner a great deal of ink in the press, there was one major takeaway – Dow Chemical’s almost comically transparent and self-serving position regarding liquefied natural gas (LNG) exports.
Committee Chair Ron Wyden (D-OR) explained that the hearing was intended to find the “sweet spot where U.S. gas producers make enough money to continue producing and U.S. manufacturers have an affordable, stable supply of natural gas.” Yet when Dow Chemical CEO Andrew Liveris was pressed to give his take on a “sweet spot” during his testimony, he was unable to deliver a cogent answer.
In his testimony, Liveris said, “How much of this natural bounty should we export? I’m here because the answer is neither simple nor obvious.” But the answer is in fact both simple and obvious. Free markets should determine the optimal level of natural gas exports—not individual companies seeking to maximize their own profits at the expense of the wider American economy. Because when it comes down to it, should the free market or Dow Chemical be in control of the export valve?
For those familiar with Washington’s ways, Dow’s agenda comes as no real surprise. In what the Wall Street Journal called a “self-interested campaign to bar LNG sales abroad,” Dow has already put together a new coalition of chemical companies and aluminum producers. Known as America’s Energy Advantage, the coalition is advocating for policies that will artificially alter natural gas prices. Under the guise of protecting domestic manufacturing, this coalition is trying to ensure their own financial interests with total disregard for free trade, jobs, the U.S. economy or America’s energy security.
Ultimately for Dow Chemical, their “sweet spot” translates to inflated profits through low energy prices thanks to a Dow minority-owned export facility, Freeport LNG. Freeport is the first facility in line to receive FERC approval for exports, having gained approval from the Department of Energy in February 2012.
Arbitrarily limiting the exportation of our abundant natural gas resources means limiting the huge economic potential we stand to gain. In a recent study, the Department of Energy echoed the conclusions already made by Deloitte and the Brookings Institution, reporting that across all export scenarios it examined, the net benefit to the economy far outweighs the disingenuous “concerns” for American manufacturing that Mr. Liveris presents in his Wall Street Journal piece. Liveris is apparently alone when he says that LNG exports would hurt American manufacturers as the National Association of Manufacturers, the leading trade association representing the interests of American manufacturers, fully supports natural gas exports because of the benefits to reviving American manufacturing.
Oil and gas is currently the number one job creator in the United States. The evidence overwhelmingly shows that the shale gas exploration boon has been a key job creator over the last four years. Allowing LNG exports will further reduce our trade deficit with China, increase gross domestic product, and increase the overall welfare of Americans. At a time when the economy is desperately trying to recover and we are faced with an increasingly difficult geopolitical situation, limiting LNG exports is not a credible option. America is blessed with an abundant energy source and its exportation will put America in best the position to create more jobs here at home while improving our energy security.
LNG exports are consistent with the President Obama’s National Export Initiative that aims to expand exports and create “sustainable economic growth” and “good high-paying jobs.” So why would we allow the individual concerns of a single company to trump wider benefits to our economy?
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