As President Obama discussed the Ukraine crisis with European leaders in The Hague Monday, including the Continent's energy challenges, his administration brought one potential solution a small step closer to reality.
The US Department of Energy conditionally approved Monday the Jordan Cove liquefied natural gas (LNG) project in Coos Bay, Ore. The proposed $7.5 billion export terminal is the seventh such facility to receive a federal permit, and would export up to 0.8 billion standard cubic feet of natural gas per day for 20 years.
With production booming, US oil and gas companies have put pressure on the administration to review longstanding policies that have limited energy exports for security reasons. The need for alternative gas supplies in Europe – made more palpable by the role of natural gas in the ongoing Ukraine crisis – has heightened calls for opening up domestic gas markets to foreign buyers.
Jordan Cove's location on the West Coast makes it a less-attractive option for exporting to Europe, but the approval could serve as a signal of support just as Mr. Obama meets with allies across the Atlantic Ocean. The announcement comes only six weeks after the most recent LNG approval (the average duration between approvals has been two to three months), and as members of the G7 planned to meet without Russia in coming weeks to discuss diversifying Europe's energy supply.
“Given the situation in Ukraine, this license sends a positive signal to our allies and to energy markets that the United States is ready to join the growing global gas trade,” Sen. Lisa Murkowski (R) of Alaska and ranking member of the Senate Energy and Natural Resources Committee, said in a statement responding to the approval. “While this license moves us in the right direction, I would be strongly opposed to any ‘pause for further study,’ as some have proposed.”
More LNG terminals would boost job growth at home, supporters say, while giving Europe a friendlier and more stable natural gas supply at time when they need it most. The construction and investment required would boost domestic job growth, supporters say, and reduce the overall trade deficit.
The US first needs to permit and construct the expensive and complex infrastructure necessary for exporting the heating and electricity fuel. That is a time-consuming process, and even the most developed export terminal project isn't expected to come online until late 2015. Shipping gas overseas would also raise the historically low natural gas prices American consumers currently enjoy.
There are environmental concerns, too. Exports would likely mean a drive to extract more natural gas, often using a controversial drilling technique in regions unaccustomed to oil and gas production. Natural gas is cleaner burning than coal, and has made a significant contribution to reducing US carbon emissions, but extracting and transporting the fossil fuel can release methane, a highly potent greenhouse gas.
Technology might provide an alternate solution. The US has pioneered the hydraulic fracturing and horizontal drilling used to extract gas from shale rock formations previously believed to be inaccessible. Those kinds of formations exist in vast quantities in China, Russia, Europe, and elsewhere, suggesting similar success could be found by applying US expertise in other parts of the world.
"History tells me that what the US is particularly good at is developing technology and exporting it to rest of the world," says Frank Wolak, director of Stanford University's Program on Energy and Sustainable Development in California. "You could end up with a lot of export terminals being unused because entrepreneurs get the technology out there first."
In light of the situation in Eastern Europe, the Energy Department might "give some additional weight to the geopolitical criterion going forward,” Energy Secretary Ernest Moniz said at a Bloomberg New Energy Finance event last Friday. Obama has asked Mr. Moniz and Secretary of State John Kerry to confer with European leaders on efforts to diversify Europe's energy mix.
"The Energy Department will continue to process the applications currently pending on a case-by-case basis, in the order of precedence previously detailed," the department said in a press release Monday. "During this time, the Department will continue to monitor any market developments and assess their impact in subsequent public interest determinations as further information becomes available."