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    USA Today Editorial: Exporting natural gas would not hurt U.S.

    June 20, 2012

    Editorial Board, USA Today

    Once in a great while, the nation gets a problem that's actually nice to have. The latest example: the huge windfall of domestic natural gas from shale deposits, and the growing debate over whether to export some of it.

    For a country long used to importing much of its oil and some of its natural gas, the idea of becoming an OPEC-like energy exporter is heady stuff. More than a dozen U.S. companies have applied to the Energy Department for permits to sell natural gas abroad, as required by a 1938 federal law. But some in Congress want to block any more permits, beyond the one that has already gone to a Louisiana company.

    The keep-it-here crowd argues that the energy is needed at home, and that exports would cause domestic prices to skyrocket. On close examination, though, their warnings are more scaremongering than reality, and certainly no reason to tamper with the nation's usual allegiance to open markets.

    Here's why.

    Barely a decade ago, it looked as if the U.S. was running so low on domestic gas that it would have to begin importing larger and larger supplies of liquefied natural gas (LNG) from abroad. Today — thanks largely to the new domestic supplies unlocked by hydraulic fracturing, or "fracking" — forecasts suggest the U.S. not only has enough gas to meet its own needs for the next 100 years, but also enough to sell it to countries that don't have enough. Japan, for example, desperately needs gas to take up the slack for the nuclear power plants it shut down after last year's tsunami.

    Gas is certainly cheap now. After the wellhead price soared above $10 per million British thermal units in 2008 as U.S. production dwindled, booming shale gas production helped push it below $2; it currently hovers around $2.50.

    Meanwhile, prices in import-dependent Asian countries have spiked as high as $18 or more. Those who oppose exports warn that when American companies start selling gas into that market, prices here will shoot up to match gas costs overseas, just the way oil prices everywhere rise toward the world level. But natural gas is very different from oil.

    The main distinction is that gas is much harder to move. Selling natural gas overseas requires turning it into a liquid by cooling it to minus-260 degrees F, putting it in specially insulated LNG ships, and then heating and re-gasifying it once it reaches its destination. That makes it a lot easier and cheaper to sell gas in the U.S. instead.

    Several studies have concluded that exports would have a minor impact on U.S. prices. The consulting firms Deloitte, Navigant and ICF International have all found that exporting U.S. gas is likely to raise prices by just 2% to 11% between 2015 and 2035.

    An Energy Information Administration study shows that exports could raise U.S. gas prices as much as 54%, but only under an unlikely scenario in which U.S. companies rapidly begin exporting huge quantities of gas. The EIA says the likelier scenario — slower exports of modest amounts — would raise prices about 10%.

    Government meddling in energy markets typically doesn't go well. For example, a requirement that oil from the Trans-Alaska Pipeline be used only in America resulted in enormous shipping costs to get it to refineries in the eastern U.S., and artificially stunted potential oil production in Alaska and California. And if the U.S. blocks natural gas imports, how can its complaints about China's export restrictions on rare-earth metals be taken seriously?

    Blocking exports of natural gas might hold prices down a bit, but it would dampen production here, too. In fact, export demand will create more drilling-related jobs at home and give suppliers more incentive to produce. The best solution to this nice-to-have problem is to do what the U.S. usually does best, which is to let the free market work.

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