Congress Could Take This One Step and Weaken Putin Significantly. So Why Won’t They?

Nicolas Loris /

Russian President Putin and top EU officials meet for trust-building summit

Now that Congress has wisely chosen not to include unrelated Internal Monetary Fund reform in the Ukrainian aid package, policymakers should focus on practical solutions that are a bit more relevant. How about lifting restrictions on American natural gas exports?

An antiquated and unnecessary law stipulates that if a company wants to export natural gas to a country with which the U.S. does not have a free trade agreement (FTA), the Department of Energy must determine if the project is in the public’s national interest. Congressman Henry Waxman (D–Calif.) warned, “Rubber-stamping unlimited LNG [liquefied natural gas] exports without any determination that they are in the public interest could have serious unintended consequence.”

But the distinction between exports to FTA countries that are in the “public interest,” and those that are not, is an arbitrary one. There are numerous non-FTA nations with which the U.S. trades regularly. Natural gas should be no different and should be treated as any other good traded around the world.

There’s ample evidence why Congress should liberalize our energy markets and let those that develop and own the natural gas, along with American consumers, determine the appropriate level of gas exports— rather than a government agency.

Testifying yesterday on LNG exports, economist and Senior Vice President of NERA Economic Consulting David Montgomery gave Congressman Waxman plenty of reasons why we should free up export opportunities.

First, there are the domestic economic benefits. Montgomery’s written testimony concludes, “The investment in LNG export facilities and in additional natural gas exploration and production for export would take from 3,000 to 45,000 workers off the unemployment rolls during the next four years.” Additionally, “In the scenario with the highest level of LNG exports across all those we examined, GDP in 2038 will increase by about $25 billion compared to the no export case.”

Think reducing Russia’s use of energy for geopolitical leverage is in the public interest? Because a more globally competitive energy market would certainly reduce Russia’s energy profits as well as its political and economic leverage over Ukraine and the European Union. The NERA study estimates that removing onerous barriers to LNG exports could reduce Russia’s profits by as much as 60 percent over the long term.

Importantly, lifting the restrictions now would have a near-term impact as well. Montgomery writes:

Even if it takes 5 to 10 years for U.S. LNG exports to equal a large share of Russian natural gas exports, the effect of a clear policy to encourage domestic oil and gas production and remove obstacles to LNG exports would have an immediate effect on the pricing of natural gas and Russia’s revenues.

In a Senate hearing on the same topic, Lithuania’s energy minister Jaroslav Neverovic emphasized that point, saying, “It would strengthen buyers so that we don’t have to attach ourselves to these long-term (Russian) contracts because there will be gas in the market.”

Congress is missing a real opportunity to help Ukraine and the rest of Europe. Montgomery said it best when he affirmed that opening our energy markets to reduce Russia’s power would be “a penalty with teeth.”