LNG export limits violate US free trade tradition, ExxonMobil executive says

The US should remove the national interest demonstration requirement for LNG exports to countries with which it does not have a free-trade agreement before it loses one of its biggest energy and economic opportunities in its history, an ExxonMobil Corp. executive said.

The requirement, which originally was imposed as part of the 1938 Natural Gas Act, is more than an archaic relic that does not recognize the dramatically improved US oil and gas outlook, ExxonMobil Gas & Power Marketing Co. Pres. Rob Franklin said.

It also flies in the face of the country’s free-trade heritage and potentially could lead to international legal actions under the General Agreement on Tariffs and Trade, Franklin said during an Apr. 20 address at Johns Hopkins University’s School for Advanced International Studies.

Asked which Washington policymakers specifically need to act on this, Franklin said, “The responsibility lies with Congress, although encouragement from the executive branch would be appreciated. There are bills before each house which at least try to address the problem, but they have languished for years. Getting them to the top of the legislative agenda will be challenging.”

He said while everyone in the US from the president on down generally favors open markets and the reduction of trade barriers, a number of artificial barriers have been imposed on exporting certain energy products, including natural gas.

Watching from sidelines

“Flying in the face of America’s traditional commitment to open trade, these barriers threaten to stifle the ability of the US to contribute and benefit from the growth of a worldwide gas market,” Franklin warned. “Though it could be a very significant development in energy economics, the US is in danger of watching from the sidelines—and paying for it dearly in terms of lost jobs and missed economic opportunities.”

Franklin noted that in the past 5 years, the US Department of Energy, which is charged with making this national interest determination, has received more than 30 applications to export LNG to non-FTA countries. In the time since, it has processed only a handful of them “while it has changed the procedures more than once,” he said.

He said if Congress acts, “It wouldn’t change the situation tomorrow. It takes about 3 years to construct one of these plants. But the process would be more certain.” More projects would move forward if the 1938 legislation was repealed or amended, he predicted, saying, “I’m not prepared to say which ones they are because there are financing decisions which need to be made by the individual companies.”

But the matter needs to be addressed before the window of opportunity for US gas producers to benefit from the rapidly expanding global LNG market closes, Franklin said. “If policymakers don’t revisit and redress some significant legal and regulatory problems [which] are relics of a long-gone era, the US will underperform during one of the great developments in global energy and trade,” he said.

Contact Nick Snow at nicks@pennwell.com.

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