Congressman
John E. Peterson

LNG: No Silver Bullet  

By Congressman John E. Peterson
September 2005

It occurs to me that there may be some stunning similarities between the circumstances that have led our nation to the edge of an impending energy crisis, and the essential plot elements at play in a summer blockbuster.

To start, there’s the conflict – in this case, our nation’s reliance on foreign sources of energy, put within the security context of a post-9/11 world.

Then there’s the complicated, but ultimately double-dealing villain: far-away oil-producing states that have proven unreliable when it comes to protecting basic human rights, and who have been even less reliable when it comes to cooperating with the global community in the war against terrorism.

And, depending on who you’ve been talking to, there’s even a popular hero – directed by fate, and impervious to outside forces: Liquefied Natural Gas (LNG).

Indeed, considering what we’ve been told by folks in the media and on Madison Ave., the average American would be forgiven for arriving at the very reasonable conclusion that not only are our energy problems about to fritter away, but that, wholly as a result of LNG, they might actually be a thing of the past – made obsolete by an upcoming revolution led by a frozen gas from the heavens.

A compelling plot line, indeed. But, like most Hollywood heroes, LNG is not without its fatal character flaw – a defect that puts its meteoric rise in political popularity into a very different light.  

I’m referring to the fact that LNG, despite representing the “future of American energy” according to some energy producers, is not – and will never be – produced on or near American soil. To get it, we must negotiate with far-away natural gas producing countries, many of whom are unknown quantities in the best case, and downright adversarial to American interests in the worst.

Sound familiar? 

At some point, you’d think we would ask ourselves: With the country already heavily dependent on overseas oil from unstable regions of the world, is it prudent public policy for us to put all of our collective eggs into one basket and enter into a similar energy arrangement with a different set of unknowns?

Some of my colleagues in Congress sure think so. Many of them believe that LNG represents a “silver bullet” that, when discharged, will provide U.S. consumers and industries with an endless supply of good, cheap natural gas.

This Congress is so enamored of LNG, in fact, that it added a provision to the recently passed energy bill that would give the Federal Energy Regulatory Commission (FERC) final say in pre-empting governors and state legislatures on questions related to where future LNG terminals can be built.

Now, to be clear, I’m not saying that LNG is the source of our problems. In fact, I lent my support to the FERC siting provision because I, like many of my colleagues, recognize that LNG has the potential to be part of a comprehensive national strategy to address the current scarcity in supply.

But unlike many of my colleagues, I believe LNG is only a small piece of the puzzle.

If our nation genuinely seeks to forever flip the current energy equation, I believe we must look for the ultimate solution in the most unlikely of locations: Home.

Today, most experts believe that Russia is the “Saudi Arabia” of natural gas. If that’s true, then the United States would be considered the Kuwait. Even with domestic production growing at an annual rate of well below one percent, we still provide ourselves with 88 percent of our own natural gas. With a renewed focus on finding better ways to harvest our own stock, I’m confident we can provide ourselves with the full one-hundred.

But we better get moving fast. Natural gas is an essential energy for heating homes, schools and hospitals, generating electricity, and fueling American industries and transportation systems – but it isn’t getting any cheaper. Over the past several years, natural gas has become widely unaffordable, and America has become less competitive because of it.

And while natural gas prices have been spiraling out of control in the United States (up 120 percent over the past 3 years), prices abroad – where there is no government lockdown on supply – have largely held steady.

These circumstances have led to a huge natural gas price disparity among our world’s most competitive nations. Today, a businessman in Pennsylvania pays over $8.00 per/million British Thermal Units for natural gas. But his competitor in China only pays $4.55; his counterpart in the United Kingdom, only $5.65; $1.60 in Argentina, $0.95 in Russia, and a startling $0.80 in North Africa. It doesn’t take an economist to arrive at the conclusion that U.S. industries that rely on natural gas – of which there are tens of thousands – have been put at a severe disadvantage because of our government’s inability, unwillingness even, to put them on a level playing field with their international competitors.

Some in Congress are starting to realize the economic implications of skyrocketing natural gas prices, including a bipartisan coalition of 157 House members who supported my recent amendment to the Interior Appropriations bill that would have lifted the generation-old moratoria on natural gas exploration in the Outer Continental Shelf. 

In offering that amendment, I was joined by Republicans and Democrats from across the country, including members who represent coastal areas in Hawaii, California, and Florida, who spoke out in favor of crafting a commonsense solution to increasing domestic natural gas supply.

In order to make a legislative change to the existing moratoria, I will need the support of 217 of my fellow colleagues. I fully expect to get it. The only question that remains is, will we bring relief to U.S. consumers and industries now, or will we wait until some of our nation’s highest paying industrial jobs have left our shores for good? Time will ultimately tell, I suppose, but I’m going to continue working hard to make sure our journey toward energy independence begins sooner rather than later.