In a bitterly divided U.S. political environment, there's at least one thing Republicans and Democrats can agree on: Avoid a public showdown on natural gas exports, arguably the most important energy policy decision in recent memory.
While fluctuating gasoline prices, the Keystone pipeline and the fight over fracking steal headlines, the question of how much of the newfound U.S. shale gas bounty should be shared with the rest of the world goes largely without comment or coverage — despite holding far wider and longer-lasting consequences.
The reason is clear: unlike the relatively simple, black-and-white issues that politicians often favor and voters connect to, liquefied natural gas (LNG) is deep, deep gray.
It affects a tangled web of constituents, from Big Oil to international allies such as Japan, pits free-trade orthodoxy against the domestic economy, and requires an awkward explanation of why allowing some exports — inevitably raising U.S. energy prices in the short term, even if at the margin — may ultimately be better for the country in the long run.
All the same, this U.S. president or the next will have to make a tricky decision, and its consequences may only become clear years from now: How much U.S. gas should be sold to other countries if it means boosting prices for consumers at home?
"Right now I don't think this issue is getting anywhere near the attention it deserves," said Democratic congressman Edward Markey, one of a small number of politicians actively seeking to rein in energy exports.
"Keystone and Solyndra are election-year political sideshows," he said, referring to the bankruptcy of a government-funded solar panel maker. "This is the main event."
But lobbyists on both sides of the issue say it suits them best to keep the subject out of the headlines. The gas producers that stand to benefit from higher selling prices see no upside from a public brawl, while many manufacturers who could benefit from continuing low prices shy away from anti-export statements.
With Congress unlikely to weigh in, the decision falls to a small, obscure unit of the Energy Department, the Office of Natural Gas Regulatory Activities.
The department's statistical branch has been criticized for failing to predict how new drilling techniques would revolutionize the sector, and how quickly the vast stores of unearthed gas would send domestic prices to unsustainable lows.
So the natural gas office is now awaiting advice from a second and final report on the economic implications of exports — a report so sensitive that the government has kept it under wraps, including the identity of the consultants preparing it.
Not since the liberalization of power markets in the 1980s have politicians had more sway over future energy costs — or been less willing to grapple publicly with the issue.
Only one hearing on LNG exports has been held to date in the Senate, and in the House of Representatives, the Energy and Commerce Committee has no plan to hold hearings at the moment.
Markey has struggled to get traction behind legislation that would block gas exports, a measure almost certain to fail to pass through the divided Congress. Few lawmakers openly oppose exports, though even fewer vocally advocate a fully open market that would raise prices at home.
The Obama administration has said it will wait until the gas office releases the final economic analysis of LNG exports to make any decision on eight pending applications to sell liquefied natural gas to countries with which the United States has no free-trade agreement — the most political step of the multiple state and federal approvals needed to send LNG abroad.
The report was due out this spring, but in March the administration pushed back the release until later in the year. A White House official said on Monday the report could be released in the next few weeks.
Overall, the boom in the energy sector, coupled with a slow recovery in domestic manufacturing, could raise gross domestic product by 2 to 3.3 percent by 2020, according to a recent analysis by Citigroup. But exports could force politicians to play favorites, effectively choosing between energy companies and industry.
Democrats, often critical of the oil and gas sector, are wary of getting out in front of an issue that divides even the manufacturers benefitting from low gas prices. Republicans, who favor free trade and support fossil fuel development, are leery of being accused of raising costs for consumers and industry.
"No politician wants to be accused of raising end-user prices to add to oil companies' bottom lines," says Kevin Book, an energy analyst at Clearview Energy Partners.
So for most officials willing to take a stand, it is inevitably one of moderation. Few are ready to weigh in on the toughest question: How much is too much?
Senator Ron Wyden, a Democrat who has backed the pause in the permitting process, knows how quickly fortunes can change: just a few years ago he witnessed the battle over the prospect of a gas import terminal in his home state of Oregon at a time when the industry was convinced of a growing U.S. gas deficit.
Instead, the pioneering use of hydraulic fracturing and horizontal drilling has lifted economically recoverable U.S. reserves of natural gas to 500 trillion cubic feet, a previously unimaginable level.
"I've always supported market-expanding agreements, and I'm trying to balance that with the fact that, with natural gas, America now has a strategic advantage," Wyden said.
"This is something where we now lead. I just want to make sure we don't trade it away," said Wyden, who is in line to be the top Democrat on the Senate energy committee next year. Unlike Markey, he has no plans to push legislation that would prevent exports, an acknowledgement of the issue's complexity.
Republicans in the House Energy and Commerce Committee believe gas companies would likely export marginal amounts compared to the current supply, and any price effects will be minimal.
"If we don't have some sort of exports, it's not going to be economic to produce as much gas here," a committee Republican aide said.
CONFLICT ON CONFLICT
Congressman Gene Green, a Democrat on the House energy committee who represents the greater part of eastern Houston, said he supports LNG export projects — on a case-by-case basis. His district includes a chemical complex, and such plants tend to be large consumers of natural gas. Several companies plan to build new U.S. facilities to take advantage of now-low prices.
"We can simultaneously have reasonable natural gas prices that foster chemical industry expansion while we export natural gas," Green said.
Energy-intensive manufacturers are keen to use cheap gas to boost domestic production, but many companies also have plants overseas that could benefit from U.S. gas exports. Others are wary of advocating any measures that would impinge on free trade. They too are taking a quiet, moderate stance.
Although Dow Chemical is a major consumer of natural gas, it supports a limited amount of exports, controlled perhaps by some kind of quota based on total gas production.
"As a proponent of fair and free trade, (Dow) opposes policies that arbitrarily limit reasonable exports of natural gas to free-trade agreement countries or that provide for unlimited global exports," the company said in a statement.
The surge in gas output has made companies such as Chesapeake and Exxon Mobil's XTO victims of their own success, unleashing a surplus of supply that could keep prices — and therefore profits — depressed for decades.
For them, selling gas to Japan or Europe — which buys imported LNG at five or six times the domestic price of $2.50 per million British thermal units — is essential to continue expanding their U.S. business, creating jobs in the process.
The shale gas boom is on track to support 1.5 million jobs across the United States by 2015, according to an industry-funded study by IHS Global Insight.
Export licenses will make big winners out of some firms such as Cheniere, which last year secured the first and, so far, only export permit from the Energy Department.
For those that get the green light, the multibillion-dollar terminals are likely to be buzzing for decades, freezing and compressing the gas at a temperature of -260 degrees Fahrenheit (-162 Celsius) for seaborne shipment on special tankers.
But others in the queue — which includes firms from utility Southern Co to gas giant BG Group and Australian bank Macquarie — could come out disappointed, as few analysts expect all the projects to be approved.
"I don't think they are going to give blanket approval to all takers, but on a case-by-case basis, I think they would be favorably disposed if the supply is there," said Frank Verrastro, director of the energy and national security program at the Center for Strategic and International Studies.
The eight projects pending review span from Maryland to Oregon. Including Cheniere's Sabine Pass in Louisiana, these sites could export more than 12 billion cubic feet per day of gas — equivalent to about one-sixth of current U.S. demand.
TAPPING THE BOUNTY
If the gap between global and domestic prices remains wide, as many analysts expect, more export projects are certain to be brought forward and the government may draw a line in the sand.
A ban on energy exports is not without precedent. The Mineral Leasing Act of 1920 and the Outer Continental Shelf Lands Act require a presidential waiver for the sale of most unrefined crude oil abroad, essentially blocking exports.
Even with a boom in domestic oil output, the United States is in little danger of becoming an oil exporter. But gas is far less fraught with geopolitical significance.
"Oil has been a political issue. Natural gas has never been that," said David Wochner, an attorney for the Sutherland law firm that represents natural gas producers.
Heather Zichal, a White House energy adviser, told a recent conference that the administration was not opposed to exports and that it wanted "analysis to drive the decisions".
That puts the burden squarely on the Energy Department's natural gas regulatory office and its coming report.
It remains to be seen whether the prognosis from the department's commissioned study is more prescient than previous examinations of the shale gas surge, which has proven extraordinarily hard to predict.
A much-critiqued, department-commissioned analysis earlier from the Energy Information Administration found that approving all pending export applications could add as much as 9 percent a year to prices of the fuel in the next two decades.
A more recent report from the Brookings Institution moderated the EIA finding, predicting that sending U.S. gas abroad would have only a "modest" upward impact on prices and that U.S. manufacturers would stay competitive despite exports.
The department has declined to commit publicly to any timeline for evaluating the export applications. Facing no legislative deadline to act, it can essentially stretch out or speed up the process to its liking.
It is already honing its rationale, including the benefit of using exports as a "balancing" mechanism for the market, one that has been so volatile over past decades that drillers and users have struggled to make long-term plans.
"One of the potential impacts that you might have from LNG exports would be creating a stable block of demand, which helps the market get to a stable sustainable price," Christopher Smith, deputy assistant secretary in the department's office of fossil energy, told Reuters in February.
APPROVALS: WAIT AND SEE
The American Public Gas Association, a lobby group representing publicly owned gas distributors, has been one of the few groups to press lawmakers against exports and supports Markey's legislation.
On the other side of the debate, the Center for Liquefied Natural Gas, a trade group that represents LNG companies, has been reaching out to lawmakers in Congress to "educate" on the process for approving exports.
It spent $40,000 on lobbying last year and about $10,000 in the first quarter of 2012, according to data from the Center for Responsive Politics. Cheniere spent $520,000 on lobbying last year, and $80,000 so far this year.
The LNG group does not want hearings or legislation. It wants Congress to step back and let the Department of Energy decide.
"There's nothing we want done other than letting DOE do its job," said Bill Cooper, the center's president. "We want people to know about the process and that it does work when it's allowed to."
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