Will US LNG Export Policy Change in 2015?

Since granting the first authorization to export natural gas to non-free-trade-agreement (FTA) countries over two years ago, the issue of natural gas exports has been one of the dominant policy debates on Capitol Hill.  This debate has encompassed numerous analyses, several hearings in both the House and Senate, and, at times, has been a leading diplomatic issue between the United States and our allies abroad. 

During the 2014 election cycle, to the extent the gas export issue garnered attention, it was largely an issue of agreement among both Republican and Democrat candidates who were united in wanting to see the Obama Administration take swifter and more decisive action to approve gas exports.  The majority of candidates in both parties saw increased gas exports as leading to lower global greenhouse gas emissions, greater U.S. jobs, and enhanced geopolitical leverage in a suddenly chaotic world.  Dissenting voices in Congress on LNG exports – primarily liberal Democrats like Senators Ed Markey (D-MA) and Robert Menendez (D-NJ) – will find themselves with fewer allies in the next Congress.

With such widespread agreement that the U.S. should export more LNG, the new Republican majority in the Senate may make it possible for Congress to take action to more rapidly achieve that objective, taking advantage of Democratic rhetoric on the subject and the slow pace of export approvals.  President Obama and many of his top aides and Cabinet officials have extolled the virtues of increased gas exports and, even in a Democrat-led Senate, a number of Democrats sponsored or cosponsored legislation to speed up permits.  However, despite the public statements from the Executive Branch, as of October 21, 2014, the U.S. Department of Energy (DOE) has issued only three final authorizations to export natural gas, totaling just under 4 Bcf/d of natural gas.  Nearly 40 applications to export natural gas to non-FTA countries remain pending before DOE, totaling just over 34 Bcf/d.  And despite the sentiments of centrist Democrats on Capitol Hill, legislation to expedite gas exports was never brought to the floor by Majority Leader Senator Harry Reid (D-NV).   

DOE’s recent revisions to its export approval process and a deadlock in the Ukraine crisis diverted attention from these bills in the last session.  However, most observers continue to believe Russian President Vladimir Putin will continue to press his interests in Ukraine and other Eastern European countries in the months ahead.  With a new Republican majority in the Senate, we can expect previously-proposed House and Senate bills that would extend preferential treatment to applications to export natural gas to NATO allies and Japan to once again receive Committee attention.  If Europe experiences another cold winter and Russia begins to use natural gas supplies to pressure our allies, could a new Republican majority in the Senate gather enough moderate Democrat votes to get a bill to President Obama’s desk?  Perhaps, and if so, it would be difficult for President Obama to veto a bill that is so heavily sought by our foreign allies.

Eric Washburn is a principal and Salo Zelermyer is a senior counsel at Bracewell & Giuliani LLP in Washington, DC.