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Debate over natural gas exports is complicated. Best to go slow

Increased U.S. exports is normally good news. More American-made cars, trucks or medical devices going overseas is seen as an undisputed win.

Plans to export natural gas exports, including through a Maryland terminal, would also seem to be a good-news story. But exporting natural gas is a complicated issue — unlike cars or medical equipment. The debate over natural gas exports has created conflicts within groups that normally agree. It’s also created unusual alliances in opposition to the pro-export group.

In Pennsylvania, the export issue is compounded by the state’s lack of an extraction tax on Marcellus Shale gas, as well as ongoing environmental concerns over fracking.

Much of the natural gas story in the U.S. sounds like Economics 101, meaning supply and demand. The production surge created by hydraulic fracturing and horizontal drilling increased domestic supplies, which in turn lowered prices. Lower gas prices are good for both energy-intensive manufacturers and consumers. But low gas prices are not good for gas producers, who see the export market as a way to increase demand as well as profits with sales to Europe and Japan where gas prices are much higher than in the United States.

While exporting natural gas will increase profits for gas producers, it will increase costs for many manufacturers, including Dow Chemical, which is leading the effort to limit gas exports.

Dow’s motives are tied to profits, just as with the gas producers’ efforts to increase exports. But the issue goes beyond Dow and the gas producers. Lower energy costs linked to a rapid increase in the supply of natural gas has helped rejuvenate domestic manufacturing. Some manufacturing jobs have returned to the U.S. from overseas in something called on-shoring — the reverse of off-shoring, which saw many jobs leave for other countries.

The gas industry is pushing for exports, saying more gas extraction and the construction of export terminals will create jobs. But Dow and other large manufacturers counter by saying gas prices driven higher by exports will cost domestic manufacturing jobs and raise prices across the board, including for people who heat their homes with gas.

It’s a complex issue with reasonable arguments on both sides. In the strange bedfellows department, Dow Chemical and environmental groups, normally on opposing sides, are together in opposing natural gas exports.

Pennsylvanians have another issue to consider in the gas export debate — the lack of a gas extraction tax. Despite the passage of a gas drilling impact fee, Pennsylvania is leaving money on the table — and in the pockets of gas industry — by not having an extraction tax.

Part of the argument against an extraction tax made by Gov. Tom Corbett and other gas industry friends was that encouraging natural gas production would help make Pennsylvania and the U.S. energy independent. They argued that clean-burning, low-cost natural gas would bring more manufacturing jobs.

Current gas industry efforts to boost exports suggests the energy independence argument was just part of their sales pitch. Maximizing profits is the goal, not energy independence. Given that, why should Pennsylvania taxpayers continue to subsidize the natural gas industry by not imposing an extraction tax that is comparable to what’s imposed in other nearby states with Marcellus Shale gas?

The natural gas export story is not a simple one of exports meaning more jobs. The consequences of increased natural gas exports could include higher prices for consumers, higher costs for domestic manufacturers and a potential for job losses. Environmentalists also argue that higher gas prices caused by exports will lead to a gas extraction stampede to quickly capture higher profits. It would be better, they argue, to have the industry grow more slowly so that better regulation and more foolproof technologies can reduce the risk of accidents that damage the environment or harm human health.

Given the big picture, natural gas exports should grow slowly, allowing regulators to observe natural gas price changes as well as the impacts of fracking and transporting the gas.

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