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Let U.S. gas exports expand, but slowly and with caution

The United States has dramatically increased its energy production, particularly natural gas and oil extracted using horizontal drilling and hydraulic fracturing. These new technologies are controversial and opposed by many environmental groups, but they also are changing the global energy landscape.

The increased energy production is turning the U.S. into a net energy exporter after decades of being an energy importer. Since the days of the Arab Oil Embargo in the early- to mid-1970s, politicians have talked about the goal of energy independence. That day is here, or rapidly approaching, especially when oil and gas from Canada and Mexico are considered.

In Pennsylvania, Marcellus Shale gas production has been promoted as a way to achieve energy independence and create jobs through low-cost energy for manufacturers.

The expansion of natural gas production across parts of the U.S. is giving domestic manufacturers a competitive energy-cost advantage over foreign competitors. The increased production of natural gas in the U.S. is also behind plans for more buses, trucks and cars to run on clean-burning natural gas, which is also cheaper than gasoline on miles-per-gallon basis.

Increased supplies of gas and oil have brought price moderation, which is good for consumers, but not for producers’ profits. Major gas and oil companies want to expand the market — and their profits — through exports. There are 21 applications for export terminals and liquification plants to chill the gas to minus-260 degrees, so that it can be loaded onto ships and transported overseas. Prices for natural gas in Europe and Asia are several times higher than in the U.S., so gas producers see big profits with exports. But it’s expected that U.S. prices for gas will increase with more exports.

A go-slow approach would be the best position for the government to take when it comes to the expansion of natural gas exports.

The U.S. Energy Department has approved six of the 21 applications for natural gas export terminals. At this point, it would make sense to slow the approvals and watch gas price trends as well as the industry’s safety record in extracting, transporting, liquifying and shipping gas.

Federal officials must weigh the economic benefits to the gas industry against the downsides of exporting — which include higher natural gas prices for consumers as well as some major U.S. manufacturers.

Increased natural gas exports also are pushed as a geopolitical tool to curb aggressive moves by Russian President Vladimir Putin. Russia is the world’s largest exporter of natural gas, even with increased U.S. production. Much of Europe is dependent on Russian gas and Ukraine is particularly vulnerable to any disruption in Russia’s supply of gas. Adding U.S. natural gas to the global supply, particularly in Europe, would weaken Putin’s economic and political leverage.

But instead of rapidly ramping up U.S. gas exports, it makes more sense to boost gas production across Europe. There already are efforts by international gas companies to increase production in Europe and Ukraine, with Halliburten using fracking in Poland and Shell exploring for natural gas in Ukraine.

The idea of increased exports from Pennsylvania should renew the debate over a gas extraction tax. This state’s lack of an extraction tax on Marcellus Shale gas was sold as a way to encourage more production and create manufacturing jobs here. If more Pennsylvania natural gas is headed for export terminals, which mostly benefits gas producers, then an extraction tax should be imposed that makes gas production costs here competitive with other states, but not a lot less expensive. Shale gas production here should be less subsidized if the gas is exported, benefiting mostly gas producers.

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