Continued LNG Export Restrictions Could Put U.S. At Risk of WTO Sanctions
Continuing to limit natural gas exports could put the U.S. at risk of World Trade Organization sanctions, industry representatives and House lawmakers said at a Foreign Affairs Subcommittee hearing April 25.
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The U.S. has brought cases before the WTO, accusing other countries of limiting exports to keep prices low. “Here the [Department of Energy] is limiting our own natural gas exports,” said Rep. Ted Poe, R-Texas, chairman of the trade subcommittee. “If this continues [there is a] possibility we could be sanctioned by the WTO. Our entire regime could be hurt.”
“Export restrictions may put the U.S. in a contradictory position,” said Michael Ratner, an energy policy specialist at the Congressional Research Service who testified at the hearing. The likelihood of WTO sanctions depends on other member states, especially Pacific countries that are a big potential market for U.S. liquefied natural gas exports. There is a chance Japan could sue the U.S. in international court over restrictions for example, Ratner said. “But how likely [that is] remains to be seen.”
There are 20 companies waiting for Department of Energy approval to export LNG to countries not possessing free trade agreements with the U.S. House committees have debated DOE delays in issuing licenses before (see 13032013), while energy associations continue to push the Department to allow more exports (see 13022602).
All the witnesses at the April 25 hearing supported increased LNG exports. One of the major concerns of opponents -- rising exports triggering higher domestic prices -- will be stymied by the high cost of LNG transportation, said David Montgomery, senior vice president at National Economic Research Associates. There will be an “irreducible” difference of about $6, per million cubic feet of LNG, between the U.S. and the countries that it exports to, Montgomery said. His organization published an economic study on LNG exports, which found that they benefit the U.S. in all circumstances. The study is part of DOE’s consideration of whether to allow more exports (see 12120610).
Increased LNG exports could also provide foreign policy benefits, Michael Levi, director of the Council on Foreign Relation’s Program on Energy Security and Climate Change, said. Though the amount of U.S. LNG exports will be “small,” it still provides countries an alternative to Middle Eastern or Russian producers. “It’s unlikely that LNG exports alone will fundamentally change the highly politicized nature of natural gas,” Levi said. But there is a possibility exports could give negotiation leverage to other countries, or help Europe “sustain pressure on Russia to sell natural gas on European terms.”