LNG Bill Could Tighten Screws On Putin

By Rob Nikolewski
January 12, 2015

The Russian economy is already hurting from the sudden drop in global oil prices.

Now President Vladimir Putin could eventually feel more pressure if liquefied natural gas deliveries from the United States speed up, which is what a bill introduced in the U.S. Senate aims to do.

Republican Sen. John Barrasso of Wyoming and Democrat Sen. Martin Heinrich of New Mexico have introduced legislation that would require the secretary of the Department of Energy to make a decision on LNG export applications within 45 days after environmental review documents for projects are published to countries that do not have free trade agreements with the United States.

“If the U.S. does not aggressively market LNG abroad, many of these countries may have no choice but to purchase energy from Russia or other nations that are not aligned with our own national interests,” Heinrich said in a news release announcing the bipartisan bill, called the LNG Permitting Certainty and Transparency Act.

The Barrasso-Heinrich bill would also require LNG exporters to disclose to which countries the liquefied gas they’re exporting goes.

“Right now, LNG exports are being stalled by Washington red tape and permitting delays,” Barrasso said in the release. “Our bipartisan bill fixes this by creating clear deadlines that force Washington to make timely decisions on these critical energy permits. This is a win-win for our economy and America’s national security interests.”

Russia is one of the world’s most powerful natural gas suppliers and has been accused of using the fuel as an economic weapon against nations in Europe that rely on natural gas for heating.

In fact, even though the Putin government outraged the Ukranian government when Russia annexed the Crimea last year, Ukraine is one of the nations most reliant on natural gas from Russian energy giant Gazprom.

Last year, Russia hiked its gas price to Ukraine from $268.50 per 1,000 cubic meters to $485.50.

A potential challenge to Russia’s market share in natural gas could prove to be a double-whammy to the Putin government, already hurting badly from cratering oil prices.

Russia is a major oil-producing state and it’s estimated that its “break-even price” for oil is $98 a barrel. Last week, the global oil benchmark price dipped to $50 a barrel.

“I think Putin has a lot of things to worry about,” Geoffrey Styles, managing director of energy analysis firm GSW Strategy Group, told Watchdog.org. “The No. 1 thing right now is the price of oil but if you can put U.S. natural gas into Europe, which has been the primary, premium market for Russian natural gas, then that’s definitely another thing he has to focus on.

“And even if all he ends up doing is having to cut his price to keep his existing customers, that’s still money out of the pocket of the Russian industry, ultimately it’s money out of the Russian military and the whole economy.”

However, Styles and energy experts point out the process of getting LNG from America to European markets could take up to two years.

It’s probably no coincidence Barrasso and Heinrich each represent states that have rich deposits of natural gas.

In New Mexico, for example, a recent analysis showed that for every 10-cent increase in the price of natural gas, the general fund in New Mexico receives an additional $10 million.

“Improving the process for reviewing permits to export U.S. natural gas to our allies would create jobs in states like New Mexico because we’re rich in the resource,” Heinrich said in the statement.

But environmental groups have long opposed natural gas production in general and LNG exports in particular because so much natural gas extraction in the United States involves hydraulic fracturing — the process in which pressurized liquid is pumped into the ground to break up rock formations.

“Exporting natural gas would increase fracking and carbon emissions, put sensitive ecological areas at risk, and do nothing to address our country’s energy challenges,” said the website of the Sierra Club, which has created a “Beyond Natural Gas” campaign.

The Heinrich-Barrasso bill has been referred to the Senate Committee on Energy and Natural Resources.

In addition to Heinrich and Barrasso, Cory Gardner, R-Colo., Heidi Heitkamp, D-N.D., John Hoeven, R-N.D., Tim Kaine, D-Va., Shelley Moore Capito, R-W.Va., and Michael Bennet, D-Colo., are original cosponsors of the bill.