Energy Exports as Foreign-Policy Tool

Monday, March 17th, 2014 @ 7:10PM

By: Gerald F. Seib

For a sagging president and a discredited Congress, the Ukraine crisis actually could be a blessing in disguise. It gives them a chance to do something big: Start a historically significant drive to transform’s America’s energy picture.

Russia’s biggest leverage in its attempt to keep Ukraine in its orbit and annex the Crimean peninsula is that Ukraine and its potential allies elsewhere in Europe still depend on Russian natural gas.

But Russia’s long-term edge may well decline if the U.S. and other Western powers play their cards right. The U.S. is on its way to becoming a net exporter of natural gas, and potentially a net exporter of crude oil as well. So the energy weapon that has been used so effectively against the U.S. in the last half century could easily change hands with the right kinds of American action.

Moreover, the psychological effects could kick in immediately, if the U.S. convinces the world it is serious. Thus can an American drive for real energy independence be a game-changer economically as well as strategically.

That’s where the president and Congress come in. Energy trends change slowly, but a bold, bipartisan statement now of American intentions could have outsize impact by building confidence. And, let’s face it, the policy-making machinery in Washington isn’t doing anything else all that meaningful this year, so the decks are cleared for meaningful bipartisan action.

Invoking the Manhattan Project—the rush to develop nuclear arms in World War II—and the race to the moon in the 1960s has become a trite practice, but the analogies actually could apply here. Just as those were nonpartisan, patriotic drives, so could be a campaign to develop an energy position so robust that Washington actually could step up to help its friends at crucial moments such as this.

Simply look at trend lines now to see what is possible. Data from the Energy Information Administration indicate that the U.S. imported 8% of its net natural gas needs in 2011. By 2019, thanks in large measure to the shale-gas boom, the lines will cross and U.S. production will outpace domestic consumption; the U.S. would become a net exporter of natural gas. And by 2040, the U.S. is projected to be exporting 3.6 trillion cubic feet of gas annually, or about 12% of its production.

In other words, a transformation already is under way. The policy trick is to accelerate and solidify it. Much as the best time to fix a roof is when the sun is shining, so the time to lock in a different energy situation is when things are trending well already. Ukraine can help policy makers cement that sentiment.

In political terms, the best thing is that there is something for both parties and all ideologies to like here. Yes, there is an obvious and significant split between left and right on the use of carbon fuels and the global-warming implications, and U.S. firms that are big energy users may resist export policies that they think might put upward pressure on their prices. But a robust all-of-the-above energy policy—to which President Barack Obama and Republican leaders alike have at least paid lip service—could go a long way to diminishing that problem.

Such an effort could easily start with administration approval of the Keystone XL pipeline, opening a new path to carry oil from Canada’s tar sands to the Midwest and Gulf of Mexico coast for refining. A strong case can be made that this oil will be extracted and used whether this pipeline is built or not, and that all alternate uses of the oil would be less efficient and ultimately more damaging to the environment.

If there is a true spirit of national determination on the energy front, pipeline proponents could in return offer to support efforts to lock in federal support for more research into alternative energy sources. Yes, the results of federal backing for green energy have hardly been stellar, but the upside potential for a new bipartisan effort remains big.

Meantime, House Republicans have been arguing that extending the natural-gas boom requires locking in some certainty about federal regulations of drilling and transporting the gas. A comprehensive package doing that could include some federal dollars to help determine the safest ways to extract and use natural gas, which is, in the long run, a fuel with far less global-warming implications than is coal.

Finally, the U.S. has the opportunity now to overturn decades of outdated policy and lift a virtual ban on crude oil exports.

As economic policy, such changes make sense. As national-security strategy, they would win the strong backing of supporters of Israel eager to end once and for all dependence on Arab and Iranian oil. As part of a drive to change the world, they just might rouse a nation to action.

Write to Gerald F. Seib at jerry.seib@wsj.com

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