The Department of Energy recently released its highly-anticipated report on LNG exports, which found that “the U.S. would experience net economic benefits from increased LNG exports” and that exports would result in “an increase in U.S. households’ real income and welfare.” The report added that exporting LNG would be “welfare-improving for U.S. consumers,” and that any potential price impacts would be in a “relatively narrow range” across all scenarios modeled.
Unfortunately, some did not see such broad gains for the U.S. economy as a positive, and some have even suggested LNG exports will harm the American economy.
To be sure, chemical manufacturers in the United States contribute enormously to our economy, much more than people realize, and are responsible for tens of thousands if not hundreds of thousands of jobs across the country. From the plastics used in our everyday lives to the tires on our cars (among many other products), petrochemicals are vital to the American economy.
So, it’s worth emphasizing: LNG exports will not undermine American manufacturing, and here’s why.
First of all, claims that exporting LNG provides only a “1-time value” add, are not true. Liquefying natural gas requires many highly-skilled workers to convert raw natural gas into a liquefied state. The resulting product – LNG – is thus a product in its own right.
Secondly, the pipes, turbines, and other materials necessary to construct and operate a liquefaction facility must be manufactured, purchased, and installed. Companies like General Electric – one of the largest U.S. manufacturers – provide a wide range of products necessary for LNG terminal operation, including gas turbines, pumps and compressors. In addition, all of these products require steel and other raw materials. This means a single LNG facility has a long manufacturing value chain, with significant economic gains – including jobs – at each step along the way.
Indeed, opening up new markets for U.S. products is an economic winner for the United States, and it’s exactly why President Obama’s National Export Initiative seeks to double U.S. exports by 2015.
But don’t just take our word for it. The National Association of Manufacturers, in its official policy position on LNG, reads in part: “The NAM fundamentally supports free trade and open markets. We support a natural gas policy process that is open, transparent, and objective.” The president of the American Chemistry Council – a major trade association representing chemical manufacturers – recently said he did not support “government getting in and regulating either demand or regulating the flow of resources, either domestically or internationally.”
These facts, among many others, are why experts at the Brookings Institution, Deloitte, ICF International, and many others have concluded that LNG exports would be in the United States’ best interests. Reports from a variety of outlets, including the U.S. Energy Information Administration, show that most LNG would be sourced from new natural gas development, which means LNG won’t materially impact domestic demand.
The American economy is diverse, and we benefit as a country by opening new markets for U.S. products. Our goal should be not only a growing economy, but also an economy that is allowed to grow.