Ukraine conflict provides catalyst for export movement

As the United States continues to grapple with how to turn its ongoing energy renaissance into a foreign policy tool, the ongoing hostilities between Ukraine and Russia have escalated and boosted arguments in favor of exporting U.S. oil and natural gas.

The closest parallel to this week's momentum to increase attention to long-standing proposals that would speed export of liquefied natural gas may be the April 2010 Gulf of Mexico oil spill, which briefly revived hopes that Congress could enact a new cap-and-trade law.

It is true that passing an LNG bill today would have no immediate impact on the amount of U.S. gas that provides heat or electricity to Ukraine and its European neighbors because of the years of lead time required to complete export terminals. Nonetheless, supporters argue that enacting such legislation would send a powerful signal to international energy markets as well as to Russian President Vladimir Putin, who uses his country's vast oil and gas exports to exert pressure on other countries in the region.

The post-BP case for cap and trade relied on a similar two-step dynamic. The bill under consideration at the time would have done nothing to clean up the oil-befouled beaches of the Gulf, but supporters argued that it would have set in motion a chain of events that could have eventually made such oil drilling unnecessary in the first place.

The showdown with Russia over Ukraine is not necessarily the first in which domestic energy supplies are able to bolster the U.S. foreign policy arsenal -- for example, officials credited the U.S. drilling boom with preventing global oil price spikes in the wake of imposing sanctions on Iran. But it has generated the loudest calls for changing U.S. law to rely more heavily on energy advantages.


Indeed, Sen. Bob Corker (R-Tenn.), the ranking member of the Foreign Relations Committee, said U.S. lawmakers are probably paying more attention to the energy dynamic of the existing conflict than are their counterparts in Ukraine. Corker said he met earlier this week with interim Ukrainian Prime Minister Arseniy Yatsenyuk and was told that Ukraine does not have much to worry about until April 1, when natural gas prices are expected to increase. But even then, Corker said, Yatsenyuk indicated there were ways he could address the problem internally.

"I think he appreciates that we're looking at policies that over the longer term might affect them, but in the short term, he's really got to deal with the here and now, and I felt like he felt pretty good about how he might deal with that," Corker said.

"I will say, in fairness, it seems like we're taking it to a level -- I very much support, by the way, us trying to deal with this in an appropriate way -- but I almost feel like the conversations here about that are at a higher level than they are maybe within their own country," he added.

Unfinished business with Ukraine aid package

While immediate legislative action remains unlikely, the situation in Ukraine promises to remain a potent symbol for pro-export lawmakers in Congress, who can be found in both parties.

The Senate, which will adjourn today for a recess until March 24, is expected to take up a package to aid Ukraine soon after they return. The House, which passed a Ukraine loan guarantee bill narrower than the package that came out of Senate committee, is also scheduled to go on recess after today.

Neither the House nor Senate bill currently contains language that would speed LNG exports, but there are several other tangential provisions in the bill over which the two chambers continue to quarrel. It remains possible that LNG exports could make it into the deal as a sweetener for Republicans who are resisting an Obama administration proposal to reform International Monetary Fund (IMF) rules in the bill. However, lawmakers from both parties said it was too soon to judge how negotiations over the bill's future would proceed.

Sen. John Barrasso (R-Wyo.), who was stymied earlier this week when he tried to offer an LNG amendment in a Foreign Relations Committee markup, objected to passing the committee's bill on the Senate floor last night. Instead, he sought unanimous consent for the Senate to enact the House-passed package, a request to which Democrats objected.

"That is the only thing that could actually get done today before the recess that would actually be a tangible accomplishment," Barrasso said in an interview afterward, explaining that even unanimous Senate passage of the Foreign Relations Committee bill would send it to the House, where Republicans object to the IMF reforms, among other provisions.

Barrasso also took to the floor numerous news articles and a New York Times editorial published in recent days making the case for LNG exports. He has pledged to reintroduce his amendment and push for its adoption when the Senate returns to the Ukraine bill after recess. He declined to speculate on what sort of horse-trading may be necessary to get an LNG provision passed in the coming weeks.

"That is the only issue I'm focused on -- energy exports as a foreign policy tool," he told E&E Daily, pointing toward a folder full of the pro-LNG news clippings.

Kerry: 'We're all for it'

A similar point emerged yesterday in the House, where Secretary of State John Kerry was testifying. During a Foreign Affairs Committee hearing, Chairman Ed Royce (R-Calif.) said authorizing exports to the region would send a powerful signal to the region and could change Moscow's calculus regarding conflicts with its neighbors.

"Well, we're all for it, Mr. Chairman," Kerry said, pointing to ongoing activity at the Department of Energy, which has approved six licenses to export 8.5 billion cubic feet of natural gas to countries that do not have a free-trade agreement with the United States.

Kerry added that the first exports would not flow until next year at the earliest and that Ukraine should be able to weather any short-term problems. "And in the long run, we're prepared, and I hope others will be prepared, to help shift the current energy dependency," he said.

Testifying at a separate Senate hearing on the Keystone XL pipeline yesterday, a former Obama national security adviser, retired Marine Gen. James Jones, also touched on the potential role for energy exports in the current conflict.

"In the case of the Ukraine and Europe, which depend on Russian energy, and how we use energy -- how this nation, Canada and Mexico use energy together -- can actually have geopolitical ramifications to prevent future conflicts," he told the Senate Foreign Relations Committee.

Recalling his service in the region during Putin's past attempts to use natural gas transport for geopolitical gain, Jones added that "the Europeans are overly dependent" on such supplies. "We have an opportunity to play in that game. We're not as dependent as we were."

Controversy over LNG as foreign policy tool

The LNG-as-a-foreign-policy-tool push hit a snag from environmental groups that have resisted exports because they would lead to additional oil and gas extraction in the United States. Two hundred organizations sent a letter to the administration and Congress urging against additional exports.

"ExxonMobil and other oil and gas giants should not be controlling our foreign policy," Wenonah Hauter, executive director of activist group Food & Water Watch, said in a statement. "We cannot sacrifice communities here in the United States for illusory-short term foreign policy objectives. We strongly urge Congress and the Obama administration to say 'no' to oil and gas exports."

A number of Democrats have declared support for exporting LNG as a foreign policy tool.

"There are environmental issues and logistical issues associated with the transport of LNG in any kind of increased quantity," said Rep. Gerry Connolly (D-Va.), co-chairman of the House Sustainable Energy and Environment Coalition.

"Having said that," he added, "there's a foreign policy value right now in making it clear to Russia that we are prepared to meet Ukraine's energy needs at least as one major supplier if that is what is called for."

Connolly said it is possible that LNG exports will become a chit to trade for the IMF reforms sought by the administration, but he said it he was puzzled by the GOP opposition in the first place. The provision would implement a proposed IMF rules change that gives more authority to large developing nations; conservatives oppose it on grounds that it would weaken U.S. control over the body.

Sen. Mark Begich (D-Alaska), another supporter of LNG exports, also said an LNG-for-IMF trade was a possible endgame. Just as some moderate Democrats are supportive of LNG exports over the objections of their more liberal colleagues, the IMF changes have support among moderate Republicans like Corker despite objections from his right flank.

"There's a little overlap and a little opportunity on them," Begich told E&E Daily.

Still, some of the fiercest Republican critics of the proposal, including Sens. Ron Johnson of Wisconsin and Jim Risch of Idaho, said yesterday they were not interested in such a deal.

"I haven't seen anything yet at this point," Risch said of a possible proposal that could lead him to support a deal.

An industry source said it was not surprising to see Barrasso's amendment fail in committee but expected it would return on the floor. Even if this bill is not the vehicle for LNG export provisions, another bill could carry similar language, perhaps tax extenders legislation that is a priority for many Democrats, the source added.

The industry source also noted that Rep. Cory Gardner (R-Colo.), who recently launched a Senate campaign, has offered an LNG export bill that could move quickly in the lower chamber. That could create pressure for Senate Majority Leader Harry Reid (D-Nev.) to bring LNG language to the floor to protect the political prospects of Sen. Mark Udall (D-Colo.), an LNG supporter whom Gardner is challenging.

Given the complexity of the LNG issue, some say it should not be handled as part of a Ukraine aid package. Sen. Tim Kaine (D-Va.), who endorsed exporting LNG in limited quantities to avoid domestic price spikes and other consequences, said he would support such an approach.

"I do think it's an important enough topic that we ought to really flesh that out," he said, "rather than just ... throwing it into a really time-is-of-the-essence discussion about Ukraine."

Reporters Elana Schor and Hannah Northey contributed.

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