UPDATE 2-Ukraine crisis new rallying point for U.S. energy export backers

Tue Mar 4, 2014 5:25pm GMT

* U.S. LNG could work for Western Europe, not Central Europe

* Broad U.S. shipments not expected until at least 2017

* Bill in Congress would expedite exports for NATO nations

* Boosting gas storage might be better than buying LNG (Adds comments by Speaker of the House John Boehner)

By Timothy Gardner

WASHINGTON, March 4 (Reuters) - House Speaker John Boehner and other supporters of U.S. energy exports pounced on the crisis in Ukraine to pressure the Obama administration to speed approval of liquid natural gas (LNG) exports, saying doing so could help keep Russia in check.

LNG supplies from the United States could help some Western European countries react to any Russian aggression in coming years, but the added transportation costs could make the fuel too expensive for others in Central Europe who are likely to remain dependent on their neighbors, energy experts said.

As Russian President Vladimir Putin's forces tightened their grip on the Crimea peninsula in the Ukraine, the moves heightened concerns that the crisis could worsen and that Russia could slash its shipments of natural gas to Europe, nearly half of which are sent through Ukraine via pipeline.

The United States has become the world's top natural gas producer in recent years, due to hydraulic fracturing, known as fracking, and horizontal drilling. Surplus U.S. energy could help provide Europe with an alternative to Russian supplies, supporters say.

"We should not force our allies to remain dependent on Putin for their energy needs," Boehner said in a release. "One immediate step the president can and should take is to dramatically expedite the approval of U.S. exports of natural gas."

The view that President Barack Obama could brandish energy exports as a tool to deflate Russian power over Europe is one espoused by many in U.S. foreign policy circles.

"The U.S. energy transformation of recent years gives us options we didn't have several years ago. So we ought to explore using those options," said Richard Haass, the president of the Council on Foreign Relations think tank.

U.S. LNG exports are not expected to begin in earnest until at least 2017 as many proposals require more approval and billion-dollar projects need to be built or expanded. In the meantime, supplies from other global exporters, including Australia, Canada, and Qatar, could rush in to help fill European demand.

Since 2011, the U.S. Department of Energy has conditionally approved six proposals to export LNG to countries with which the United States does not have free-trade agreements.

Joe McMonigle, who was chief of staff at the DOE under former President George W. Bush, and other supporters of unfettered exports have classified the DOE's approval rate as a "go-slow" approach, especially given the lead time between approval and actual exports.

The approvals total some 8.5 billion cubic feet per day of LNG, or more than the 6 bcf per day Russia exports through pipelines through the Ukraine to Europe. More than 20 U.S. projects await full federal approvals.

But it is uncertain how much of that would be available to Europe as countries in Asia have entered contracts to buy much of it.

Exports backers are also calling for the Obama administration to end a 40-year ban on U.S. crude exports. But new supplies of U.S. light sweet crude may not be an ideal substitute for Russia's heavy sour oil.

There is no expectation that the Obama administration will lift the ban based on one crisis, and some U.S. lawmakers are concerned that exporting crude would translate to higher gasoline prices at home.

Still, Energy Secretary Ernest Moniz caused a stir in December by saying the ban was outdated at a time the United States has become an energy producing power.

LEGISLATIVE EFFORTS

The Ukraine conflict has breathed new life into bills introduced in the Senate and House of Representatives in early 2013 that would force the DOE to speed its approvals for LNG exports to Japan and to NATO allies.

The legislation, called the Expedited LNG for American Allies Act, would also allow the State Department to intervene, expediting approvals if it was determined to be in the national interest.

The Senate version is sponsored by John Barrasso, a Wyoming Republican. It has 13 Republican and two Democratic co-sponsors but would need more support from Democrats who lead the Senate to have a chance of passage.

McMonigle said if the crisis in Ukraine deepens, it could give the legislation more support.

In the Republican-led House, Representative Tim Ryan, an Ohio Democrat who supports the legislation, said on Monday that the events in the Ukraine show the need to act.

"This crisis also points to the fact that the United States should help Eastern Europe find alternative sources of natural gas," Ryan said in a release.

U.S. Representative Fred Upton, the chairman of the House Energy and Commerce Committee, recently met with officials from Lithuania, Hungary and Poland who asked when U.S. LNG would be available.

"Now is the time to send the signal to our global allies that U.S. natural gas will be an available and viable alternative," Upton said late on Monday, adding that he would work to advance legislation. The DOE's approval process is "unnecessarily putting our allies at the mercy of Vladimir Putin."

GOT TO BE AN AFFORDABLE PRICE

Countries such as Germany and Austria might benefit from using U.S. LNG shipments as stop-gap measures in times of crisis or supply dislocation.

But others in central and southern Europe, such as Bulgaria, Hungary and Greece, may remain mostly dependent on Russia, an expert said.

"It's not enough to just get the gas there, it's got to be at a price that governments can afford," said Brenda Shaffer, an energy security expert and visiting professor at Georgetown University. She said U.S. LNG, after liquefaction, regasification and shipping, may be too expensive for countries farther from the United States.

Many of those countries could do well to increase their storage capacity of gas to shield against supply disruptions, she said. "I see storage as important, if not more important than diversification," of supply for European countries, Shaffer said. (Additional reporting by Julia Edwards and Ricard Cowan, Editing by Ros Krasny, Ken Wills, Bernadette Baum and Meredith Mazzilli)