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Canada Leaps Past Dithering US in Energy Race

Energy companies are already focused on the shale boom in the U.S., but now they are increasingly turning to America’s neighbor to the north. Both the U.S. and Canada are sitting atop massive quantities of oil and gas that could fetch high prices on the world market. Both countries face unique sets of challenges in getting that energy to market.

One columnist at the FT, Ed Crooks, is arguing that, despite America’s many advantages, Canada may be a better bet for companies looking to export LNG (liquefied natural gas) overseas. His chief concern is the U.S. political climate, which has yet to adjust to America’s new energy wealth, and its skepticism when it comes to exporting domestic energy:

Many manufacturers worry that allowing unrestricted LNG exports would erode . . . competitive advantage. Andrew Liveris of Dow Chemical, for example, has warned about the risk that higher Asian gas prices, linked to the price of oil, could “bleed back” into US gas prices.

A study commissioned by the US Department of Energy from NERA Economic Consulting, published early this month, played down that risk, concluding that even unlimited LNG exports would raise US prices by at most a little over $1 per mBTU.

Still, the government seems in no rush to give the green light to the 19 proposed new US LNG export projects. Only Cheniere Energy’s Sabine Pass project in Louisiana has so far been awarded a licence to export gas to countries that do not have a free trade agreement with the US, and the energy department said it would begin to review applications for more “on a case-by-case basis”.

Mr Liveris has suggested that the government should give the green light to only “a few” projects at first, and he seems likely to get his way.

Canada poses its own set of problems for exporters. Ottawa has the political will to export gas that is still lacking in Washington, but it doesn’t have anything like America’s pipeline infrastructure to easily carry its fuel to international markets. However, as Crooks argues, energy companies believe that “politics is more intractable than geography,” and so they are putting their bets on Canada to win.

For Americans, that would be a shame. We don’t want to take anything away from Canada, but America should be doing everything it can to take advantage of its new energy riches, and we should also be doing our part to stabilize global energy markets (and politics) by ensuring reliable supplies to key friends and allies. Greens should note than an era of cheap natural gas will reduce the use of coal globally, and bend the greenhouse gas curve much more effectively than some of the complex and expensive remedies now under review.

We are optimistic that the U.S. political outlook will change. America, unlike Canada, is still getting used to its role as a global energy powerhouse, and with sixty years of energy imports and insecurity behind them, many politicians and businessmen still haven’t come to terms with this status. As a result, much of our thinking and policy on energy issues is stuck in a late 20th-century mindset, more concerned with keeping access to cheap foreign energy open rather than managing our own. This will change, but adjusting to such a rapid role reversal takes time.

In the meantime, Washington needs to develop an energy policy that promotes prosperity and security while also taking due care to safeguard the environment. This won’t be easy, and there will be a lot of political infighting and bickering associated with the task, but let’s not forget: managing our energy abundance is not a bad problem to have. May God smite us with many more curses of just the same kind. .

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