Washington, DC (PRWEB) March 18, 2013
Some of the export restrictions on natural gas being contemplated by the U.S. Department of Energy would violate binding U.S. commitments under international trade agreements, including the WTO, says a former assistant commerce secretary who served as one of the lead U.S. trade negotiators in the GATT negotiations that established the WTO.
A DOE policy restricting gas imports could be challenged in any of several forums including federal court and likely would be overturned or forced to be withdrawn, said Alan M. Dunn, a partner at the international trade law firm Stewart and Stewart and former assistant secretary of commerce in the International Trade Administration.
In addition, Dunn said DOE decisions made regarding gas exports could affect the larger issue of U.S. oil exports.
In addition to serving as a GATT negotiator in the Uruguay Round establishing the WTO, Dunn was one of the lead NAFTA negotiators with Mexico and Canada, and participated in redrafting the U.S. model Bilateral Investment Treaty (BIT) as a member of the State Department Advisory Committee on International Economic Policy. He also assisted Cheniere Energy in their successful application for a license to export U.S. gas to non- FTA countries – the only such license granted in recent decades.
Speaking on issues of trade in natural gas on March 7 at the National Press Club, Dunn said U.S. restraints on exports of natural gas present nettlesome public policy issues of tremendous economic consequence and could impact other policies affecting exports of U.S. oil.
“Gas alone will directly impact over $100 billion in investments here in the U.S. and will have a similar indirect impact on investments in energy infrastructure and consumption in other countries, whether they are importing nations that consume gas or countries that win the competition to export natural gas,” Dunn said. This estimate is based on the assumption that timing and pricing will result in exports by only a handful of the 23 projects with current pending DOE export applications. “Assuming U.S. gas exports ultimately total between 6 – 12 billion cubic feet daily (as opposed to almost 30 billion cubic feet daily that is covered by currently pending export applications), even that much smaller volume will require $20–$30 billion in new liquefaction trains alone, plus expensive cryogenically cooled storage tanks, export terminals, wharfs, and new pipelines,” Dunn said. “Those investments don’t include the very consequential associated investments in gas exploration and recovery. Taken together, those investments represent a significant amount of steel, jobs, revenues, and financing, all of which contribute to economic growth.”
Dunn added that “As important as the issues are regarding exports of U.S. gas, any decision regarding export restrictions on gas sets the stage for policy making on the much larger economic decision regarding U.S. export licensing of crude oil and certain petroleum products – an issue that is subject to very similar international obligations and that is quickly forcing its way upon U.S. decision makers.”
From an environmental point of view, Dunn explained that delays and restrictions on U.S. gas exports only reduce the total amount of gas in world markets that could facilitate the choice to build projects using lower emission gas as a fuel.
“It’s difficult to see how the environmental goal of fewer emissions is served by restricting gas exports when any forgone U.S. gas production by reason of an export restriction will be replaced by non-U.S. gas – or by higher emission fuels such as oil and coal,” Dunn said. “For example, the decision on U.S. gas export policy already has been delayed for at least two years, during which time, China and other countries have continued to make plans to build new coal-powered electric plants, undeterred by the potential of cleaner gas-powered plants.”
Restricting gas exports is problematic both in terms of U.S. international trade obligations and under U.S. law, according to Dunn’s analysis.
The U.S. has clear obligations under the WTO agreements and GATT to permit virtually unfettered exports of gas unless certain specific exigent circumstances are met, Dunn said. He added that U.S. rules of statutory construction compel DOE to consider U.S. GATT commitments in the context of applying the Natural Gas Act’s “public interest” standard.
While there are exemptions from the prohibition on export restraints, Dunn’s analysis of each potential exemption strongly suggests that none are applicable to the export license applications pending at present. As an example, Dunn pointed to a potential exemption relating to critical shortages and asked, “How can the U.S. claim an exemption based on a critical shortage of gas in the face of the current gas boom?”
Dunn added that the restrictions under consideration as well as DOE’s delays in issuing export licenses are actionable under the binding WTO Dispute Settlement Understanding.
“These are the very same procedures recently used by the U.S. to successfully challenge China’s restrictions on exports of natural resources and currently being used by the U.S. to pursue a second challenge to China’s export restraints on rare earths, tungsten, and molybdenum,” Dunn said.
He compared the lengthy DOE review of the current gas export applications (some for as much as two years) with “past GATT panel decisions holding that a licensing delay of three months constituted a violation.”
Dunn thinks any export restriction could be challenged under one or more authorities including:
Dunn’s complete remarks and legal analysis are available at stewartlaw.com
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