Europe Needs Natural Gas And America Could Help—If We Could Get Out Of Our Own Way

Last week, Russia began enforcing its demand that European Union (EU) countries pay for Russian natural gas in rubles. Poland and Bulgaria were the first countries to have their Russian gas supplies halted, but they may not be the last: The European Commission reiterated that payments in rubles violate the economic sanctions placed on Russia. Now EU countries, which get on average 40% of their natural gas from Russia, are stuck between a rock and a hard place.

Like Russia, the United States is a big producer of natural gas. Since Russia’s belligerent behavior and refusal to sell gas is hurting our European allies, it would be great if we could step in and provide some relief. This is a good idea in theory, but unfortunately our own policy decisions undermine it.

As the figure below shows, America produces more natural gas than it uses, so exports to Europe are possible. In 2020, America produced 33.5 trillion cubic feet of natural gas and the top five natural gas producing states were Texas, Pennsylvania, Louisiana, Oklahoma, and West Virginia.

In 2020, the United States was able to export 2.7 trillion cubic feet of natural gas. The EU uses about 45 billion cubic feet of natural gas per day and imports 80% of that. So even if we sent all our extra natural gas to Europe, it would only provide about 75 days’ worth of supply.

But the amount of gas we produce is not carved in stone. Public policies, global demand, and technological improvements all influence the supply of natural gas. Global demand is outside of our control, but we can change our domestic policies to make it easier to both produce natural gas and incentivize investment in additional capacity.

The Marcellus Shale rock formation primarily sits beneath Ohio, New York, Pennsylvania, West Virginia, and Maryland. It is the most productive shale formation in the country based on output, as shown in the figure below, providing around 25 billion cubic feet of gas per day. That is a lot of gas, but we could produce more if not for state and local bans on fracking.

Maryland banned fracking in 2017 and New York’s legislature banned fracking in 2020, though former New York governor Andrew Cuomo essentially banned fracking back in 2014. New York used to produce a considerable amount of natural gas, producing 56 billion cubic feet in 2006. After Cuomo banned fracking production slowed, falling below 10 billion cubic feet by 2020. This decline occurred despite the fact that New York sits on 12 million acres of gas-rich Marcellus shale.

More recently, in 2021, the Delaware River Basin Commission voted 4-0 to permanently ban fracking in the areas under its control. This includes seven northeast Pennsylvania counties that sit on top of Marcellus shale. So even though Pennsylvania allows fracking and is one of the country’s biggest producers of natural gas, these seven counties are now off limits.

We can help our European allies quit Russian natural gas by producing more in America, but only if state and local governments revoke their regulations that prevent more production.

Exporting more liquefied natural gas to Europe would create good-paying jobs here and provide EU countries with a friendly supplier they could rely on while they increase their own energy production, whether that be more gas production, nuclear plants, solar power, or something else. New York should be especially interested in the economic benefits of more natural gas production since the cities and towns in its upstate region—where the Marcellus shale is—are struggling.

State and local government obstruction is not the only barrier. The Biden administration is doing everything it can to thwart more natural gas production. A good example is the now-abandoned $800 million natural gas processing plant that was supposed to open in the Pennsylvania town of Wyalusing. New Fortress Energy is suspending the project after significant push back from so-called environmental groups and a Biden decision to suspend a Department of Transportation rule that would have allowed natural gas to be shipped by rail.

Gas pipelines have also drawn President Biden’s ire. His termination of the Keystone XL pipeline is well-known, but it is not the only shutdown he has considered. The Line 5 in Michigan moves oil and gas from Wisconsin to Ontario, Canada, and in late 2021 the Biden administration acknowledged studying the economic impacts of shutting it down.

While Line 5 appears safe for now, Biden’s hostility towards natural gas and other fossil fuels is obvious. This creates regulatory uncertainty for firms that then reduce their investments in new production. Less production means there is less gas to send to Europe and other trading partners.

Biden’s recent changes to the National Environmental Policy Act, or NEPA, will also make it harder to increase natural gas production. NEPA requires environmental review of just about any project that requires federal action, such as a permit. The environmental impact statements now take about five years to complete and are growing longer each year, creating significant costs and delays.

Former President Trump improved NEPA by making some common-sense changes that presidents going back to Clinton largely supported, such as placing time and page limits on reviews, setting clearer rules for categorical exclusions, and tightening the scope of reviews. Biden rolled back these changes and his actions will hinder construction of all energy projects, including the wind and solar projects he claims to care about.

The federal, local, and state regulations that prevent us from producing more natural gas are just one example of a bigger problem: It is too hard to build things in America. The digital world of bits is still an innovative place with thousands of new apps and web-based companies appearing daily. Web3 and the metaverse may further accelerate digital innovation.

The physical world of atoms, on the other hand, is dull. There is not enough housing, energy, infrastructure, or entrepreneurship. We need to make more stuff and producing more natural gas to help our European allies is a great place to start.