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Dragging its heels like a child heading for school, the Obama administration is taking America into the global gas trade. Dominion Resources Inc. has secured Department of Energy approval to export liquefied natural gas from Cove Point, its existing LNG import facility on Chesapeake Bay. The fourth export project to be blessed by the DoE, it is further evidence that the United States government is of a mind to sell part of America's energy endowment overseas. That will raise hackles in the chemical industry, and further provoke lobbyists who argue that American natural gas should stay cheap for American consumers.

The Cove Point project, which still requires Federal Energy Regulatory Commission approval to commence construction, will bring total energy export capacity to 6.4 billion cubic feet per day. That represents about 9 per cent of U.S. daily natural gas consumption, which is about the level at which some experts believe the U.S. gas market can cope without signficantly raising prices. However, the DOE has about 18 further export project applications pending, reflecting the eagerness of energy companies to take advantage of gas markets overseas where prices can be three or four times their depressed level in the U.S. .

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On Monday, Freeport LNG signed up Toshiba and SK of Korea as customers to liquefy gas for export from its planned facility in Texas. Freeport secured approval for its plant in May; it was followed in August by Lake Charles, an existing LNG import facility in Lousiana operated by Britain's BG Group. Cheniere Energy was the first company to secure an export permit for its proposed liquefaction plant at Sabine Pass.

A huge amount of capital is being earmarked for these ventures – Dominion's project is expected to cost as much as $3.8-bilion (U.S.) – and says as much about the weakness of the U.S. gas price as it does about the bullishness of the promoters. With the price of gas at Henry Hub stuck between $3.50 and $4 per million BTU, the prospect of selling LNG at $15 in Asia is too tempting to ignore. Moreover, without better pricing, the shale gas boom is unlikely to be sustained, with the oil majors rapidly shelving shale gas expansion projects which fail to cover their costs.

Objectors, such as Dow Chemical and other members of the America's Energy Advantage coalition, want the DoE to keep the export tap flowing at a trickle in order to ensure that America's industrial recovery is not stillborn. Their case gets unintended support in Europe, where an expanding lobby of politicians and industrialists is calling for a massive retreat by the EU from its green energy commitments, and a push for shale gas. Huge subsidies for wind energy and aggressive renewable targets have hamstrung European industry, reckons Antonio Tajani, the EU industry commissioner, who has give warning of a "systemic industrial massacre" if the EU fails to change its priorities.

America faces a stark choice: allowing more exports will stimulate further shale gas exploration, but it will raise energy costs for American industry. Mr. Obama should not be blinded by energy nationalists at home. To do so would be to engage in a form of domestic gas price manipulation, encouraging inefficiency among energy users and denying energy producers access to markets. It was free markets, not government regulation that created the shale gas boom. The president should not be allowed to forget it.

Carl Mortished is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights.

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