Trade in Energy under the Ttip: Benefits of Allied Power

By Ventocilla, Michael S. | Houston Journal of International Law, Spring 2018 | Go to article overview

Trade in Energy under the Ttip: Benefits of Allied Power


Ventocilla, Michael S., Houston Journal of International Law


This article examines the potential for a secure and sustainable trade in energy between the U.S. and the E.U. through the Transatlantic Trade and Investment Partnership (TTIP). Since the start of negotiations on the comprehensive trade agreement in 2013, the E.U. has made clear its desire to have access to the abundant shale energy sources that have transformed the U.S. into the world's largest producer of both oil and gas. (1) Until present, longstanding political barriers and insufficient transport infrastructure have acted to keep most of the fruits of the U.S. shale revolution within North American borders. (2) Recent changes in energy export restrictions, however, may soon see the U.S. become a major energy exporter, by providing viable export markets through free trade agreements (FTAs) such as the TTIP. (3) This report will address a brief history and the development of U.S. energy policies and interests, modern U.S. energy export policy, opportunities for transatlantic energy trade, obstacles to trade development, and inclusion of a separate energy chapter in the TTIP. This information will be used to analyze the potential for a robust energy trade between the two parties, and its implications for global energy markets.

A day will come when we shall see those two immense groups, the United States of America and the United States of Europe, facing one another, stretching out their hands across the sea, exchanging their products ... and joining together, to reap the well-being of all, these two infinite forces, the fraternity of men and the power of God. (4)

  I. THE DEVELOPMENT OF U.S. ENERGY POLICIES AND
     INTERESTS
 II. MODERN U.S. ENERGY EXPORT POLICY
III. OPPORTUNITIES FOR TRANSATLANTIC ENERGY TRADE
 IV. OBSTACLES TO TRADE DEVELOPMENT
  V. INCLUSION OF A SEPARATE ENERGY CHAPTER
 VI. IMPLICATIONS FOR THE FUTURE

I. THE DEVELOPMENT OF U.S. ENERGY POLICIES AND INTERESTS

With limited exceptions, (5) the U.S. has followed a protectionist policy with regard to its crude oil resources since the government made the decision to impose a ban on exports over 40 years ago. (6) The Energy Policy and Conservation Act--enacted in the wake of the 1973-74 Arab oil embargo--created an approach to federal energy policy that centered on increasing domestic energy production and supply, restraining energy demand, and promoting overall energy efficiency. (7) The urgency for the U.S. to become more self-sufficient in energy became painfully evident after members of the Organization of Arab Petroleum Exporting Countries banned petroleum exports to the U.S. in retaliation for its support of Israel in the 1973 Arab-Israeli War, or Yom Kippur War. (8) The disruption in supply sent the price of crude oil spiraling upward and caused nationwide fuel shortages in the U.S., (9) where production had been declining since 1970. (10) In fact, oil became so scarce during this time that the U.S. had to institute an allocation system. (11) While the Nixon Administration was able to negotiate an end to the embargo in March 1974, (12) the vulnerability exposed in the crisis--the danger of long-term U.S. dependency on foreign oil--operated to position energy independence firmly at the top of the national security agenda. (13)

Though stopping short of an outright ban on foreign exports, the U.S. also imposes trade restrictions on its natural gas resources through a very stringent export-licensing regime. Under the Natural Gas Act of 1938 (NGA), as subsequently amended, the Department of Energy (DOE) is responsible for the administration of natural gas export licenses to prospective exporters on an ad hoc basis. (14) Section 3 of the NGA specifies that authorization for exports will only be issued after a determination is made that such exports are "consistent with the public interest." (15) While the guiding criteria for determining whether a given natural gas export is in the public interest do not accompany this provision of the NGA, the DOE has since provided some insight into how it makes its assessment. …

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