Under our system of government, states and individual localities may adopt different policy approaches on a host of issues. The lessons and success of those policies can offer valuable guidance to other lawmaking and regulatory authorities, including the federal government.

That point was made ably in the headline of a recent Wall Street Journal editorial: “A Tale of Two Oil States.” The piece contrasts the differing approaches taken by two energy-rich locales – Texas and California – to developing their abundant natural resources.

Oil production has skyrocketed in Texas in recent years, creating jobs and economic growth as a result. Meanwhile, California oil production has declined 21 percent since 2001, largely because of policy choices and litigation. The Journal’s look at the competing visions of how and whether to develop energy resources offers a lot of lessons about what makes for a vibrant state economy.

A similar comparison is being made between Pennsylvania and New York, neighboring states that are moving in opposite directions when it comes to producing energy from the Marcellus Shale. Pennsylvania has encouraged responsible shale energy production; New York, so far, has banned it.

The Syracuse Post-Sandard notes a new study by the Manhattan Institute showing that “allowing hydrofracking to proceed in New York would be an economic boom that would bring $8 billion of income to Upstate New Yorkers. … If New York lifts its moratorium on hydrofracking … income of residents in the 28 counties that lie above the gas-rich Marcellus Shale could rise by 15 percent. The report says Pennsylvania counties in which hydrofracking has occurred have grown faster than those without it.”

Finally, I spotted this article about the best and worst states in which to do business, according to a survey of American CEOs. The poll measured the sentiments of business leaders on issues like regulations, tax policies, workforce quality and infrastructure.

What I found curious are the two states that finished last in the rankings: California (50) and New York (49). The article notes that CEOs say California’s “poor ranking is the result of a perceived hostility to business, high state taxes and onerous regulations, all of which drive investment, companies and jobs to higher states.” Texas, by the way, was deemed the best state for business in the U.S.

Also of interest is the jump that Ohio took in the poll. The Buckeye State moved up 13 spots from its 2012 ranking, the most significant improvement of any state. Ohio’s newfound willingness to improve conditions for business and investment – particularly Utica Shale energy development – offers a lesson that policymakers in Washington and the other state capitals might be wise to consider.

One way to advance that worthy ambition – and to give the overall economy a much-needed lift – would be for the Obama administration to give the green light to applications to export liquefied natural gas (LNG) that are presently on file with the Department of Energy.

Two new reports show just how powerful the job growth and other economic benefits would be if the federal government endorsed the same free-trade principles with respect to energy exports that it does with virtually every other product – from agriculture and aircraft to pharmaceuticals and vehicles.

The first study, conducted by consulting firm ICF International on behalf of the American Petroleum Institute, calculates that LNG exports will create huge numbers of new jobs.

ICF considered a range of scenarios and determined that the net effect on U.S. employment from LNG exports between 2016 and 2035 could range from 73,100 to as many as 452,300 total jobs with exports of 16 billion cubic feet per day. And contrary to assertions by protectionist U.S. manufacturers that oppose a market-based exports policy, manufacturing employment increases on average between 7,800 and 76,800 net jobs during the period. And that includes 1,700 to 11,400 net chemical, petrochemical and refining job gains.

Of course, manufacturing and exports mean economic benefits not just for particular industries, but for the country as a whole. The ICF study calculates that the net effect on American’s gross domestic product would be between $15.6 billion and $73.6 billion each year.

Meanwhile a study from the Small Business & Entrepreneurship Council (SBEC) provides more evidence that exports will produce broad economic benefits. It notes how small business already has prospered from the nation’s 27 percent increase in natural gas production between 2005 and 2011, particularly in terms of employment.

ExxonMobil is not a small business, but we know how important small businesses are to our economy.  Many of the people we do business with on a daily basis are with small- and medium-sized businesses. In fact, more than 90 percent of U.S. businesses involved in oil and gas extraction and handling have fewer than 500 employees.

That’s why we’re encouraged by SBEC’s conclusion: “LNG exports guided by market forces mean further expanding opportunity for small and mid-size businesses to be created, to grow and to create jobs.”

Natural gas exports would provide a big boost for American businesses big and small – and for American jobs and economic growth.

The discussion featured Columbia University economist Jagdish Bhagwati, Michael Levi of the Council on Foreign Relations, and Richard Schmalensee, a former member of the Council of Economic Advisers. It was moderated by ACCF chief economist Margo Thorning.

The entire dialogue is worth reading. I was struck by one exchange in particular that focused on the environmental and energy security benefits of exports:

Levi: You will expand domestic production if you allow exports and that’s a good thing. It’s good for the U.S. economy but it also means that this is an occasion to make sure we have good environmental protections in place. When the United States exports into the global market, it has a different chance to influence geo-political outcomes and again it’s important to be aware of that, so that we can take advantage of that as far as we can.

Schmalensee: It’s hard to make the argument that our exports in this market will disadvantage us strategically. It seems to me it benefits our allies to have diverse sources of supply, and on the environmental side, if we had a price impact internationally, we’d encourage the substitution of natural gas for coal, which is environmentally beneficial.

In another part of the conversation, talk turned to the dynamic features of the U.S. economy:

Schmalensee: One of the great strengths of the U.S. economy historically has been our flexibility and our ability to react quickly and effectively to changes in the global marketplace. Restricting LNG exports would be resisting what we are good at, which is reacting to change.

Bhagwati: Asking for protection is not a good answer as, at most, you can protect yourself in your own market but you lose competitive advantage in the much bigger world markets if you become flabby and uncompetitive thanks to protection. Flexibility in the face of intense competition is therefore today’s norm if you wish to prosper.

The clear consensus that emerges from this thoughtful discussion is that LNG exports provide net benefits for the United States across the board – from growth, to jobs, to emissions, to international leadership. As the Department of Energy assesses applications on LNG exports, DOE policymakers would be wise to consider the views of these experts.

It can also help the United States advance its global trade and diplomacy aims. National Security Advisor Tom Donilon spelled out President Obama’s “free trade path to prosperity” in a Wall Street Journal op-ed earlier this week about U.S.-Japanese relations.

As Mr. Donilon noted, international trade “make[s] the U.S. stronger at home and better positioned to lead in the regions where it matters most.” International trade in natural gas obviously serves that purpose.

One important point that studies recently have made clear is that the large natural gas resource base can support both growing domestic use of natural gas as well as LNG exports. They confirm that more exports will almost certainly lead to more investment, more exploration and more production.

That’s good news, because any realistic attempt to meet the goal the president set forth in 2010 of doubling exports of American products by 2015 must include energy products like liquefied natural gas.

As those at LNG 17 in Houston this week can attest, the industry is ready to do its part. In an industry of such enormous complexity and scale, companies like ExxonMobil are communicating to the public the realities of natural gas production and LNG markets.

What matters most now, though, is the willingness of policymakers in Washington to stay true to the free-trade principles that are the bedrock of prosperity and security.

Robust international trade will expand the economy, enlarge economic opportunities, create jobs and generate tax revenue – for the United States as well as our trading partners.

That’s the thought crossing my mind this week as thousands of delegates meet in Houston for the 17th International Conference and Exhibition on Liquefied Natural Gas, better known as LNG 17. The conference is the world’s premier LNG event, bringing together industry leaders, government figures, academics and others to discuss the various issues and opportunities before the global LNG industry in an age of natural gas abundance.

As the industry gathers this week, it’s worth recalling that a very different mood prevailed 10 years ago. That was when Federal Reserve Chairman Alan Greenspan and Energy Secretary Spencer Abraham issued warnings of looming price squeezes brought on by shortages of domestically produced natural gas.

A decade ago, Americans wondered whether we could build LNG import terminals fast enough to stave off economic crisis. Today, policymakers don’t talk about natural gas imports. In fact, our energy debates focus on why the United States should expand LNG exports.

That we are even considering such a possibility owes to the tremendous transformation in America’s energy situation brought about by recent innovations in drilling and completion technology. The energy revolution made possible by combining hydraulic fracturing and directional drilling has unlocked stores of natural gas from shale that, 10 years ago, were considered practically inaccessible.

Energy expert Dan Yergin recently put this transformation into perspective, noting that “shale gas has risen from two percent of domestic production a decade ago to 37 percent of supply [today].” More than that, he pointed out, the unconventional revolution supports 1.7 million direct, indirect and induced jobs and was responsible for $62 billion in taxes in 2012. Meanwhile, America’s greenhouse gas emissions have fallen to levels not seen in two decades, thanks to power plants burning natural gas in place of coal.

And there’s reason to think the years ahead will prove more fruitful. Last week the Potential Gas Committee, which gauges technically recoverable reserves of oil and natural gas, revised its natural gas resource assessment upward. It increased estimates of potential natural gas resources by 26 percent over the 2010 assessment, reaching a record high in the committee’s 48-year history and demonstrating the extraordinary nature of the country’s new natural gas abundance.

Abundant U.S. natural gas supplies and LNG exports – that’s a story that nobody a decade ago could imagine we’d be telling today.

Speaking at the annual IHS CERAWeek conference in Houston today, ExxonMobil Chemical president Steve Pryor offered a good summation of the chemical industry renaissance that has been sparked by a new abundance of natural gas, which chemical manufacturers use as a feedstock.

Five years ago, the chemical industry was in decline in the United States, an example of American manufacturing’s weakening position.

Today, the industry is America’s leading exporter and has led to a wave of new domestic investment.

As Steve noted, new chemical projects announced by the industry “represent a capacity increase of 33 percent by 2017, which is the equivalent of six to eight new world-scale steam crackers. On top of that are smaller debottleneck projects already completed, equivalent to at least one steam cracker.”

While not every one of these proposed projects may materialize, these announcements represent a resurgent chemical industry. Considering that plastics and chemicals are “the bricks and mortar of contemporary civilization,” to quote CERAWeek host Dan Yergin, that is good news for the American economy.

That’s particularly true on America’s Gulf Coast, home to many U.S. chemical facilities and the location for much (though not all) of the industry’s proposed expansions.

Take just one example: ExxonMobil Chemical’s planned expansion in Baytown, TX. If developed, the project to convert ethylene into premium polyethylene products would be expected to create 10,000 jobs at the peak of construction and add about 350 permanent jobs to the company’s existing Baytown workforce of 6,500. “The multiplier effect of new economic activity created by the facilities will add 3,800 other jobs in the area and increase regional economic activity by $870 million per year.”

Steve also noted the economic stimulus that would be generated by the development of a proposed liquefied natural gas (LNG) export facility in Texas at an ExxonMobil joint venture – a $10 billion-dollar investment generating an estimated $31 billion in economic gains in the U.S. over the life of the project. It could create 45,000 direct and indirect jobs nationwide during the estimated five-year construction period, and thousands more permanent positions as well.

Given that the American economy grew by an almost imperceptible 0.1 percent in the fourth quarter of 2012, numbers like those should make everyone sit up and take notice.

I also want to draw your attention to an important policy brief just issued by the Peterson Institute for International Economics. This policy brief provides further evidence for why natural gas exports present such a valuable economic opportunity for the United States.

More than that, the Peterson Institute paper is a valuable read because it provides one of the best distillations that I have seen of the legal and regulatory issues involved with natural gas trade issues.

It details the history of U.S. trade law regarding natural gas, going back to the 1938 Natural Gas Act’s “public interest” requirement for exports.

It also touches on America’s involvement in the General Agreement on Tariffs and Trade (GATT), the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO), giving appropriate context to the decision facing the federal government on the LNG export applications pending before the U.S. Department of Energy.

The Peterson Institute draws several lessons from its read of trade rules and the cases that have shaped them:

• Using export restraints runs contrary to the central U.S. stance on exports, a stance that dates to the drafting of the Constitution;
• Restraining exports while permitting unlimited domestic consumption of natural gas would amount to a violation of WTO rules; and
• Restricting LNG production or exports would undermine future investment in the domestic natural gas industry.

Check out the Peterson Institute’s Liquefied Natural Gas: An Opportunity for America policy brief here.

Preliminary data from a forthcoming study on the economic ramifications of LNG exports hint at a wide range of benefits from the export opportunities made possible by America’s new abundance of natural gas.

The study is being prepared by the consulting group ICF International, and a presentation citing some of its key findings was recently made public. The projected data should give policymakers added incentive to authorize LNG export applications currently on file with the federal government.

A look at the presentation shows that ICF believes there would be an overall net gain in employment if the industry proceeds with exports. They found that by 2035, LNG exports could “result in between 28,000-116,000 direct and indirect annual job additions, as well as up to 120,000-540,000 in annual induced employment.” The ranges depend on the level of exports.

Interestingly, ICF found the overall jobs impacts are larger the greater the export volumes, refuting claims put forth by some that exports would have a negative economic impact.

All told, ICF expects a total economic contribution of $723 billion to the nation’s GDP between 2015 and 2035 under their mid-range estimate if exports go forward  –  an average gain to the economy of more than $36 billion each year.

Meanwhile, the Bipartisan Policy Center just issued a comprehensive strategy for guiding what it calls “America’s energy resurgence.” My colleague, Bill Colton, ExxonMobil’s vice president of Corporate Strategic Planning, is a board member of the Bipartisan Policy Center’s Strategic Energy Policy Initiative and participated in the launch of the strategy earlier this week.

Among the Center’s key recommendations is that the U.S. government should place no restrictions on international trade in fossil fuels like natural gas or coal.

In examining the export question, the authors of the report determined “that LNG exports are likely to have only modest impacts on domestic natural gas prices  –  LNG exports will adjust as domestic prices rise or fall.”

The Bipartisan Policy Center’s report is about more than LNG exports, of course. But it recognizes that a market-based approach to exports should be a critical part of a broader national energy policy to maximize the advantages of our newfound energy abundance.

Set aside some time to read it, as well as ExxonMobil’s latest comments regarding the DOE/NERA study on natural gas exports that I’ve written on recently. They both show that, thanks to new supplies of natural gas, there is good reason to be optimistic about the American economy, if we make the right policy decisions.

Many readers know Yergin for The Prize, his monumental history of the global petroleum industry, and his follow-up work, The Quest. In his day job he heads IHS Consulting, an energy and economic research firm that (among many other things) has documented the ways in which the nation’s unconventional oil and natural gas bonanza is transforming our economy.

That work forms the basis of Yergin’s prepared testimony, which I invite you to read for yourself. But I also wanted to highlight a few of the points he made to explain why the dramatic increase in production of shale gas and tight oil amounts to “the most important energy innovation so far of the 21^st century.”

I’ll let Yergin’s own words tell the story:

• The unconventional revolution has unfolded pretty fast … Just half a decade ago, during the turmoil of 2008 … it was widely assumed that a permanent era of energy shortage was at hand.

• Shale gas has risen from two percent of domestic production a decade ago to 37 percent of supply [today].

• U.S. oil output, instead of continuing its long decline, has increased dramatically – by about 38 percent since 2008 … [which is] equivalent to the entire output of Nigeria, the seventh-largest producing country in OPEC.

• So far, this unconventional revolution is supporting 1.7 million jobs – direct, indirect, and induced … [and] the total revenues flowing to governments from unconventional amounted to $62 billion last year.

• Job impacts are being felt across the United States, including in states with no shale gas or tight oil activity. For instance, New York State, with a ban presently in effect on shale gas development, nevertheless has benefited with 44,000 jobs. Illinois, debating how to go forward, already registers 39,000 jobs.

• The most notable impact is in terms of CO2 emissions. U.S. carbon dioxide emissions from energy consumption are down 13 percent since 2007. The economic downturn is part of the story. But the most significant part is the result of natural gas supplanting coal in electric generation at a rapid rate. 

Yergin also offered smart insights about potential natural gas exports, noting that the U.S. has long made the free flow of energy supplies one of the cornerstones of foreign policy.

Every one of the points or statistics Yergin mentioned in today’s testimony is a significant story in itself. Taken together they add up to an extraordinary narrative that could well define the economic and environmental story of our times.

That study concluded that natural gas exports would yield net economic benefits for the United States. Its conclusions also reinforce the fact that the country’s enormous natural gas resource base can support both growing domestic use of natural gas for manufacturing and electricity generation as well as LNG exports.

The study’s findings are backed up by similar analyses from the Brookings Institution, Manhattan Institute, Rice University’s Baker Institute, the National Association of Manufacturers, the American Chemistry Council, the Small Business & Entrepreneurship Council, and the U.S. Chamber of Commerce, along with numerous other organizations, editorial boards and elected officials.

DOE’s study is more good news for America’s growing natural gas production, a result of technological innovations by industry to unlock supplies trapped in unconventional formations. The simple fact is that natural gas is creating a brighter, cleaner, more secure energy future. We have more than a century’s worth of supply with prolific new resources coming online. And increased use of natural gas is contributing to substantial reductions in air pollution and greenhouse gas emissions.

This is having a profound and positive effect on America’s economy, a point we emphasized in the comments we filed. I encourage you to read them. They provide an excellent overview of the issues facing policymakers as the export discussion advances.

Higher wages and economic multipliers

Of particular interest are the sections on pages 4-5, citing research from IHS Consulting on jobs and wages in the energy industry that are tied to natural gas production from unconventional sources.

In a study last year, IHS noted that the average wage rate for production workers in the oil and natural gas industry – $35.15 per hour – far exceeds the average hourly wage rates “paid in manufacturing (at $23.70 per hour), wholesale trade, education and many other industries.”

The result is a “large multiplier and induced impact because more income is spent on general goods and services by workers in unconventional oil and natural gas activity than in other industries or in the economy in general.”

That helps explain why oil and natural gas production from unconventional sources acts as “one of the larger employment multipliers” in the U.S. economy.

And as the DOE-commissioned report indicates, more exports will almost certainly lead to more investment, more exploration, and more production, meaning even more economic benefits.

The industry will add this economic expansion while continuing its main task of reliably providing the energy supplies vital to the functioning of a modern and growing American economy.

A myriad of benefits

The technological revolution tied to unconventional oil and gas development is having a transformative effect on our economy.

It’s helping revive American manufacturing. It’s slashing greenhouse gas emissions. It’s increasing energy security. And it’s a robust job creator at a time when much of the rest of the economy is still limping along.

That points the way to an energy future worth pursuing.