With Japan’s nuclear power future clouded by discoveries of active faults near atomic plants in Fukui and Aomori prefectures, liquefied natural gas has become a critical resource and an area of great potential for strengthening relations with the United States.

From the frozen wilderness of Alaska’s North Slope to Louisiana and the Gulf Coast, American LNG reserves have increasingly drawn interest from Japan since the March 2011 megaquake and tsunami. With all but two of the nation’s 50 nuclear reactors shut down, Japan has seen LNG imports surge.

In fiscal 2011, LNG imports reached about 83.2 million metric tons (mmt), up 18 percent from the previous year. For fiscal 2012, which ends this March, total LNG imports are expected to reach 90 million mmt.

Japan’s LNG came from 17 countries in 2011, but almost two-thirds were from four countries: Malaysia (19 percent), Australia (18 percent), Qatar (15 percent) and Indonesia (12 percent). Alaska, the only place in the U.S. where LNG exports are currently allowed, along with eight other countries, accounted for just 7 percent of last year’s imports.

That is likely to change within the next decade.

Last year, then-Prime Minister Yoshihiko Noda and U.S. President Barack Obama discussed drastically increasing LNG exports to Japan.

Obama said that while the U.S. was still discussing its energy policy, Japanese energy security is considered important to bilateral ties.

Japanese firms have a specific interest in Alaska’s North Slope, where there are plans to build a 1,280-km natural gas pipeline to the southern coast. The North Slope contains about 35 trillion cu. feet of proven gas reserves.

“Alaska’s natural gas would provide a comparatively clean, sustainable, and entirely reliable energy source to our friends in Japan. Alaska’s natural gas resources do not present the concerns and controversies surrounding natural gas exports from the Lower 48,” Alaska Sen. Lisa Murkowski, who is vice chairwoman of a group of U.S. and Japanese lawmakers, said in a letter to Obama in late April, just before his meeting with Noda.

In 2011, Japan received eight shipments of Alaskan LNG, totaling 15.27 billion cu. feet.

Shipments went to utilities in Tokyo or the Kansai region.

“Alaskan LNG has many advantages for Japan, starting with cost. Not only is the gas cheap, but so is transportation. It only takes about a week for the tankers to arrive in Japan” says Kojiro Abe, trade representative for Alaska’s Japan office. “America’s political stability compared to some other LNG suppliers, and the safety of the sea lane from Alaska to Japan is a huge advantage as well.”

Resources Energy Inc., a Japanese consortium, has already opened an office in Alaska. Members include Japan Petroleum Exploration Co., Idemitsu Kosan Co., Nippon Oil and Energy Corp., Mitsubishi Gas Chemical Co., and Nippon Telephone and Telegraph Corp.

The consortium hopes to have North Slope gas flowing to Japan as early as 2019 by building an LNG plant in the southern part of the state.

There are two major hurdles that must be overcome, however.

First is a pipeline. While it would be constructed beside a current oil pipeline and thus be logistically easier than plowing through virgin territory, who would pay for the project is a matter of ongoing discussion among Japanese, U.S. and international firms interested in the project, as well as the U.S. government.

The second issue is legal and political. A section in the 1976 Alaska Natural Gas Transportation Act says that if North Slope gas exports to countries other than Canada and Mexico exceed 1 million cu. feet a day, the U.S. president must ensure such exports will neither diminish the total quantity or quality, nor increase the total price of energy stores available to the U.S.

But Japanese and American firms are increasingly confident the U.S. government will allow greater exports.

In addition to Alaska, Japan hopes to buy up to 30 million metric tons per year of LNG from terminals in Louisiana, Texas, and Maryland. Last summer, Osaka Gas Co. and Chubu Electric Power Co. announced they’d signed contracts with a Texas firm to liquefy 4.4 million tons annually of LNG that will start arriving in Japan from 2017, assuming the final approvals are granted by mid-2013, as expected.

U.S. law also says private companies seeking to export LNG to a country without a free-trade agreement with the U.S., that includes a specific clause about exporting natural gas, must get approval from the U.S. Department of Energy for each shipment.

For a U.S. ally like Japan, approval is almost automatic.

But the DOE can deny permission if it determines such exports violate the “public interest.” U.S. congressional opponents of LNG exports have used this stipulation to argue that sending large quantities of LNG outside the country will drive up prices domestically.

In addition, Alaskan environmentalists argue that a new natural gas pipeline will damage its environment.

Last month, however, a DOE-sponsored report concluded that exporting LNG could be good for the U.S. economy, even if gas prices go up.

“Benefits that come from export expansion more than outweigh the losses from reduced capital and wage income to U.S. consumers, and hence LNG exports have net economic benefits in spite of higher domestic natural gas prices,” the report said.

Japan’s quest for more U.S. LNG also has the support of influential Washington insiders.

In an August report, the Center for Strategic and International Studies recommended the U.S. begin to export LNG from the Lower 48 states by 2015.

“The U.S. should not resort to resource nationalism. As part of the security relationship, the U.S. and Japan should be natural resource allies as well as military allies. This area of cooperation remains insufficiently developed,” the CSIS report said.

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