Dear Readers, more permits have been issued to export US fracked natural gas as LNG. Our gas, our so-called energy independence and national security is headed for Asia where the Big Gas Mafia can get a lot more money for it. These are long-term contracts–20 years–to sell our fracked gas. It is vital that you pay attention.
“…the Chinese are willing to pay a premium to secure North American resources necessary to feed the growing Asian economy.”
Here is the Big Gas Mafia’s dual path. Either way, you lose.
From Deborah Rogers, Energy Policy Forum:
At the recent Marcellus Shale Insights conference held in September, 2011, Aubrey McClendon, CEO of Chesapeake Energy stated ” a cleaner, safer and more prosperous future awaits if we commit to fuel our economic engine with shale energy made by Americans and for Americans.”
Domestic energy security is, of course, is a political hot topic and bears scrutiny.
A mere week after such comments were made, another proposal to build an LNG export terminal was filed with FERC (Federal Energy Regulatory Commission) for the exportation of shale gas from the US to markets in the Far East. Last week, it was announced that the first export terminal at Sabine Pass had been permitted and shale gas would indeed be exported from the US.
The demand for natural gas has grown exponentially in recent years in emerging economies, particularly Asia. According to the Oil and Gas Financial Journal, “…the Chinese are willing to pay a premium to secure North American resources necessary to feed the growing Asian economy.”
Other foreign operators want in the game as well. Royal Dutch Shell recently commented that “Shell has placed a big emphasis on North American gas; it’s an area of growth for us. We’ve invested something like $15B since 2004 in the onshore [sector]. What [we] develop here, [we’d] like to export to the rest of the world.”
Currently, the price of natural gas in Asian markets is substantially higher than domestic U.S. prices, as much as 3-4 times higher because it is indexed to the price of crude oil.
A country like Japan, for instance, that has no domestic supply of natural gas is currently paying as much as $15 per million BTU for multiple year natural gas contracts. Domestic U.S. prices, on the other hand, are trading at a mere $3-4 per million BTU. This means that gas can be extracted, piped, liquefied and delivered to Japan for around $9 and then sold for as much as $15, a substantial spread.
The natural gas industry has pushed hard to effect a two prong approach: infrastructure changes, such as large scale conversion of power plants and truck fleets to run on natural gas, popularly known as the Pickens Plan, and exportation abilities. Industry refers to increased domestic usage as “the holy grail.” The populist argument states that creating new domestic markets for natural gas would free the U.S. from foreign reliance on fossil fuel and give the U.S. a decided advantage. Of course, it would also be advantageous for the operators because a robust domestic market would cause prices to increase and close the pricing gap with crude oil which has always been a primary industry objective. In other words, the “holy grail” is pricing parity couched in populist rhetoric.
But perhaps more to the point, pricing parity can be effected much more quickly by exporting natural gas to Asian markets which are already paying 3-4 times more than the U.S. domestic market. Interestingly, exportation has not been publicly promoted by industry in the way the Pickens Plan has for obvious reasons; it does not concur with the populist message. Nevertheless, it has been pursued as a parallel path and is now a reality with the recent announcement that the first terminal at Sabine Pass has been permitted and shale gas will indeed be exported to Asia
But if U.S. natural gas is allowed to be exported as a major source of energy to the rest of the world, then domestic prices will inevitably rise, perhaps precipitously and natural gas will no longer be a cheap source of energy for chemical feedstocks, manufacturing processes or utility generation in the U.S.
This would effect a classic consumer squeeze. Hence the two prong approach. It makes good business sense.
Interestingly enough, however, from a consumer’s perspective, there are enormous benefits of a low natural gas price, particularly for the American economy. Industry itself likes to mention that the abundant supply of natural gas has dropped the price since 2008 by 67% thereby providing an economic stimulus of $250 million per day. That is substantial.
This has indeed been a serendipitous boon for our ailing and sluggish economy. In fact, manufacturing industries such as plastics are now announcing plans to ramp up production in the US specifically because they foresee cheap and abundant natural gas going forward.
But this may be short lived. If prices rise precipitously and manufacturing is locked in to natural gas as feedstock, an inflationary scenario will follow.
Further, such exportation contracts could obviously undermine US energy security by potentially locking the US into long term export contracts at fixed prices. At that time, the populist notion of “shale energy made by Americans and for Americans” is defunct in that we would be depleting our natural resources willingly to grow Asian economies. This is particularly problematic if reserves are not as great as expected because we could then face questions of scarcity while locked into long term contracts. EIA recently slashed its reserve estimates for the Marcellus by 80%. Its prior erroneous estimates had been based on information provided to government by industry as to how much shale gas was commercially extractable. Clearly, government needs more independent verification of reserves before agreeing to export.
Interestingly, at least one shale gas CEO inadvertently spoke frankly of such a consumer squeeze which might follow a precipitous rise in gas prices. He stated that if the price of natural gas “went through the roof”, 70% of American homes on natural gas heat would be cold; 35% of American homes and businesses and factories that use electricity from natural gas would be dark; and crops that require natural gas fertilizer would not be grown.
Yes, but oil and gas operators will have turned a very handy profit which is maybe what Chesapeake Energy’s CEO was really talking about when he said a “more prosperous future awaits”.
About Sharon Wilson
Sharon Wilson is considered a leading citizen expert on the impacts of shale oil and gas extraction. She is the go-to person whether it’s top EPA officials from D.C., national and international news networks, or residents facing the shock of eminent domain and the devastating environmental effects of natural gas development in their backyards.
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Kim Feil says
So if the build out expected becomes a reality WHEN the price of NG goes up (current prices are break even in dryer gas areas), towns like Arlington and Ft Worth will see alot of accidents…. Before anybody ever signs away their minerals, they need to be truly informed. These are just some of the incidents I’ve become aware of…. we’ve already had spills (UTA & Lake Arlington), power outage emission events (Fulson site & Pappy Elkins site), vapor cloud (XTO Ft Worth), migration into older wells during fracking (Carrizo, Pantego), Arl compressor station strong odor reports called in’s to TCEQ, flooded compressor during rainstorm (XTO Pappy in DWG), tornado offline reports at Rufe Snow emission event at NRH), drill site flooding with storm water run off (Barron site & a Ft Worth site), waste disposal lightening strikes (Boyd TX recently), DWG compressor odor events that even sickened the TCEQ investigator, the Yeandle site emission event due to corrision wear/poor valve maintenance, and fracking trucks overturning/spilling (University Dr in Ft Worth). These are just the tip of the iceberg of what is yet to come at this rate of accident to “build out expected”. The exemptions from regulation range from air, water, drinking water, defining air & water pollution as hazardous substances, reporting these to the toxic release inventory, and waste disposal. One would hope that a local ordinance would “catch” some of these so that at one level of government folks get protection. Since the Railroad Commission has a 4% rate of $lapping on the wrist in violations, something is terribly wrong and we are the sacrificial lambs.
There is only about 3 solutions to this fiasco of exporting our natural gas: (1) get the politicians to fix the situation. (2) have the politions to impose a great big ‘ole disinsintive export TAX on our natural resourse that is being exported. Forget about that happening because of the bought-off politicians. Alternatively you could get that 3rd branch of our guvment to declare such activity to be illegal–but, with the oil soaked courts in Tx., bet that won’t happen. So—-we are screwed. Big gas wins again! Other ideas are welcome.
The best solution is wind solar and other renewable energy technologies. Kick the Big Gas Mafia to the curb.
Right on TxSharon–wind and solar is the solution.
BTW I was recalling from an old study of alternate energy sources that I did in the late ’70’s there was a solution being proposed called OTEC (Ocean Thermal Energy Conversion). Has anyone heard anything about this solution–is it still floating out there?
The American public sat idly by and let all the low and mid level jobs be exported to the far east. Alaskan crude goes to the far east and we were nice enuf to build and maintain a pipeline to facilitate this exporting. Now, while the gas fracking giants are spoiling our water supplies and causing earthquakes, I suppose we will sit idly by and let the gas companies export the fuel to clean up the far east processes that have all our jobs. We can’t build a pipeline to transport oil shale crude from Canada to our industries because some bleeding hearts are afraid it will upset some animal or another, when it is a fact that animals shelter and hang around the Alaska pipeline. We are a bunch of apathetic damn fools! Don’t bother to write your congressman, he is already bought (cheap) and paid for against our best interests.
LNG currently being “fracked” from existing and recently discovered on-shore US gas-shale deposits, as I understand in a recent Oregon Public Broadcast (OPB) TV program titled “Energy Quest Usa – Earth: The Operators’ Manual” (see link here: http://www.opb.org/television/programs/energy-quest-usa—earth-the-operators-manual/ ), has the potential to supply the current US economy with a 20 year supply of a “relatively clean” domestic energy source.
If there is ONLY a best guess that we have a 20 year supply, then what do we do 20 years from NOW?!?
Why would WE ALLOW our government to approve contracts to sell and export this precious energy commodity to other countries, most of which are in direct economic competition/warfare with the US, furthering their economic agendas and NOT OURS?!?
1) GET MAD AS HELL and say to yourself out loud, “I’M MAD AS HELL and I’m NOT going to take this crap anymore !!!
2) NOW DO SOMETHING … anything like;
• Contact your local City and/or County officials and get them involved in this issue. Get them to commit to doing something too!
• Contact your State Representatives and and get them involved in this issue. Get them to commit to doing something too!
• Contact your Congressional Representatives (both House AND Senate) and and get them involved in this issue. Get them to commit to doing something too!
• Show up to your local City AND County Government meetings and BE HEARD … NOT just part of the HERD!
If YOU WANT democracy then it requires that YOU participate in it. YOU and others that YOU will inspire will ultimately be the catalyst of DEMOCRACY that WE as a Country have been devoid of for far too long.
Voting for our local, state and federal representative is only part of the “democratic process”!
YOU and others like you and ME need to show up and stand up at our local governments’ public meetings and participate in the discussion (public testimony) and decisions being made by your local representatives.
So get up out of your easy-chair and re-read the “SOLUTIONS” section (above) and BE THE SOLUTION.
See YOU at the next local government meeting!
Hell yeah, Tom!