This article was first published at The McAlvany Intelligence Advisor on Wednesday, April 29, 2015:
Prior to last September there was only one port fitted out to export liquefied natural gas to customers abroad: the ConocoPhillips’ Kenai LNG Terminal near Anchorage, Alaska. But when environmentalists got word that Obama’s Department of Energy was about to issue permits allowing two more ports to be built on the Gulf Coast, they rolled out their big guns in protest. Said Kate DeAngelis, an anti-energy, anti-fracking, climate change activist and campaigner for Friends of the Earth:
In supporting liquefied natural gas exports, President Obama is treating climate change like a game of peek-a-boo, opening his eyes to the harmful effects of carbon but closing them to the devastating disruption potential of methane.
Allowing more LNG exports completely counteracts President Obama’s expressed commitment to reduce emissions and protect the public health.
One could question every basic assumption underlying her unhappiness, starting with the so-called “harmful effects” of carbon and closing with the “devastating disruption potential” of methane. Suffice to say that carbon dioxide is a nutrient essential to every living green organism on the planet, and the “potential” for that “devastating disruption” exists only in her mind. Producers have been finding, developing, and producing natural gas in the US for decades and observers are still waiting to experience those disruptions.
But facts don’t matter. Facts like using natural gas as an energy source actually results in significantly fewer emissions than using either oil or coal. Facts that gas is increasingly replacing coal in coal-fired power plants because of those lower emissions. Facts that in Europe natural gas costs three to four times as much as it does here in the States. Facts that if low-cost LNG were available to European nations, those nations wouldn’t suffer under Vladimir Putin’s chokehold as their only supplier. Facts that manufacturing facilities shipped abroad in the past because of lower wage costs are now being returned thanks to lower energy costs.
Deb Nardone, head of the Sierra Club’s Beyond Natural Gas Campaign, is equally uncaring about those facts:
Exporting LNG will mean more drilling and fracking, and that means more climate pollution, more risk of contaminated groundwater, and more threats to the health of people who live near gas wells.
Each of these “facts” is either provably false or merely speculation. Even those earthquakes in Oklahoma allegedly caused by fracking waste water remain questionable.
But no matter. There’s been a change of heart at the Department of Energy’s Federal Energy Regulatory Commission, albeit temporary. Concerns in the past that the US might not have enough natural gas if producers shipped it abroad have disappeared in light of the fracking revolution. For instance, less than 10 years ago daily production of natural gas was 5 bcf (billion cubic feet). Today? Close to 40 bcf a day, an eight-fold increase, with no signs of a slowdown.
Observers have been expecting, counting on, betting on, and predicting a slowdown in oil and gas production as prices have been cut in half. But technology continues to surprise and delight – causing massive losses for those betting the wrong way – as the industry continues to produce more and more with less and less. For example, Steve Mueller, head of Southwestern Energy, the fourth largest producer of natural gas in the country, said that even he was “amazed” at his company’s newest technology. Eight years ago his company took 17 days to drill a 2,600-foot deep gas well while today it takes just six days to drill a 5,400-foot well.
This has resulted in natural gas producers providing a third more natural gas today with just 280 rigs that they were able to in 2009 with 1,200 rigs.
Now that the DOE has opened the door, applicants and capital are flooding in. On April 14 the department issued a summary showing that five new plants are now under construction on the East and Gulf coasts, with another one about to break ground.
The economic impact is mind-bending. Construction has already begun in five locations: Sabine and Hackberrry, Louisiana; Freeport and Corpus Christi, Texas; and Cove Point, Maryland. The private capital involved is massive: the Cove Point facility investment is $3.8 billion, while the Sabine Pass plant will pump $10 billion into the local economy. Sempra Energy is investing $10 billion into the Hackberry project, while the Freeport plant will require $11 billion of private capital. Construction at a second Sabine Pass plant is about to begin.
Estimates are that this flood of new capital bringing jobs to those areas has just begun. In the next eight years it is estimated that more than $130 billion in new construction will occur in the corridor between Houston and New Orleans. As Mueller put it: “We’re just 15 years into a 150-year process.”
Naturally, the energy secretary, Ernest Moniz, is taking all the credit for the resurgence:
We anticipate becoming big players, and I think we’ll have a big impact. [With our approval of these plants] we’re going to influence the whole global LNG market.
Certainly in this decade, there’s a good chance that we will be LNG exporters on the scale of Qatar, which is today’s largest LNG exporter.
It’s unclear who this “we” is to whom he is referring. Up until recently the DOE was the prime impediment to LNG exports, and now he’s claiming victory for “us”?
The silliness of the environmentalists’ laments is, for the moment, falling on deaf ears at the DOE. As Margo Thorning, vice president and chief economist for the American Council for Capital Formation put it, “The case for expediting export permits for U.S.-produced liquefied natural gas has moved from logical to compelling,” adding:
Given the compelling economic implications of letting America realize its potential as an LNG exporter, we do not have time to waste on faux environmental arguments.
As the DOE continues to grant LNG export permits (there are reportedly dozens of applications pending), the shift in the world’s energy equation can almost be felt underfoot. No one else on the world scene has the US’s fracking technology. The US has the inside track. If the DOE continues its policy of letting producers produce and sellers sell to whomever they wish, wherever they may reside, the US will take the lead, resuming its position at the head of the drove in producing energy for the world.
Telegraph.uk.co: US to launch blitz of gas exports, eyes global energy dominance
FERC.gov: LNG export plant approvals