Too Much Natural Gas? Let’s Give it to China!
November 9, 2011
Once upon a fairly recent time, as our nation struggled to find the right path toward energy independence, industry and policy makers devoted a great deal of time and money developing the infrastucture capacity to import liquefied natural gas (LNG). Hailed by many as a clean and viable solution for weening us off of dirtier sources of energy, the promise of LNG seemed limitless. In many places, like my hometown of Baltimore, furious debates raged between concerned community activists (or "insurgents" in the modern parlance of industry fracking officials) and industry representatives on everything from landowner rights, to water quality, to homeland security implications. That was 2007.
Yesterday, I attended a hearing of the US Senate's Energy and Natural Resources Committee. The topic: Markets for Exporting LNG. Apparently, we have come full circle. In the last few years, the proliferation of fracking wells has unleashed a boom of natural gas supply in the United States. So, we're no longer talking about importing LNG and a number of these facilities are applying to convert to export terminals. The environmental implications surrounding this policy shift are substantial. Clearly, a profitable market for LNG exports means more domestic drilling. With it, greater air pollution, water use, and potentially earthquakes and water contamination.
But since the hearing did not address the effects of increased drilling on communities and the environment, let's put that issue aside for a moment. The real focus of this hearing was money. Inquiring minds want to know, what will happen to domestic energy prices if we're shipping our LNG to Asia? The answer: I dunno. The Energy Information Administration will release its study on this topic during the first quarter of next year. It's pretty clear from the industry enthusiasm that some folks will likely make plenty of money on this gambit. Senator Ron Wyden (D-OR) expressed his concern that exporting LNG is going to make the natural gas market as volatile as that for oil. He supports a moratorium on new permits to export LNG until we better understand the environmental and economic impacts.
Earlier this year, the U.S. Department of Energy conceded that the permit they approved for the Sabine Pass LNG export project in Louisiana would raise gas prices in the U.S. by more than 10 percent in 2015. DOE came to this conclusion after their required Public Interest Review Determination, a process where price, impact on the local economy, energy security and supply, and national gross domestic product are the main factors considered. We currently have a number of different government agencies conducting proper determinations as to what (besides money) is in the public interest with respect to the whole life cycle of natural gas production. Precaution precludes proceeding on a needless and risky energy strategy. We need to keep the natural gas bridge short and narrow. After all, five years from now, a whole new energy solution may emerge.