Who Doesn’t Like Free Markets?

Contrary to popular belief, most corporations do NOT like free markets.  They would prefer a tightly regulated market or monopoly that looks after their interests at the expense of their suppliers or the public as a whole.  Trade associations are frequently formed to look after the interests of incumbent players and limit competition. Recently, another such trade group was formed, America’s Energy Advantage (AEA).  Their purpose is to block the export of natural gas to high demand markets outside the US in hopes that by artificially limiting the demand for domestically produced natural gas, they can keep their own prices lower.

I am asking the leaders of the AEA founding corporations to take a less self interested and short sighted approach to market manipulation and join principled leaders like, Southern Co. CEO, President and Chairman, Thomas Fanning, in supporting free markets for natural gas.  It will bring jobs and money to our country, stabilize prices, and most importantly, stop industry capture of our regulatory regime for the sole benefit of stockholders of their corporations.

From SNL:

“[Fanning’s] company happens to be the third-largest natural gas consumer in the nation.

“We’ve got to make some historic decisions about exporting natural gas. Being parochial, you may be interested to know that I am in favor of exporting natural gas,” he told the audience at the U.S. Energy Information Administration’s 2013 Energy Conference. “If it helps the economy, then I’m for it.”

Fanning said striving for increased North American energy security will create a multiplier effect through the economy. And one way or another, Fanning sees natural gas prices rising. Other large natural gas consumers, led by Dow Chemical Co., have said the U.S. would be better off restricting exports and have formed the group America’s Energy Advantage to lobby for their interests.”

Fear Wins Again

San Onofre Nuclear Generating Station

From my car the day after the radioactive steam release in 2012.

Over 2,000 MW of base-load electrical generation capacity was permanently lost in Southern California last week. Activists succeeded in forcing Southern California Edison to close down the *zero* greenhouse gas emission SONGS plant just south of San Clemente. In addition to costing 1,100 jobs and incurring an almost $3 billion dollar decommissioning cost, Southern California’s summer electrical supply is now at risk and new fossil fuel based generation will need to be activated quickly in order to keep air conditioners running.  While I had my own concerns about living 20 miles from the generation site should a disaster happen, the monologue (not dialogue or debate) I heard surrounding the reactivation of the site was not centered on science, environmental fitness or safety planning, but unfortunately half truths and hysterics that suggested another Fukishima disaster was inevitable.

I would have preferred deliberate plan over the reactionary one.  I believe this is what happens when fear and NIMBY concerns take precedence over honest assessment and debate.

Read more….http://sanclemente.patch.com/groups/breaking-news/p/san-onofre-to-close-permanently

Economist Explains Why Exports will Stabilize U.S. Natural Gas Prices

The WSJ editorial by Thomas Tunstall, research director at the University of Texas at San Antonio’s Institute for Economic Development, is worth reading.

Supply and demand swings have played havoc with U.S. natural gas prices in the the last decade. Opening up the export market will allow U.S. producers to be more secure in knowing that there will be a market for their production and justify additional development efforts. Stabilizing the supply will reduce shocks and should stabilize prices without huge increases in costs for consumers.

http://online.wsj.com/article/SB10001424127887323611604578396441358002584.html

100,000s of new jobs and Billions in GDP growth from LNG exports

In a study done by ICF Consultants, the benefits of LNG exports to the U.S. economy were predicted to be huge- amounting to hundreds of thousands of jobs and billions in GDP.  Domestic price increases would be tempered by increases in capacity.

Click Here for the summary and link to the paper:
http://www.api.org/news-and-media/news/newsitems/2013/may-2013/report-us-lng-exports-can-boost-economy-but-face-competition?utm_source=feedly

Energy Independence by 2020?

I just read an article in Forbes that noted the U.S. should be able to fill all of it’s energy needs from North American sources by 2020.  This would be accomplished largely by exploiting the new technologies for recovering oil and gas from shale deposits, a number of which are found in Texas. Here is the money quote:

Many people scoffed when first Citigroup and then the US Energy Information Administration issued reports last year projecting that the US could become completely independent of imports from outside of North America by 2020. Today, few informed people scoff at that prospect.

God bless Texas!  (and North Dakota, and Pennsylvania, and New York…)

CLICK HERE to read the full story at Forbes.com.

Making Exports Illegal

With the boom in new natural gas extraction techniques, America suddenly finds itself with more supply than the domestic market requires and prices depressed to levels that are hindering the development of additional wells.  However, there is a solution that adds jobs, brings money to the U.S. and offsets our trade imbalance: exporting the excess to international markets.

I have seen how energy exports have made countries in the Middle East incredibly wealthy.  However the federal government of the U.S. has ruled against allowing American companies to export natural gas despite stockpiles that far exceed historical averages.  (See links below)

charthttp://www.eia.gov/dnav/ng/hist/nw_epg0_sao_r48_bcfw.htm
http://ir.eia.gov/ngs/ngs.html

This export ban means lost money to our country and a reduction in energy sector jobs.

Why would the government ban exports?  The government and large chemical companies want to suppress demand to keep American natural gas prices low.  How big would the impact on domestic prices be if we begin exporting natural gas?

According to a recent Deloitte Research paper, the cost increase would be a minor 1.7% between 2016 and 2035.  However how much export revenues would America lose?  $10-$50+ Billion.

Purpose

My first job after high school graduation was working in an experimental DOE shale oil refinery.  It was located near the entrance of a mine high in the mountains near Parachute, Colorado.  I learned a lot about energy politics while working in that amazing operation.  After my summer job, I started school at MIT, where I did my undergraduate research at the Center for Energy and Environmental Policy Research.  Once again I was amazed at insights I gained into the politics of climate change, oil pricing, and world energy markets.

In my consulting career, I continued to see the impacts of energy economics.  Following a stint in Abu Dhabi where I saw the fantastic wealth that petrodollars had created, my next project in the United States was for Cloud Peak Energy, a Powder River Basin coal mining Company.  After seeing how seriously the executives of the company took environmental restoration and safety, I understood that developing new energy and preserving the environment didn’t have to be at odds with each other.  After meeting some executives in the coal bed methane business, I looked for some Utah based CBM plays and discovered the nearby Alton coal field and the potential of that mine and other energy resources of my home state to fuel economic growth.

I want to use this blog to build a bridge between environmental groups and the energy companies who are helping to make American energy cheap, the country energy independent, and preserve the environment for the future.   Both sides may be called out as well for putting their own interests ahead of the public’s.  I think a middle ground approach is required.  Environmentalist cannot insist that every piece of land remain pristine and all fossil fuels remain in the ground.  The companies who extract these resources need to do so with sensitivity to the environment and a commitment to post-extraction restoration.  With ingenuity, it is possible.