July 03, 2014
America’s budding export boom can be traced to
a meatpacking mogul’s scheme to ship liquefied natural gas (LNG) up the Mississippi River.
In 1951, W.
Wood Prince, of Chicago’s
Union Stock Yard &
Transit Co., had a vision. His facility needed cheap energy, and the natural
gas down in Louisiana
wasn’t pricey. He commissioned a cryogenic engineer to build a prototype barge.
But Prince’s effort failed. Technical glitches and the American Bureau
of Shipping’s refusal to sign off on the vessel’s safety blocked the plan to
use the Father of Waters to move natural gas to the Windy City’s
on both sides of the Atlantic forged ahead. In
1959, a converted World War II freighter successfully conducted a
proof-of-concept delivery of supercooled natural gas to England. And in 1964, the
Information Administration (EIA) recently noted,
the “world’s first purpose-built [LNG] carrier, the Methane Princess, entered service.” (Prince and his wife were
present for the launching.)
later, hundreds of LNG
tankers are at sea. They collect their cargo at terminals where natural gas
is chilled to -260° F. Now in liquid form, it is brought to a destination, then
condensed back to its normal state.
While the LNG marketplace
is global, until a few years ago, America had little connection to it.
We didn’t buy much. The
Lower 48 didn’t sell any. Then came fracking.
When horizontal drilling
teamed up with hydraulic fracturing, the nation’s natural-gas renaissance was
born. Despite the economic
calamities of the Bush and Obama administrations, production soared by 28.6
percent between 2005 and 2013. Boosted supply brought impressive savings. In 2013, the
residential price of natural gas was 25.6 percent lower than in had been five
years earlier. Commercial (33.5 percent) and industrial (51.7 percent) customers
fared even better.
advances ensure that the more we use, the more there seems to be. When it comes
natural-gas reserves, the core’s the limit. Last year the Potential Gas Committee revised its
estimate of the “technically recoverable resource base” upward, again. The new best
guess, 2,384 trillion cubic feet, is “the highest resource evaluation in the
Committee’s 48-year history.”
hydrocarbon industry sees an opportunity for exports. Along with foreign
partners, it’s getting into the LNG business, bigtime. America could become the dominant
player, if politicians and bureaucrats let it.
At the federal level,
the Department of Energy’s Office
of Fossil Energy can’t stop an otherwise-permitted export terminal from
shipping natural gas to a nation with which the U.S. has a free-trade agreement
(FTA). But excluding the Republic
of Korea, the
pre-approved list is bereft of major LNG purchasers. Special authorization is needed from the Secretary of Energy to supply
major and/or growing buyers such as China,
India, Japan, France,
Germany, and the United Kingdom.
The exports, according to statute, must be “consistent with the public interest.”
That loophole, in addition to providing a maddening example of congressional
abdication of its rulemaking authority to the executive branch, has left
room for plenty of mischief.
So far, only seven
of the 33 projects seeking to export to non-FTA customers have been okayed. The
pro-LNG team is right to smell a rat. The yoga-and-Prius community opposes any
policy that might spur more fracking, and its opposition to LNG exports borders
on the deranged. Little wonder why the Obama administration is dragging its
feet on approvals.
have been joined by another deep-pocketed lobby in their quest to thwart LNG exports.
Warning that “we should not take chances and gamble with this critical
strategic resource,” Dow,
Alcoa, Nucor, and other big-name
manufacturers have organized “America’s Energy
Advantage.” Economist Mark J. Perry has
a better name for the coalition: “America’s Energy Advantage for Some
Big Chemical, Steel, and Aluminum Companies Using Other Companies’ Cheap
forces have enlisted powerful allies, such as Sen.
Ron Wyden (D-OR), who demands proof that LNG “exports will not have a
significant impact on domestic prices, and in turn on energy security, growth
The American Petroleum
Association’s Mark Green counters
with Econ 101: “When a domestic commodity -- whether natural gas, wheat,
machinery or computer products -- can find available markets, the demand helps
stimulate more domestic production.”
U.S. firms will export LNG. It’s a
certainty. But the industry won’t reach its potential unless key decisionmakers
at the federal, state, and local levels ignore the braying of rent seekers and
America’s got gas, and plenty of it. It’s
clean and safe. Let’s sell as much as possible.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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