Riding the Fracking Wave All the Way to China

A liquefied natural gas (LNG) tanker arrives at a gas storage station at Sodegaura city in Chiba prefecture, east of Tokyo on April 6, 2009 for the first shipment of LNG from Sakhalin-2 natural gas development project in Sakhalin, Russia. AFP PHOTO / JIJI PRESS (Photo credit should read STR/AFP/Getty Images)
National Journal
Patrick Reis
Dec. 5, 2013, 3:27 p.m.

The race is on to make Amer­ica the Saudi Ar­a­bia of nat­ur­al gas, but not every­one is in love with the idea of the U.S. be­com­ing a ma­jor ex­port­er of the in­creas­ingly abund­ant en­ergy source.

Flush with new pro­duc­tion thanks to the frack­ing re­volu­tion, the nat­ur­al gas in­dustry is hop­ing to send some of its sup­plies over­seas, and bring back some cash back to Amer­ica’s shores in the pro­cess. But if the in­dustry is to move ex­ports bey­ond the cur­rent trickle, it will have to over­come some for­mid­able polit­ic­al and reg­u­lat­ory hurdles — and do it quickly.

As glob­al en­ergy de­mand con­tin­ues to surge there is grow­ing com­pet­i­tion to be­come ma­jor ex­port­ers of gas and oth­er fossil fuels. If the U.S. doesn’t fill the gap, oth­er en­ergy-rich coun­tries will be happy to do it for them.

“There’s a win­dow of op­por­tun­ity, be­cause there are com­pet­it­ors,” said Chris Mc­Gill, vice pres­id­ent of policy ana­lys­is at the Amer­ic­an Gas As­so­ci­ation. “It’s not a 20-year win­dow; it’s something that’s defin­able as over the next dec­ade.”

After that, for­eign com­pet­it­ors such as Aus­tralia, In­done­sia, and above all, Rus­sia will have the mar­ket cornered, Mc­Gill said.

But get­ting nat­ur­al gas from Pennsylvania to the Pa­cific Rim is no easy trick. To be moved over­seas, it has to be con­ver­ted to a li­quid form and loaded onto ocean­go­ing tankers. That pro­cess re­quires build­ing li­que­fied-nat­ur­al-gas ter­min­als that are ex­pens­ive, con­tro­ver­sial, and dif­fi­cult to get ap­proved.

Con­struct­ing an ex­port fa­cil­ity costs about $5 bil­lion, Mc­Gill said, and it re­quires nav­ig­at­ing a com­plic­ated per­mit­ting pro­cess. To get ap­prov­al for a ter­min­al, a com­pany needs per­mis­sion from a pair of for­mid­able fed­er­al bod­ies: the En­ergy De­part­ment and Fed­er­al En­ergy Reg­u­lat­ory Com­mis­sion.

The hurdles and the hurry, however, have not been enough to scare the nat­ur­al gas in­dustry away from try­ing. Four ex­port ter­min­als have already been per­mit­ted in the U.S. that would ex­port a com­bined 6 bil­lion cu­bic feet of gas per day. And that’s just the be­gin­ning: If all pro­posed ter­min­als were to win ap­prov­al, they would add close to 30 bil­lion cu­bic feet per day in ex­port ca­pa­city, ac­cord­ing to the Amer­ic­an Gas As­so­ci­ation.

The po­ten­tial for ex­ports on a grand scale is clear, but why is the in­dustry will­ing to wade in­to this reg­u­lat­ory thick­et?

The al­lure of high for­eign prices is simply too much to res­ist. Un­like with oil, the com­plic­a­tions of li­que­fy­ing, ship­ping, and re-gas­i­fy­ing nat­ur­al gas mean there are large glob­al dis­crep­an­cies in price.

In the U.S., pro­du­cers sold gas for an av­er­age of $2.66 per thou­sand cu­bic feet in 2012, a two-thirds price drop from 2008. In Europe, nat­ur­al gas is typ­ic­ally three times as ex­pens­ive. And in Asia — where China is con­sum­ing more en­ergy but at­tempt­ing to cut back on coal, while Ja­pan is search­ing for sub­sti­tutes for nuc­le­ar power plants — nat­ur­al gas routinely sells for five to six times the U.S. price.

That’s a price gap that U.S. politi­cians, backed by a power­ful co­ali­tion of do­mest­ic nat­ur­al gas cus­tom­ers, are keen to keep — but they fear prices at home will rise dra­mat­ic­ally if sup­plies go over­seas.

Lead­ing that co­ali­tion is Sen. Ed­ward Mar­key, a Mas­sachu­setts Demo­crat, who in 2012 in­tro­duced le­gis­la­tion to ban ex­ports of nat­ur­al gas taken from fed­er­al lands and to freeze the ap­prov­al of any new ex­port ter­min­als through 2025. Mar­key ar­gues that by al­low­ing ex­ports, the U.S. would be vol­un­tar­ily sur­ren­der­ing a cost ad­vant­age for do­mest­ic in­dus­tries.

How much do­mest­ic prices would rise is a mat­ter of con­ten­tion. Ex­port op­pon­ents say it could largely erase the gap between do­mest­ic and for­eign mar­kets, but a May re­port from the Bi­par­tis­an Policy Cen­ter said the ef­fects on do­mest­ic costs would be min­im­al.

What We're Following See More »
BACKING OUT ON BERNIE
Trump Won’t Debate Sanders After All
3 days ago
THE LATEST

Trump, in a statement: “Based on the fact that the Democratic nominating process is totally rigged and Crooked Hillary Clinton and Deborah Wasserman Schultz will not allow Bernie Sanders to win, and now that I am the presumptive Republican nominee, it seems inappropriate that I would debate the second place finisher. ... I will wait to debate the first place finisher in the Democratic Party, probably Crooked Hillary Clinton, or whoever it may be.”

AKNOWLEDGING THE INEVITABLE
UAW: Time to Unite Behind Hillary
4 days ago
THE DETAILS

"It's about time for unity," said UAW President Dennis Williams. "We're endorsing Hillary Clinton. She's gotten 3 million more votes than Bernie, a million more votes than Donald Trump. She's our nominee." He called Sanders "a great friend of the UAW" while saying Trump "does not support the economic security of UAW families." Some 28 percent of UAW members indicated their support for Trump in an internal survey.

Source:
AP KEEPING COUNT
Trump Clinches Enough Delegates for the Nomination
4 days ago
THE LATEST

"Donald Trump on Thursday reached the number of delegates needed to clinch the Republican nomination for president, completing an unlikely rise that has upended the political landscape and sets the stage for a bitter fall campaign. Trump was put over the top in the Associated Press delegate count by a small number of the party's unbound delegates who told the AP they would support him at the convention."

Source:
TRUMP FLOATED IDEA ON JIMMY KIMMEL’S SHOW
Trump/Sanders Debate Before California Primary?
4 days ago
THE LATEST
CAMPAIGNS INJECTED NEW AD MONEY
California: It’s Not Over Yet
4 days ago
THE LATEST

"Clinton and Bernie Sanders "are now devoting additional money to television advertising. A day after Sanders announced a new ad buy of less than $2 million in the state, Clinton announced her own television campaign. Ads featuring actor Morgan Freeman as well as labor leader and civil rights activist Dolores Huerta will air beginning on Fridayin Fresno, Sacramento, and Los Angeles media markets. Some ads will also target Latino voters and Asian American voters. The total value of the buy is about six figures according to the Clinton campaign." Meanwhile, a new poll shows Sanders within the margin of error, trailing Clinton 44%-46%.

Source:
×