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
Add to Briefcase
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 »
STATES HOPE TO FILE IN D.C. CIRCUIT
Twenty-One States Sue FCC Over Net Neutrality Repeal
22 minutes ago
THE DETAILS

Twenty-one states, the District of Columbia and several public interest groups filed the first major lawsuits Tuesday to block the repeal of the Federal Communications Commission’s net neutrality rules. The FCC's rules had prohibited Internet providers from slowing down or blocking websites. New York Attorney General Eric Schneiderman, who is leading the states' suit, said that the FCC’s repeal was “arbitrary” and “capricious” and violates federal law. The suit comes just a day after Democrats in the Senate said they were inching closer to acquiring the votes needed to pass legislation overturning the FCC's rule change. It has garnered the support of all 49 Democratic senators as well as one Republican, Sen. Susan Collins (R-ME).

Source:
BELIEVED RESPONSIBLE FOR AGENTS’ DEATHS
Ex-CIA Officer Arrested for Assisting China
2 hours ago
THE DETAILS

"A former C.I.A. officer suspected of helping China identify the agency’s informants in that country has been arrested, the Justice Department said on Tuesday. Many of the informants were killed in a systematic dismantling of the C.I.A.’s spy network in China starting in 2010 that was one of the American government’s worst intelligence failures in recent years, several former intelligence officials have said. The arrest of the former agent, Jerry Chun Shing Lee, 53, capped an intense F.B.I. investigation that began around 2012 after the C.I.A. began losing its informants in China."

Source:
ZINKE REFUSED TO MEET WITH THEM
Park Service Panel Resigns En Masse
2 hours ago
THE DETAILS

"Three-quarters of the members of a federally chartered board advising the National Park Service abruptly quit Monday night out of frustration that Interior Secretary Ryan Zinke had refused to meet with them or convene a single meeting last year. The resignation of nine out of 12 National Park System Advisory Board members leaves the federal government without a functioning body to designate national historic or natural landmarks. It also underscores the extent to which federal advisory bodies have become marginalized under the Trump administration."

Source:
WOULD ALSO DELAY OBAMACARE TAXES
GOP Leaders Dangle CHIP Fix to Avert Shutdown
12 hours ago
THE LATEST

"House GOP leaders on Tuesday night pitched a new strategy to avert a looming government shutdown that includes children's health funding and the delay of ObamaCare taxes. Lawmakers need to pass a short-term stopgap bill by midnight Friday, when money for the federal government runs out. The latest GOP plan would keep the government’s lights on through Feb. 16, and be coupled with a six-year extension of funding for the popular Children's Health Insurance Program (CHIP). The continuing resolution or CR would also delay ObamaCare's medical device and Cadillac taxes for two years, and the health insurance tax for one year starting in 2019."

Source:
NO DACA DEAL = NO SPENDING DEAL?
With Deadline Approaching, Lawmakers Sounding Notes of Pessimism
15 hours ago
THE LATEST

"A key Senate negotiator and White House official on Tuesday expressed little hope for an immigration deal this week but nonetheless predicted that Congress can avoid a government shutdown." Marc Short, the White House Capitol Hill liaison, said he's optimistic about a deal on DACA overall, but not this week. Senate Majority Whip John Cornyn also said he doubts an agreement can be made before week's end.

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login