The Great Natural Gas Export Swindle

July 3rd, 2011, US – The natural gas industry is quietly moving closer to committing one of the greatest energy swindles in recent U.S. history—with the blessing of federal and state officials.

The industry recruited another government partner to its scam when the New York Department of Environmental Conservation on July 1 recommended that natural gas producers be allowed to use hydraulic fracturing to drill in 85% of the state’s portion of the Marcellus Shale.

It’s bad enough that a government agency with the words “environmental” and “conservation” in its name wants to give large corporations permission to ransack the environment. What makes this scenario even more unsavory is that large volumes of the gas produced in New York won’t be consumed by the people bearing the brunt of the environmental damage. In fact, if the gas companies get their way, much of the gas produced in New York will bypass not only New Yorkers, but all Americans, as it gets piped to coastal terminals for export to foreign countries.

And this scenario is not a pipe dream. It’s coming and it’s just around the corner. Most of the necessary gas transportation infrastructure is already in place. A few gathering pipelines and compressor stations will need to be built here and there in the middle of the shale play. Once these relatively small projects are completed, it will be clear sailing for the natural gas as it heads to the closest export terminal, possibly as early as 2013.

Do the existing terminals currently have the ability to export natural gas? No, but several companies are pursuing plans to convert their existing liquefied natural gas import terminals into export terminals. And these companies are receiving nothing but green lights from federal agencies as they seek the necessary approvals for the conversions.

Three applications for export have already been filed at the U.S. Department of Energy (DOE), the latest coming from Southern Union Co. and BG LNG Services who want approval to export LNG for the next 25 years from the Lake Charles terminal in Louisiana. Elsewhere along the Gulf Coast, Cheniere Energy wants to export from its Sabine Pass terminal in Louisiana, and Freeport LNG Development LP has similar plans for the Freeport LNG terminal in Texas. In May, Cheniere received approval from DOE to export gas from Sabine Pass to any country not prohibited by U.S. law.

So, which LNG terminal would serve shale gas volumes produced in New York? Speculation is growing that Dominion Resources Inc., owner of the Cove Point LNG terminal in Maryland, will be seeking permission from DOE and the Federal Energy Regulatory Commission (FERC) to convert its import terminal into an export terminal. A network of underground pipelines exists in the Northeast and mid-Atlantic regions that could be used to easily ship the gas from New York to the Cove Point facility.

Dominion concedes its Cove Point import terminal is “currently experiencing a significant decline in usage,” largely driven by the development of the Marcellus and other shale gas plays. Because of the strong production rates from these shale plays, there’s no longer much, if any, demand for LNG imported from countries such as Trinidad and Tobago and Qatar. Out of desperation, Dominion was forced to ask FERC for permission to compel shippers to deliver LNG to the Cove Point import terminal in order to keep the terminal cool and operational. But the federal commission rejected Dominion’s request. With few other options, Dominion will probably respond to FERC’s rejection by following the lead of the Gulf Coast terminal owners. DOE and FERC should get their stamps of approval ready because they’ll soon be receiving applications from Dominion seeking permission to export LNG.

Dominion officials are on the record as saying the company is considering installing natural gas liquefaction facilities at Cove Point. Dominion already has a large-diameter natural gas pipeline that delivers gas away from the Cove Point terminal. This pipeline could easily be converted to transport gas in the opposite direction, from wells drilled in the Marcellus back to the Cove Point facility.

In January, during the company’s 2010 financial earnings conference call, Dominion Chairman, President and CEO Thomas Farrell said the company had “discussed the potential for liquefaction facilities at Cove Point with a number of major companies.” Farrell conceded that there is not enough demand for all of the natural gas that is expected to be produced in the Marcellus Shale. “If Marcellus is going to build out the way it is expected to reach its full potential, people are going to have to explore exportation of the gas,” he said.

What’s Going On?

Let’s stop for a moment and make sure we understand what’s going on. The industry is planning to extract natural gas from geological formations beneath our feet and then transport it to coastal industrial plants, liquefy it and then ship it overseas to the highest bidder. Instead of keeping the natural gas underground (where it belongs) or, let’s say, producing it in limited quantities for local or regional consumption, natural gas companies want to create industrial drilling zones in our backyards and then turn around and sell the gas to other countries.

There’s currently not enough demand for natural gas in the United States to satisfy the needs of the major players in the exploration and production sector and their shareholders. Natural gas producers have gotten rich off extracting gas from the various shale gas plays across the U.S., but now they want more. By extracting gas from these underground formations and then absconding with it, natural gas producers are hoping to find new markets for their “product” to boost shareholder value and to drive up the price of natural gas here in the United States.

Natural gas in the $4 to $5/MMBtu range is not good enough for these producers, even though such a price range has been high enough to generate healthy profits for these companies for the past half dozen years. The companies want gas prices to climb into the $7-$8/MMBtu range, and they believe exporting gas produced here in the U.S. will do the trick because it will create a tighter supply-and-demand balance. But the gas industry doesn’t want Americans getting word of its plans, which would almost certainly raise home heating bills and increase the cost of various products that use natural gas as a feedstock. To distract attention away from its ploy to raise gas prices here in the U.S., the gas industry is mounting a massive public relations campaign to tout the number of jobs created by shale gas drilling. But a recent study in Pennsylvania found that the gas industry is exaggerating the jobs potential of shale gas drilling in the state.

And then there is the madness of an economic system that favors endless industrial growth over the health of the natural world. Rural areas are taken over by gas companies and contractors, with their drilling sites dominating the landscape. Drilling accidents, including the release of hydraulic fracturing fluids into surface waters, are routine. If the industry gets its way, a large portion of the natural gas that producers extract from underground will get shipped overseas, leaving the land in tatters and domestic natural gas prices much higher.

Unlike the U.S. coal industry, virtually all of the gas produced in the United States has been consumed in the United States since the dawn of the natural gas age. The natural gas industry, with its well pads and gathering lines and compressor stations and interstate pipelines, has been causing serious damage to the environment over the last 60 years. But at least we could say that the natural gas produced here, stayed here. Whether for home heating or aluminum manufacturing or fertilizer production or electric generation, the natural gas produced from the various basins across the United States was used for domestic purposes. But now the natural gas industry wants to contaminate water supplies and do considerable harm to the environment, and then turn around, without even a thank you, and sell the natural gas for top dollar to energy marketers serving Europe and China and India.

Hoppin’ on the LNG Train

Throughout the previous decade, the gas industry argued the United States was in dire need of natural gas imports or else high prices and shortages would become the norm. FERC put the fast-track on all applications that companies submitted requesting permission to build LNG import terminals. Lo and behold the natural gas industry has changed its tune. The industry now contends the nation is awash in gas supplies and that it must be allowed to export to sustain its member companies’ healthy quarterly earnings.

And the natural gas industry is now getting bolder, enlisting the help of politicians in their quest to expand shale gas producing zones and convert their import terminals into export facilities. Politicians in Pennsylvania, including former Democratic Gov. Ed Rendell and current Republican Gov. Tom Corbett, are welcoming with open arms the natural gas rush in their state. Even the former head of the state Department of Environmental Protection, John Hanger, is an unabashed supporter of natural gas drilling. Hanger is also the former head of the environmental group Citizens for Pennsylvania’s Future, a.k.a. PennFuture. Having a strong advocate of the natural gas industry head an environmental group is a clear indicator of where that group really stands on protecting the environment—and that stance certainly isn’t one that is committed to doing no harm to the environment.

In 2010, the Marcellus Shale Coalition, the leading industry trade group for natural gas producers in the region, hired former Pennsylvania Gov. Tom Ridge to serve as a “strategic advisor.” “There is much work to be done to maximize the benefits of these abundant and domestic resources, and I’m looking forward to help lead this important effort,” Ridge said in a statement at the time.

Founded in 2008, the Marcellus Shale Coalition spent the most among natural gas industry interests—$1.1 million—on lobbying lawmakers and state officials in 2010, the Scranton Times-Tribune reported July 3.

Down south in Louisiana, nine state senators recently submitted a joint letter to DOE’s Office of Fossil Energy in support of the proposed Lake Charles LNG export project.

Letting Southern Union and BG LNG Services, a subsidiary of BG Group (formerly British Gas), export LNG from the Lake Charles terminal would “provide a much needed boost to Louisiana’s local and regional economy through resource development, an enhanced tax base, direct and indirect job creation and increased overall economic activity,” the state senators wrote in their June 16 letter. “Allowing exports of LNG will provide additional markets for the abundant natural gas produced in Louisiana, as well as the rest of the country.”

In the letter, the Louisiana senators demonstrated the proper deference to their patrons in industry. “BG Group and [Southern Union] have been longstanding key members of the business community in Louisiana,” the senators said. “BG Group has also significantly invested in shale gas exploration and production in Louisiana providing additional jobs and economic investment within the state.”

During the past decade, one of the slogans of the natural gas industry was “energy independence” as it campaigned to drill for gas on public lands and in environmentally sensitive areas. But now we know the industry’s use of that slogan was just a ruse to get permission to drill in regions that may have remained off-limits if government officials had known the industry would end up running off with the gas supplies to sell to overseas markets.

By Press Action

Replicated only for posterity. All credit goes to Press Action. Copyright 2011. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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