Friday, July 3, 2015

Energy Independence or Profitable Export?

Energy Independence
or Profitable Export?
by John Trallo, aka: Citizen Sane
You've seen the TV commercials and heard the sound bite ad nauseam:  "Natural gas offers American energy independence." It stands to reason, therefore, that a resource developed to offer energy independence to the United States ought to stay within U.S. borders. So why is the industry pushing so hard to liquefy America's natural gas and ship it overseas? Increased profits, of course. Right now, consumers in China, Japan and elsewhere are paying 400% - 500% more for natural gas than Americans. The industry wants to keep investors happy by making the most of the higher global prices, and par for the course, the industry is talking out of both sides of its money-hungry mouth.
On one hand, the oil and gas industry states that domestic natural gas prices in parts of New England have risen because of "stranded resources" due to the lack of pipeline infrastructure. Kim Watson, Kinder-Morgan's eastern pipeline group president, went as far as to say: "New England has paid more than $7 billion in the last 2 years than what it would have with access to supplies in Pennsylvania, West Virginia, and Ohio." Yet opponents have been saying that pipelines shouldn't be built because consumers would be paying too much. The industry also claims, "America's newfound abundance of natural gas is powering a remarkable manufacturing renaissance, which to date has generated more than $110 billion of announced investment in over 120 different manufacturing projects, and is already responsible for an impressive 68,000 manufacturing jobs this year."
On the other hand, the oil and gas industry is pushing for more LNG exports to Free Trade Agreement countries (FTA) and non-FTA countries as well. The push is enough to raise concerns among U.S. consumers and manufacturers.
The Federal Energy Regulatory Commission (FERC) is the agency that oversees and permits interstate pipelines. (NOTE: FERC receives zero dollars in congressional funding and 100% of its funding from the fossil fuel industry.) With FERC approval comes the power of eminent domain, defined as authorization "for the government or the condemning authority, called the condemner, to conduct a compulsory sale of property for the common welfare, such as health or safety. Just compensation is required, in order to ease the financial burden incurred by the property owner for the benefit of the public." This definition begs the question: How is exporting a natural resource to foreign countries a "benefit of the public"?  In reality, it isn't.
Corporations accomplish this is by minimizing operating costs via deregulation and a host of cost and corner-cutting measures, and by selling the product/service in the highest paying market. Currently, the overseas price for natural gas is four to five times that of the current U.S. domestic price.
The law of supply and demand
Economics 101 tells us that as supplies decrease, consumer prices rise. Since overseas exports increase demand, which puts more pressure on supply, exports will cause the price of gas in the U.S. to rise. As long as domestic prices are below overseas prices, oil and gas corporations are feverishly trying to sell as much product overseas as possible, thereby forcing domestic prices to rise toward overseas prices.
So, on one hand you have the industry claiming that domestic prices are "too high due to lack of infrastructure," and on the other hand, you have the same industry calling for more export facilities because the domestic price is too low and investors are not getting the highest return on their investment.
In commenting on the New York state fracking ban vs. gas drilling in PA, Governor Tom Wolf said he wanted to "have his cake and eat it too". The oil and gas industry is doing the same thing, but neither Wolf nor the industry can have it both ways. What'll it be, U.S. energy independence or exports for profit?  

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