The economics of natural gas have changed radically in the last few years. Back in the early 2000s, it appeared that gas prices would rapidly rise here, due to lack of supply and increasing demand. That all changed since 2007, when recession hit, demand nosedived, and the fracking boom began.
Most companies that deal with natural gas are global fossil fuel companies. They don’t particularly care where they get their gas, or where it goes. Shifting markets need flexible solutions, and in the case of building big plants, this presents a problem. The answer lies in being able to obtain permits that are flexible. If a plant can be built that will allow export or import of natural gas, then it’s likely to pay for itself more than one that needs to close if market conditions change.
You probably know all the above, but anyway, it makes sense to me that the gas companies would change their tune in the face of economic realities. Back a few years ago, they didn’t anticipate the changing economic conditions, and in any case, they tend to think on a quarterly basis, instead of long-term.
While our federal or state government may want to take a protectionist stance on this issue, I don’t think it meshes with the global nature of the market. The reality is that natural gas is a commodity that will be shuttled around the world to the best (highest-paying) markets, in the current system.
This same scenario is being played out with other fossil fuels (i.e. coal and tar sands oil) as we strive to extract the last bits all over the earth. Unfortunately, the U.S. and Canada are blessed with lots of these essential commodities, and we will inevitably suffer from exploiting them.
I don’t have any good answers to this conundrum. International trade and markets trump local needs, as they always have.
I welcome any comments you may have on this. A good discussion would be a starting point for possible solutions.
From Dan Serres of Columbia Riverkeeper:
I agree with your sense of where the export push is good for powerful corporations, and potentially good for the trade balance. But this is only true in the short-term. Ultimately, if we supply cheap energy to Asia, it boosts their manufacturing and undercuts ours. In the words of Paul Cicio, president of the Industrial Energy Consumers of America, “America needs to wake up. We’re about to export our only competitive advantage.” He’s right.
It makes complete sense to me when Riverkeeper and other activist groups shout “I told you so” with respect to the export of LNG. From a corporate view, yes, it makes business sense for the petro-patriarchs to have the flexibility to export. But they’ve been pitching development of the terminals as a way of insuring our domestic energy needs, making it seem as if the people who bear the brunt of the risks will receive the benefits. Activists are right to take credit for seeing this pitch as window-dressing.
Now, no doubt, the LNG promotors will switch to job creation. They’ll urge us to export our remaining resources in order to put people to work. From the corporate standpoint, this is reasonable, since all they care about is making money.
Yet we are rightly outraged, at least from where I sit, if we look at this issue in terms of natural resources, social justice, and stewardship of G-d’s creation.
I read Steve Forrester’s editorial in the Daily Astorian yesterday (9/27/11) entitled “Surprise, surprise” (http://www.dailyastorian.com/opinion/editorials/editorial-surprise-surprise/article_f53e9bbe-e928-11e0-b5c5-001cc4c03286.html), about exporting LNG. Forrester adds something to the debate about LNG exports with the opening paragraph about big energy projects (watch out!). I said this about LNG in my campaign (for Astoria City Council) interview with Forrester and DA staff in 2008. Size matters! (I’m glad he endorsed my idea though he didn’t endorse me for city council at the time.)
Forrester decries the siting process as a giveaway to speculators. Maybe so. But in the big picture, permits and other government actions are really inconsequential. As I said in the article above, the gas will move from wherever it can be extracted the most cheaply to wherever it can be sold the most expensively. These market forces are so large that it would be hard to stop them. If the terminals on the Columbia don’t work out, or the Coos Bay one, then these forces will demand an outlet for U.S. and Canadian gas somewhere else.
Better to work on the political and economic structure that causes these forces to exist. Believe it or not, these are less intractable than market forces.