The United States doesn’t usually look to Britain for guidance—the last time may have been when Winston Churchill was Prime Minister. That time has come again. This time, the US should follow the leadership of Prime Minister David Cameron, who last week said: “Britain must be at the heart of the shale gas revolution.” He pointed out that ignoring the “revolution” could be giving their economy “much higher energy prices than would otherwise be necessary.”
But, the most significant aspect of his comments may well be that the “shale gas revolution” has the potential to “re-industrialise” the economy. That one word—“re-industralise”—may hold the key to the Obama Administration’s opposition to our own “shale gas revolution.”
America’s own “shale gas revolution” is, in large part, responsible for the US Energy Information Administration’s (EIA) recent announcement citing a 29% increase in natural gas production. The resource is so plentiful that supplies show a storage surplus and prices have remained near decade lows. As a result, in the past seven years, America has flipped from a potential liquefied natural gas (LNG) importer, to an exporter. Energy companies have proposed 16 projects to export LNG to Europe and Asia. The projects would, according to the New York Times, “generate thousands of construction jobs, spur further development of natural gas fields and generate lucrative export earnings.” Yet the Obama Administration has only approved one export terminal—stalling the economic development the remaining 15 projects would create.
According to Kathleen Sgamma, Vice President of Government and Public Affairs for theWestern Energy Alliance, there are two “concerns” preventing approval of the 15 pending projects:
1) Fear that LNG exports will raise the cost of natural gas and, therefore, hurt consumers, and
2) Fear that LNG exports will cause environmental harm.
To point number 1, it is interesting to note that one of the loudest opponents of the huge opportunity to generate “thousands of construction jobs” and “lucrative export earnings” (which would have a positive impact on our balance of payments) is Rep. Ed Markey (D-MA). Markey, “a critic of both fracking and natural gas,” “has introduced two [now-failed] bills in Congress with the stated purpose of protecting US consumers from increased natural gas prices,” while preventing the Federal Energy Regulatory Commission from approving new LNG export terminals. Following the approval of the first LNG export terminal, Markey issued a press release stating that LNG exports: “will increase electricity and heating prices for American consumers.” This is the same Markey of the Waxman-Markey bill (often referred to as the cap-and-trade bill), about which the Congressional Budget Office said would have a $175 per household annual cost—which Markey minimized by saying it was “the cost of about a postage stamp a day.” (Note: other reports found the annual per-household cost of the cap and trade bill to be $1500.) So, in 2009, he was okay with raising energy prices on consumers, yet now, in 2012, he wants to block LNG export terminals due to potential price increases for American consumers.
In a five-page letter to Secretary Steven Chu, dated January 4, 2012, in which Markey states: “I am worried that exporting America’s natural gas would raise energy costs for American consumers,” Markey calls upon the DOE to explore the “consequences” of exporting natural gas. He asks specifically for scenario comparisons: He asks specifically for scenario comparisons:
“Please compare this export scenario to a scenario in which no natural gas is exported, providing your near- and long-term expectations for
(1) domestic supply and consumer prices;
(2) U.S. economic competitiveness and manufacturing;
(3) consumption rates of oil, coal and natural gas in the United States and foreign countries; and
(4) greenhouse gas emissions in the United States and globally.”
Several such studies have been completed. One from the US EIA was released in January 2012 and found that “increased natural gas exports lead to higher domestic natural gas prices, increased domestic natural gas production, reduced domestic natural gas consumption, and increased natural gas imports from Canada via pipeline.” However, “the EIA also noted that U.S. natural gas prices are expected to increase even before considering the possibility of additional exports. Nonetheless, increased natural gas exports are expected to lead to higher domestic natural gas prices, although the precise amount depends on the ultimate level of exports and the rate of phasing in increased exports.”