Shippin' Shale, or: What's That You Say About Our Energy Independence?

Categories: Biz

perry-energy.jpeg
The days of lease-bearing landmen making it rain on the Barnett Shale are over. The industry became so proficient at fracturing the rock thousands of feet beneath the surface and extracting the gas trapped within that they glutted the market. Gas prices took a swan dive and have stagnated ever since, and lower prices meant less interest from drilling companies. That's why only a quarter of the rigs that once spudded wells in the shale's 2008 heyday are still running.

Meanwhile, the price of oil continues to hover around $100 a barrel. The big money once sunk into the Barnett has flocked south to the Eagle Ford Shale, an oil- and condensate-rich formation.

All of which is why energy companies are working so hard to export the gas they're taking out of the ground -- and why on Wednesday, Massachusetts Congressman Edward Markey, the ranking member of the House Natural Resources Committee, sent a letter to Energy Secretary Steven Chu about Chu's approval of an application by Houston-based Cheniere Energy to export liquefied natural gas.

"I am worried that exporting America's natural gas would raise energy costs for American consumers, reduce the global competitiveness of U.S. businesses, make us more dependent on foreign sources of energy, and slow our transition away from dirtier fuels," Markey writes. And he has a point.

It's easy to see why the industry would want this. Starting in the 1990s, energy companies began investing in liquefied natural gas (LNG) terminals overseas to satisfy domestic demand. But when hydraulic fracturing enabled them to tap a plentiful, domestic source, there was little need for the terminals. That was before natural gas prices tanked.

From a business standpoint it makes sense -- create other markets for your product, thereby fueling demand. The depressed price of natural gas rises and suddenly those shale gas wells can again be profitably produced. Like Markey said, the result is that the consumer gets stuck with higher natural gas prices.

But as Mike Norman asked in yesterday's Star-Telegram, "Wasn't one of the benefits of expanded natural gas drilling supposed to be to supply us with cleaner energy at a lower price?"

Ostensibly, yes. But the move to export it exposes the "Energy Independence" mantra repeated by the industry and its elected stooges for what it is: an expert play on our fear of unfriendly Middle Eastern governments. Whip up enough anxiety about some sneering shah and, hey, maybe dismantling federal regulations isn't such a bad idea after all. No one did that better than presidential candidate Rick Perry, who promised at campaign stop after campaign stop that drilling was the answer to the country's every woe, especially unemployment and our dependence on foreign oil.

"We're creating foreign jobs, we're creating foreign profits," he said at a campaign stop in Pittsburgh, where he unveiled his energy plan, emphasizing the development of domestic energy reserves.

Similarly, in its Energy Tomorrow campaign, the American Petroleum Institute claims "U.S. and Canadian supplies can provide 100 percent of our liquid fuel needs by 2030 with the implementation of two straightforward policies -- (1) accessing U.S. oil and natural gas reserves that are currently off-limits; and (2) partnering with our friendly neighbor to the north, Canada, in the development of the Keystone XL pipeline."

But what both API and Perry fail to mention is that the number of petroleum products we export has doubled since 2005. The U.S. is now a net exporter of petroleum products. Yet Perry and API claim our every energy need could be satisfied domestically if only we freed an industry shackled by "job-killing" regulation.

It's gonna suck when my heating bill goes up, but does this mean we can stop pretending that Perry, the industry and its men in the GOP establishment actually give a rat's ass about "energy independence?"

My Voice Nation Help
30 comments
Edgar
Edgar

Exporting LNG is a way for producers to arbitrage on the price on gas.  In America, there's never been anything wrong with that, though you point out that it seems to conflict with the industry's mantra that domestically-produced gas will weaken our dependence on foreign energy.  I see your point, but your argument assumes our ability to export LNG will result in a single market price for gas - that is, that it will result in a world price for gas that is in equiibrium with the price of foreign energy (to put it crudely (no pun intended)).  First, LNG degasification facilities costs huge sums of money - billions and billions of dollars for each terminal.  Converting them is hugely expensive too - export facilities don't exist yet.  Those costs mean there's no way that many of them will get built, at least for a long, long time.  That means our capacity to export gas will never drive down up the price of gas to a point where the US is in the same position it was in if we weren't finding all this new gas.

Even with LNG export terminals, we're still going to have a lot of new gas supply that never gets exported.  That means less market dependence on foreign energy.  Terminals would also mean more domestic energy jobs, which will give commenters more people like me and pak152 to loathe.

Jeff Semon
Jeff Semon

Jeff Semon is a candidate for U.S. congress running against Ed Markey in MA-5. Please read http://www.jeffin2012.com/expo... which is the common sense response to Rep. Markey's delaying job growth and energy independence.

Steve T
Steve T

Let's get some facts straight: First, the US has lately exported some petroleum products (mostly deisel gasoline), but these are refined products, not raw oil and gas; we still import well over half our crude oil. Second, the US does not have nationalized oil/gas production, unlike many other countries; so we do not control where American refineries obtain their raw oil/gas--price primarily determines that.  Third, those who assert the US can supply all it's oil don't understand the facts above, and don't understand the bottom line of energy supply is not what's known to be "in the ground", but the cost (the true cost) of finding, extracting, transporting, and converting.  True cost does not mean just money, but the energy used and the environmental degradation that accompanies oil/gas production.  Or they believe industry hype, which is partially designed to obtain investors.

Christine_Whittemore_28
Christine_Whittemore_28

@84c4754af459751a90ebc04df023055d:disqus .....WоW......Мy friеnd`s sistеr mакеs 69/hr оn thе intеrnеt. Shе hаs bееn unеmрlоуеd fоr 11 mоnths but lаst mоnth hеr incоmе wаs 5846$ јust wоrкing оn thе РС fоr а fеw hоurs. Read about it here ........... C a s h M a n y . c о m

Texanagainstscammers
Texanagainstscammers

So why does the oil and gas industry continue to receive Government subsidies afforded to them in 1989?

pak152
pak152

'that any company allowed to drill on city land not be allowed to export the gas" seriously? natural gas like oil is fungible and should sold at the highest market price which is why natural gas is being exported right now. the American price is below what the price is being paid abroad. Right now more shale gas plays are taking place in other places such as  South Africa and Poland to name just two countries. Should not the companies and their stockholders make a profit on their investments?

"Yet Perry and API claim our every energy need could be satisfied domestically if only we freed an industry shackled by "job-killing" regulation." and yes we could. take a look at the areas that are not being explored ie Pacific and Atlantic Coasts, Gulf coast off of Florida. as well as a wide variety of federal lands onshore. The more that we discover and develop the better for the economy. Our increased production and exports are already having an effect.

"Wasn't one of the benefits of expanded natural gas drilling supposed to be to supply us with cleaner energy at a lower price?"" and this guy calls himself a journalist sheeshjust take a look at these two blog postingshttp://mjperry.blogspot.com/20...

http://mjperry.blogspot.com/20...

what this "journalist" fails to point out either through ignorance or a desire to not reveal the full story is that much natural gas is under contract . the utilities have bought gas years/months ago locked in the cost of natural gas to ensure stability. Now some companies as evidenced by the first link are looking to reduce the cost to customers.

but remember the producers can not continue to sell their gas for less than what it costs to produce which is why they are starting to export some of the production. the exports are at a higher price.

sheesh some folks don't understand market economics

PlanoDave
PlanoDave

Hmmmm

I'm reading through the Constitution and I don't see anything about Congress deciding winners and losers in industry.  I don't see anything about them deciding (with the exception of national security matters) what US companies can export, either.

claytonauger
claytonauger

Yes. This is why the citizens group that are shadowing the City's efforts to re-write its gas drilling ordinance recommended that any company allowed to drill on city land not be allowed to export the gas. Also, in a kind of important development for Dallas in particular, the Centers for Disease Control says it doesn't have enough info on fracking to know whether it's a public health threat or not. So...Ms. Finkelman, Mayor Rawlings, City Council members - are you claiming you'll shortly know more than the CDC about this issue and claim drilling in Dallas is perfectly safe? I'd like to see your degrees in public health.

http://downwindersatrisk.org/_...

Darrd2010
Darrd2010

the quick answer is no, to the energy independence question. It's just 'red meat' to the crowd who clutches their tea bags,and rifles. I'm still waiting for Mayor Mike to tell us all about his stock portfolio of Halliburton, Dale Drilling, and his other energy assets. He can cheer lead for Dallas all he wants to but until he gets rid of those stocks, he needs to keep his mouth closed and his hands out of the gas issue in Dallas. Mary Suhm has done her fair share of getting us in this mess back in 2007-2008. Right now the price of NG hovers around $2.99, too low for the industry so that's why they've been whipping it up overseas and converting those terminals up in Washington State and Louisiana to LG transfer terminals. So we get the contamination and we export to the world. Wrap yourself in the flag, fist pump to the Dallas theme song and breathe deeply now.

james
james

all they ever wanted was money for their masters.

Ed D.
Ed D.

Which part of Collin County contains the great Commonwealth of Massachusetts?

pak152
pak152

see my response above conversely why does the solar and wind energy industries receive such outrageous subsidies?

claytonauger
claytonauger

I'll see you this rebuttal from the man himself (and btw DOE/typing error), and raise you the CDC conclusion that we don't know enough about fracking to know whether it's a public health threat or not........

"In April 2011, my colleagues Tony Ingraffea, Renee Santoro, and I published the first comprehensive analysis of greenhouse gas (GHG) emissions from shale gas obtained by hydraulic fracturing, with a focus on methane emissions, in the journal Climatic Change Letters. Our analysis was challenged by Cathles et al. (2012). We were invited by the journal to write a reply, with the understanding that the criticism of Cathles et al. and our reply would be published simultaneously early this year. Unfortunately, a mistake by the publisher apparently resulted in the premature publication of the Cathles et al. piece earlier today. We are still finalizing our reply, but we fully expect to have a reply finished and ready for publication within a few weeks at most, with publication on line following within 1-2 months after that.We stand by our approach and findings published last April, and find little of merit in the criticisms by Cathles and colleagues. The latest EPA estimate for methane emissions from shale gas falls within the range of our estimates but not those of Cathles et al, which are substantially lower. Cathles et al. believe the focus should be just on electricity generation, and the global warming potential of methane should be considered only on a 100-year time scale. Our analysis covered both electricity (30% of US usage) and heat generation (the largest usage), and we evaluated both 20- and 100-year integrated time frames for methane. Both time frames are important, but the decadal scale is critical, given the urgent need to avoid climate-system tipping points. We also used the latest available estimates for the global warming potential of methane, while Cathles relied on older and lower values.Using all available information and the latest climate science, we conclude that for most uses, the GHG footprint of shale gas is greater than that of other fossil fuels on time scales of up to 100 years. When used to generate electricity, the shale-gas footprint is still significantly greater than that of coal at decadal time scales but is less at the century scale. We reiterate our conclusion from our April 2011 paper that shale gas is not a suitable bridge fuel for the 21st Century."

engmofo
engmofo

The dude that wrote that looks like he has a door stop for a head.

TXsharon
TXsharon

LOL! Man, that's the most convincing thing I read in...the last 20 seconds. 

TXsharon
TXsharon

If this were truly market economics then We the People wouldn't have to gift the Big Gas Mafia BILLIONS in handouts. 

claytonauger
claytonauger

And some folks are apologists for the excuses the market makes to screw people. There's no such thing as a free market. Industry loves regulation - that it sponsors and controls. You can't sell nuclear technology overseas without permission from DOW and State. You shouldn't be able to sell "America's Energy Independence" without special provisions either.

TXsharon
TXsharon

Third world countries exploit their resources at the citizens' expense then export them. So, you think the US should become a third world country?

engmofo
engmofo

I'm fairly convinced your moniker should be A$$hole not pak152.......

Texanagainstscammers
Texanagainstscammers

So you are stating that the wind and solar industries are making outrageous profits?

pak152
pak152

"A 2008 study of energy subsidies from the Energy Information Administration, entitled “Federal Financial Interventions and Subsidies in Energy Markets 2007,” explores the subject in detail, and produced estimates of subsidies on a per-unit-of-energy supplied basis, which is the best way to think about this. This report defines subsidies in the three most prevalent forms: direct payments to energy producers, tax treatment (favorable depreciation and credits), and research and development assistance (which can be both direct payments or tax favoritism). "http://blog.american.com/2011/...

http://www.eia.gov/oiaf/servic...

now even the Heritage Foundation agrees that some oil subsidies should be removed"

Oil Subsidies That Should Be Removed

First, let’s take a look at oil subsidies that are obvious and unnecessary. Congress should eliminate the following subsidies:"http://www.heritage.org/resear...

and since you want to eliminate "subsidies" to the O&G industry then you must agree that we should eliminate the subsidies for solar and wind

pak152
pak152

selling nuclear technology is greatly different from selling natural gas thus your comparison fails. if they gas production can't sell abroad ie make a profit then they will plug and abandon the wells as not being commercially viable. then where will we be.

who is DOW?

pak152
pak152

selling nuclear technology is greatly different from selling natural gas thus your comparison fails. if they gas production can't sell abroad ie make a profit then they will plug and abandon the wells as not being commercially viable. then where will we be.

who is DOW?

pak152
pak152

selling nuclear technology is greatly different from selling natural gas thus your comparison fails. if they gas production can't sell abroad ie make a profit then they will plug and abandon the wells as not being commercially viable. then where will we be.

who is DOW?

pak152
pak152

big difference between us and other countries. In other countries the government owns in the mineral resources while here the mineral resources are considered private property. here private citizens are able to reap the benefits resulting from owning mineral rights either as a landowner or a stockholder or a consumer

Texanagainstscammers
Texanagainstscammers

Are you familiar what happens when an oil and gas operator requests an exception to Statewide Rule 37? Ninety-nine percent are granted by the Railroad Commission, leaving a mineral rights owner--which I agree with you that minerals are private property in the US--who may not want to lease for numerous reasons. Once the RRC grants the exception, the O&G operator gets to extract the minerals without paying any compensation to the mineral right owner. Legally sanctioned theft by a group of three elected officials whose majority of campaign contributions are from the O&G industry. Or shall we call it unconstitutional since it is clearly in violation of one's Fifth Amendment right?

Now Trending

Dallas Concert Tickets

From the Vault

 

General

Loading...