Tuesday, January 17, 2012

Why does Rep. Markey oppose natural gas exports?

It is often stated that politics makes for strange bedfellows. And energy politics makes for perhaps the strangest.

The Research Triangle Energy Consortium blog recently reported on a letter Representative Ed Markey (D-MA) sent to Energy Secretary Steven Chu urging him to reconsider licensing natural gas export terminals. Markey, a ranking member of the House Natural Resources Committee, is known to be a notorious (and notoriously opportunistic) nuclear opponent.

Markey states in his letter than his concerns are twofold - first, the oft-declared view of natural gas as a "bridge fuel" to solar, wind, and other alternatives (so long as those "alternatives" leave the atom unfissioned as God and nature intended...) as well as a matter of keeping energy prices affordable. Given Markey's track record of outright hostility to one of the cheapest forms of zero-carbon baseload energy around, his sudden concern for energy affordability - particularly in light of the high production cost of wind and solar - is almost laughable.

Opponents of exporting LNG cite a panoply of arguments against allowing U.S. companies to allow exports, the impact on energy prices notwithstanding. One is the possibility of producing higher-value products than the raw gas exported (e.g., ammonia-based products such as fertilizer, of which natural gas is a chief component). The second, cited by Markey and others, is the impact of rising natural gas prices on its direct competitiveness with coal (again, nevermind nuclear...).

Yet both of these arguments are equally specious. For one, given that the asset in question (i.e., LNG) is privately-owned, one should be asking where the government has the right or authority to assert that private producers can no longer sell their products to those who bid at the highest price (i.e., LNG importers), but rather must sell it to businesses deemed "suitable" to the current political agenda. Without going full Galt, it has all the creepy vibes of a stock villain from an Ayn Rand novel.

Second, with regard to concerns over the potential "bid-up" of natural gas prices, it beggars belief that such a similar phenomenon would not also occur as demand rose with increased consumption of natural gas for manufacturing, energy production, and as a transportation fuel. In other words, LNG boosters simply can't have it both ways: cheap natural gas will inspire demand across multiple sectors (energy, manufacturing, and export), and thus the price will not forever remain "cheap." Further, in a market economy, producers will sell their product at the highest margin - be it direct export, manufacturers, or energy companies.

And now, a plot twist

One interesting snag in all of this is something Rod Adams at Atomic Insights pointed out awhile ago as a speculation as to Markey's anti-nuclear fervor: Markey's district represents Everett Marine Terminal, the only operating LNG terminal in the U.S. (note this is a major source of LNG import activity). While I don't share Rod's enthusiasm for pinning down financial interest in the fossil industry as the sole and principle reason for organized opposition to nuclear energy (I find that there is far greater room for ideology in energy politics), it certainly does raise eyebrows. In Rod's thesis, opposition to nuclear naturally drives up demand for natural gas imports - good for Markey's constituency, which makes it good for him.

Yet the shale gas boom throws a wrench into all of this - petroleum companies like ConocoPhillips are already putting in applications to become natural gas exporters. At first glance, one has to wonder then why Markey remains in strident opposition to what would appear to work just as well for his district.

And so we go back to Markey's letter, in which I am forced to wonder perhaps if his intent is to push natural gas prices down, namely by shutting out alternative markets for natural gas consumption. In as much, by keeping the prices low, Markey hopes to outflank competition to alternatives (again, where I part ways with Adams - I truly believe that Markey does want to see an all-solar/wind future, and to hell with the consequences) by undercutting the competition through natural gas. Thus, the "bridge" - natural gas as a vehicle to drive out all future competition to renewables. This line of logic is readily apparent in his letter, where he describes natural gas being used to displace coal (although the term "nuclear" is not present at all in his multi-page letter to Dr. Chu). In as much, Markey's strategy becomes quite clear.

Ultimately, a new abundance of shale natural gas is a boon for energy consumers. While I am a feverent believer that safe and affordable nuclear energy offers the best path toward long-term reductions in carbon emissions and a better environment, the other thing I recognize is the need for affordable energy all-around, of which natural gas clearly does have a role to play. However, Markey's ham-fisted attempts to shunt supply solely to energy production under the guise of "affordability" (and ultimately as a means of manipulating sources of energy production over the long-term) could not be more readily transparent.