Ecocentric

The Unintended Consequences of Exporting Natural Gas

A move to increase U.S. exports of natural gas could pay off for the economy, but it could also lead to more pollution and higher carbon emissions

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Hazlan Abdul Hakim/Getty Images

LNG tankers like this one could become more common if the U.S. begins exporting natural gas more widely

The best intentions during an election campaign have a habit of twisting beyond recognition once a candidate is in power. I doubt when Barack Obama was teaching constitutional law at the University of Chicago he thought that, once in the White House, his Administration would be responsible for one of the most chilling crackdowns on the freedom of the press in recent American history. And yet, after the revelation of the Department of Justice’s wide-ranging move to seize phone records of Associated Press reporters and a deeply disturbing investigation of the Fox News reporter James Rosen — seriously, read this — Obama’s legacy has been permanently altered.

I also doubt that the candidate who in 2008 ran on a cap-and-trade plan and promised to make climate change a top priority thought he would go down as the driller in chief. And yet — without taking anything away from Obama’s very real accomplishments in supporting renewable energy and efficiency — that’s exactly what’s happening. Domestic oil and natural gas production have boomed under Obama’s watch, and even though he was hardly the cause (most of the new fracking is happening on private land largely outside federal regulation), neither had Obama done much to stand in the way, at least according to his increasingly frustrated environmental allies. Greens want Obama to stop the proposed Keystone pipeline and halt the expansion of fracked oil and natural gas, but as Obama begins his second term in earnest, that seems unlikely.

(MORE: Why the Shale-Gas Industry Needs Regulations for Fracking)

Take natural gas. For some time, gas companies have been pushing the federal government to make it easier to export natural gas in liquefied form to foreign countries. This is itself a huge turnaround. Less than a decade ago, domestic production of natural gas was so low that facilities were being built in U.S. ports to import foreign natural gas. The shale-gas revolution, made possible by fracking, changed all that. Now the U.S. literally has more natural gas than it knows what to do with, and the price of gas has tumbled to around $4 per million BTU.

That’s great for U.S. utilities, which have taken advantage of cheap natural gas to close out old, polluting coal plants, helping them comply with environmental regulations while reducing U.S. pollution and carbon emissions. It’s also been good for American manufacturers — especially those in the chemical industry — who can take advantage of cheaper power and raw materials. But the glut of gas — and natural gas, unlike oil, can’t easily be stored — hasn’t been so great for one sector: natural gas companies themselves, which have begun complaining that drilling is costing them more than they can make selling their product.

Econ 101: if your supply outstrips your demand, the only way to raise prices is to reduce your supply — something gas companies can’t easily do because their contracts on wells often require them to keep drilling to maintain the lease — or increase the demand. And since the demand for natural gas in the U.S. seems to be more or less maxed out, the best way to do that is to ship the gas to other countries where the price of natural gas is much, much higher. Like Japan, which has virtually no natural gas resources of its own, and which pays some $17 per million BTU — or more than four times what we pay in the U.S. — to import liquefied natural gas (LNG).

(MORE: Energy Independence and Other Myths: A Q&A With Michael Levi, Author of The Power Surge)

So the news on May 17 that the Department of Energy (DOE) had given a terminal near Freeport, La. — one originally built to import gas — permission to export LNG was met with approval by natural gas companies, even as chemical companies worried about the effect on prices and environmentalists worried that more exports would mean more fracking. In a statement after DOE approved the export terminal, Deb Nardone of the Sierra Club’s Beyond Natural Gas campaign said:

Exporting LNG will lead to more drilling — and more drilling means more fracking, more air and water pollution, and more climate fueled weather disasters like last year’s record fires, droughts and superstorms. In today’s conditional authorization, DOE acknowledges that it has not yet considered any of these impacts, but that environmental effects must be considered before DOE can grant final approval.

But while there are legitimate environmental concerns about more natural gas drilling, there’s an economic value to exporting a product that can sell for far more abroad than it can at home. Let’s let Joe Nocera of the New York Times, in a May 18 column titled “Energy Exports Are Good!” explain why exporting natural gas would be good:

Exporting natural gas has enormous benefits for the United States. Exports create jobs that are every bit as good as manufacturing jobs. They help our trade deficit. They tie us closer to important allies like Japan, which desperately need the gas. According to Michael Levi, the author of an authoritative new book, “The Power Surge: Energy, Opportunity, and the Battle for America’s Future,” the prospect that America could export natural gas has even helped our European allies gain leverage with its primary supplier of fossil fuels, Russia.

Nonetheless, it’s hard to see how exporting natural gas will help the environment, at least at home. The price for natural gas has begun to rise — and partially in response, utilities have begun switching back to burning polluting coal. Since January, utilities have been burning less gas, and coal now provides about 40% of U.S. electricity. That’s still a much smaller share than coal demanded a few years ago, but it’s a sign that pricier natural gas, which is significantly cleaner-burning than coal, will likely mean more carbon emissions. Export more natural gas, and that’s just what you might get.

In environmental policy — in all policy — actions can have unintended consequences and take you places you never expected. Just ask the driller in chief.

VIDEO: TIME Explains: U.S. Energy Independence

39 comments
JackWolf
JackWolf

Regardless of what Potus says on Tuesday, his inaction in the first 5 years of his presidency will haunt him.  I volunteered and voted for him in 2008, and now I pretty much despise him for his expansion of fracking and other drilling.  One only has to walk along the gas line ROWs, or look at all of Pittsburgh's pretty sunsets of late, to know that these pipes leak.

coachhatcher
coachhatcher

Under the laws under president bush in 2005 ,fuel companies can drill without any consequences for environmental safety laws.which means the can do whatever they want ,the president is powerless .unless Congress pass new laws and stop ,talking about Obama care.one day our children want be able to drink water from there own home .We can't think about saving a few dollars on gas ,without a healthy environment your money means nothing .

DoubleDucks
DoubleDucks

"... it’s hard to see how exporting natural gas will help the environment, at least at home." Last I heard, the planet Earth has one global atmosphere, and natural gas produces less CO2 than burning coal, with none of the heavy metal pollution or particulates. Second, exporting does decrease the foreign trade deficit, but not as much as using natural gas as a domestic source of fuel for transportation in the USA. Besides the reduction in OPEC imports that would induce, it would reduce the US need for military involvement in the Middle East, which in turn would reduce the reason for Islamic fundamentalists to target the US. Under these circumstances, one must ask why a liberal administration like Obama's is opting to please the economic interests of Exxon and the Koch Brothers by exporting natural gas (thus keeping US transportation dependent on OPEC oil) rather than investing a relatively meager amount (compared to, say,  the US investment in solar energy and electric cars) to provide refueling facilities in the US for nat gas vehicles, allowing truck and car manufacturers to move quickly to nat gas engines.



HenryKBarton
HenryKBarton

We need not only energy independence but also cheap and safe power sources to meet our current and future needs to keep the economy always lively for generating more business opportunities and jobs here and around the world. http://www.youtube.com/watch?v=VUrt186pWoA

kolagunta
kolagunta

US has a golden opportunity to reduce the dependence of the developing world on the Conflict zone of the middle east. This will also facilitate the US to withdraw from the conflict zone. It will improve the US economy while containing the terror within the conflict zone. All of us will start reducing the wasteful expenses on security to contain the terror. Instead of imposing sanctions on Iran, the US should take Iran's business, thereby making Iran to reverse its nuclear initiatives. US needs to withdraw from the Afpak area at he earlist and cut off the aid to that region, a sure shot method to contain the terror, emanating from that region. Today the US is indirectly abetting terror in more than one way. The aid given to fight terror is being used to settle the sectarian ( Sunni- Shia ), conflict. The spill over is what is being exported. US is also the biggest consumer of drugs, which illegal money is funding one or the other terror groups. So the US has to overhaul its politowards the conflict zone. They should withdraw totally from the zone except for a measured and restricted business and totally plug the drug channel. It may be even be better economic solution to buy up the drugs and dump it in the sea.  

asJBdorightthng
asJBdorightthng

@TIME Even though I grew up boating big, big, big boats gives me the creeps. Closed link B4 reading.

BillionareKyoko
BillionareKyoko

@TIME Mr. Hashimoto is not conservative at all. If u don't know, u don't know anything of Japan. N u don't even have the right to write.

DeweySayenoff
DeweySayenoff

When an article starts out with the condemnation of investigative techniques begun by the previous president and continued by the next, taking up nearly a third of the article space which has absolutely nothing to do with the alleged topic at hand, one has already undermined the validity of the entire article.

It's impossible to take someone seriously who has stretched so far to bring an unrelated topic into something they intended to write about.  If the author wanted to rant about investigative techniques, then the article should be about that.  If the author wanted to rant about LNG exports, then the article should have been about that.

But the information in the articles are opinion, ignoring many other factors which influence both the way the government investigates federal crimes and the way the free trade of commodities works in the world.  In short, this was an op-ed piece and should be in the op-ed section.

Its connection to reality is severely impaired by the lack of research and understanding of the unrelated subjects at hand.

cliveste
cliveste

This is just a question concerning energy topics.  Why hasn't time covered the Ecat, as third party tests have now been done and it turns out that LENR (commonly called Cold Fusion)  may be the real deal.  This has now been covered twice on Forbes and it is interesting that many of the leading media outlets haven't touched this topic.  There is still a lot of skepticism in the scientific fields regarding this topic but there were some major names involved in the third party tests.  One would think this topic would be of enough interest to at least generate some articles in leading publications.

rl
rl

More research before publication.  Here are a few things to consider:  1) drilling to hold leases is not forcing companies to drill currently.   That effect petered out in 2011;  2) producers of a commodity do not generally think about trying to create demand (no company produces more than 10% of the total supply); 3) every LNG project has been initiated by a mid-stream company (not a producer) and is really being driven by the enormous arbitrage with international prices (i.e., demand from foreign consumers that are paying prices of $12-15 per MMBtu); 4) CO2 is a global problem  -- if we care about it, then we should care about displacing coal from the global stack.  Note that German coal use is rocketing up this year as they cannot access cheap gas, but can access cheap coal from the US.  More exports and supply of gas should help, not hinder, making some meaningful progress.  China in particular, which adds dozens of coal plants each year, needs as much gas as possible.  .  

Palerider1957
Palerider1957

Lewt's get a few things straight. pResident Barry Soetoro, aka Barack Obama NEVER TAUGHT LAW OR THE CONSTITUTION!! ANYWHERE!
First, he was a LECTURER, and NEVER gave a lecture because, according to his "co-workers" he was lazy, not particularly bright enough to actually teach, wasn't liked by anybody, and, AND there are NO RECORDS of any of this "teaching". So, can we finally dispense with the lies Time?

Now, on to the environment. Let's face it, you Libturds care about one thing and one thing only, destroying America.
North America has THE largest recoverable oil reserves IN THE WORLD (can power every car in the U.S for 400 years!), yet, because of 'environmentalists, we can drill for any of it.
America has the largest coal deposits in the world, yet, thanks to environmentalists, we can no long mine or use coal. Coal provides over 50% of ALL electric needs in the U.S.
"I am not saying that they can't build coal powered [electric power plants], I'm just saying I will bankrupt them if they do." _ pResident Soetoro
Now Natural gas and Fracking. Fracking is dangerous, and safe-guards need to be taken, but an outright ban? So freaking stupid. We in the U.S. have some the the largest recoverable natural gas reserves in the world, but guess what, you Libturds and environmentalists, won't let us get that either.

You all talk about "renewable energy", and that is a good thing. But you don't turn everything else off UNTIL AFTER you have perfected this "renewable energy" and it is offered to the people in an amount that will allow people to continue to live their lives.
But you uneducated, unable to form one rational thought, would rather shut everything off and THEN FORCE this "renewable energy" on everyone WHEN THERE ISN'T ANY YET!
And the funny part is, while all this is happening, the same Libturds will complain about the cost of a gallon of gasoline or home heat, while quenting their thirst out of plastic bottle of water while sitting in their SUV or luxury car.
For example, Al Gore, Michael Moore, Obama!

I guess Forest Gump was right when he said about Libturds: "Stupid is as stupid does".

TAMC98
TAMC98

@bryanrwalsh Bryan, interesting take on why you thing LNG is tied to the environment. I still question your understanding of frac'ing.

DabizLegend
DabizLegend

@TIME I thought they were safe? lol. Never trust a theory founded by Liberals.

BrianGreul
BrianGreul

One last thought... if you think fracking causes environmental problems and nuclear is too dangerous... .wait til an LNG tanker has an accident.  If an LNG tanker was to blow up it would be like a small nuclear device going off.

http://www.cfr.org/port-security/liquefied-natural-gas-potential-terrorist-target/p9810  <- discussion of LNG tanker risks

http://energy.gov/sites/prod/files/2013/03/f0/DOE_LNG_Safety_Research_Report_To_Congre.pdf  <- Government report on LNG Tanker risks.... bottom line - extremely unlikely but devastating should one occur.  I would like to point out that this is the same language used to discuss oil tanker spills.... 



antonmarq
antonmarq

Now, what's becoming typical Times propaganda to create fear in an industry that is anything but truthful. As I also recall, it was the GOP that wanted to have COAL and GAS become our natural energy resources of choice with gas the less of the two evils. Obama's energies of choices remain as air, sun, and water driven products that do not pollute and environment but give oil and gas a competitive headache.

So, Times, I'm not sure who is running this BS magazine or the idiots that now report lies from it, but WE THE PEOPLE will expose you.

BrianGreul
BrianGreul

Nothing like climate based FUD (Fear - Uncertainty - Doubt) to make your case.  The core issue is that we should not allow profits to erode energy security.  Bountiful natural gas is energy security.  Energy security lowers production costs and electricity prices and that stabilizes and creates jobs.  Exporting gas will ultimately hurt domestic consumers big and small.  However, the issue we need to discuss is using gas for electricity.  Gas is better suited as a transportation fuel.  We should be promoting nuclear power.  Not the nasty light water system that we predominantly use, but 3rd and 4th generation plants that don't produce waste.  The issue we currently have is that the light water system was designed around re-processing fuel.  The problem in the US is that we never reprocessed the fuel.  That's like using rechargeable batteries and then refusing to buy a battery charger or send your batteries out for charging.  After a while you wind up with a lot of batteries sitting around.  Of course there are some valid concerns as some designs are capable of producing plutonium which can easily be weaponized.  However, at the end of the day we need to move forward with nuclear because nothing else is going to bring the scale of economy.  To do so safely means getting rid of PBR light water reactors like the one that melted down in Japan, building the reactors in safe places, and fast tracking more modern designs that don't require constant refueling or generate lots of spent waste.  The French have done an excellent job of both reprocessing fuel and using breeder reactors.  

zbzoom2
zbzoom2

The first two paragraphs - a third of the article - was a gratuitous attack on Obama on matters either completely  unrelated to the subject of the article or for which Obama had no control over and was not the cause.  So much for being the science and health reporter for Time.

Rightsmite
Rightsmite

Environmentalist just cant make a decision. Gas drilling companies can hold back output. They can literally turn off the gas and leave it where it is. However, right now there is a hugh market for gas in Europe and CHINA where they have virtually NO gas. Liquified gas is a new medium that may have other potentials here. If we have an unlimited supply of natural gas then we should be using it and not oil or coal. It would be more sensible to change to LNG cars than solar or electric.  There is no pollution with natural gas and there is not a $10,000 battery to dispose of in a car that will not get you out of town. Those electric cars that environmentalist are just in love with are a big problem. First of all there is the disposal problem. Second,What do you think recharges those batteries, the sun? They are recharged from ELECTRICITY generated by gas, oil or coal!! If you really think you want the destruction of the oil and gas industry,  just wait until you are paying $10/ gal for gas. The electric car will go the way of the dinosaur they are inefficient high maintenance vehicles that the average person will never be able to afford.

KjellNygren
KjellNygren

Many excellent points in the comment section. Understanding the global impact on overall global warming, both short term and long-term, must factor in the impact on other types of energy sources both in the US and globally. The export is likely to lead to less coal production in other countries (hopefully reversing the dramatic recent increase in a countries like Japan and Germany as they move away from Nuclear Power).  The higher energy prices in the US that may result will likely result in some shift back to other sources (likely a mix of coal and renewals-the former of which would be bad and the latter good). My guess is that that the short term impact (next 5-years would be a reduction in global emissions)....

scottlincicome
scottlincicome

.@Ben_Geman this is the great irony of greens' opposition to gas exports: it wld make solar/wind more competitive! Alas, blinded by fracking

scottlincicome
scottlincicome

.@Ben_Geman According to the EIA, the role of renewables in US electricity generation would be “greater in a higher-gas-price environment."

ShaleGasExpert
ShaleGasExpert

If the Sierra Club is worried about air pollution and CO2 production, they should concern themselves with coal, which leads to actual deaths by the  thousands.  If they are worried about water resources, they should concern themselves with golf courses, or again, coal mines and coal powered generation.

It's a shame the SC, uses catastrophic fears while at the same time seeking magical solutions:  Wind and  solar simply aren't ready for prime time, not to mention are very hard to use at scale because of nimby opposition - often I imagine from SC members

Shale gas isn't perfect, but it's not perfectly evil either.  According to a study done for the DoE,  average gas prices could rise by up to 7% thanks to exports,  a range they often achieve on a daily basis.

lachlanwells1990
lachlanwells1990

Did the author ever consider that exporting gas reduces prices for foreign utilities thus allowing them to reduce their coal-fired electricity production as well? The logic presented here seems rather poor.

benyaminshaker
benyaminshaker

@DeweySayenoff  it is simply stating that obama isn't the environmental "wiz" he professes to be. It is completely relevant to the subject,

TroyOwen
TroyOwen

@Palerider1957 I use 100% wind power for electricity, from wind farms in N. Texas. 

It's here in many places, you may have to look.

antonmarq
antonmarq

@Rightsmite Dude, supply and demand has absolutely nothing to do with the environmentalist actions. One is driven by economic greed and the other by social change. The position of the environmentalist remains the same, to not used oil, gas, or any other earth damaging product regardless of its economic sways. 

Ben_Geman
Ben_Geman

@scottlincicome Yeah I think fracking/drill site pollution concerns + lower CO2 w/gas than coal/oil = complex landscape for enviros on gas

scottlincicome
scottlincicome

@Ben_Geman totally agree it's complex = why I don't understand the uniform, scorched-earth opposition to gas exports. Too simplistic