The reason why natural-gas exports are still even a “question”

posted at 1:51 pm on January 15, 2013 by Erika Johnsen

The U.S. government is perfectly capable of recognizing the widespread wealth-generating benefits of free trade and allowing exports in certain areas of the economy (just take a closer look at the government’s involvement in the agricultural sector for plenty of examples), but for some strange reason, the current energy-company clamor of applications for obtaining permits to further export liquified natural gas is persistently encountering some fierce resistance.

And when I say “strange reason,” what I really mean is… Mark Perry explains at AEI (h/t Tim Carney):

It’s somewhat ironic (or timely) that on the day after public choice economist James Buchanan died, a classic, textbook example of rent-seeking emerged from a group called “America’s Energy Advantage,” which might be more appropriately called “America’s Self-Interested Energy (Natural Gas) Advantage for Some Big Private Chemical and Steel Companies.” …

Thanks to advanced drilling technologies (hydraulic fracturing and horizontal drilling), and private risk-taking investors, private oil and gas companies tapped into an ocean of shale gas in America that by some estimates is enough to supply our natural gas demand for the next 100 years. …

But here’s where rent-seeking enters the picture.  Energy-intensive US manufacturing companies like Dow Chemical, Nucor (the country’s largest steel producer) and Alcoa have benefited significantly from historically low natural gas prices, and want to restrict natural gas exports through the political process, to protect their lower energy prices and higher profits.

In a nutshell, these companies are playing the long-disproved and economy-damaging protectionist card, using up what could otherwise be productive resources in order to lobby the government for political favoritism that will only ‘benefit’ their niche interests.

There’s still some debate about whether or not exporting natural gas will actually be worthwhile in the long term, but the point is, that’s not for the federal government to dictate — if energy companies find it profitable to take their goods to the global market, they should be free to do so. The free-market logic, the potential geopolitical benefits (i.e., breaking Russia’s hold over gas supplies), and while I’m holding out hope that the Obama administration will ultimately decide on at least partially freeing up the industry more, the opportunities for jobs and economic growth are all clearly there — it’s only political, big-government rent-seeking holding us back.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

In a nutshell, these companies are playing the long-disproved and economy-damaging protectionist card, using up what could otherwise be productive resources in order to lobby the government for political favoritism that will only ‘benefit’ their niche interests.

Can’t really blame them given this administrations unabashed hatred of big business.

Nice piece Erika.

Tim_CA on January 15, 2013 at 1:59 PM

Necessarily Skyrocketing energy price don’t happen on their own.

Flange on January 15, 2013 at 2:01 PM

Where’s “The Rent Is Too Damn High” guy?

The Rogue Tomato on January 15, 2013 at 2:01 PM

When gas is mentioned to this administration they suggest Tums.

docflash on January 15, 2013 at 2:03 PM

Isn’t this how we lost the steel industry?

Rinse, repeat, fail.

PattyJ on January 15, 2013 at 2:04 PM

The reason why natural-gas exports are still even a “question”

The answer is Cloward-Pivens. The question is why is the Obamanation Administration trying to destroy America’s economy.

President Obama to be arrested and Impeached.

SWalker on January 15, 2013 at 2:07 PM

Natural Gas prices just tripled in December in Nova Scotia.

Supply issues but our State Department and EPA will probably tell them to buy solar from China or wind power from Japan.

Source; Atlantic CTV news.ca n-s-looking-for-new-natural-ga-sources-as-prices-rse. Sorry about sources all the time but I have been accused of lying or creating things. Not by conservatives, though..

Oh — and this is while firms like CHK are laying off and buying employees out of contracts.

IlikedAUH2O on January 15, 2013 at 2:07 PM

Call me late for dinner.

Remember the saying about “Taking coal to Newcastle?”

Well, we have US energy frims shedding workers and fighting to stay afloat in the midst of an energy shortage.

The country’s second largest natural gas producer, Chesapeake Energy Corp. (NYSE: CHK) today announced that it has offered a voluntary separation program to approximately 275 employees “as part of the company’s ongoing efforts to improve efficiencies and reduce costs.” The employees who received the offer were selected “based upon a combination of age and years of Chesapeake service.”

Read more: Chesapeake Offers Buyouts to 275 Employees – 24/7 Wall St.

Should somebody be calling congressmen?

IlikedAUH2O on January 15, 2013 at 2:11 PM

In a nutshell, these companies are playing the long-disproved and economy-damaging protectionist card, using up what could otherwise be productive resources in order to lobby the government for political favoritism that will only ‘benefit’ their niche interests.

Leftards will be by soon to defend that Obama is bought and kept by rich white people.

Schadenfreude on January 15, 2013 at 2:14 PM

A big part of the progressive agenda, is to force America to spend it’s wealth to 3rd world hellholes, instead of recycling that wealth within the economy.

Social justice, and all that rot.

Rebar on January 15, 2013 at 2:20 PM

Whenever I hear about energy protectionist/Big Government situations I think of this book:

Myth of the Robber Barons

A quick, interesting and cheap read. Highly recommended.

visions on January 15, 2013 at 2:21 PM

Gas industry people should suggest an export tax and a rush to put the pipes in place to do it.

Except for the fact that they are less welcome than firearms makers, this might work.

IlikedAUH2O on January 15, 2013 at 2:21 PM

I say no to exporting our energy supplies. I might be inclined to say otherwise should we have a massive resurgence in nuclear power plants or a first run of thorium reactors to replace any lost power.

Sorry, but those energy resources belong to everyone, including future generations of Americans.

astonerii on January 15, 2013 at 2:29 PM

Sorry, but those energy resources belong to everyone, including future generations of Americans.

astonerii on January 15, 2013 at 2:29 PM

So, what other private property do you feel is collectively owned? If the energy company owns the gas, they should be able to do what they want to with it in the absence of some national emergency. If I told you that the government wanted to encourage apartment use rather than single family homes and forbade you to ever sell your house, I am sure you would not complain. Right?

KW64 on January 15, 2013 at 2:46 PM

But here’s where rent-seeking enters the picture. Energy-intensive US manufacturing companies like Dow Chemical, Nucor (the country’s largest steel producer) and Alcoa have benefited significantly from historically low natural gas prices, and want to restrict natural gas exports through the political process, to protect their lower energy prices and higher profits.

Typical liberal propaganda–blame big business.

The real problem is to get government out of the energy business. In 2010, Obama’s EPA Administrator imposed “rules” (which couldn’t pass even a Democrat-controlled Congress) which made it prohibitive to obtain a permit for a power plant emitting more than 250,000 tons per year of carbon dioxide. Since this is equivalent to about 80 MW of gas-fired electricity, and most gas turbines produce about 200 MW or more, the rule basically shut down construction of gas-fired power plants, despite an abundant new supply of shale gas which would have made such plants cheaper to operate.

We shouldn’t be exporting natural gas–we should be burning it to produce electricity, and using the abundant supply and low price to encourage homeowners to exchange oil-burning furnaces for gas-burning furnaces, thereby reducing the demand for foreign oil.

And if that saves money for the Dow Chemicals and Alcoas of the world, so what? The less they spend on gas, the more profit they make, and the more workers they can hire.

If natural gas is more expensive than it should be, blame Obama for not letting power companies build gas-fired plants. Dow Chemical and Alcoa have nothing to do with it, and are victims of Obama’s policies like the rest of us.

Steve Z on January 15, 2013 at 2:50 PM

If it’s good for the economy, you know Barry will oppose it.

GarandFan on January 15, 2013 at 2:57 PM

So, what other private property do you feel is collectively owned? If the energy company owns the gas, they should be able to do what they want to with it in the absence of some national emergency. If I told you that the government wanted to encourage apartment use rather than single family homes and forbade you to ever sell your house, I am sure you would not complain. Right?

KW64 on January 15, 2013 at 2:46 PM

Anything that is defensive in nature and not renewable or replaced. Energy supplies are one such item.

Like I said, if we replaced that energy somewhere else, I would not have a problem with it. But here is the kicker, as long as this generation of losers does not want to actually build the replacement energy producing items, nuclear, thorium reactors (which were invented back in the 1950′s by the way and are far safer than uranium reactors), then this generation of losers should to have to keep in reserves energy sources for the next generation’s usage.

By the way one of this generation’s loser, a large portion of the energy we produce comes off public lands, not exactly private.

astonerii on January 15, 2013 at 2:57 PM

and while I’m holding out hope that the Obama administration will ultimately decide on at least partially freeing up the industry more,

bwahahahahahahaha. That’s rich. Good one.

search4truth on January 15, 2013 at 2:57 PM

By the way one of this generation’s loser, a large portion of the energy we produce comes off public lands, not exactly private.

astonerii on January 15, 2013 at 2:57 PM

But if a private company buys the leasing rights, pays the cost of producing the gas and pays the royalty it belongs to the private company not the US public.

I agree with building advanced nuclear power plants and using new technologies to produce oil and gas such as Fracking. I also expect that down the road other technologies will develop. The time to create jobs and wealth is when a product is in demand. With time demand may wane and the opportunity you think you saved will actually be lost and some other producer will get the jobs and wealth. Before alumina smelting with cryolite and bauxite was developed, aluminum was considered precious enough to hoard away and make kingly crowns. Technology made it cheap and anyone who horded it lost out.

The amount of resource that is available is not fixed; in fact it is a price dependent variable. If demand for natural gas increases down the road enough to increase the price enough, there will be other higher priced sources such as the methane hydrides in the ocean where it can be produced. We need jobs now. We need wealth creation now. The world wants our gas now because they have not perfected the means of recovery from tight shales but they will eventually. The time to take advantage is now.

KW64 on January 15, 2013 at 3:41 PM

We shouldn’t be exporting natural gas–we should be burning it to produce electricity, and using the abundant supply and low price to encourage homeowners to exchange oil-burning furnaces for gas-burning furnaces, thereby reducing the demand for foreign oil. Steve Z on January 15, 2013 at 2:50 PM

Not only do I agree but we need to have a National Gasification program that makes it easier to build the pipelines that bring natural gas to areas where it is currently not available. It does not matter how how the price signal is, people will not switch if the natural gas is not available. Sadly proposing the building pipelines brings the enviro whackos out of the woodwork.

KW64 on January 15, 2013 at 3:50 PM

KW64 on January 15, 2013 at 3:41 PM

Like I said, as a generation, this one has f&cked the next generations enough. This is the biggest loser generation we have ever known.

They have made nuclear power impossible to get, have spent 16.4 trillion more dollars than they created, have set themselves up to live off the slave labors of the next generation.

Sorry, but no to letting them hobble the next generation with energy costs that are way too high to bear.

The natural gas is not going to lose value in the ground, it will always create the same amount of energy and because of the form it is in, it has specific uses which are hardly likely to ever be replaced by a cheaper replacement.

100years supply at current rates of usage. Selling it means it will be reduced that many years. Higher usage means that many fewer years. The next generation of energy has always been just a few years down the road…

astonerii on January 15, 2013 at 4:32 PM

Whenever I hear about energy protectionist/Big Government situations I think of this book:

Myth of the Robber Barons

A quick, interesting and cheap read. Highly recommended.

visions on January 15, 2013 at 2:21 PM

Excellent. All that bullcrap about ‘robber barons’ was propaganda from the first plague of the ‘progressive’ movement. Those slandered as robber barons were really the heroes of the industrial age.

slickwillie2001 on January 15, 2013 at 5:26 PM

In a nutshell, these companies are playing the long-disproved and economy-damaging protectionist card, using up what could otherwise be productive resources in order to lobby the government for political favoritism that will only ‘benefit’ their niche interests

…the inauguration is a little short of money?

KOOLAID2 on January 15, 2013 at 9:08 PM

Excellent. All that bullcrap about ‘robber barons’ was propaganda from the first plague of the ‘progressive’ movement. Those slandered as robber barons were really the heroes of the industrial age.

slickwillie2001 on January 15, 2013 at 5:26 PM

Excellent. I would be a robber baron if I could. I keep getting stymied. In working on it, I have discovered that the path to large scale economic success starts with working the government. There you have the bramble bush, the briar patch, the gauntlet, the cuckoo’s nest, Dante’s Inferno and ending with the death of 1,000 cuts. Wonder why there is no economic growth?

BTW, I love the Toyota driving folks like those above who want to keep natural gas in this country instead of exporting it for profits and potential tax revenues.

Why don’t we outlaw imported cars and computers while we are at it?

IlikedAUH2O on January 15, 2013 at 9:17 PM