Thomas Elias: Expedite gas exports; expedite price hikes at home
It has been less than three months since Californians received their latest severe lesson in the laws of supply and demand, unfairly applied. Gasoline prices, which had dropped almost $2 per gallon from their 2014 peaks, suddenly spiked by more than a dollar when two refineries in the state had outages.
The refineries are back online, but prices still have not returned to previous levels.
Now switch the subject to natural gas, where the House of Representatives voted overwhelmingly last year for the LNG Permitting Certainty and Transparency Act, which might better be called the “Let’s Send Our Big New Supplies of Natural Gas Overseas Act.”
Many Congress members who less than 10 years ago were loudly decrying America’s dependence on foreign oil and natural gas voted for this bill, which gives the federal Energy Department just 30 days to issue final decisions on natural gas exports after it accepts final environmental impact statements on them.
The reason for this short-sighted action was simple: money.
Oil and gas exploration firms whose hydraulic fracturing operations in places like Pennsylvania, Oklahoma and North Dakota have produced an oversupply are tired of selling that gas cheaply to consumers in states like California, where gas bills are significantly lower now than two and three years ago.
They want to send much of the new supply in the form of liquefied natural gas (LNG) to places like Japan and Europe for premium prices.
So most of the LNG terminals built 10 to 15 years ago as import facilities have been converted from turning sub-freezing LNG from a liquid back to a gaseous form and are now freezing gas to turn it into a liquid, the opposite of what they were built for.
Terminals are being converted in locales as diverse as Boston, Charleston, S.C. and along the Gulf Coast. Two brand-new export terminals to handle gas from Wyoming and Colorado are in process in Oregon, with another to come in British Columbia, Canada.
But because it fought off the LNG fad of 10 years ago, when federal experts and academics like Mary Nichols (then a UCLA professor and now head of the state Air Resources Board) were claiming California absolutely needed hyper-expensive LNG imports, no export facilities are in the cards here.
The votes cast by most California representatives for the LNG export speedup bill, supported by both conservative Republicans and the Obama Administration, were a serious disservice to their constituents, even if they did assure campaign funds will keep flowing from oil and gas interests.
It’s not that natural gas prices have plunged quite as much as gasoline did in early 2014, but that’s mostly because the wholesale cost of natural gas accounts for slightly less than half of what consumers pay.
The rest of the price comes from transportation and the cost of maintaining pumps, storage facilities and pipelines, plus a profit percentage.
But double or triple the wholesale price of natural gas – as will surely happen when exports start reducing supplies – and California bills will go up again, probably back to the levels of 2008 and 2009 just for starters.
For consumers and businesses, that will be just like a large tax increase, as there are always severe penalties when people and companies don’t pay their utility bills.
Since no one calls this a tax, few pay much heed, but anyone who listens to businesses relocating to other states knows that it’s not just high California taxes pushing them.
It’s also sky-high utility rates, OKd routinely by the state Public Utilities Commission before its collusion with big utility companies became widely known and proven by email correspondence.
This, then, is no simple matter.
There’s the need to preserve American energy supplies to assure the nation’s independence from outfits like OPEC, the rapacious Organization of Petroleum Exporting Countries.
There’s also the danger from LNG, most recently seen in last year’s explosions of two LNG barges in Alabama.
And there’s the pernicious effect on both consumers and businesses when prices rise.
Put these together and it’s easy to see LNG exports are as big a mistake now as LNG imports would have been in California 10 years ago. But whoever said the politicians pushing this are immune from huge errors?
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