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The Manufacturing Sector Needs Natural Gas

Jessica Kennedy's picture
Energy Consultant Energy Curtailment Specialists

Jessica Kennedy has worked in the energy industry since 2008. She earned her bachelor's degree in English from the State University of New York at Geneseo. She earned her master's degree in...

  • Member since 2013
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  • Jan 27, 2013
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ImageAmerica’s new favorite fuel, liquefied natural gas or LNG, is causing a rift between gas producers and manufacturers.  The question is, what to do with the shale gas surplus that US gas producers now have at their disposal?  Once extracted, natural gas producers have the option of selling the fuel here in the US, or exporting it to Asia and Europe where LNG fetches much higher prices.  US manufacturers have formed a coalition, America’s Energy Advantage, with the purpose of promoting energy policies that benefit American manufacturing and its ability to create jobs and bolster the economy.

Many government officials, however, from federal, state and even city levels, are urging Energy Secretary Steven Chu to quickly approve pending LNG export applications.  Governments, especially those in states rich with natural gas, strongly believe natural gas exports will benefit national, state and local economies due to construction of LNG processing plants and resulting job growth.  From the government perspective, LNG exports will help prevent an “oversupply” of natural gas that could otherwise be sold internationally to profit LNG producers and support job growth in the industry.

Both the manufacturing and government sectors voice a vested interest in economic growth, specifically in terms of job creation, but their means of achieving this are directly at odds with one another.  Balanced LNG production will aid in the nation’s goal of energy independence if kept in the US, but large scale production for export could supply more jobs and lower the unemployment rate.  The problem exportation presents for the industrial sector is that the price of LNG will be far higher than if it were distributed domestically only, and that difference in cost can mean a big difference in business for manufacturers.

It all comes down to Capitalism, and whether or not the free market shall be allowed to dictate our energy policy.  Senator Jim Inhofe (R-OK) wrote in a letter to Energy Secretary Steven Chu yesterday that the administration is “overreaching in efforts to regulate hydraulic fracturing at the federal level – despite the fact that states have an excellent track record of regulating the practice of hydraulic fracturing since its first use in Duncan, Oklahoma, in 1949.”  If federal regulations on natural gas extraction are relaxed, as Inhofe is insinuating they should be, then economics alone will drive the production and distribution of LNG both in the US and abroad.

Manufacturers in the United States are the largest users of natural gas domestically, and the inexpensive fuel would be paramount in a rebound of the US industrial sector.  Peter Huntsman, CEO of Huntsman Corp. says it best when he notes it is a “very short-sighted and bad public policy to allow our nation’s natural gas advantage to be stripped and sent overseas to build a new manufacturing base that would otherwise be built here in the US.”  Unrestricted production and exportation of LNG would benefit gas producing energy companies and perhaps create some jobs in the process.  Balancing the LNG supply and fueling domestic manufacturing, however, is an investment that promises long lasting economic growth for the country.

Discussions
Bob Meinetz's picture
Bob Meinetz on Jan 26, 2013

Jessica,

If only it did "all come down to capitalism".

I'm amazed that anyone in this day and age, in an article about natural gas policy, can not even mention climate change. Any expansion of  LNG production not only fails to address global warming, but recklessly and irresponsibly exacerbates it.

The decision of whether to burn gas in the US or abroad is akin to rearranging deck chairs on a sinking Titanic. Really...who cares? Are we that myopic that we need to put short-term economic effects above changes being made to the Earth which will last 100,000 years or more? Is the stewardship of the Earth more responsibly entrusted to business titans or climatologists?

 

Bart Johnson's picture
Bart Johnson on Jan 27, 2013

There is so very, very much wrong with this essay.

LNG isn't "America's favorite fuel". Barely any LNG is consumed in the US - less than 0.2 Bcf/d these days, out of about 70 Bcf/d.

Natural gas proiducers do not have the option of selling gas to Asia or Europe, as there are currently no LNG liquifaction facilities in the Lower 48. One is under construction, but will not enter service until 2016 at the earliest.

I'm not sure where that gibberish about an "LNG oversupply" comes from. If the author had ever taken a course in economics, which appears to not be the case, she'd know that "oversupply" is an empty, meaningless term.

"If federal regulations on natural gas extraction are relaxed...". There are basically no Federal regulations. Oil and gas drilling is regulated at the state level.

"...economics alone will drive the production and distribution of LNG both in the US and abroad." Domestic distribution of LNG? Huh?

"Manufacturers in the United States are the largest users of natural gas domestically" Nonsense. The electricity generation sector used about 25 Bcf/d in 2012. Utilities delivered about 22.5 Bcf/d to homes and businesses. The industrial sector was the third largest sector, at about 20 Bcf/d.

"Balancing the LNG supply and fueling domestic manufacturing, however, is an investment that promises long lasting economic growth for the country."

The active verb in this sentence is "balancing", how exactly is "balancing" an investment?

I thought this forum had higher standards. A little quality control would be welcome.

Ron Wagner's picture
Ron Wagner on Jan 27, 2013

Here is the study that tell it all: Made in America The Economic Implications of LNG Exports from the United States. 

http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Document...

Ron Wagner's picture
Ron Wagner on Jan 27, 2013

The main concern for environmentalists worldwide should be to cut the use of coal, especially in
antiquated plants. Here are the top ten coal burners: http://www.treehugger.com/clean-technology/what-are-the-top-10-coal-burning-countries-on-the-planet-whos-1.html

It is possible for the whole world to drastically cut coal burning and benefit the health of all. Coal pollution travels around the world. It is the worst fuel for pollution:http://www.ucsusa.org/clean_energy/coalvswind/c02c.html

Producing and using natural gas is the best solution for base power, in conjunction with solar, wind, geothermal etc. There is plenty of natural gas all around the world, and it can be accessed with new and future technology. In the meantime old coal plants must be replaced with modern ones that can be switched to natural gas fuel when it is available.
http://www.worldwatch.org/system/files/184_natural_gas_FINAL.pdf
http://green.autoblog.com/2013/01/23/scientists-sound-alarm-on-soots-effect-on-global-warming/

Natural gas is the future of energy. It is replacing dirty old coal plants, and dangerous expensive nuclear plants. It will fuel cars, trucks, vans, buses, locomotives, aircraft, ships, tractors, air conditioners, engines of all kinds. It costs far less. It will help keep us out of more useless wars, where we shed our blood and money. It is used to make many products. It lowers CO2 emissions. Over 4,100 natural gas story links on my free blog. An annotated and illustrated bibliography of live links, updated daily. The worldwide picture of natural gas. Read in 66 nations.
ronwagnersrants . blogspot . com

Bob Meinetz's picture
Bob Meinetz on Jan 27, 2013

Ronald,

I agree 100% with your assessment of coal, but disagree 100% with your contention that natural gas is a panacea.

In 2010 combustion of natural gas released 6.2 gigatons of CO2 into the atmosphere, almost 50% as much as from coal. This represents carbon not part of the biosphere, but additional carbon which has no possibility of being absorbed (except through ocean acidification).

If we accept the World Health Organization's conclusion that climatic changes already are estimated to cause over 150,000 deaths annually, and natural gas is responsible for 20% of anthropogenic atmospheric CO2, that makes 30,000 annual deaths attributable to the combustion of natural gas. Since the number of deaths attributable to nuclear power for several years in a row has been exactly zero, I'm not sure what basis you have to claim that nuclear power is "dangerous", especially in relation to burning fossil fuels.

That's the real "worldwide picture" of natural gas.

 

Jessica Kennedy's picture
Jessica Kennedy on Jan 28, 2013

Bob,

I agree with you that LNG is not the long term solution - after all it is still a fossil fuel and still emits carbon that contributes to global warming.  I do think, though, that it should have our support because it is the lesser of the fossil fueled evils, so to speak. 
between coal, oil & natural gas - natural gas is the most efficient & emits the least carbon.  US carbon emissions have been dropping the past few years since LNG has been gaining popularity. 
the EIA has graphs you can compare:
http://www.eia.gov/todayinenergy/detail.cfm?id=7350#tabs_co2emissions-2 

It's far from perfect - but it's a step in the right direction i think.  We need to transition to a renewable energy economy - that much we know.  But - let's face it - no matter how much protesting & environmental research is done - it's not going to happen overnight.  Maybe LNG can bridge the gap?

It's at least some improvement.  I'd rather see that than none at all. 

Jessica Kennedy's picture
Jessica Kennedy on Jan 28, 2013

Hi Bart,

Can you give me your sources on natural gas use & production facilities?  I referenced the EIA information that gives use & production by volume. 
You're right about electric power - that is the number one consumer of natural gas - followed by the industrial sector:
http://www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_m.htm 

We've also already begun exporting LNG - Japan is the largest Asian market right now & you can see the price is higher:
http://www.eia.gov/dnav/ng/ng_move_expc_s1_m.htm 

Yes, fracking is exempt from most federal regulations - except the Clean Air Act overseen by the EPA - there are some new regulations going into effect soon that are going to require air pollution to be mitigated at natural gas wells.  http://www.epa.gov/airquality/oilandgas/actions.html 

Balancing simply means attending to the needs of domestic LNG use before considering profits gained by exporting to keep prices low in the US.  That invests in US manufacturing by creating low costs of operations and an incentive for facilities to remain here instead of building factories overseas. 

 

 

 

Bart Johnson's picture
Bart Johnson on Jan 29, 2013

Concerning usage, if you add together residential and commercial use, they are greater than industrial.  Since both are fed by local distribution utilities and have almost identical usage profiles, they're usually grouped together.

About LNG exports: we have not "begun" exporting LNG to Japan, it has been happening since the 1960s at a very small facility in Alaska (a facility that was almost shuttered for good last year - try Googling "Kenai LNG".) For gas production purposes, you can consider Alaska to be a separate country, as there are no gas infrastructure links to the Lower 48 states. Gas producers in the continental US do not have the option of exporting LNG. By the way, if you read the EIA spreadsheets you'll also see LNG exports to Brazil, China, South Korea, the UK, Chile, Mexico and Spain in 2011. Here's your homework assignment: figure out just how it is we're exporting LNG to all these countries. Let me know when you're done.

As to your last paragraph, there isn't enough time or space to highlight the folly of such nativist and mercantilist thinking. Anti-trade policies and the attendant central planning are always economic losers. The recent DoE commissioned NERA LNG study simply reiterated what anybody who has read an economics textbook (or seriously thought about human nature) already knows. I can understand why Dow Chemical wants the government to force gas producers to sell to them on the cheap, but I can't understand why anyobdy else would support such outright theft.

Jessica Kennedy's picture
Jessica Kennedy on Jan 31, 2013

Maybe the whole topic will become a non-issue if Texas is right:
ERCOT has predicted that renewables will be competitive with natural gas within 20 years!

http://www.forbes.com/sites/edfenergyexchange/2013/01/28/new-ercot-report-shows-that-texas-wind-and-solar-are-highly-competitive-with-natural-gas/?ss=business:energy 

 

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