A Natural Gas Story

An old Iowa joke goes something like this:

A farmer tilling his field sees a car drive up and a nicely dressed young man gets out of the car and heads toward him.
“Howdy,” says the farmer, “Are you lost?”
“No,” replies the young man, “I’m from the federal government and I’m here to show you how to farm better!”
“Save your breath,” responds the farmer, “I ain’t farming as good as I know how now!”

This is the same U.S. government which, in the so called “Carter Energy Plan” of 1977, told American farmers and everyone else that the U.S. would run out of natural gas and the world would run out of oil by the year 2000.

Energy experts were skeptical and subsequent studies indicated the domestic interstate gas shortages of the late 1970s had more to do with the mispricing of production and interstate gas by the regulator Federal Power Commission ( predecessor of the Federal Energy Regulatory Commission FERC) than with resources. Nevertheless, in 1978, Congress listened to government experts and passed a law making it illegal to use natural gas for electricity production, and made pricing even more complex. (The law was repealed a few years later.)

Soon became apparent that neither the gas nor oil forecast was accurate. The domestic supply of natural gas did decline and by early 2000s the Federal Energy Regulatory Commission (FERC) had applications for over 27 liquid natural gas ( LNG) import terminals. By 2007 however the new technologies of directional drilling and hydraulic fracturing allowed for the production of gas from America’s heretofore unavailable huge shale gas and oil geologic resources. Domestic production of natural gas boomed.

Proposed LNG import terminal applications by 2010 were resubmitted to the FERC as applications for LNG export terminals. Today seven LNG export terminals can supply 11.4 billion cubic feet per day (bcf/day) of LNG to global markets by ocean shipping. Major LNG markets are now Europe, replacing pipeline gas from Russia, and Asia, including Japanese purchases for electricity production to make up for closing its nuclear power plant fleet after the Fukushima tsunami of 2011.

More significantly five FERC approved LNG export facilities are under construction which will add 9.7 bcf/day capacity by 2027.

There are also a dozen applications pending which could add another 10 bcf/day.

All these sales have made the US the world’s number 1 supplier of LNG benefiting the domestic economy with jobs and international revenue.

So what’s the relationship of this natural gas boom to the story of the “young man” from the government? Last month the Biden administration decided to “pause” new export licensing (under DOE administration) to study the impact of exports on climate change. Considering that the greenhouse gas emissions from this exported natural gas would take place in the importing countries – perhaps displacing coal usage there - it would seem that any consequence would be the responsibility of and attributable to the policies of these sovereign countries and not the US.

Really, does the US government know what’s better for Japan than Japanese do?

Just saying.

By Branko Terzic