Stronger regs needed for LNG

Posted: November 3, 2013 in Uncategorized

This morning I witnessed a dramatic seasonal phenomenon. It was the kind of experience that made words written long ago come to life, connecting one with the kind of writer no long prominent or commercially viable but occasionally popping up in Yankee magazine or the like.

What it was, you see, was that the fallen logs I generally use to cross above a stream about 14 feet across were being flooded over, creating a waterfall of about four feet in height.

However inconvenient, for the log bridge could not be used with any reasonable guarantee of safety (let alone of dry footwear), the new waterfall was certainly pleasing to the eye and to the ear.

What had happened, you see, was that autumn leaves had fallen into the stream to stuff the gaps in the logs and branches spanning the stream.

The water had nowhere to go but up; it rose to the highest point in the span (which had effectively become a dam) and spilled over.

The gas and oil industry has been busily stuffing falling leaves into a sort of haphazard formation spanning a gentle stream, creating demand ahead of supply in the natural gas industry in an insidious drive to addiction.

Part of that strategy involves liquefied natural gas (LNG).

There is some concern that natgas could become the “big-box store” of the energy sector, as a big price difference between natural gas and diesel fuel drives conversion of trucking fleets, perhaps even a significant number of passenger automobiles à la “Pickens Plan,” with price increases to wallop users later.

Note that the Albany Times-Union reported that, “one of the single largest concentrations of (natural gas) vehicles in New York belongs to the state Transportation Department, which has 623; of those 398 are Honda Civics, which is almost as many as are held by private owners. The balance are a mix of pick-up trucks and vans.” Note that these are compressed natural gas (CNG) vehicles as opposed to liquid natural gas (LNG) vehicles.

Liquid natural gas is seen as more convenient to transport and store although a methanol heat-exchanger method must be used to lower the temperature and thus liquify methane.

Way back in 2001, NYDOT bought 60 natgas Honda Civics, increasing its total Civic GX fleet to 110 sedans.

Note also that companies such as Waste Management have converted fleets to natural gas. This isn’t like the fad biodiesel conversion fad we witnessed about a decade ago. This is much bigger and more systemic.

I’d be remiss if I didn’t at least cite the report of Charles K. Ebinger of the Brookings Institution on projected price increases due to exportation of liquefied natural gas:

“Under the most reasonable assumptions (in this case assuming 6 bcf/day of exports), most reports forecast that natural gas prices will be between 2 and 11 percent higher in 2035 than if the U.S. did not export LNG.”

If you examine China’s thirst for gas, however, you might want to take a harder look at those projections.

(click here)

Of course when you look at China’s growth it’s almost like you’ve entered the world of quantum physics … the usual rules of the physical world don’t apply.

By the way, here’s a more qualitative look at near-term effects of conversion from Forbes magazine:

(click here)

But what of the price increases due to a surge in domestic demand?

The World Bank’s got the domestic price of natural gas doubling by 2020.

(click here)

The World Bank projects crude oil to be slightly lower in 2020 than it is now.

(click here)

So, based on an "expected" increase in demand, there is at least some leveling effect.

Enter the investment community.

Some investors are no doubt playing the "over-and-under" on natural gas — using that two to 11 percent range. There probably is a way to hedge their bets, shorting a heavily leveraged or otherwise encumbered natural gas company.

What could create a much larger increase in demand to create a boon (sorry Mr. Pickens) for those investors? Well, the very build-out that a lift of the New York State ban on new staging/storage facilities for liquefied natural gas could create! Especially if the regulations for new storage/transport facilities are flimsy and fail to shield the public from infrastructure, safety and remediation costs down the road.

Investment analysts, for one, have noted that the lack of refueling, staging and transportation facilities have limited the use of liquefied natural gas and depressed its price. Building new facilities would bring supply and demand closer together. So, in spite of what the New York Department of Conservation may said, B>there IS a connection between hydraulic fracturing (supply) and lifting a ban on new LNG storage/staging facilities with new regulations.

Ebinger notes there is a significant and not-so-hidden agenda behind LNG exports, and that is global political power:

"A large increase in U.S. LNG exports will have the potential to increase U.S. foreign policy interests in both the Atlantic and Pacific basins. Unlike oil, natural gas has traditionally been an infrastructure constrained business, giving geographical proximity and political relations between producers and consumers a high level of importance. Issues of “pipeline politics” have been most directly visible in Europe, which relies on Russia for around a third of its gas."

(click here)

Perhaps LNG exportation gives the United States a stronger voice on the world stage. There is a cost, however. The cost will be to the health of residents of the state of New York and the world. And that will WEAKEN the United States’ voice on the world stage as failure to address global warming has ALREADY WEAKENED the United States’ voice on the world stage.

It’s our failure to address our profligate consumption of energy and join the community of nations on global warming protocols.

From the Washington Post:“At the moment, cheap natural gas appears to be hindering the development of even lower-carbon energy sources. In addition to pushing aside dirty coal, the flood of cheap shale gas in the United States has also undermined the advance of lower-carbon sources such as wind, solar, and nuclear power. And some analysts fear that could prove counterproductive in the long run. One study from MIT suggested that cheap natural gas could actually lead to higher greenhouse-gas emissions in the United States by 2050 if it stunts the growth of renewable energy.”

The newspaper reminds us of what Bill McKibben has called the “new math” of global warming. The best climate science suggests that world can only emit about 500 more gigatons of carbon by mid-century if we want a shot at staying below that 2°C threshold.

“Shale gas is a great advantage to the U.S. in the short term, for the next few decades,” Massachusetts Institute of Technology study author Henry Jacoby said. “But it is so attractive that it threatens other energy sources we ultimately will need.”

Hydraulic fracturing — the source of our new oversupply of natural gas, which is the driving force for lifting a ban on LNG facilities — is spurring global warming through leaks in field extraction operations. It is steering investment away from solar, wind, hydropower and other technologies. Most significantly it is wasting water.

If (replacement of coal with natural gas) this was the only change made to our energy system, the IEA estimates that the world would still be on track to increase atmospheric carbon emissions to about 650 parts per million, “a trajectory consistent with a probable temperature rise of more than 3.5°C in the long term, well above the widely accepted 2°C target.” In other words, relying solely on natural gas to clean up emissions would put the world on pace for global warming that Tyndall Center director Kevin Anderson says is “likely to be beyond ‘adaptation.’ ”

“Under the most reasonable assumptions (in this case assuming 6 bcf/day of exports), most reports forecast that natural gas prices will be between 2 and 11 percent higher in 2035 than if the U.S. did not export LNG.”

(click here)

Here’s what the Tyndall Centre for Climate Change is suggesting: “Focusing on keeping world temperatures beneath 2°C is no longer an effective policy strategy … the United Nations needs to consider adapting climate policy to an amended goal of ‘Mitigate for 2 but adapt for 4’ as the 2°C limit — the point beyond which the effects of climate climate are likely to become catastrophic — starts to slip out of sight. (Click here)

What we are talking about is coastal cities underwater, a sharply diminished food supply, scarcity of water and interruptions in global supply chains.

Any regulations proposed for the storage and transportation of a carbon fuel source should take into account how extraction, processing and use of that fuel source. The regulations should provide for the collection of funds to, at the very least, deal with costs of disaster remediation pertinent to those processes.

Quite frankly, I do not see how this can easily be achieved. And I do not see us avoiding some of these disasters. I do believe that conservation on the part of consumers must somehow become a part of the process. Perhaps any new regulation should include provides for conservation and environmental education, even disaster preparedness education.

I see far too little of substance in the proposed regulations as they stand.

Obviously the natural gas industry is working to create demand … as illustrated here.

Here’s some more information on natural gas export facilities: (click here)

And on natural gas liquefaction: (click here)

In case you missed it, Charles K. Ebinger’s report: (click here)

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