Get Ready for Higher Prices and Less Energy Security: Our Natural Gas Reserves Are Being Plundered For Export

A deeply flawed study that ignores the harmful environmental and health impacts of gas drilling is being used to rally for exports.

This article was published in partnership with GlobalPossibilities.org.

Unlimited export of U.S. natural gas would have enormous implications on the future of the nation"s economy, environment and domestic energy choices. Yet a burgeoning chorus in Congress, on both sides of the aisle, is calling for the swift approval of 19 liquid natural gas (LNG) export permits.

The acceptance of these permits would unleash an unprecedented frenzy of domestic high-volume hydraulic fracturing, or fracking, just to meet daily production rates under decades-long contractual obligations. If accepted, the total of the permits currently under review by the Department of Energy for LNG export would be equal to 28.54 billion cubic feet (Bcf) per day, approximately 45 percent of what the U.S. is projected to consume daily in 2013, according to the U.S. Energy Administration.

Congressional supporters of unlimited exports argue that turning the U.S. into a major net exporter of LNG would not only boost our economy and create jobs, but also — seeming to defy the basic tenets of supply and demand — sustain low domestic natural gas prices, increase our energy security and propel us to energy independence. Some have even contended that such exports would smooth out boom-and-bust cycles and stabilize the price of natural gas.

By law, the Natural Gas Act requires the Department of Energy to grant export permits of LNG to non-free trade agreement countries only if such exports are deemed in the public interest. LNG exports to countries the U.S. has free-trade agreements with, such as Canada and Mexico, do not require a public interest determination.

On the Senate floor last month, Sen. James Inhofe (R-OK) argued, “What could be inconsistent with this for the public interest? This is something that would be cheaper gas for us and give us total independence in a matter of weeks.”

At an event last year sponsored by the trade group America"s Natural Gas Alliance, Alaska Sen. Lisa Murkowski, the top Republican on the Senate Committee on Energy and Natural Resources, said, “Exports of natural gas … are not expected to play a significant role in setting prices here at home.”

In a statement released by his office, Sen. Mark Begich (D-AK), told AlterNet, “Concerns that natural gas exports will significantly drive up the price of natural gas for domestic use are overblown.”

He added, “Additionally, even with dramatic growth in LNG markets abroad and use of natural gas at home, the U.S. has more than enough gas to satisfy both markets for a long time.”

But many experts close to the issue — backed by multiple studies, real-world numbers and historical trends — say these elected leaders are either not leveling with the American public or are simply ill-informed.

“Members of Congress are not energy experts so they are easily confused,” said Tad Patzek, chairman of the Department of Petroleum and Geosystems Engineering at the University of Texas. “And their religion is free market. It"s got nothing to do with reality, especially energy markets.”

Patzek, an expert in unconventional gas recovery who has extensively studied U.S. shale plays, called congressional boosters of unlimited exports “delusional” in an interview with AlterNet.

“This is the same argument over and over again,” he added. “If we have a boom, then twice the boom is always better. Right? Well, not necessarily.”

Domestically, natural gas remains cheap, hovering around $ 3.50 per thousand cubic feet (Mcf). But in Europe and Asia, respectively, prices are three to nearly five times that amount.

The current glut of natural gas in the U.S. has kept prices low for both consumers" electricity bills and for energy-intensive areas of the economy, such as the revitalized domestic manufacturing sector, which uses natural gas for feedstock. But over the last couple of years, gas companies have been losing money because supply has outpaced demand and returns on natural gas at its domestic price became too low to warrant the cost of production.

Exporting LNG to the highest bidder overseas would greatly benefit the profits of gas companies and also some companies involved in its export. But many experts agree, and multiple studies reveal, that it would have the dual effect of raising prices domestically to levels that would both hurt consumers and all other energy-intensive sectors of the economy.

“If we are forced to pay $ 12 to $ 16 per Mcf, well, then our economy"s going bust,” Patzek said.

“I don"t know of anybody who"s studied this who doesn"t acknowledge that prices will go up,” said Art Berman, an oil and gas geologist who heads the Houston-based geological consulting firm Labyrinth Consulting. ”So if we lock ourselves into 20-year contracts to export X number of billions of cubic feet a day, well, that"s going to increase the price. And that"s really what it"s all about.”

Berman"s research on actual U.S. shale well production, as opposed to mere projections, has led him and others to question industry and government mantras boasting of America"s ever-abundant supply of natural gas reserves. With industry and government projections upward of 100 years of untapped domestic natural gas, Berman, based on the rate of returns from drilled shale plays across the nation, estimates that a more realistic number would be around 20-25 years of supply.

That"s without factoring in the impact on supply if the U.S. becomes a major exporter. Patzek said industry and government projections of natural gas reserves are merely “speculation,” which is why the use of this resource demands “moderation.” Using these reserves in moderation, he said it"s probable that several decades of untapped domestic natural gas remains. But what"s undeniable, he added, was that opening our supply to limitless exports would force the U.S. to deplete these finite reserves faster, needlessly squandering them.

“How does exporting a strategic natural resource make you more energy independent?” Berman said in an interview with AlterNet. “If you"re selling it to somebody else, then by definition you"re decreasing your own supply.”

He continued, “Signing long-term contracts that require you to export natural gas, if anything, only decreases your energy independence.”

Eben Burnham-Snyder, a spokesman for House Natural Resources Committee Ranking Member Rep. Edward Markey (D-Mass.), agreed.

“Every single analysis of natural gas exporting has concluded that domestic prices will increase,” Burnham-Snyder said in an email to AlterNet. “That"s based on basic economic theory.”

He continued, “Sending more of our natural gas resources abroad, instead of keeping more of it here for consumers and manufacturers and providing a diverse energy supply, is not a policy to make us more energy secure…[it] makes us less independent, not more.”

Berman added, “These companies have stupidly, imprudently overproduced their own product to the point they can"t make money at the price they"ve created themselves. So now they"re looking for a solution to that problem, and they"ve managed to convince a number of idiots in Congress that this is a good idea.”

No congressional supporters contacted by AlterNet would explain how exporting natural gas would, in turn, increase the country"s energy security and energy independence.

Supporters Rally Around “Seriously Flawed” Study

Congressional supporters of unfettered natural gas exports were buoyed by last year"s economic impact study commissioned by the Department of Energy. The report, conducted by the outside firm NERA Economic Consulting, concluded that although domestic natural gas prices would rise moderately and some sectors of the economy, such as manufacturing, would be adversely affected, the “U.S. would experience net economic benefits from increased LNG exports.”

Following its release, 110 bipartisan members of the House of Representatives fired off a letter urging Energy Secretary Steven Chu to hasten approval of all LNG export permits.

When criticisms of the NERA study began pouring in, a bipartisan group of senators, including James Inhofe (R-OK), Mary Landrieu (D-LA), David Vitter (R-LA) and Mark Begich (D-AK), followed up with a letter of their own to Secretary Chu, insisting he listen to “the sound science and economic theory that comprises” the study"s conclusions.

But the NERA study was not only assailed for questionable modeling and omitting economic impacts on the environment, health and local jobs — such as farms and the businesses they support — but also for NERA"s troubling history of conducting favorable studies for both the tobacco and coal industries.

In a January 2013 letter to the Energy Department, Sen. Ron Wyden (D-OR), chairman of the Senate Committee on Energy and Natural Resources, ripped the NERA report, calling it “seriously flawed” to the point of rendering “this study insufficient for the Department to use in any export determination.”

Shortcomings Wyden highlighted include NERA using two-year-old energy figures to project the domestic consumption of natural gas, failing to fully assess the effect of rising prices on households and businesses, inadequately accounting for production impacts on various regional markets, and omitting the result of higher prices on different socioeconomic groups. All of which, Wyden noted, the Energy Department is tasked to assess in order to meet public interest determinations under the Natural Gas Act.

After its release, Rep. Edward Markey (D-MA), the top Democrat on the House Natural Resources Committee, said the study reveals, though downplays, that such exports would “constitute a massive transfer of wealth from working Americans to natural gas production and export companies.”

“Most Americans don"t own stock in natural gas companies, but nearly all Americans use natural gas and buy goods created using low-cost natural gas,” Markey spokesman Burnham-Snyder told AlterNet. “Unlimited exports of natural gas will benefit only a very few, while leaving the rest of America to pay the increased costs from higher natural gas prices.”

The Energy Department first commissioned a companion study conducted by the Energy Information Administration (EIA), an independent branch of the Department. The study, published in January 2012, focused on how increased natural gas exports would impact domestic consumption, production and prices.

The report concludes:

Increased natural gas exports lead to higher domestic natural gas prices, increased domestic natural gas production, reduced domestic natural gas consumption, and increased natural gas imports from Canada via pipeline.

Yet even this EIA assessment, as Wyden noted to the Energy Department, made its calculations based on estimated export volumes far lower than the total of the permits now under review. The EIA projected between a low volume of 6 billion cubic feet per day and a high volume of 12 billion cubic feet per day. So even its high range is dwarfed by the roughly 29 billion cubic feet per day now being proposed.

But the findings of an independent Purdue University study, released after the NERA analysis, were even more stark and directly challenged NERA"s conclusions.

“The major conclusion of this research is that permitting natural gas exports causes a small reduction in US GDP and also increases GHG emissions and other environmental emissions such as particulates. There is a loss of labor and capital income in all energy intensive sectors, and electricity prices increase.”

The authors continue, “The major differences between our results and the other major study (NERA) are that we get considerably higher natural gas price impacts, and we do not get export revenue as large. The higher natural gas prices cause pervasive losses throughout the commercial, industrial, and residential sectors.”

In a final note, the authors caution, “Given all the results of this analysis, it is clear that policy makers need to be very careful in approving US natural gas exports. While we are normally disciples of the free trade orthodoxy, one must examine the evidence in each case. We have done that, and the analysis shows that this case is different. Using the natural gas in the US is more advantageous than exports, both economically and environmentally.”

Environmental and Health Impacts Left Out of the Mix

Environmental groups, including the Natural Resources Defense Council (NRDC) and the Sierra Club, also slammed the study for failing to assess environmental impacts of increased domestic fracking on both the economy and health of local communities in which drilling would occur and on the overall global climate.

The Sierra Club revealed that the NERA study"s main supporting point for a net economic benefit from exports was built on ignoring negative environmental impacts.

Applying federal government estimates, the group calculatedthat the increase in natural gas exports would pump an additional 689,000 tons of methane into the atmosphere each year at a staggering social cost of $ 430,625,000. This additional cost would nullify more than 20 percent of the GDP increase projected in the NERA study, which would shift the slight net gain from exports to a net loss.

Jeff Deyette, a senior energy analyst at the Union of Concerned Scientists, said that methane leakage issues, both in the act of fracking and extraction and in the transport of natural gas, demand greater evaluation.

“Given how potent methane is, even modest amounts could make natural gas as bad or worse than coal from a total greenhouse gas emissions standpoint,” said Deyette.

The NRDC noted the NERA report “ignores environmental externalities, including global warming, air pollution, water pollution and other pollution impacts” and “wholly neglects to estimate public health and environmental damages that are routinely estimated in regulatory impact analyses.”

Henry Henderson, director of the Midwest Program at the Natural Resources Defense Council, noted that the negative drilling impacts on communities don"t show up in GDP estimates or corporate annual reports.

“There are long-term impacts on property values and the economies of rural communities that are not properly measured by simply the cost of selling natural gas on the market,” said Henderson in a recent interview with AlterNet.

“They are jobs that come and go as opposed to impacts that remain in perpetuity,” he said.

This impact has already been seen in states that were home to the early fracking boom, such as Pennsylvania. As a January report by the Center for Public Integrity detailed, the prospect of exporting natural gas was not part of the bargain when Pennsylvanians agreed to open their state to fracking.

So now, adding insult to injury, people in towns who"ve already suffered environmental, health and economic degradation from this extractive process are “surprised, stunned, angry and upset” to discover these same companies not only want to drill in higher volumes but also seek to export the gas without regard for the increased price or the continued negative drilling effects in their communities.

Patzek, of the University of Texas, noted that in later stages of exploitation of a resource such as hydrocarbons, we tend to go from using faraway places with very concentrated hydrocarbons, such as West Texas or the Middle East, to lesser quality, more difficult and dilute resources, which are close to where people live.

“We are at that stage right now and it"s only going to get worse,” he said. “We will be encroaching more and more on where people live.”

Patzek added, “We don"t seem to be able to go beyond the next boom-or-bust cycle and ask for a little bit longer planning. This thought that there is a common good and a common future that we all have has vanished.”

 

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Get Ready for Higher Prices and Less Energy Security: Our Natural Gas Reserves Are Being Plundered For Export

Get Ready for Higher Prices and Less Energy Security: Our Natural Gas Reserves Are Being Plundered For Export

A deeply flawed study that ignores the harmful environmental and health impacts of gas drilling is being used to rally for exports.

This article was published in partnership with GlobalPossibilities.org.

Unlimited export of U.S. natural gas would have enormous implications on the future of the nation"s economy, environment and domestic energy choices. Yet a burgeoning chorus in Congress, on both sides of the aisle, is calling for the swift approval of 19 liquid natural gas (LNG) export permits.

The acceptance of these permits would unleash an unprecedented frenzy of domestic high-volume hydraulic fracturing, or fracking, just to meet daily production rates under decades-long contractual obligations. If accepted, the total of the permits currently under review by the Department of Energy for LNG export would be equal to 28.54 billion cubic feet (Bcf) per day, approximately 45 percent of what the U.S. is projected to consume daily in 2013, according to the U.S. Energy Administration.

Congressional supporters of unlimited exports argue that turning the U.S. into a major net exporter of LNG would not only boost our economy and create jobs, but also — seeming to defy the basic tenets of supply and demand — sustain low domestic natural gas prices, increase our energy security and propel us to energy independence. Some have even contended that such exports would smooth out boom-and-bust cycles and stabilize the price of natural gas.

By law, the Natural Gas Act requires the Department of Energy to grant export permits of LNG to non-free trade agreement countries only if such exports are deemed in the public interest. LNG exports to countries the U.S. has free-trade agreements with, such as Canada and Mexico, do not require a public interest determination.

On the Senate floor last month, Sen. James Inhofe (R-OK) argued, “What could be inconsistent with this for the public interest? This is something that would be cheaper gas for us and give us total independence in a matter of weeks.”

At an event last year sponsored by the trade group America"s Natural Gas Alliance, Alaska Sen. Lisa Murkowski, the top Republican on the Senate Committee on Energy and Natural Resources, said, “Exports of natural gas … are not expected to play a significant role in setting prices here at home.”

In a statement released by his office, Sen. Mark Begich (D-AK), told AlterNet, “Concerns that natural gas exports will significantly drive up the price of natural gas for domestic use are overblown.”

He added, “Additionally, even with dramatic growth in LNG markets abroad and use of natural gas at home, the U.S. has more than enough gas to satisfy both markets for a long time.”

But many experts close to the issue — backed by multiple studies, real-world numbers and historical trends — say these elected leaders are either not leveling with the American public or are simply ill-informed.

“Members of Congress are not energy experts so they are easily confused,” said Tad Patzek, chairman of the Department of Petroleum and Geosystems Engineering at the University of Texas. “And their religion is free market. It"s got nothing to do with reality, especially energy markets.”

Patzek, an expert in unconventional gas recovery who has extensively studied U.S. shale plays, called congressional boosters of unlimited exports “delusional” in an interview with AlterNet.

“This is the same argument over and over again,” he added. “If we have a boom, then twice the boom is always better. Right? Well, not necessarily.”

Domestically, natural gas remains cheap, hovering around $ 3.50 per thousand cubic feet (Mcf). But in Europe and Asia, respectively, prices are three to nearly five times that amount.

The current glut of natural gas in the U.S. has kept prices low for both consumers" electricity bills and for energy-intensive areas of the economy, such as the revitalized domestic manufacturing sector, which uses natural gas for feedstock. But over the last couple of years, gas companies have been losing money because supply has outpaced demand and returns on natural gas at its domestic price became too low to warrant the cost of production.

Exporting LNG to the highest bidder overseas would greatly benefit the profits of gas companies and also some companies involved in its export. But many experts agree, and multiple studies reveal, that it would have the dual effect of raising prices domestically to levels that would both hurt consumers and all other energy-intensive sectors of the economy.

“If we are forced to pay $ 12 to $ 16 per Mcf, well, then our economy"s going bust,” Patzek said.

“I don"t know of anybody who"s studied this who doesn"t acknowledge that prices will go up,” said Art Berman, an oil and gas geologist who heads the Houston-based geological consulting firm Labyrinth Consulting. ”So if we lock ourselves into 20-year contracts to export X number of billions of cubic feet a day, well, that"s going to increase the price. And that"s really what it"s all about.”

Berman"s research on actual U.S. shale well production, as opposed to mere projections, has led him and others to question industry and government mantras boasting of America"s ever-abundant supply of natural gas reserves. With industry and government projections upward of 100 years of untapped domestic natural gas, Berman, based on the rate of returns from drilled shale plays across the nation, estimates that a more realistic number would be around 20-25 years of supply.

That"s without factoring in the impact on supply if the U.S. becomes a major exporter. Patzek said industry and government projections of natural gas reserves are merely “speculation,” which is why the use of this resource demands “moderation.” Using these reserves in moderation, he said it"s probable that several decades of untapped domestic natural gas remains. But what"s undeniable, he added, was that opening our supply to limitless exports would force the U.S. to deplete these finite reserves faster, needlessly squandering them.

“How does exporting a strategic natural resource make you more energy independent?” Berman said in an interview with AlterNet. “If you"re selling it to somebody else, then by definition you"re decreasing your own supply.”

He continued, “Signing long-term contracts that require you to export natural gas, if anything, only decreases your energy independence.”

Eben Burnham-Snyder, a spokesman for House Natural Resources Committee Ranking Member Rep. Edward Markey (D-Mass.), agreed.

“Every single analysis of natural gas exporting has concluded that domestic prices will increase,” Burnham-Snyder said in an email to AlterNet. “That"s based on basic economic theory.”

He continued, “Sending more of our natural gas resources abroad, instead of keeping more of it here for consumers and manufacturers and providing a diverse energy supply, is not a policy to make us more energy secure…[it] makes us less independent, not more.”

Berman added, “These companies have stupidly, imprudently overproduced their own product to the point they can"t make money at the price they"ve created themselves. So now they"re looking for a solution to that problem, and they"ve managed to convince a number of idiots in Congress that this is a good idea.”

No congressional supporters contacted by AlterNet would explain how exporting natural gas would, in turn, increase the country"s energy security and energy independence.

Supporters Rally Around “Seriously Flawed” Study

Congressional supporters of unfettered natural gas exports were buoyed by last year"s economic impact study commissioned by the Department of Energy. The report, conducted by the outside firm NERA Economic Consulting, concluded that although domestic natural gas prices would rise moderately and some sectors of the economy, such as manufacturing, would be adversely affected, the “U.S. would experience net economic benefits from increased LNG exports.”

Following its release, 110 bipartisan members of the House of Representatives fired off a letter urging Energy Secretary Steven Chu to hasten approval of all LNG export permits.

When criticisms of the NERA study began pouring in, a bipartisan group of senators, including James Inhofe (R-OK), Mary Landrieu (D-LA), David Vitter (R-LA) and Mark Begich (D-AK), followed up with a letter of their own to Secretary Chu, insisting he listen to “the sound science and economic theory that comprises” the study"s conclusions.

But the NERA study was not only assailed for questionable modeling and omitting economic impacts on the environment, health and local jobs — such as farms and the businesses they support — but also for NERA"s troubling history of conducting favorable studies for both the tobacco and coal industries.

In a January 2013 letter to the Energy Department, Sen. Ron Wyden (D-OR), chairman of the Senate Committee on Energy and Natural Resources, ripped the NERA report, calling it “seriously flawed” to the point of rendering “this study insufficient for the Department to use in any export determination.”

Shortcomings Wyden highlighted include NERA using two-year-old energy figures to project the domestic consumption of natural gas, failing to fully assess the effect of rising prices on households and businesses, inadequately accounting for production impacts on various regional markets, and omitting the result of higher prices on different socioeconomic groups. All of which, Wyden noted, the Energy Department is tasked to assess in order to meet public interest determinations under the Natural Gas Act.

After its release, Rep. Edward Markey (D-MA), the top Democrat on the House Natural Resources Committee, said the study reveals, though downplays, that such exports would “constitute a massive transfer of wealth from working Americans to natural gas production and export companies.”

“Most Americans don"t own stock in natural gas companies, but nearly all Americans use natural gas and buy goods created using low-cost natural gas,” Markey spokesman Burnham-Snyder told AlterNet. “Unlimited exports of natural gas will benefit only a very few, while leaving the rest of America to pay the increased costs from higher natural gas prices.”

The Energy Department first commissioned a companion study conducted by the Energy Information Administration (EIA), an independent branch of the Department. The study, published in January 2012, focused on how increased natural gas exports would impact domestic consumption, production and prices.

The report concludes:

Increased natural gas exports lead to higher domestic natural gas prices, increased domestic natural gas production, reduced domestic natural gas consumption, and increased natural gas imports from Canada via pipeline.

Yet even this EIA assessment, as Wyden noted to the Energy Department, made its calculations based on estimated export volumes far lower than the total of the permits now under review. The EIA projected between a low volume of 6 billion cubic feet per day and a high volume of 12 billion cubic feet per day. So even its high range is dwarfed by the roughly 29 billion cubic feet per day now being proposed.

But the findings of an independent Purdue University study, released after the NERA analysis, were even more stark and directly challenged NERA"s conclusions.

“The major conclusion of this research is that permitting natural gas exports causes a small reduction in US GDP and also increases GHG emissions and other environmental emissions such as particulates. There is a loss of labor and capital income in all energy intensive sectors, and electricity prices increase.”

The authors continue, “The major differences between our results and the other major study (NERA) are that we get considerably higher natural gas price impacts, and we do not get export revenue as large. The higher natural gas prices cause pervasive losses throughout the commercial, industrial, and residential sectors.”

In a final note, the authors caution, “Given all the results of this analysis, it is clear that policy makers need to be very careful in approving US natural gas exports. While we are normally disciples of the free trade orthodoxy, one must examine the evidence in each case. We have done that, and the analysis shows that this case is different. Using the natural gas in the US is more advantageous than exports, both economically and environmentally.”

Environmental and Health Impacts Left Out of the Mix

Environmental groups, including the Natural Resources Defense Council (NRDC) and the Sierra Club, also slammed the study for failing to assess environmental impacts of increased domestic fracking on both the economy and health of local communities in which drilling would occur and on the overall global climate.

The Sierra Club revealed that the NERA study"s main supporting point for a net economic benefit from exports was built on ignoring negative environmental impacts.

Applying federal government estimates, the group calculatedthat the increase in natural gas exports would pump an additional 689,000 tons of methane into the atmosphere each year at a staggering social cost of $ 430,625,000. This additional cost would nullify more than 20 percent of the GDP increase projected in the NERA study, which would shift the slight net gain from exports to a net loss.

Jeff Deyette, a senior energy analyst at the Union of Concerned Scientists, said that methane leakage issues, both in the act of fracking and extraction and in the transport of natural gas, demand greater evaluation.

“Given how potent methane is, even modest amounts could make natural gas as bad or worse than coal from a total greenhouse gas emissions standpoint,” said Deyette.

The NRDC noted the NERA report “ignores environmental externalities, including global warming, air pollution, water pollution and other pollution impacts” and “wholly neglects to estimate public health and environmental damages that are routinely estimated in regulatory impact analyses.”

Henry Henderson, director of the Midwest Program at the Natural Resources Defense Council, noted that the negative drilling impacts on communities don"t show up in GDP estimates or corporate annual reports.

“There are long-term impacts on property values and the economies of rural communities that are not properly measured by simply the cost of selling natural gas on the market,” said Henderson in a recent interview with AlterNet.

“They are jobs that come and go as opposed to impacts that remain in perpetuity,” he said.

This impact has already been seen in states that were home to the early fracking boom, such as Pennsylvania. As a January report by the Center for Public Integrity detailed, the prospect of exporting natural gas was not part of the bargain when Pennsylvanians agreed to open their state to fracking.

So now, adding insult to injury, people in towns who"ve already suffered environmental, health and economic degradation from this extractive process are “surprised, stunned, angry and upset” to discover these same companies not only want to drill in higher volumes but also seek to export the gas without regard for the increased price or the continued negative drilling effects in their communities.

Patzek, of the University of Texas, noted that in later stages of exploitation of a resource such as hydrocarbons, we tend to go from using faraway places with very concentrated hydrocarbons, such as West Texas or the Middle East, to lesser quality, more difficult and dilute resources, which are close to where people live.

“We are at that stage right now and it"s only going to get worse,” he said. “We will be encroaching more and more on where people live.”

Patzek added, “We don"t seem to be able to go beyond the next boom-or-bust cycle and ask for a little bit longer planning. This thought that there is a common good and a common future that we all have has vanished.”

 

Related Stories

• Josh Fox"s "Gasland" Sequel Opens, a Tour Through a Land of Abandoned Homes and Broken Promises


• Sandra Steingraber"s Moving Letter: From Jail on Earth Day


• Josh Fox"s “Gasland" Sequel Opens, a Depressing Tour Through a Land of Abandoned Homes and Broken Promises

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Get Ready for Higher Prices and Less Energy Security: Our Natural Gas Reserves Are Being Plundered For Export

South Stream Shapes European Energy Security, Nabucco Falls Behind

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South Stream is an ambitious endeavor of Russia’s energy giant Gazprom to get direct access to the EU energy market.

by Igor Alexeev
Intellihub.com
April 9, 2013

It is portrayed and criticized by some politicians in Europe as a “dangerous” gateway to a broader economic relationship with Moscow. Remarkably enough, Bulgaria, Serbia, Croatia, Slovenia and Hungary have one-by-one opted for the project.

The Eastern Europe unanimously placed its bet on the South Stream. Plain fact is that the new Europeans chose to protect their national interests in spite of all temptations and threats from Brussels and Washington. Now it is not an overstatement to say: the South Stream business blueprint is complete and it is entering construction stage. By the end of 2018 the pipeline is planned to reach a transport capacity of 63 billion cubic meters per year – enough gigajoules to supply energy needs of 38 million households. What has encouraged the pro-South Stream choice of Eastern European political elites presuming their frosty relations with Russia? Why did they not resort to broadly advertised alternatives?

The not-so-obvious answers to these geopolitical riddles are conditioned by cold math and economic forecasting. Independent economic feasibility studies show that expensive and bulky South Stream is the only realistic way to guarantee safe and reliable natural gas supplies to Europe. It will play a pivotal role in the regional energy security up to 2030-es. Other sources like nuclear power or renewable sources are nothing more than perspective alternatives. Sovereign national leaders in Budapest and Belgrade understand very well: overoptimistic advertisements of wind energy on Euronews TV channel will not power heating networks in their countries. And the notorious Cyprus affair ruined the last remnants of their belief in “European solidarity”.

Let’s have a look at energy statistics. The primary production of renewable energy within the EU in 2010 was 166.6 million tonnes of oil equivalent – a 20.1 % share of total primary energy production from all sources. EU renewable energy targets 2020 are very ambitious in times of financial turmoil. But even if the European Commission completes this costly energy program, the total share of alternatives will reach only 30%. It means that today the end users in the Eastern Europe are in urgent need of stable fossil fuel source. Brussels understands it very well, but puts a brave face on a sorry business. Now the EU officials are presenting paper-and-pencil pipelines trying to lure Azerbaijanian businessmen into their controversial Nabucco West project. Although even the main US lobbyist for the Nabucco West, former US Ambassador to Baku Matthew Bryza admits: “the chances [of the South Stream] are excellent. When the leader of Russia puts his mind to a pipeline it happens.”

It is often claimed, that nuclear energy can be a solution. But Germany, the industrial powerhouse of Europe, has recently banned the use of nuclear power. Influential Green party in Berlin took advantage of overwhelming popular support after the Fukushima incident. Therefore, in the mid-term Germany’s energy demand will be satisfied by supplies via the completed Nord Stream and the emerging South Stream. A country-by-country survey of the South Stream milestones may shed some light on the key motives behind the strategic decision of the Eastern European countries to opt for this pipeline.

Bulgaria will develop both the South Stream and the atomic engineering. Sofia is planning to construct a new 1,000-megawatt (MW) reactor at the existing Kozloduy NPP with the help of the Russian company “Atomstroyexport”. In 2012 Bulgarian officials broke the deadlock in negotiations with Gazprom and signed a protocol of the final investment decision on the South Stream. The construction of gas receiving facilities will start in Bulgaria in 2013. “A 538-kilometer section of the gas pipeline will provide Bulgarian consumers with continuous and uninterrupted natural gas supplies over a long term,” said Alexey Miller, the CEO of Gazprom. As early as 2009, Sasho Dontchev, Executive Director of Bulgaria’s Overgas explained why his country stands with Russia: “We mostly have to discuss real opportunities. Nabucco would be very fine as it assures an alternative supplier and an alternative route, but the project hasn’t been sustained by the sufficient amount of gas. Therefore, the South Stream seems more preferable to me now.”

Serbia was the first South Stream member country to adopt the pipeline’s final investment decision. South Stream’s first facility – the Banatski Dvor underground gas storage – shaved gas consumption peaks in Serbia during the 2011/2012 cold winter season. Early 2013 Sebian government promised to grant the South Stream national significance status. Managing Director of state-owned Srbijagas Dusan Bajatovic confirmed that the construction of South Stream in Serbia will begin by the end of 2013. Now project implementation is going according to plan despite all sorts of speculation in a number of Serbian media outlets. In March, 2013 Mr. Bajatovic explained that some international “business groups” attempted to lobby against the South Stream, but failed. If we take into account US intrigues in Bulgaria against the Kozloduy NPP, this assumption doesn’t seem improbable.

Croatia gave a final nod to the South Stream in January 2013. Environmental impact assessment procedures required by national law are currently at their final stage. Gazprom and Croatia’s Plinacro inked an Action Plan to implement the South Stream project between 2013 and 2016. The document envisages that a joint project company for building a gas branch to Croatia will be set up at the beginning of the second half of 2013.

Hungary performed a feasibility study for the Hungarian section of the South Stream in 2011. It resulted in the approval of the final investment decision on building of a 229 kilometers long pipeline section. Moreover, Budapest granted the South Stream the status of a national significance project. Csaba Baji, CEO of the MVM Group, the largest Hungarian power company, favors the deal: “With the Hungarian Government’s support, we are committed to increasing energy security and diversifying the routes of natural gas supply to the European Union. The South Stream project is an important part of our long-term strategy.”

Slovenia teamed up with Gazprom for the South Stream on November 13, 2012. Slovenian stakeholders including energy company Plinovodi signed the final investment decision on construction of the gas pipeline section in this country. Priority is given to environmentally friendly construction schemes and economic efficiency. The Russian investors entrusted the majority of technical and operational work to the state-owned Slovenian natural gas company Geoplin for the purpose of carrying out the joint enterprise.

 

If we consider strategic agreements, economic feasibility studies and environmental assessments completed by the sovereign Eastern European energy companies, we can predict, that the South Stream project will be completed by 2018-2020, but with estimated cost overrun (approximately $ 39 billion – see fact sheet below). The rival consortium Nabucco West targets the same market as the South Stream. Although today these projects do not compete on equal terms. The South Stream boasts fixed construction schedule and a plethora of bilateral agreements with transit states, while the Nabucco West still undergoes negotiation process. Given the geopolitical importance of energy supplies to Europe, it is very probable that in the long term Nabucco West will eventually be completed, although the South Stream being a large-scale project may by that time capture lion’s share of the market.

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The South Stream Fact Sheet

• Gas pipeline will be 1455 km long in Southern and Central Europe;


• 8500 people will be employed in its construction, with 770 at the operational level;


• Eight compression stations are to be set up in the main transit countries;


• The South Stream planned transport capacity may reach 63 billion cubic meters;


• The overall cost of the project is approximately $ 39 billion.

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South Stream Shapes European Energy Security, Nabucco Falls Behind

James Howard Kunstler: The Dangers Of The Age Of Delusion

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Submitted by Adam Taggart of Peak Prosperity,

It’s characteristic of the time that we’re living in that there simply is no sense of consequence. And that’s exactly what you get when you have a Federal Reserve that’s out of control and a public that is filled with technological narcissistic visions of Santa Claus delivering rescue remedies on demand. And so there’s no general sense that when you do things, bad things can happen. 

James Howard Kunstler is concerned. Sure, he still has the same issues with the West’s highly energy-consuming suburban lifestyle that he famously brought to light in his books, The Long Emergency, the World Made by Hand series, and Too Much Magic. But beyond our decaying fundamentals, he’s distressed by society’s unwillingness to be honest with itself about the issue’s it’s facing.

Instead, we are embracing a narrative based in “magical thinking” (e.g., prosperity through the printing press, energy independence through domestic shale) that assures us everything is fine. That we’ll be able to enter the future without having to make any changes to our manner or standards of living, despite our massive debts and depleting resources:

History is very peculiar in the sense that sometimes cultures and societies go through very strange periods of their history, and we’re in one of those now. And I characterize this as the “great period of America lying to itself.” And the way that it’s really carried out as a practical matter is that accounting fraud is now the basic mechanism for running most of the important things in American life. Accounting fraud is now the basis for banking and finance, and it’s certainly the basis for government, and certainly for its fiscal role.

 

So I think what you’re seeing is a kind of deformity of the consensus. And of course, the most striking feature of our current times is this inability of the country to construct a coherent story about what’s happening to us, and therefore the inability to construct a story about what we might do about it.

And the sad thing is there is much we can get busy on to address our situation. But to get started, we need to engage in an eyes-wide open assessment of our true state:

What’s really happening in reality, in this moment in history, is a comprehensive contraction in economic activity, because there’s a connection between the energy inputs into an economy and a culture and your ability to accumulate wealth of the kind that we’re used to, produced by industrial activity. And that’s coming to an end, and there’s no way around it.

 

Now, there are plenty of things we can do. And the terminology that we use, I think, the way we deal with this – for example, using the word “growth” incessantly is, I think, very counterproductive rather than using the term “activity”. Because you can have a lot of activity of the kind that we need without necessarily having the kind of industrial growth that we’ve experienced in the past. For example, we have a tremendous amount of work to do in this country to reform and downscale and re-localize and reorganize the major activities of American life, whether it’s agriculture – which is going to have to get smaller and more local and finer and be done by more human beings than machines, and be done by more human beings than energy slaves – or commerce – which has got to be reorganized from the Wal-Mart level of twelve-thousand-mile supply lines and warehouses on wheels, depending on all of the tractor-trailer trucks running incessantly around the interstate highway system.

 

So that’s a huge test that faces us. We basically have to rebuild the Main Street economies – and not just in an intellectual or conceptual way, but actually in the bricks and mortar. We’ve got to go in there and refurbish our downtowns. We’ve got to change the transportation system, because the airline industry is failing and the happy motoring industry or way of life will be coming to an end, probably sooner rather than later.

Yet if we continue to cling to our magical, no-consequences narrative, Kunstler fears we will likely burrow deeper into our delusion:

It comes back to the unfortunate condition of a nation that is so frightened of the consequences of what it has been doing that it cannot really face reality, and so it just spins one story after another.

 

I think Jim Rickards put it pretty well the other day when he said that this kind of monetary policy exists in what he referred to as a critical state dynamic. In other words, you can’t just dial up free money and then dial down free money when you seem to be getting into an inflationary problem. The control, the toggle, just doesn’t work that way. And what happens, in fact, is that things go critical because it is a critical state dynamic.

 

And what’s been going on is that we’ve been trying to compensate for the lack of capital formation with this imaginary money. And by capital formation, I mean the ability to accumulate real wealth from real wealth-producing activities. And creating credit card money on a national level is not real wealth-producing activity.

 

I think the closer we get to this point of criticality, the more delusional we’re liable to become about it. So this is just a subset of that larger dynamic of, the more distressed the society gets, the more delusional it gets.

Click the play button below to listen to Chris’ interview with James Howard Kunstler (46m:59s):

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James Howard Kunstler: The Dangers Of The Age Of Delusion