The natural gas boom in North Texas is sputtering, with the number of rigs working the Barnett Shale recently hitting a 10-year low. It’s an issue elsewhere as well, as the glut of domestic energy that’s transforming America drives down the price of natural gas and makes drilling less profitable.
An industry association based in Fort Worth, Texas, is among those arguing that a solution is for the federal government to allow exports of America’s natural gas to foreign nations, where the price can be five times higher.
“It is very important to develop a new market for domestic natural gas,” said Ed Ireland, the executive director of the Barnett Shale Energy Education Council.
But there’s a powerful voice of skepticism: the new chairman of the Senate Energy and Natural Resources Committee, who says he’s worried that exporting America’s natural gas will drive up energy prices for U.S. consumers and manufacturers, killing a “manufacturing renaissance” the nation badly needs.
“If you don’t get it right, you can do a lot of damage,” the chairman, Oregon Democratic Sen. Ron Wyden, said at a recent natural gas forum in Washington.
The question of whether to export natural gas is among the top energy issues for Congress and the White House, and it dominated the first Senate energy committee hearing under Wyden’s leadership.
The chief executive officer of Dow Chemical, Andrew Liveris, expressed alarm over the idea of mass exports at that Feb. 12 hearing. He described natural gas as the “first indispensable ingredient for everything that is made and consumed in this country,” and said it created eight times more value across the economy as a building block for manufactured goods than if it were exported to other nations.
“America’s natural gas bounty is more than a simple commodity. It’s a once-in-a-generation opportunity,” he said.
The Department of Energy is considering 16 applications for terminals to export American natural gas to energy-hungry countries such as Japan, China and India. The White House hasn’t made a decision.
Senior White House energy adviser Heather Zichal said America had the lowest natural-gas prices in the world. That makes the nation attractive for business, she said.
“The abundance of affordable natural gas is supporting a new dawn in American manufacturing,” she said last week at the Center for Strategic and International Studies in Washington.
Zichal said allowing some of America’s energy bonanza to go to foreign lands would provide an opportunity to create oil and gas industry jobs in the United States. But that has to be balanced with the impact on manufacturing, national security and home energy bills, she said.
“As a general rule of thumb, we are not opposed to the notion of exports,” Zichal said. “But that’s through the lens of making sure we are not doing that in a manner that is going to undermine American consumers.”
The oil and gas industry argues that fears of exports are misplaced. American natural gas production would go up if there were new foreign markets, said Ireland, of the Barnett Shale council. So the supply would increase along with the demand and keep prices down, he said.
“Does anyone argue that because Apple sells iPads worldwide, that somehow increases the price of iPads for U.S. consumers?” Ireland asked in an interview.
He said the dilemma for North Texas was that the nation’s natural gas supply had skyrocketed and it took longer for U.S. demand to catch up.
New natural gas-fired power plants and petrochemical operations take time to build and get online, he said. So rigs leave the Barnett Shale and its natural gas behind in favor of drilling somewhere else for oil, which goes for a much higher price.
The number of active rigs in the Barnett Shale peaked at 200 in September of 2008. It was down to a 10-year low of 27 before going up to 32 last week.
The big Haynesville natural gas field in Louisiana also is seeing a declining interest, said Philip Budzik, an analyst with the Energy Information Administration, which is part of the Department of Energy.
“The only natural gas play that seems to be really heavily focused on right now is the Marcellus in Pennsylvania and West Virginia,” he said in an interview. “I think part of that is due to the fact that gas there has received a higher price because it’s closer to (the biggest) markets.”
A major study for the Department of Energy released in December supported the idea of exporting natural gas to help drillers. The study looked at what the impact on the economy might be if various amounts of liquefied natural gas were exported.
“Across all these scenarios, the U.S. was projected to gain net economic benefits from allowing LNG exports,” said the report from NERA Economic Consulting.
But Wyden, the Senate energy committee chairman, called the study “seriously flawed.” He said it shouldn’t be used to decide whether to allow exports.
Wyden said he didn’t oppose all exports. He said he wanted to see whether there was a “sweet spot” where drillers could make money and U.S. natural gas stayed cheap.
“Let’s just spend some time looking before we do the leaping,” he said.