Natural gas war pits Saran Wrap against Honda Civic GX “Cracker plant” and vehicles vie for shale supplies

Shell's Pulau Bukom plant off Pulau Hantu reefs in Singapore 

The site of a similar plant in Appalachia is to be determined   

PHOTO COURTESY OF WILD SINGAPORE   

CNN's Steve Hargreaves is among the many mainstream news reporters to declare the natural gas industry a winner under President Obama’s recent State of the Union address. Hargreaves reported Monday that “out of all the different energy players, natural gas seems to have won the most.”

Maybe. In giving this assessment the critique it deserves, it’s important to keep in mind that Obama’s favorable tone towards shale gas development is nothing new. His energy blueprint, released last summer, characterizes domestic oil and natural gas supplies as “critical components of our Nation’s energy portfolio.” He has already supported an unsuccessful initiative in Congress to provide tax credits to natural gas vehicles and infrastructure. In an election year, then, it’s no surprise that Obama is counting on the country’s eagerness to find fixes for the economy and the environment, and on the face, “clean energy” seems to do both.

If only it were so simple.  A complicating factor is that one person’s clean abundant natural gas is another person’s environmental problem.  Hydraulic fracturing necessary to produce shale gas also produces unprecedented amounts of waste. No need to go into details here given the coverage this gets in other venues, but take a look at the EPA investigations in Dimock, Pa. and Pavillion Wyoming for more. Even without a set of hurdles being placed in the path of shale gas development by the anti-fracking movement (most notably in New York State) and possibly by the EPA itself, Obama’s plan for natural gas as a bridge to cleaner energy has to pass the test of market factors.

For natural gas production to flourish, prices will have to go up, and that means demand will have to increase. For demand to increase, new markets must be developed.  To address this, Obama is counting on providing infrastructure and incentives to fuel vehicles – like the Honda Civic GX -- with natural gas. But before this can happen, Obama, if reelected, would have to resolve a fight between two opposing capitalist heavyweights. On one side is Koch Industries, a $100 billion privately held conglomerate with major holdings in cattle, timber, and oil controlled by Charles Koch and his brother, David. On the other is T. Boone Pickens, the outspoken natural gas tycoon and creator of the “Picken’s Plan” which seeks to convert the nation’s vehicles to natural gas.

Koch -- teamed with Dow Chemicals and lobbyists from the petro-chemical manufacturing sector which makes things like plastic wrap to nail polish – have already stalled the Picken’s Plan once, and there’s no reason to believe future initiatives to give tax breaks to natural gas vehicles will overcome this formidable resistance. That’s because the Pickens Plan would hurt Koch Industries on several fronts. It would reduce the need for pipelines and oil refineries, in which Koch is heavily invested. It would also, by raising demand, raise the price of natural gas and encroach on a cheap, abundant supply of feedstock, including ethane, that the petrochemical companies use to make products ranging from plastic wrap to fertilizer.

That brings us to the latest natural gas saga unfolding in Appalachia: The “cracker plant.” As reported by various regional and national press, Pennsylvania, Ohio and West Virginia are in the running to land a multi-billion dollar petrochemical processing plant – a “cracker plant” – overlaying the Marcellus and Utica shales. The plant, by Shell Oil, would use shale gas as both fuel and feedstock for products at the core of the U.S. consumer econmy, including packaging material and plastics of all sizes and shapes. Where will this plant go? Answer: Wherever it can get the biggest tax break. There is supposedly an abundance of shale gas to supply this endeavor. But is there enough public money to feed the interests of both Pickens and the petrochemical industry supported by Koch? That may be very well for the victors of this year’s elections to determine.

UPDATE MARCH 16, 2O12: Shell chose a site in Potter Township for further evaluation for its plant. CLICK HERE for more.