NY nat' gas projection exemplifies doublespeak on fracking Cuomo plan bases outlook on conflicting scenarios

Will Fracking be part of New York’s energy picture for the next 20 years, or not? The state’s draft 2014 Energy Plan is supposed to answer this kind of question, and the fact that it appears to but doesn’t represents the politically unwieldy position Governor Andrew Cuomo finds himself in with the fracking debate.

In a recent post, I wrote that the plan “makes no mention of developing New York’s shale reserves through fracking, a discussion that remains the elephant in the room. But the plan gives a nod to the role of natural gas and more infrastructure as part and parcel to some very ambitious, of very broad, goals.”

An astute reader, Keith Schue, flagged this. He pointed out Cuomo's plan does in fact mention fracking, albeit in a convoluted and (in my view) meaningless way. Schue directed me to “Volume 2 – Sources,” and a subsection on p. 88 titled "New York Production Forecast." (Embedded below)

My own review of this section found several things worth noting.  First, the forecast, accompanied by a chart, extends through 2035. During that time, the state’s natural gas production is “expected to decrease significantly,” according to the text, due to a “decline in existing formations” and “lack of new wells being drilled.”

Yet, oddly, the line plotted in the accompanying “figure 32” gas production climbs impressively through that period.

The text attempts to explain this, ignoring the inconsistency in the original analysis that gas production was expected to decline. The graph illustrates “a conservative Marcellus Shale natural gas production level.” This “conservative” level accounts for “potential (my emphasis) permitting and production difficulties related to horizontal drilling and hydraulic fracturing.” It offers this elaboration. “If these difficulties are minimized, Marcellus production levels could potentially be higher.”

Finally, it explains that the graph “would show a forecasted overall decline in production continuing through 2035 if the current prohibition on shale development continues.” It concludes that “Regardless of actions within New York boundaries,” ample supplies of gas exist elsewhere “as long as the interstate pipeline capacity exists.”

In a nut, the plan says that Marcellus gas will make production go up, contingent on unknowable factors if it happens, and go down if it doesn’t; and New York can get gas elsewhere anyway, if their are enough pipelines.

To my eye, the analysis appears at first blush to be vague to the point of meaninglessness. But I will grant that it provides a baseline for discussion and many will find that the very dance around the Marcellus question along with the excruciating qualifications and parsing of language are emblematic of the ambiguous state of our energy future.

Shue, who is working with various environmental and anti-frcking groups, explained in an email that he and others were in the process of “writing an exhaustive critique of the energy plan and will be shining a spotlight on this sly mention of fracking at the hearings too.” I am happy that others are looking carefully at this, and I welcome their assessments.

2014 Draft Nysep Vol2 Sources (Page88) 1

Moratorium or not, NY begins to feel fracking’s impact Outcome rests with future of consumption, production

While New York’s governor Andrew Cuomo has officially tabled a decision over the politically explosive issue of fracking until sometime after elections, his state’s energy dilemma continues to simmer.

For worse or better, the Empire State will continue to feel impacts of the fracking boom for the next decade or more. The question is how big those impacts will be. The answer, to a large degree, rests with the governor, who can direct policy encouraging or discouraging both production and consumption of natural gas, and/or alternatives.

Even with no decision to allow shale gas wells to be permitted within the state, fracked natural gas and oil are flowing into or passing through New York at an accelerated rate as the on-shore drilling boom continues to ramp up nationwide. Crude oil from the Bakken shale in North Dakota has begun passing through New York at an annual rate of 2 billion gallons, traveling by rail to Albany and then down the Hudson River on tankers and on to refineries in New Brunswick Canada. (The oil carries unusual risks. With relatively high concentrations of gas, it has caused explosions after four separate rail mishaps in North America, including one that killed 47 people in Lac Megantic, Canada.)

Numerous infrastructure plans to store and transport natural gas within New York are also well underway. Liberty Natural Gas has proposed a terminal to import gas to communities in New York and New Jersey. The Port Ambrose facility, proposed 19 miles off Long Island, would take in liquefied natural gas (LNG) from ships, convert it back into gas, and pipe it to markets in New York and New Jersey now dependent on heating oil. Anti-fracking activists fear the port will be converted to an export facility. In addition to various pipelines on the drawing board and underway throughout upstate and downstate, there are plans to increase storage capacity. In the Finger Lakes community of Seneca Lake, Inergy Midstream is seeking final approval from the Department of Environmental Conservation to store propane in depleted salt mines, which would serve as a distribution hub through the region. The project faces intense opposition from grass roots and institutional environmental causes.

Over the long haul, the impact of regional and national shale gas development on New York rests with two primary factors: How much gas the state consumes, and how much it produces.

On the consumption side, natural gas is a primary fuel for heating and electricity generation. Based on a draft of the New York State 2014 Energy Plan, recently released by the governor’s office, that trend is destine to continue, like it or not. The plan calls for expansion of natural gas infrastructure to replace heating oil – which is both dirty and expensive -- in urban areas downstate and elsewhere.  Initiative 9 on p. 44 states it this way:

Reduce reliance on petroleum products for heating buildings by supporting the use of clean alternatives to heating oil and expanding access to natural gas in the near term while pursuing strategies to reduce natural gas leakage.

Simply put, natural gas consumption will continue to be a staple in the state’s energy diet with intended improvements to its leaky delivery system.

The plan talks much about consumption and infrastructure of natural gas, but little about production. It makes no mention of developing New York’s shale reserves through fracking, a discussion that remains the elephant in the room. But the plan gives a nod to the role of natural gas and more infrastructure as part and parcel to some very ambitious, if very broad, goals. An overriding goal (rooted in policy from Gov. David Paterson's administration) is to reduce the amount of greenhouse gasses emitted in the state by 80 percent by 2050. It’s important to note that the gauge for measuring this goal is predicated on carbon; and that fuel oil – like coal -- emits much more carbon than gas. Critics like Bob Howarth feel the plan falls well short of fully accounting for the impact of methane. Howarth, a Cornell University ecology professor, is one of several co-authors of a paper challenging the notion that methane is an environmentally sound alternative to coal or other fossil fuels for that matter. “Natural gas is a disastrous fuel,” he said.

There are other aspects to the 2014 Energy Plan, including a $1 billion “New York Green Bank” to invest in “clean energy projects”; an initiative that lists “increased transportation alternatives”; and independent “microgrids” that can offer alternative and backup sources to communities apart from primary  grids.

The plan is easy to look at, with an abundance of glossy and marginally relevant pictures of happy people in scenic landscapes, but difficult to read with bureaucratic jargon that is simultaneously dense and vague. Some critics called out the report for a lack of specifics and the preponderance of gloss. Andy Leahy, a drilling proponent and blogger who has been following developments in New York, wrote in Shale Gas Now that the Energy Plan was “governance of wishful perception” and he suggested it was “catering to the uninformed, wishful desires of everybody in New York who wants to feel vaguely good about the future, but to stay lit and warm throughout, burning what's extracted out of Pennsylvania.”

Others were enthusiastic about the plan. Pierre Bull, a policy analyst for the National Resources Defense Council, wrote on the agency’s blog, Switchboard:

The already-impressive NY-Sun Initiative is about to become one of the most ambitious solar programs in the nation, with the governor committing, through a filing with the state’s Public Service Commission, $1 billion to the program—that’s right, $1 billion—over the next 10 years. (Governor Cuomo’s text also announces a major new program to help K-12 schools throughout New York go solar. You can read more about that here.) The governor’s goal is to install 3,000 megawatts of solar across New York. That’s enough solar to power 465,000 New York homes, cut greenhouse gas emissions by 2.3 million tons annually—the equivalent of taking almost 435,000 cars off the road—and create more than 13,000 new solar jobs. 

If New York expects to become a national showcase for how to dramatically reduce greenhouse gasses, it has plenty to work with. But assessing how that measure is made – and the degree that it includes natural gas -- is critically important.

By design more a PR gloss and political showcase than a technical document, the daft energy plan still serves a critical role as a catalyst for public discourse and involvement on the politics and technicalities of energy delivery. To that end, public hearings will be held around the state in February and March. (Full schedule here.)

The primary question not mentioned in the energy plan is whether New York will allow exploration to begin for shale gas production. With a recent announcement from Department of Environmental Commissioner Joseph Martens that the state will not issue permits until at least 2015, the governor’s staff has put speculation to rest that we will see fracking in New York anytime soon.

But both landowners and industry interests are mounting legal challenges in an attempt to force the governor’s hand. Tom West, an industry lawyer, is a primary figure behind the challenges, which I wrote about here. (Note that a hearing for West’s case, Wallach v New York state, has been postponed until March 7. This is so the complaint can be filed with a parallel case by the Joint Landowners Coalition, represented by attorney Scott Kurkoski of Levene, Gouldin & Thompson and funded by the Rocky Mountain Legal Defense Fund, an NGO that supports conservative causes.

Regardless of how the challenges to Cuomo’s indefinite delay on fracking turn out, another group has brought up a nagging question about the extent of New York’s shale reserves, and whether development is even viable at current prices. Chip Northrup, a former industry investor, accompanied by a group of critics with backgrounds in geology and industry, have been making presentations, most recently to a state Senate committee. The thrust of their argument is that geological data suggest New York’s shale gas reserves are not worth the bother, but speculators who gamble on them may still cause significant environmental headaches for the greater public.

All the speculation, either supporting or undermining the size of the state’s fossil fuel assets, won’t change this underlying reality: Upstate and New York City need lots of energy now, and tend to consume it in its cheapest and most available form.

Obama’s upstate tour motivates anti-fracking activists President: ‘Fossil fuels finite. Climate change is real’

Anti-fracking protestors line the motorcade route at Binghamton University

It was tough going for the 400 protesters preparing for Obama’s visit to Binghamton University Friday. They faced traffic from a rush of returning students and a maze of construction barriers, detours, and police blockades. Parking on campus, limited under ideal circumstances, got predictably worse when police closed campus roads at 10 a.m., two and a half hours prior to the arrival of the presidential motorcade.

After getting an early morning start that began with a walk of a mile or more from remote parking spots, with NO FRACKING WAY placards and provisions in hand, the protesters – skewed heavily toward the baby boom generation but also including students -- gathered at a designated spot on the motorcade route in front of the university library. They rallied for hours while waiting for the president’s arrival.  They chanted “Yes We Can,” echoing both the president’s campaign slogan, and their intention to stop fracking. The cheers reverberated across quads and walkways at the center of campus that were mostly empty due to security measures, and the animation of the protesters offered stark contrast to the poised vigilance of police and secret service personnel stationed at every turn.

Behind the scene at the Town Hall meeting

I passed the protesters as I negotiated the series of barriers and yellow tape, hurrying to get to the press check-in at the university union before the cut-off. After getting cleared, I was directed through the press entrance to the venue, where I set up my laptop at a bank of workstations that accommodated about 40 other reporters on the periphery of the action. My view was partially obscured by the risers in front of me, which held cameras for photographers and broadcast outlets. The press pool, easily numbering more than 100, flanked one side of the small hall. The president’s podium was in the middle. Two other sets of risers – opposite and at a right angle to the risers for the press pool -- held students and faculty picked from a lottery. In the remaining space a row of folded chairs directly in front of the president was reserved for local officials and dignitaries.

A few hours later, with everybody in their assigned places, a helicopter churned overhead and the presidential motorcade turned onto campus. As the line of motorcycles with flashing lights, SUVs and a large black bus with the presidential seal made their way up the road, the activists by the library seized their brief moment and shouted and waved banners. Some glimpsed the president standing near the front of the bus, but it was difficult to discern a reaction behind the tinted class. It was over in an instant, and several minutes later, the president made his way into the Union from an unseen entrance.


Video of Obama's town hall meeting at Binghamton

Obama opened the meeting with a short talk about education as the essence of the American Dream. Predictably, he offered no passing mention of the subject that stirred the protest that greeted his arrival, or other protests that had been staged across various points of his two-day tour through upstate New York and Pennsylvania. The questions and answers of the two-hour town hall meeting were themed around equality and access and affordability of the American higher education system. (With due respect to the significance of the educational issues that were the focus of the president’s tour, I will not go into these much here, and leave that worthwhile work to other bloggers and educational beat writers.)

In keeping with the heart of the theme of his second term – working for the middle class -- Obama projected an approachable and informal manner throughout his upstate tour, which included spontaneous stops to greet surprised onlookers at soccer-fields, diners, and cafes. And he kept  up that manner at Binghamton University.  “I’m interested in hearing your stories, getting your questions,” he said. “And this will be a pretty informal affair -- well, as informal as it gets when the President comes -- (to laughter) -- and there are a bunch of cameras everywhere.” After calling on a student in an Obama T-shirt, he advised “here’s a general rule in the presidential town hall:  If you want to get called on, wear the president's face on your shirt.” (The student’s question: How does your administration plan to address the major budget cuts that are happening with Head Start schools around the U.S.? Obama’s answer: As the deficit continues to fall with the economic recovery, he sees more resources for federal funding. But it remains a political fight, and he will fight for worthwhile programs like Head Start.)

Near the end of the meeting, Obama called on a man with something other than education on his mind. His name was Adam Flint, coordinator of a Cooperative Extension program called Broome Energy Leadership Program. Flint began with a bit of context: Fossil fuels might last another generation. And then what? He was worried about his children’s futures, and he was guessing that the president, with adolescent daughters of his own, shared his concern. “Is there any good news for green economy of future?” Flint asked.

Behind that simple question lies a convoluted political dilemma, and the president’s answer reflected this, if little else. On the one hand, Obama said, with record production of domestic fossil fuel “we’ve actually achieved, or are on the verge of achieving about as close as you can get to energy independence as America is going to see.” He notably chose to avoid the word “fracking” – the controversial method of splitting rock with pressurized chemical solutions. This technology, exempt from federal regulations that govern chemicals that go into the ground and waste that comes out of the ground, is largely responsible for prolonging and enabling our fossil fuel-based energy system.

Without mentioning these exemptions, Obama pushed on to the crux of the question: The future. “The bottom line is those (fossil fuels) are still finite resources.  Climate change is real.  The planet is getting warmer.  And you’ve got several billion Chinese, Indians, Africans and others who also want cars, refrigerators, electricity. And as they go through their development cycle, the planet cannot sustain the same kinds of energy use as we have right now.  So we’re going to have to make a shift.”

The shift will require new technology, he said. But immediate improvements can come through conservation measures now within reach that could reduce the country’s energy consumption by 20 percent to 30 percent.  Retrofitting buildings for energy efficiency, as well as building new energy-efficient buildings and communities, can create jobs as well as decrease energy dependence. But even a relatively simple approach like this – what Obama called the “low hanging fruit” of the energy question – involves a problem. The problem is rooted deeply in prevailing influence of Big Energy on Capitol Hill, and ideological factors that “tend not to be particularly sympathetic to alternative energy strategies,” Obama said.

“In some cases, we’ve actually been criticized that it’s a socialist plot that’s restricting your freedom for us to encourage energy-efficient light bulbs, for example.  I never understood that.  But you hear those arguments.  I mean, you can go on the Web, and people will be decrying how simple stuff that we’re doing, like trying to set up regulations to make appliances more energy-efficient -- which saves consumers money and is good for our environment -- is somehow restricting America’s liberty and violates the Constitution.

“A lot of our job is to educate the public as to why this can be good for them -- in a very narrow self-interested way.  This is not pie in the sky. This is not tree-hugging, sprout-eating university professors. This is a practical, hardheaded, smart, business-savvy approach to how we deal with energy.”

Obama is dealing with energy in a somewhat different way than his fellow Democratic leader, New York Governor Andrew Cuomo. Obama has embraced an “all of the above” approach to encourage sources of domestic energy production, including fossil fuels and renewables, and in previous speeches he has identified fracking for natural gas and oil as “a priority.” Obama’s words have been supported by his actions: His EPA has dropped two critical investigations into groundwater pollution near drilling sites in Pavillion, Wyoming and Dimock, Pennsylvania. Both investigations found chemicals associated with drilling in residential water wells, and this finding, if pursued, could have provided ammunition for policy reform and a threat to the industry’s exemption to the Safe Drinking Water Act. Also, Obama’s Department of Energy has begun permitting facilities to export gas, a move that will encourage more exploration and production at home.

Cuomo, on the other hand, leads a state that sits over a lucrative part of the Marcellus and Utica shales – world class gas reserves. Yet Cuomo has not allowed shale gas development. A defacto-moratorium on permitting is now entering its sixth year, while the Cuomo administration continues to evaluate health and environmental impacts of fracking and the broader consequences of shale gas development.

In the meantime, political action groups both for and against fracking have used the delay to pressure Cuomo. Fracking supporters also appeared with signs  – Drill a Well, bring a soldier home -- within view of the presidential motorcade yesterday. That protest, at Otsiningo Park boarding Route 81 several miles north of Binghamton, was much smaller and less visible than the one on campus, and the difference between the two protests illustrates the way things are going in New York state.

Walter Hang, an anti-fracking activist and an organizer of the Binghamton University protest, said the logistically difficult demonstration on campus was a reflection of the organizational ability and commitment of the anti-fracking push from the grass roots that has stalled the development of shale gas at the Pennsylvania border.

“When Obama’s office announced he would be taking a bus tour through upstate, we knew this was a chance to get our message out nationally,” said Hang, a career activist who worked as a community organizer for New York Public Interest Research Group for decades. Hang emphasizes the importance of tactics and execution in political action campaigns. “We’re out-organizing the industry in New York state,” he said.

In addition to well-organized grass roots campaigns in upstate New York, the movement is also getting help from Cuomo’s broader progressive base, which includes a host of institutions and influence from the Hudson Valley and New York City areas strongly opposed to fracking.

Cuomo, seen by many as a rising star in the Democratic party and a possible successor to Obama, neatly sidestepped this chapter of the shale gas controversy. After greeting the president at the Buffalo airport Thursday, he took his daughters back to college while the president made his rounds upstate.

On a related note: While most drilling takes place on private land, the federal government is considering a set of rules to regulate fracking on federal and Indian lands. This recent article by Keith Johnson of the Wall Street Journal explains the fight between the industry and environmentalists over the scope of proposed rules by the Bureau of Land Management.

Model T or Tesla: Reformers take on $3.9B NJ grid project Post-Sandy plan draws challenge to 20th Century ways

When Hurricane Sandy tore into the east coast last year, it left several million people without power – some for weeks -- and provided what is widely believed to be a preview of life with global warming.

Anticipating more extreme weather, PSE&G is pursuing Energy Strong -- a $3.9 billion plan to fortify its power grid. With funding from ratepayers, the project would raise and protect switching and substations, reinforce utility poles and overhead wires, and replace gas lines and other infrastructure in flood-prone areas. The intention, according to the plan, is to capitalize on low interest rates, cheap natural gas, and “a glut” of available labor to produce a stronger, more reliable power-delivery system that will withstand extreme weather and rising sea levels.

Energy Strong is a massive infrastructure project, but it represents something much more. It’s a critical test of how eager society is to prolong the life of a 20th Century grid designed around fossil fuels, or begin shifting to a new generation of technology that encourages power from multiple energy sources, including wind and solar.

According to an industry-generated release on PR Newswire, Energy Strong draws support from a number of municipalities, labor unions, businesses and health care providers eager for a grid that can withstand extreme weather and the promise of jobs associated with a multibillion infrastructure project.

It is also facing challenges from influential lobbies. The AARP is questioning the return on investment to rate-payers, and the Sierra Club challenges the wisdom of spending billions to shore up rather than modernize an archaic system of power-delivery. Tom Johnson, of NJ Spotlight, has been covering the proposal from the beginning. He summed up stakes of the AARP challenged in a May article.

The dispute underscores the tough choices facing state regulators and utilities, both of which are under pressure from the public to avert widespread outages, that can leave some customers without any power for more than a week. How to do so without increasing electric bills, already among the highest in the nation, is the dilemma facing state officials.

The problem became even more divisive last week, when the New Jersey Sierra Club and the New Jersey Environmental Federation filed a “motion for intervention”with the New Jersey Board of Public Utilities. The motion argued that the agency should focus on energy efficiency, renewable energy, and distributed generation – where energy is produced closer to where it is consumed from a decentralized network of power sources – including  renewable sources and hybrids -- in short, more of what a 21st Century, post-fossil fuel grid would look like.

Johnson reported in a follow-up article this week:

The entry of the two environmental groups in the BPU rate case is unusual, but it underscores the concerns harbored by some who fear the state’s aggressive clean energy goals may be undermined by huge investments in making the power grid more resilient.

This is really an argument about fossil fuels versus renewable energy sources. To some degree, it reflects a broader, national and global argument about justifying capital investments necessary to build the infrastructure for shale gas delivery. Knowing what we know now about climate change, does it make sense to channel money into expanding the life of a carbon-based energy grid for resources that at best will last a few more generations (or less) and at worst make the planet less suitable for human habitation?

According to the motion filed by the Sierra Club, the PSE&G plan misses a critical opportunity to begin adapting the grid to sustainable energy, in addition to reinforcing it. “A solution that focuses solely on the physical protection of infrastructure misses a huge opportunity to address or eliminate the underlying causes of the vulnerability,” the motion states. The environmental groups seek input to the plan “to ensure that cost effective investments going forward capitalize on opportunities to reduce energy demand through energy efficiency and other demand side efforts… Also techniques such as the use of a smart grid, distributed generation and renewable energy sources can provide critical support to the delivery of reliable and cost effective power to the public.”

In a phone conversation this week, Jeff Tittel, director of the New Jersey Chapter of the Sierra Club, told me the plan is based on an archaic model that is “like trying to make upgrades to the Model T automobile in the age of the Tesla… It’s more about reinforcing and elevating and not about being smart.” The intervening parties are not looking to stop the program, but to influence it, he said, adding that additional perspective and planning will ultimately help ratepayers.

Company officials, meanwhile, are pitching the plan as an urgent step to storm-proof the grid in the face of climate change that is no longer an abstraction projected for future generations. More than 1.9 million PSE&G customers (and millions more served by other utilities) lost power after Sandy -- some for as long as two weeks. In addition to Sandy, two other storms -- Hurricane Irene, the freak snowstorm in October 2011 – have in the last two years wrought damage unprecedented in the utility’s 100-year history. As spelled out in a company press kit for Energy Strong: “Keeping the lights on day-to-day is no longer enough. Future investments must be about increasing resiliency, which is the ability to withstand damage and quickly recover from extreme weather and events.”

Whether the economics support an appreciable shift to renewable energy is a matter of public policy as much as technology, and it begins with plans such as the PSE&G proposal. Anti-frackers in New York, where a moratorium on fracking now in its fifth year has spurred a similar discussion about the role of renewables, have seized the opportunity to showcase a plan of their own, which I wrote about in May. It’s authored by Cornell University researchers and demonstrates how the state can be run entirely on non-fossil natural resources – sun, wind, and water. Some say this looks good on paper, but does not readily translate to the real world. But if not now, when will we overcome the inertial forces of a carbon-based infrastructure? At the very least, the New York state plan provides a starting point for much-needed discussions about the empirical framework for life after carbon, and the Sierra Club challenge to the PSE&G plan begins testing our willingness to move progressively in that direction.

LNG port slated for NY coast. Will gas come or will it go? Shale gas exports/imports stir energy policy debate

The second wave of the shale gas debate:Where does it go? 

The controversy over fracking began with the process of extracting gas from shale. Now it involves where the bounty goes and how it gets there.

First, about where it goes: In response to a glut from an onshore drilling boom, President Obama has voiced support for plans to boost sales by exporting liquefied natural gas (LNG) to countries in Asia and other places where supply is low and prices are high. It’s a strategy opposed by anti-fracking groups because global markets  = more demand = more fracking. Export plans have also drawn resistance from the manufacturing sector and petro-chemical industry, which use natural gas both as fuel and feedstock to create products. As reported by DCBureau.org, Dow Chemical CEO Andrew Liveris argues that it’s far better for America to use its newfound shale gas supply to stimulate domestic jobs and production than it is to  export it wholesale to foreign manufacturing rivals. “America’s natural gas bounty is more than a simple commodity,” he testified at a Senate committee hearing in February. “It’s a once-in-a-generation opportunity for America to export advanced products, not just BTUs.” His position is supported by a report commissioned by the U.S. Department of Energy that shows exporting gas would drive up prices and drive down wages. Yet drawbacks would be more than offset from gains to economic stakeholders in the natural gas extraction and exporting industries, the report concludes.

Now, about how it gets there: Companies are seeking federal approval to convert natural gas import terminals on the Gulf and Pacific coasts to export terminals. Since the Obama administration approved LNG export terminals in Louisiana and Texas, more than two-dozen applicants have lined up with licensing requests.

Whether you are for this or against this, it’s easy to understand the economics. Companies developing low cost domestic shale are finding higher returns in foreign markets, while U.S. manufacturers are better served by keeping an abundance of cheap energy to themselves. But it’s not all that simple. While companies are racing to capitalize on overseas demand, one company is pushing ahead with plans to build a terminal to IMPORT gas to communities in New York and New Jersey, next to one of the world’s largest shale plays. Liberty Natural Gas is proposing the Port Ambrose project, 19 miles off the Long Island, in relatively close regional proximity to the Marcellus play, which extends under northeastern and mid-Atlantic states.

Why?

I put the question to Teri Viswanath, an analyst with BNP Paribas who follows global natural gas markets. Despite a glut in domestic markets, Viswanath said, there are still sizable pockets in parts of New England and New York City where demand is outpacing supply.  With neighboring Pennsylvania now a major producer, it isn’t related to a lack of gas. It’s due to lack of infrastructure. Unlike reserves in Texas and other established oil and gas states, the Marcellus Shale is in large part a “greenfield” development, Viswanath said, meaning it extends over areas that lack established infrastructure.

The aggressive build-out of that infrastructure continues throughout the northeast, including upgrades and add-ons to established pipelines to the south, and both new and expanded pipelines through Pennsylvania and upstate New York to New York City, New Jersey and New England. Even so, pipeline expansion is limited by logistic and social hurdles that will continue to prevent it from bridging the demand-gap in certain east coast markets – what Viswanath called “transportation-constrained” markets.

Pipeline gaps evolved partly due to a “supply push rather than a demand pull.” The supply push characterized natural gas development in the northeast. In other words, as operators explored and developed relatively small hit-and-miss conventional plays in the northeast, they built gas infrastructure along the path of least resistance – often along existing rights of ways. Before unconventional gas development changed the dynamic of energy consumption, natural gas markets were regional and prices fluctuated along with supplies. (Storage projects partly compensate for this by giving producers a place to warehouse gas when demand was low and sell it when demand spiked.) The build-out may have been different if it was driven by demand  – i.e. shaped by a critical mass of consumers and planners seeking access to a large and reliable supply.

Developments in the shale gas era are changing the equation, and they include public policy encouraging demand in the advent of the boom. New York City Mayor Michael Bloomberg is pushing incentives to displace fuel oil with natural gas (and other fuels) through the city’s Clean Heat program; and Connecticut Governor Dannel Malloy is pitching a program to encourage 300,000 households to switch to natural gas through the Connecticut Comprehensive Energy Strategy.

According to Liberty’s website, the company plans to import gas produced without the controversial process of hydraulic fracturing. It will come from “conventional” wells that are “likely in the Caribbean.”  In reality, according to Viswanath, the gas could come from many areas, including shale gas from the Gulf states. That leaves room to wonder how it is economically more feasible to produce shale gas in Texas or Louisiana, liquefy it, and ship it thousands of miles from the Gulf Coast to New Jersey and New York, than to pipe it a few hundred miles from Pennsylvania.

Not everybody buys assurances that the Port Ambrose project is all about importing. A collection of anti-fracking groups, including Catskill Citizens for Safe Energy, Surfrider, and Clean Ocean Action are rallying opposition based partly on this assessment www.marcellusprotest.org posted on Marcellusprotest.org:

Ambrose LNG Port is a gateway to natural gas exports. In liquid form, LNG can be shipped around the world and sold to the highest bidder. While the project is currently described as an import terminal to receive natural gas from Trinidad and Tobago, it is widely believed that since the permit request filed under the Deepwater Port Act automatically covers both import and export, Port Ambrose, once constructed, will be used for export instead.

The question of import or export aside, The Port Ambrose project is generating plenty of controversy in coastal communities in New York and New Jersey still dealing with rebuilding from Hurricane Sandy. Some officials and residents fear the project is being railroaded without due evaluation, consideration, or public input, and some are flatly opposed to it proceeding under any circumstances. A previous version of the project was vetoed by New Jersey Governor Chris Christie.

The new project has been revised and resubmitted, with the cooperation of the federal government. Officials from the Coast Guard and the Maritime Administration recently accepted the Environmental Impact Statement, a complicated document that is a fundamental aspect for approval. The very fact that the proposal is still on the table after being defeated once shows the motivation for companies, reading what they see as encouraging signs from the federal government, to ride the crest of the shale gas wave into the LNG business.

Federal report gives thumbs up to shale gas exports Scenarios would help investors, hurt wage earners

LNG exports: shareholders win, wage earners lose
PHOTO PROVIDED

Exporting the country’s shale gas reserves would drive up prices and drive down wages, according to a report commissioned by the U.S. Department of Energy. Yet drawbacks would be more than offset from gains to economic stakeholders in the natural gas extraction and exporting industries, the report concludes.

The report by NERA Economic Consulting was forwarded last week to Christopher Smith, Deputy Assistant Secretary of the Department of Energy. It shows that policy to encourage exportation of domestic energy reserves, thought by some to be a political non-starter, is being weighed by an administration that has identified on-shore drilling as a priority to stimulate energy independence.

With 20 different plays, the collection of shale gas reserves in the lower-48 United States is thought to be among the largest in the world. President Obama’s support of shale gas development comes despite opposition from some environmental organizations and grass roots campaigns that argue drilling poses risks to public health and the environment while channeling resources away from sustainable energy development.

Wrapped up in the exporting question is a debate over the merits of high volume hydraulic fracturing, a controversial practice to fracture bedrock and release gas by injecting well bores with pressurized chemical solutions. In 2005, the Bush/Cheney administration encouraged shale gas development by making fracking exempt from the Safe Drinking Water Act. That exemption -- known to critics as the Haliburton Loophole -- came in addition to exemptions from hazardous waste laws enacted by Congress in both the Carter and Reagan years. The report issued last week is a sign that, despite a growing anti-fracking movement lead by progressives, the Obama administration could be thinking less about repealing exemptions and more about stimulating demand for the country’s shale gas.

The risks and merits of shale gas development are the subject of a polarizing national debate, including unresolved prospects of the Marcellus and Utica shale’s underlying parts of New York state. While fracking has lead to an onshore drilling boom in Texas, Pennsylvania, Louisiana, Ohio, Colorado, Arkansas, West Virginia and other places, New York, has held off on permitting shale wells as it reexamines policy in light of concerns about impacts on environment and public health. While governor Andrew Cuomo’s administration is shooting for a deadline in late February to finalize regulations, it is awaiting analysis from an independent panel of health experts, and Cuomo has left the door open to shelving the process.


To make it suitable for exporting in tankers, gas is converted into liquid (Liquid Natural Gas or LNG). The idea of exporting domestic supplies to lucrative overseas markets in Europe and Asia is sure to spur more controversy. As prices drop domestically with increased supply, companies have proposed more than a dozen projects to build coastal exporting facilities. These include a $6 billion liquefied natural gas export terminal, already approved, at Sempra Energy’s existing import terminal at Hackberry in southwestern Louisiana, with permits for other projects pending. Gas exports would stimulate more shale gas development by easing a market glut and raising prices. Higher prices, in turn, provide incentive for more exploration, development and infrastructure build out. Critics warn that unconventional extraction methods have outpaced science and regulations to understand and mitigate the costs, even without the catalytic affect of exports.

“Exporting means more fracking, and there are a lot of regulations that need to be developed before this is even close to safe,” said Craig Segall, an attorney for the Sierra Club. “You haven’t done an analysis of the cost to the public and the environment. This is a huge one and you have to think about it.”

Jim Smith, a spokesman for Independent Oil & Gas Association of New York, said the agency would not be inclined to support policy that raises costs to manufacturers, which are a mainstay of the agency’s membership. “We have to look carefully at both sides of the equation,” he said.

Nationally, any gas exporting policy is sure to meet resistance from the manufacturing sector. Gas and its derivatives are used as both fuel and feedstock for domestically produced goods ranging from textiles to fertilizer to packaging. Domestic petro-chemical manufacturers, including DOW Jones and the Koch Industries, have already successfully lobbied against proposed federal subsidies to use natural gas to fuel vehicles because, the argument goes, increased demand would raise prices and hurt manufacturing.

Yet operators and investors can fetch much higher prices in overseas markets due to global demand. The winners and losers under exporting scenarios break down accordingly, with the winners being the natural gas industry and those who invest in it, and the losers being manufacturing, transportation, service, and agriculture sectors.

Under exporting scenarios, according to the NERA report:

“Wage income decreases in all industrial sectors except for the natural gas sector. Services and manufacturing sectors see the largest change in wage income in 2015 as these are sectors that are highly labor intensive.” The report explains that “the overall effect on the economy depends on the degree to which the economy adjusts by fuel switching, introducing new technologies, or mitigating costs by compensating parties disproportionately impacted.”

The most viable “fuel-switching” scenario is this: Plants that might otherwise burn gas would likely be more inclined to burn coal as gas prices rise. Critics argue that could leave the U.S. with both the environmental consequences of air and water pollution (including methane emissions) from unconventional shale gas development, plus CO2 and mercury pollution associated with burning coal.

Updated Dec. 12 Jannette Barth, an economist, consultant and shale gas industry critic, issued a critique today charging that the DOE study did not account for hidden costs -- ranging from increased demands on municipal resources to environmental degradation -- on local communities to produce gas. Barth argues that gas exports will benefit shareholders in gas extraction companies who tend to be affluent. “Only 54% of Americans own stock of any kind, retirement savings or otherwise. Clearly, not all of the 54% own natural gas stock.” Most who do “likely hold tiny numbers of shares in mutual funds.” Additionally, according to Barth’s assessment, many shareholders in the U.S. domestic shale gas play are from outsides the U.S.

What other reports and considerations are relevant to the discussion? What do you think?