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Natural Gas

Natural gas is benefiting both consumers and the environment: Fracking has sparked an American natural gas renaissance and driven down domestic energy prices. Fracking’s success, based on affordable and abundant clean energy, should serve as the model for future emission reductions.

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S.33 - LNG Permitting Certainty and Transparency Act
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Energy 101

How Fracking Strengthens America
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Learn the basics of Natural gas

Natural Gas 101
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1. Export natural gas

Proposed Policy Reforms

Add more countries to the LNG free trade list
Each contract to export liquid natural gas is individually reviewed by the federal government. The review process adds unnecessary time and imposes extra costs on American exports.

Shorten LNG export approval times
A single natural gas contract can take years to receive final government approval if the destination country lacks a natural gas free trade agreement. Bureaucrats must be held to reasonable and business-oriented deadlines.

Background

America is in the midst of an energy renaissance. Fracking has made America the world’s top producer of natural gas.1 Estimates show enough natural gas to power us through the end of the century.2

Our windfall is driving down domestic natural gas prices. They have dropped so low that some companies are scaling back or even shutting down production.3 Exports to energy-thirsty, international markets is one promising way to stimulate production. A study commissioned by the Department of Energy found that unconstrained natural gas exports would add thousands of new jobs and billions to the American economy.4,5

global-natural-gas-prices-01

In many parts of the world, natural gas rates are more than twice those in the US. This creates a sizeable arbitrage opportunity for American exporters.
Source: FERC6

Unlike oil prices, natural gas prices vary widely across the world: Natural gas cannot be neatly packed into barrels and barges. Instead, it is often landlocked because pipelines are the standard transportation process and shipping natural gas overseas is complicated. The gas must be condensed into a liquid called liquid natural gas (LNG) at temperatures below -250ºF in highly specialized ships. These transportation constraints have created isolated natural gas markets around the world.

d1-ng-exports-v2-bar-graph

Iran and Russia are the second and third largest producers of natural gas. If America doesn’t step up, it opens the door for our adversaries to exert a larger geopolitical influence.
Source: CIA Factbook7

Although natural gas liquefaction is an expensive process, prices in the United States are so low that international arbitrage opportunities still exist. In 2015, Taiwan and Japan paid about two and a half times the average U.S. price for liquid natural gas exports.8

Government bureaucracy is one barrier that is blocking America from satisfying the international appetite for natural gas. Liquid natural gas export agreements must undergo tedious federal review. When a company attempts to export natural gas to a country without a natural gas free trade agreement, the Department of Energy reviews each case and subjectively determines if it is in the best interests of America.

Add more countries to the LNG free trade list

Natural gas free trade agreements are made with select countries to circumvent this process. But only 18 countries had a natural gas free trade agreement with the United States as of 2014.9 Artificially increasing costs on America’s exported goods through over-regulation is not in the best interests of our country. One proposal would allow all World Trade Organization members to qualify for the exemption.10

Shorten LNG export approval times

Ironically, the Department of Energy itself is a roadblock to free trade. Processing LNG contracts can take the government years, which increases uncertainty and costs on businesses. From 2010 to 2014, the Department of Energy had only approved 9 of 35 applications to non-free trade agreement countries.

d1-ng-exports-v2Regional natural gas differences create a sizeable arbitrage opportunity for American exporters. Since the price of natural gas changes quickly, however, delays can significantly impact project economics.
Source: American Enterprise Institute11

Furthermore, government reviews of export applications are not standardized. According to the Government Accountability Office, “it is a case-by-case deliberation, where each application is considered separately from the others”.12 Standardizing the process and setting deadlines on reviews would facilitate U.S. natural gas exports. American gas exports would also lower pollution in other countries by displacing higher emitting coal power.

Related Bills

America’s future energy sources should be determined by the free market, not by bureaucrats or a particular administration’s favorite technology. Conservatives have already proposed a number of market-driven reforms. See all bills.

S.33 - LNG Permitting Certainty and Transparency Act

S.33 - LNG Permitting Certainty and Transparency Act

Read More
H.R.428 - Export American Natural Gas Act of 2015

H.R.428 - Export American Natural Gas Act of 2015

Read More

Fellow Conservative Voices

U.S. Natural Gas Exports: Lift Restrictions and Empower the States

Nicolas Loris, Fellow at The Heritage Foundation

Read more at heritage.org
Natural Gas can be the Energy Policy that Works

Mark J. Perry, Scholar at the American Enterprise Institute

Read more at aei.org
Liquefied Natural Gas Exports: America's Opportunity and Advantage

American Petroleum Institute

Read more at api.org

2. Build Infrastructure

Proposed Policy Reforms

Establish deadlines for pipeline permit decisions
A single natural gas pipeline permit can take years to be approved by the federal government. Establishing regular and enforceable deadlines would reduce the regulatory burden and uncertainty on prospective pipeline developers.

Default pipeline approvals
If government agencies do not take action on a pipeline permit by specified deadlines, the project should be automatically approved. Project developers should not be penalized for bureaucratic inefficiencies.

Create pipeline corridors
The federal government can establish pre-permitted corridors to expedite the environmental review process for future pipeline developers.

Background

Over 300,000 miles of natural gas pipelines crisscross America, bringing energy to our homes and factories.13 Still, the immense network is proving insufficient in moving our vast shale gas reserves to where they’re needed.

ngpipelines-map

Source: Energy Information Administration14

Nowhere is this more clear than North Dakota. Just a few years ago, more than a third of the natural gas the state produced was wasted and went unused.15 Unused natural gas is usually burned on-site in a process called “flaring” because it converts the gas to a more stable form that improves worksite safety and air quality.

us-night-power-grid

North Dakota’s flared natural gas can be seen from NASA’s satellites in space, rivaling the brightness of America’s largest urban centers.
Source: NASA16

Why is natural gas wasted? Natural gas is often a byproduct of oil extraction, but capturing and shipping the gas can be expensive without the proper equipment. Unlike Texas and other traditional energy producing states, North Dakota lacked the pipelines and infrastructure to economically move natural gas from its fields to customers.

nd-natural-gas-production

In 2014, over a third of all the natural gas produced in North Dakota was wasted.
Source: Energy Information Administration17

A recent buildout of pipelines in North Dakota has helped cut gas waste to about 20%.18 Yet, significant progress can still be made: Texas wastes less than 1%.19 When the gas is wasted, the economy loses. Locals forgo royalties, consumers miss out on lower energy bills and precious domestic energy reserves are wasted. Throwing our gas away makes even less sense because many parts of the country pay high prices.20 Sometimes there is not even enough supply. When natural gas demand exceeds supply in winter storms, blackouts may occur because home heating takes precedent over power generation.

Wasting gas is also a missed opportunity. The benefits are only reaped, however, if it’s used. Needlessly burning gas increases air pollution and wastes a valuable resource. More pipelines are needed to fully leverage all of America’s energy resources and reap the environmental benefits of natural gas. Our natural gas fleet has ample excess capacity, with the national natural gas plant fleet running only about half the time.21

Establish deadlines for pipeline permit decisions

The federal permitting process can take years and be delayed by any number of government agencies or environmental groups. In 2005, Congress attempted to streamline the federal government’s review of interstate natural gas pipeline permits.

The Federal Energy Regulatory Commission (FERC) was given the authority to set deadlines for other agencies to conduct their reviews.22 Despite new deadlines, delays continue to plague the process. In fact, a 2012 study found that delays actually increased by 20% since the bill’s passage.23

One reason is that agencies face little consequences for not complying with the deadlines. Codifying FERC’s deadlines or adding new enforcement mechanisms would facilitate the development of America’s natural gas reserves and improve certainty for prospective developers.

Default approvals

If government agencies do not take action on a pipeline permit by the deadline date, permits should be automatically approved. Under Former Rep. Mike Pompeo’s proposed Natural Gas Pipeline Permitting Act, agencies would still have months to conduct their reviews. These deadlines could be extended if an agency could justify their need for more time.24

Create pipeline corridors

The Obama administration identified tracts of federal land suitable for large solar power projects and “pre-permitted” them to lower the costs of development. The government land can emulate the strategy for pipeline development.25 Replicating the concept would encourage the buildout of new American pipelines and infrastructure.

A proposal by Rep. MacArthur (R-NJ-3) would identify and establish suitable natural gas pipeline corridors.26 The state of Wyoming is also working on a similar process to establish carbon dioxide pipeline corridors that could be used to connect fossil power plants with enhanced oil recovery plays.27

Related Bills

America’s future energy sources should be determined by the free market, not by bureaucrats or a particular administration’s favorite technology. Conservatives have already proposed a number of market-driven reforms. See all bills.

H.R. 161 - Natural Gas Pipeline Permitting Reform Act

H.R. 161 - Natural Gas Pipeline Permitting Reform Act

Read More
S.1228 - North American Energy Infrastructure Act

S.1228 - North American Energy Infrastructure Act

Read More

3. Unlock Advanced Energy

Proposed Policy Reforms

Support energy exploration efforts
States often lack the resources to identify untapped energy resources beneath their feet. The federal government can help research and scope the potential of these untapped sources.

Research advanced technologies
Advanced natural gas technologies will deliver economic benefits, improve energy security, and reduce emissions.

Background

Research at the Department of Energy’s national laboratories helped lay the groundwork for fracking. It’s a prime model of how basic government research can be commercialized by the private sector.The United States spent about $473 million on unconventional gas research between 1976 and 1992. That research proved critical in propelling the natural gas industry that adds over $100 billion of benefits to consumers each year.28,29 As previous research fueled our current energy abundance, innovation today will support America’s continued energy security.

carboncapturetab-netl

The National Energy Technology Laboratory (NETL) is the only U.S. national laboratory dedicated to fossil energy research.
Source: Department of Energy30

Support energy exploration efforts

Oil drilling is an inefficient process. Conventional methods can leave behind 50 to 70% of oil in the ground. To tap more of the leftovers, oil companies use a set of techniques called “enhanced oil recovery”. Declining oil fields can be rejuvenated by injecting carbon dioxide beneath the ground to lubricate and extract this hard to reach oil. The oil industry (such as Shell, Chevron and Occidental Petroleum) have been independently researching and using enhanced oil recovery for more than four decades without issue. Yet, more research is needed to scope and define the potential of these opportunities in the United States.

Research new technologies

Advanced technologies in the development pipeline can improve the way electricity is made. ExxonMobil is invested in one technology that does not burn any natural gas. Instead of combustion, it uses a chemical process similar to a battery. Another remarkable feature of the technology is that it can purify a fossil power plant’s emissions.31 The processed emissions can then be used to stimulate oil extraction.

Toshiba and a host of other companies are developing the “Allam Cycle”, a technology that could revolutionize the energy landscape. Its $140 million Texas pilot project is expected to come online in 2017. If successful, it will be a lower-cost and cleaner approach to making electricity with natural gas. A few of the innovations: 1) natural gas is burned in pure oxygen instead of air, 2) it produces no pollutants, and 3) uses supercritical carbon dioxide rather than water to move the turbine.

cost-electricity-source-01

Source: NET Power32

Federal energy research programs are paving the way for these and many other types of concepts. Over a dozen of America’s largest energy companies, including Southern Company and Duke Energy, have banded together to underscore the importance of researching more dynamic and efficient technologies. Doing so will maintain America’s competitive advantage in energy through the 21st century.

4. Explore Methane Ice

Proposed Policy Reforms

Reauthorize methane ice research
The methane ice research program was not reauthorized after it expired under President Obama’s watch in 2010. Continuing basic research around this potentially transformative energy source should be a national priority.

Pilot test wells
The United States can move forward on methane ice by further demonstrating test wells. It would help answer critical questions around the financial, technical, and environmental implications of methane hydrates.

Background

More energy could exist in methane ice than all other conventional fuels combined, according to the Department of Energy.33 Methane ice, also known as “methane hydrates”, refers to natural gas that’s been trapped in frozen ice or under ocean sediments. The main benefit of methane ice is that it’s packed tightly with energy. When extracted and brought to the surface, one methane ice unit expands to 164 natural gas units. Methane ice holds the potential to revolutionize the world’s energy systems.

Early estimates show it could meet America’s gas needs for 4,000 years.34 Similar to fracking, methane ice could grow our natural gas reserves and play a positive role in fighting climate change.35

gashydrf1des

Methane ice deposits exist all over the world.
Source: US Geological Survey36

arctic-drilling-platform

An Arctic drilling platform, the result of a private-public partnership, drills for methane hydrates.
Source: Department of Energy37

The promise of methane ice has only begun to be unlocked. The United States began researching methane hydrates in earnest in 2000, with the passage of the Methane Hydrate Research and Development Act. A Congressionally mandated review of these efforts by the National Research Council was “impressed with both the quality of the work the Program has enabled and the progress that has been made”.38 Yet, the technologies are still a ways from commercialization and the environmental impacts are largely unknown.

Methane ice can be one of the cleanest fuels on the market today. One promising concept would use carbon pollution from power plants to help with extraction. Under the right conditions, the carbon pollution could push out the useful methane — with the pollution staying behind. This concept is similar to the carbon dioxide enhanced oil recovery technique used by oil companies for over four decades.39

Related Bills

America’s future energy sources should be determined by the free market, not by bureaucrats or a particular administration’s favorite technology. Conservatives have already proposed a number of market-driven reforms. See all bills.

S.1215 - Methane Hydrate Research and Development Amendments Act of 2015

S.1215 - Methane Hydrate Research and Development Amendments Act of 2015

Read More

Fellow Conservative Voices

Successful Field Trial of Methane Hydrate Production Technologies

Senator Lisa Murkowski

ead more at senate.gov
Could Methane be Humanity’s 1,000 Year Fuel?

Kenneth Green, American Enterprise Institute

Read more at aei.org

Sources

  1. Council on Foreign Relations
  2. Energy Information Administration
  3. Heritage Foundation
  4. Department of Energy
  5. Energy Information Administration
  6. Federal Energy Regulatory Commission
  7. Central Intelligence Agency
  8. Energy Information Administration
  9. U.S. Department of Commerce
  10. Congress.gov
  11. American Enterprise Institute
  12. Government Accountability Office
  13. Energy Information Administration
  14. Energy Information Administration
  15. Energy Information Administration
  16. NASA
  17. Energy Information Administration
  18. Energy Information Administration
  19. Wall Street Journal
  20. Energy Information Administration
  21. Energy Information Administration
  22. Interstate Natural Gas Association of America
  23. House Republicans
  24. U.S. Congress
  25. Argonne National Laboratory
  26. U.S. Congress
  27. Wyoming Pipeline Authority
  28. Department of Energy
  29. American Energy Innovation Council
  30. Brookings Institution
  31. NET Power
  32. FuelCell Energy
  33. U.S. Senate Committee on Energy and Natural Resources
  34. Department of Energy
  35. US Geological Survey: Hydrates Primer
  36. National Academies Press
  37. Department of Energy
  38. National Academies Press
  39. Department of Energy

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