President Barack Obama has made middle-class jobs and natural gas two of his top second-term policy objectives. Both could be undermined if his Department of Energy (DOE) continues to approve gas industry applications for exporting American gas.
There is already a move in Congress to remove DOE’s authority, so approvals can move even faster, and the oil and gas industry has thrown all its lobbying muscle behind this effort to steamroll through the permission process.
Natural gas, the cleanest of the hydrocarbon-based fuels, has long been a primary choice for heating and power generation, as well as an essential raw material, or “feedstock,” for a vast range of chemistry-based products, including every kind of plastic, synthetic cloth and high-tech composite materials. When gas supplies came under pressure in the late 1990s, the chemical industry — and most other energy-dependent U.S. heavy manufacturers — were hard hit.
Just within the last few years, however, the shale gas revolution has turned the economics of the natural gas industry upside down. Hundreds of small entrepreneurial companies rushed into production, outstripping pipeline capacity or the ability of customers to refit their fuel operations. For the last few years, the industry has been drowning in unsellable gas. Many wells were mothballed — they can be easily restarted — and producers shifted their attention to shale “liquids” that replicate most of the lighter derivatives of crude oil, including gasoline, which commands far higher prices.
The spot price of gas is set in the New York futures market, based on trades at a major Louisiana collection center called the Henry Hub. During the worst of the glut, the Henry Hub price dropped below $2 per thousand cubic feet (Mcf), well under the cost of production. But now new pipeline construction has broken the worst pipeline bottlenecks, and customer demand is rising, so prices have been hovering near $4 per Mcf for some time.