On Wednesday, The Houston Chronicle voiced its support for the Pickens Plan with an editorial that singled out the rare opportunity afforded by America’s gynormous reserves of natural gas. That’s the good news. The bad news is the Chronicle went on to point out that without any leadership in Washington, this windfall is being squandered:
The biggest disappointment in the policy area is Washington’s failure to pass the Natural Gas Act, better known as the Pickens Plan, which would convert our nation’s fleet of nearly 2 million 18-wheelers from diesel to natural gas over a period of years.
Here is the editorial in full:
There’s a fancy term for what would fix much of what ails the nation’s until recently booming natural gas industry: market equilibrium. There’s too much gas and not enough demand.
Clearly, what’s called for are Goldilocks prices for natural gas. Not too high. Not too low. Just right. Above all, predictably stable.
We can dream.
For now, however, natural gas is in a price slump that is gradually forcing producers to shut down wells and cut their plans for future production. Chesapeake Energy, one of the industry’s giants, is the latest to pull back (“Natural gas giant slashes drilling,” Page A1, August 8). The story, by the Chronicle’s Zain Shauk, detailed Chesapeake’s decision to cut by half, from 200 to 100, the number of rigs that will be drilling for natural gas, while cutting its exploration budget by 83 percent.
A headline like this one is something of a puzzler amid all the media buzz about the abundance of domestic natural gas that has become accessible in the nation’s vast shale rock formations.
Alas, that abundance is part of the problem, at least for the moment. Seeking a solution to that disconnect between natural gas supplies and markets that have seen gas prices stuck at or below $3 per mcf is a process that will require the best thinking of government policy-makers, the industry and entrepreneurs.
The transition to natural gas as a fuel source is well under way in our nation’s electric power industry, but the process is by definition a lengthy one. Power plants are behemoths that take time to build out and bring on line, and come at considerable capital cost.
The conversion process to natural gas is proceeding even more slowly in two other areas with large potential: transportation and the export of liquefied natural gas.
The biggest disappointment in the policy area is Washington’s failure to pass the Natural Gas Act, better known as the Pickens Plan, which would convert our nation’s fleet of nearly 2 million 18-wheelers from diesel to natural gas over a period of years.
Failure to move on this borders on policy negligence by our national lawmakers, especially in light of the greatly enlarged domestic gas resources accessible thanks to fracking and horizontal drilling.
With all due respect to those who remain reluctant to permit a government hand in the development of natural gas, this is a no-brainer. Policies that would steer the nation’s drivers toward the use of natural gas instead of imported oil are utterly necessary to jump-start the process.
Doing so would gradually push natural gas prices up to a point that would reopen production by companies such as Chesapeake. How much? At a price of $6-$7 per mcf, the experts say, producers would make a profit, drivers would pay less for a fill-up than they do with gasoline, the nation’s balance of payments deficit would lessen because we’d import less oil, and national security would be enhanced because we’d be less reliant on petroleum from unstable regions.
The export of liquefied natural gas is, for policy-makers, a more ticklish subject. Yes, it would revive the depressed natural gas industry because global prices are several times what the U.S. market price is.
On the other hand, doing so would raise prices for chemical companies and manufacturers. As Chronicle columnist Loren Steffy blogged the other day, several chemical companies have recently moved back stateside precisely to take advantage of lower prices. What about them?
Permitting the sale of domestic gas to foreign markets also raises politically touchy questions about the nature and highest use of this national patrimony. Should its use be decided by the free market? Or should national interests such as energy security come first? Is it possible to accommodate the two?
This is another of those political issues that has Texas written all over it, but which is increasingly a national question, if only because the shale rock resources are spread so broadly across the country.
The disconnect between production and demand that has idled rigs and cut production budgets needs addressing.
Read more HERE.