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LNG Exports: 'A Good-Faith Test' for President Obama

Tuesday, April 8, 2014

For the environmental Left, pursuit of their policy goals requires neither consistency nor evidence.

The heat is on. The environmental Left is on the attack, and the target now is not ExxonMobil, or the Kochs, or the Keystone XL pipeline, or fossil fuels, or the efforts of the world’s desperately poor to escape grinding poverty, or plastics, or indoor plumbing, or those who fail to worship Gaia, or any of the other usual suspects. Instead, it is President Obama, urged last month in an open letter by 16 environmental groups to prevent the exportation of liquefied natural gas (LNG) and to make a commitment to keep “most of our nation’s fossil fuel reserves in the ground, in line with the recommendations of most of the world’s leading climate scientists.”

The larger goal is the imposition of severe constraints on hydraulic fracturing of underground oil and gas resources in deep shale formations, a massive success story for the U.S. economy generally and for energy costs, employment, and aggregate wealth. The economic benefits of this technological revolution have been so large and so obvious and so popular politically that the Obama administration has found it necessary to voice support for fracking and its attendant expansion of energy supplies and employment, at least as a short-term “bridge fuel” to an (illusory) future of “clean, renewable” energy, which, as an aside, is neither.

The sudden concern of the environmental Left for Americans confronted with higher natural gas prices is touching.

Back to the environmental groups: They are “disturbed by [the Obama] administration’s support for hydraulic fracturing and, particularly, [its] plan to build liquefied natural gas export terminals along U.S. coastlines that would ship large amounts of fracked gas around the world.” And the pièce de résistance:

And as a good-faith test case in this direction, we ask you to hold your Federal Energy Regulatory Commission accountable to completing [sic] a full Environmental Impact Statement for the proposed “Cove Point” LNG export facility, located just 65 miles from your home on the shore of the Chesapeake Bay in Lusby, Maryland.

The relevance of the 65-mile distance between the White House and Cove Point is rather obscure, and the authors of the letter seem to believe that the White House is on the shore of the Chesapeake Bay. No matter. A bit more disturbing is the apparent belief on the part of the authors that the president can hold FERC “accountable”; FERC in fact is an independent regulatory agency within the Department of Energy. The president nominates the commissioners, subject to confirmation by the U.S. Senate, but FERC decisions are reviewable only by the courts; neither the president nor Congress has the power to change them. (I shunt aside here the hash that the courts have made of Article II of the Constitution, which vests “the executive power” only in the president.) Perhaps more to the point, the letter asserts that:

•    LNG exports “will raise U.S. gas prices — harming virtually all Americans — while becoming a historic catalyst for more fracking across the mid-Atlantic and triggering a huge new pulse of climate pollution.”
•    As noted above: Mr. Obama should “commit instead to keeping most of our nation’s fossil fuel reserves in the ground.”
•    “The life cycle of exported fracked gas, from drilling to piping to ‘liquefaction’ to shipping overseas and eventual burning, results in huge levels of carbon emissions and widespread leakage of methane, a greenhouse gas much more powerful than CO2. Emerging and credible analyses now show that exported U.S. fracked gas is as harmful to the atmosphere as the combustion of coal overseas — if not worse.”
•    “We believe that the implementation of a massive LNG export plan would lock in place infrastructure and economic dynamics that will make it almost impossible for the world to avoid catastrophic climate change.”
•    A major worldwide expansion of natural gas production and consumption would increase global temperatures by over 3.5° C over the long term, while “we need to limit temperature rise [sic] to no more than 2 degrees C.”

Wow. The sudden concern of the environmental Left for Americans confronted with higher natural gas prices is touching, but rather inconsistent with its decades-long general opposition to drilling for fossil fuels. Nor is it consistent with the Left’s support for hugely expensive “renewable” (wind and solar) electricity, which cannot compete without massive subsidies, and which has yielded sharply higher power prices in states with mandated market shares for such unconventional electricity. In any event, the most rigorous analyses of this issue find that exports of LNG might raise domestic gas prices by an amount on the order of $0.50 per thousand cubic feet. (From the summer of 2013 to this past February, prices increased by over $2.00.) But even that is irrelevant analytically: In terms of aggregate economics, the argument that LNG exports will harm Americans by increasing gas prices simply is incorrect, in that freer trade expands the economic pie for all. Other things equal, LNG exports would strengthen the dollar, yielding a decline in the prices of imported goods generally and a downward shift in the aggregate price level.

The larger goal is the imposition of severe constraints on hydraulic fracturing.

And precisely how do the environmental groups reconcile their purported concern for the higher gas prices attendant upon LNG exports with their demand that fossil fuel reserves be kept in the ground, the latter a goal rather inconsistent with lower energy prices? Is this confusion the result of a committee process for the production of the open letter? Is it the result of sloppy thinking driven by goals far more ideological than analytical? Is it the result of simple dishonesty? Or is it all three?

With respect to the effect of hydraulic fracturing and future LNG exports on greenhouse gas (GHG) emissions, the authors of the letter fail to address four central parameters: the recent peer-reviewed literature on GHG emissions from fracking, the Energy Information Administration (EIA) estimates of the GHG effects of LNG exports, the magnitude of those GHG emissions in the context of world GHG emissions and a sensible application of the climate models, and the implications of the growing use of coal-fired power overseas.

In a recent volume of Environmental Research Letters, Francis O’Sullivan and Sergey Paltsev report the findings of a survey of each of approximately four thousand horizontal shale gas wells brought online in 2010. Their finding is that modern operations and control technology (essentially, flaring and low-pressure valves) have reduced methane emissions from each well from about 228 metric tons to about 50 metric tons (for a total of about 216 thousand metric tons), so that modern hydraulic fracturing has not changed the overall GHG intensity of natural gas production. Another paper by Allen et al in the Proceedings of the National Academy of Sciences reports an estimate of 2.3 million metric tons of annual methane emissions from aggregate natural gas production activities in the United States. The EPA estimate for 2011 is substantially higher: For the “field production” component of methane emissions from “natural gas systems,” the estimate is about 53.5 million metric tons. Miller et al in the Proceedings of the National Academy of Sciences report their findings that the EPA emissions estimates “could be” biased downward by a factor of 4.9 or more.

The EIA estimates of the prospect effect of LNG exports on GHG emissions can be derived from an online interactive table. The following table summarizes those projections, and adds an adjustment for a possible downward bias equal to that estimated by Miller et al for total emissions estimates.

High/Rapid Growth of LNG Exports: Effects on GHG Emissions
(million metric tons CO2 equivalent)

________________________________________________________________________
     Year                Emissions Effect        Miller Adjustment
 ________________________________________________________________________
   2010                    0                     0
   2015                    1                     5
    2020                    9                     45
    2025                    7                     35
    2030                    5                     25
    2035                    7                     35
 ________________________________________________________________________
 Source: Energy Information Administration. Miller adjustment rounded to a factor of 5.

If we assume global GHG emissions of 40 billion metric tons per year, we can put the various estimates in context. As a percentage of the global total, 53.5 million metric tons from the field production component of U.S. “natural gas systems” is about 0.13 percent. For LNG exports, including the Miller adjustment, the GHG emissions effect (45 million metric tons in 2020) is about 0.11 percent. If we add a rough adjustment for the higher radiative (warming) effect of methane relative to carbon dioxide (nominally a factor of about 21), we calculate a crude LNG export effect on global GHG emissions of about 2.4 percent, a figure that is absurdly high. (Note that this commonly used radiative adjustment largely ignores both the far-shorter half-life of atmospheric methane relative to carbon dioxide, and the decreasing marginal effect of GHG emissions as atmospheric GHG concentrations rise.)  Yet, if we apply the MAGICC/SCENGEN climate simulator developed at the National Center for Atmospheric Research, and used by both IPCC and the EPA, using the highest IPCC assumption about the sensitivity of the climate to GHG, the temperature effect of LNG exports in the year 2100 would be about two one-thousandths of a degree, an amount two orders of magnitude smaller than the standard deviation (0.11 degrees) of the available temperature record. It would not be measurable.

The argument that LNG exports will harm Americans by increasing gas prices simply is incorrect, in that freer trade expands the economic pie for all.

There is the further matter that LNG exports would be likely to substitute for the overseas use of coal, total world consumption of which is projected by the EIA to increase by almost 40 percent (about 1.5 percent per year) between 2013 and 2035. This projected consumption increase extends far beyond China; it includes Japan, shifting away from nuclear power in the wake of the Fukushima disaster, and Germany and the United Kingdom, both attempting to find escape routes from the massive self-imposed costs of earlier “renewable” electricity goals and policies. To the extent that U.S. LNG exports allow overseas economies to substitute gas in place of coal, global GHG emissions will be reduced, a factor ignored in the open letter to Mr. Obama.

The letter, distorting a 2011 report from the International Energy Agency, asserts that a major worldwide expansion of natural gas production would increase global temperatures by “over 3.5 degrees C,” and that “we need to limit temperature rise [sic] to no more than 2 degrees C.” Have the authors of the letter thought through the implications of a decrease in emissions yielding a 1.5° C reduction? By how much would emissions have to be cut?

If we again apply the MAGICC/SCENGEN climate simulator, and assume an 80 percent reduction in GHG emissions by the OECD90 (North America, Western Europe, Australia, New Zealand, and Japan), the warming averted by 2100 would be about 0.3° C. If Asia also were to reduce emissions by 80 percent, that would increase the averted warming by about another 1.1° C, for a total close to the goal demanded in the letter. Can anyone possibly believe that emission reductions of 80 percent are anything other than a fantasy?

The letter obviously is far more a political than an analytical document, and as a reflection of scientific understanding it is deeply disingenuous. That the authors have defined their policy prescriptions as a “good-faith test” for Mr. Obama is amusing in that the letter is a blatant exercise in disinformation. Thus have the environmental groups chosen to pollute the political process in pursuit of a massive suppression of technological advance and enhanced wealth for ordinary working people, an appalling exercise in bad faith. For them it is also business as usual.

Benjamin Zycher is the John G. Searle scholar at the American Enterprise Institute.

FURTHER READING: Zycher also writes "Keystone XL: Sachs Strikes Back," "The Fact-free Opposition to Keystone XL," and "The Efficiency of a Carbon Tax: Broadly Accepted and Broadly Wrong." Representative Fred Upton contributes "Rethinking America's Energy Policy" and Vaclav Smil offers "Memories of Peak Oil."

 

Image by Dianna Ingram / Bergman Group

 

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