Listening to Cramer last night he made two facts about coal abundantly clear. First, natural gas is beginning to be quite cost competitive. At $2.70/MM BTU, NG is pretty much equivalent to coal in cost. Coal right now is running, in the east, about $2.20/MM BTU. However, NG is cheaper to transport and doesn't require scrubbers. So, I think NG and coal are pretty close.
Secondly, the EPA is very anti-coal. If their latest rounds of cuts are implemented, the demand for coal is going to drop.
re: the EPA Better watch that! They already PO 'd Louisiana and south Texas...and I'm pretty much 'Green Party' on the environment. (Not that the Obama administration was going to carry those, anyway.)
Here is one example (in one area) if one just searches a bit... Time will tell as usual. (and things do change - my sis and husband are engineers in Nuke bus - she in safety and decommissioning... things looked promising until Japan's disaster and now A. Companies hiring Engineers from overseas - importing... she is hanging on contract by contract he retired early)....
(as well read below on LNG changes)
Friday, February 24, 2012
Debate Surrounds Race to Export America’s Natural Gas
Some U.S. manufacturers, utilities and consumer advocates worry exporting gas will drive up electricity prices and deepen reliance on coal.
Energy companies are honing plans to export natural gas faster than President Obama can call the United States the “Saudi Arabia of natural gas,” and that’s raising new questions about the country’s energy policies.
Multinational energy firms and some economists say exporting natural gas is a no-brainer: the cost of producing natural gas in the United States has plummeted with the explosion in shale gas production, while prices remain high elsewhere in the world. That means exports could ease the U.S. trade deficit while stimulating job growth.
But some U.S. manufacturers, utilities and consumer advocates counter that exporting natural gas will drive up electricity prices, deepen reliance on dirtier coal and discourage investment in domestic manufacturing. A government study released last month reinforced their concerns. The independent Energy Information Administration (EIA) predicts that U.S. natural gas prices could jump 36 to 54 percent if every export plan currently on the table goes through. Electricity prices could rise 2 to 9 percent, the report says.
Even as the debate intensifies, energy companies are laying foundations to become the first to export natural gas from the United States.
No export facilities currently exist in the continental United States, but eight companies have applied to build them. At the facilities natural gas is cooled to -260 degrees Fahrenheit, so it becomes what’s known as “liquefied natural gas,” or LNG. At 600 times less volume, LNG can be loaded onto special tankers berthed at the new facilities and shipped across the world.
The size of the proposed terminals varies, but each would process between 1 billion and 3 billion cubic feet of gas a day, according to applications they filed with the Federal Energy Regulatory Commission (FERC). If all eight were built—and that’s a big if—their combined capacity would allow them to export about 18 percent of the 67 billion cubic feet of gas the U.S. consumes in a day. Meanwhile, the Energy Information Administration expects the United States to become a net exporter of natural gas by 2016, while it’s expected to export more gas by pipeline than it imports by 2025.
It’s clear why exports tempt the industry. A thousand cubic feet of natural gas—which provides roughly the same amount of energy as a barrel of oil—currently costs $14 to $15 in Asia. In Europe, the same amount of gas sells for $8 to $9. In North America, it trades for only about $4, down 9 percent from what it was at the outset of 2011.
“In my entire career there’s only been two other cases where the world has changed so fundamentally for the big energy business,” said Mikkal Herberg, an Asian energy specialist who teaches at University of California, San Diego and once led ARCO’s global energy program.
“I wasn’t entirely convinced until three to four months ago that the U.S. is going to be a big exporter,” he said, but recent events and market conditions turned his thinking around. “The economics of sending U.S. gas to Asia are awfully good right now, assuming these shale gas supplies are as good as we think they are and that economists have confidence that these high prices can last.”
Herberg and other experts doubt that all of the terminals will pan out. The investment can be huge, with a single facility costing hundreds of millions of dollars to build. The permitting process is difficult, involving clean water, coastal zone, clean air and other environmental and land use restrictions that state officials might add on top of federal rules. And getting permission to export is difficult, because companies must prove the sales are in the national interest if they ship to countries that don’t have free trade agreements with the United States.
Potential exporters might also be dissuaded by the historic volatility of the natural gas market.
Half a decade ago, energy companies were scrambling to build LNG import terminals. But by the time they had weathered organized public opposition and regulatory oversight, they discovered that the U.S. shale oil boom had destroyed the economics of LNG imports. Some import partnerships went bankrupt. Others rapidly changed course and began applying for export permits.
What’s more, unlike oil, gas isn’t traded at a global, standard price. Not only do prices differ wildly in various parts of the world, but the trade of natural gas is also subsidized and restricted by a complex web of laws in exporting and importing nations.
Despite these challenges, one company, Houston-based Cheniere Enegy, Inc., has already received permits to build a natural gas export terminal in Sabine, La. where it already has an LNG import terminal. On Jan. 30 Cheniere signed an agreement to sell 3.5 million tons of LNG to Korean Gas Corporation beginning as early as 2017.
I don't have the time to dig and site sources but late last night and as well on Bloomberg (info common but not on media outlets much) is that America is now a top EXPORTER of our energy (coal a given) but now nat gas.. even the pipeline from Ca energy would not reduce gas or nat gas prices as it was to offset losses in the East (again sorry listening in middle of night).
So even though America may produce more in future it may not be used in America nor benefit Americans(and nat gas fracking under fire more and more for contamination and Bush allowance of the companies to skirt ALL epa laws and clean up)
I will try to research and post this (Bloomberg changed it's format so harder to find unless you pay).
Cramer said out of Apple at 80 (pre split) Hansen long ago and many others - I don't pay much attention to him for years now after realizing he is usually wrong and a front runner.
So, if the EPD comes down on US coal, the global demand for coal will go down? Doubt that China cares about the EPA, and they're using coal faster than the companies in this world can get it out of the ground. Our comsumption will be dwarfed by the rest of the globe IMO. This sounds eerily like the FDA coming down on menthol in cigarettes, and we see what that did to LO before and then after. Just my thought.
Disclosure: I'm long ARLP
I agree. The US may use less coal in the future, but what do you think they're going to be doing with the country's largest natural resource? Use it as stocking stuffers for bad kids? No, believe me, in these tight financial times they will find a lucrative use for it.