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With the United States set to become the world’s largest LNG exporter this year thanks to robust demand for the superchilled fuel, a growing number of producers are looking for opportunities to join the export market. Only they can’t.
A recent analysis by Nicole Pollack in the Casper Star-Tribune noted that energy companies in Wyoming and Colorado are eager to join the ranks of LNG exporters, with some believing this would help bring down international gas prices. The problem? The landlocked gas-producing states need the cooperation of their coastal neighbors to reach international markets.
Like many confusing things in current U.S. energy policies, this cooperation was first granted by Oregon and the federal government two years ago for the Jordan Cove LNG project. In July 2020, the U.S. Department of Energy authorized exports of up to 1.08 billion cubic feet per day of natural gas from the proposed terminal in Coos Bay, Oregon, owned by Canada’s Pembina Pipeline Corporation.
The reaction of environmentalists and indigenous groups was swift, and, joined by landowner organizations, they managed to turn the tide with the government denying Pembina several key permits for the project, according to Pollack, which ultimately led to its cancellation.
Wyoming produced over 1.37 trillion cu ft of natural gas last year. Colorado pumped 2.175 trillion cu ft during the same year. For both states, the gas production figures were a decline from previous years. One reason is the still lingering effects of the pandemic. Another may well be cautiousness with investments for lack of markets. The irony is that the world does need more natural gas.
In a recent geopolitical briefing, the Bank of Canada noted that while the sudden jump in Europe’s LNG appetite is good news for U.S. gas producers, the actual boosting of production and exports faces a host of challenges, including lack of pipeline infrastructure, regulatory burden, and the federal government’s long-term environmental targets.
Then there is the fact that the U.S. gas industry has not responded to the jump in demand with an identical jump in production. This, the Bank of Canada notes, is especially pronounced in two of the biggest producing regions: Appalachia and the Permian, where gas is a by-product of oil production. But demand is growing, especially abroad—and this spells bad news for Americans.
Electricity bills have soared this year, and they will rise further because reliance on gas-fired power plants will increase, and there is not enough gas to go around, assuming the U.S. wants to keep its promise to united Europe to supply it with an additional 15 billion cu m of gas until the end of the year. That’s on top of the 22 billion cu m that the U.S. exported to the EU last year.
None of that gas is going to come from Wyoming or Colorado, however. Not for years, if ever. Because opposition to more gas production remains strong and is unlikely to weaken anytime soon.
“Why are we talking about natural gas when we can talk about renewables and electrification and other options that are available?” Shannon Anderson, attorney for a landowners’ group in Wyoming dubbed the Powder River Basin Resource Council, told Casper Star-Tribune’s Pollack.
“I think that the challenge right now with natural gas, similar to coal, is, you know, why invest in something that may not have a future — that is going to be challenged with climate change and a global reckoning around fossil fuel use?”
This statement reflects a popular sentiment among Americans, energy consumers, investors, and politicians—even, it seems, politicians that are very much interested in the U.S. increasing its energy exports to the European Union.
It is a conundrum that would be quite hard to resolve, if a resolution is possible at all. In the meantime, Colorado and Wyoming will continue sitting on their gas while consumers across the country reckon with higher electricity bills.
By Irina Slav for Oilprice.com
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