The next energy transportation fight: natural gas exports


Over the last few years, the fight to keep fossil fuels in the ground and their carbon and other pollutants out of the air has shifted. In addition to trying to stop the actual drilling and mining, a lot of effort, perhaps even more, has been put into stopping the stuff from being transported, be it over land or sea. The battle to stop the Keystone XL pipeline, which would carry heavy crude from the Canadian tar sands to Texas, has become the most prominent environmental fight in decades. Similarly, greens have fought terminals that would export U.S. coal to Asia.

Now a new type of fossil fuel artery is on its way to opening, one that would carry domestic natural gas overseas. The feds have recently approved three export terminals for liquified natural gas, or LNG, and are creeping toward giving the go-ahead to more of the 17 that have been formally proposed. So far, the fight against it has been more muted than Keystone or Gateway Pacific, yet the stakes may be far higher. Opening up overseas markets to U.S. natural gas could reignite a drilling boom in methane hotspots of the West, and encourage overseas utilities to switch from coal to cleaner-burning natural gas.

Oil is a true global commodity, shipped from just about everywhere to just about everywhere else. Source: BP Statistical Review of World Energy 2013.

Oil and coal are already global commodities, able to be loaded onto tankers and barges and shipped just about anywhere. It’s a fair bet that if Keystone or Gateway Pacific are killed, the oil and coal will find another though probably more expensive means of getting to market.

Natural gas is a different beast. Currently, our markets for import and export are mostly confined to places where pipelines can reach, namely Canada and Mexico. To ship natural gas overseas, it must be cooled to a liquid in a special export facility, shipped in refrigerated tankers and then re-gasified in an import terminal. There are only a few import terminals in the U.S. and very little export capacity.

U.S. natural gas pretty much stays in North America, at least for now. Projects like the proposed Jordan Cove export terminal in Coos Bay, Ore., would open up channels for shipping Rocky Mountain gas to Asia. Source: BP Statistical Review of World Energy 2013.


Thanks to the drilling boom that started in the West after 2001 and spread to the Eastern shale gas formations several years later, the U.S. is awash in natural gas. Prices plummeted so much that drilling simply stopped in areas that had been methane hotspots just a few years back, and drill rigs were idled or made to probe for oil, instead. Utilities shifted from coal to natural gas for generating electricity, and manufacturers rejoiced: Cheap fuel would lower their production costs. Proposals to build import terminals to bring overseas natural gas into the nation were nixed. There was simply no need anymore.

Meanwhile the opposite dynamic was playing out in the rest of the world. Natural gas prices have gone up, not down. In Europe even green Germany utilities are moving away from Russian natural gas, back to cheaper, dirtier coal (some of it from the U.S.), to generate electricity, resulting in an increase in carbon emissions. China could certainly use some of our abundant natural gas to offset the coal burning that’s destroying their air quality, and Japan could use it to replace their shuttered nuclear fleet. There is, in other words, a hungry market for American natural gas.

Natural gas prices have followed much different trends in different parts of the world. While they've plummeted in the U.S., they've climbed just about everywhere else. Source: BP Statistical Review of World Energy 2013.

Most of the export terminals proposed at this point are on the Gulf and East Coast, including the three already approved. Two of them are in the West: In Coos Bay and Astoria, Ore., conveniently located not far from one end of the recently constructed Ruby Pipeline, which starts in Opal, Wyo., and can carry 1.5 billion cubic feet of natural gas per day from Colorado, Utah and Wyoming to Malin, Ore. The line was purportedly built to serve the northern California and Oregon market, but if the Coos Bay terminal goes forward, that gas will be going much farther West than that.

If these terminals are approved and ultimately built, what will it mean? Among other things:

  • Domestic natural gas prices will increase: As markets are opened up to U.S. gas, the domestic supply will drop, and prices will go up. How much depends on how much is ultimately exported, and how much of the exported gas is replaced by increased production in US gasfields. A Department of Energy analysis found that even in a high export scenario, prices would remain far lower than they were during the peak in the middle of the last decade. But even a small jump worries some manufacturers, who have hailed the shale gas revolution as the first step in a U.S. manufacturing renaissance because it lowers production costs domestically. That’s why Dow Chemical’s CEO is the number one opponent of LNG exports.
  • As prices go up, so will the drill rigs: In parts of Wyoming, New Mexico and Colorado, drilling for gas came to a near standstill during the recession, due entirely to the price crash of natural gas. The phenomenon will reverse itself if and when prices go back up. And that will be good for local economies in the gasfields. That’s why some local leaders, not to mention industry, are rooting for exports. The DOE predicts the economic boost could be as large as $50 billion over the next decade or so.
  • Global natural gas prices will drop as more supply hits the market. And that will incentivize European and Asian utilities to choose natural gas over coal to generate electricity, which should result in an overall decrease in carbon emissions.
  • Perhaps most importantly, U.S. natural gas could shift from being a regional to a global commodity. This could put prices at the mercy of global supply and demand dynamics, as is the case with oil. This can certainly be good for natural gas producers and the people who rely on the industry, but it’s not always good for the domestic consumer: Even as U.S. oil production climbs toward record highs, and domestic demand remains relatively low, the price of oil hovers in the $100 per barrel range. That’s thanks to global demand.

Opposition from environmentalists, based on the impact to landscapes wrought by drilling and fracking, is building, albeit nowhere close to the level of push-back against Keystone or West Coast coal export terminals. Surely as the Coos Bay and Astoria proposals move forward, the local fight will heat up (an import terminal proposal in Coos Bay faced stiff local opposition, in part because a terminal can explode, resulting in a fireball that incinerates everything in the vicinity).

But in the end, the market is likely to decide. As natural gas use increases domestically, be it for utilities or transportation or manufacturing, the price will go up with or without exports. Exporting LNG isn’t easy, or inexpensive. The terminals cost billions to build, and the energy-intensive liquifying process and shipping aren’t cheap, either. This may all add up to make U.S. natural gas uncompetitive on the world market. After all, that appears to be happening with coal: After much bluster from the industry about selling its coal oversees, global prices have slumped, a handful of proposed export terminals have been dropped and coal companies are scaling back their export dreams.

Jonathan Thompson is a senior editor at High Country News. Follow him on Twitter @jonnypeace.

High Country News Classifieds
    Position Summary: Western Resource Advocates seeks a passionate Water Policy Analyst with knowledge of western water issues to join our Healthy Rivers Team to strengthen...
    9+ acre inholding. Passive solar strawbale off the grid and next to the Continental Divide Trail in ponderosa pine/doug fir forest at 7400.
    Conservation nonprofit Friends of Cedar Mesa in Bluff, Utah is hiring an Education Center Director to oversee the operation of the Bears Ears Education Center....
    Friends of the Verde River, Cottonwood, AZ. Apply at
    Verde River Exchange - Friends of the Verde River, Cottonwood, AZ. Apply at
    Teton County Planning & Building is hiring! Our ideal candidate is a team-player, a problem-solver, pays attention to detail, and can clearly communicate technical material...
    Studio Architects is seeking a full time Architectural drafts-person/project manager with1-3 years of experience to join our firm. At Studio Architects our mission is to...
    needed for 16,000+ acre conservation property in south central Colorado. Qualified candidate would have experience working on a ranch or wilderness property, general forestry/fire management...
    Nanny for 18-mnth-old. Yearly salary, vacation, health insurance. Spanish/other foreign-language native spkr prefrrd.
    Washington Association of Land Trusts seeks an ED to build on WALTs significant success & to lead the association to new levels of achievement. See...
    Secluded, energy efficient Southwestern home on 40 wooded acres. Broker - Rand Porter - United Country Real Colorado Properties. 970-261-1248, $425K
    57 acres in Skull Valley, AZ, 17 miles from Prescott, year-round creek, swimming holes, secluded canyon, hiking/meditation trails, oaks, pines, garden, greenhouse. House, office building,...
    Title: Public Lands Organizer About the Arizona Wildlife Federation (AWF) The AWF is a non-profit organization dedicated to educating, inspiring, and assisting individuals and organizations...
    Historic 1893 Ranch Headquarters. 4 Bdrm, 3.5 Ba, 4000 ft2. Remodeled 2002. Includes 2 studio apts, stables, arena, workshop, 5 RV hookups. Chirachua & Peloncillo...
    The Vice President of Retail Operations will provide overall leadership and accountability for purchasing, product development, merchandising planning, visual merchandising, retail operational excellence, oversight and...
    Grand Staircase Escalante Partners seeks an experienced fundraiser with excellent communication and organizational skills.
    position in Phoenix with the Babbitt Center for Land and Water Policy.
    Vaulted ceilings, two fireplaces, two bedrooms, loft, jetted tub, wifi. Forest, mountain views. Wildlife. [email protected]
    Our director is seeking to employ the services of an Accounting Clerk to assist with various accounting and administrative tasks. This is a great opportunity...
    Community Radio Project, Cortez, CO (KSJD & the Sunflower Theatre). Visit and click on the Executive Director search link. CRP is an EOE.