Guest Post: The Obama Administration's Natural Gas Policy Is Tragically Misguided

Tyler Durden's picture

Submitted by Chris Martenson of Peak Prosperity,

The Obama administration has come out in support of the idea of exporting U.S. natural gas. This stance is counterproductive and shortsighted, and if followed, it will prove harmful to domestic manufacturing (i.e., value generation) and to future generations of Americans.

While exporting natural gas would certainly prove to be an economic boon for a very select minority of companies and individuals, it makes no sense from an energy standpoint and undermines our national interests. All it will do is enrich a few while boosting prices for all domestic consumers and shortchanging the energy and environmental inheritance we pass along to our children.

First, the news:

Obama backs rise in U.S. gas exports

May 5, 2013


The Obama administration has signalled support for more plants to export liquefied natural gas, as the US embraces its surging energy production as a key new element of its national security policy.


Barack Obama said at the weekend the US was likely to be a net gas exporter by 2020, the strongest sign yet that the president is swinging his support behind higher energy sales overseas.


The Department of Energy is studying applications for new liquefied natural gas terminals, with approval of one in Texas likely within months. It would be only the second such approval granted for sales to countries without trade agreements with the US, such as Japan, the world’s largest importer of LNG.

Let's start with the most obvious blunder of such a policy.  Again, while exporting natural gas may result in short-term profit economically, it doesn't make any energy sense.  Here's why.

In order for natural gas to be turned into a liquid (a.k.a. liquid natural gas or LNG), it has to be compressed and refrigerated all the way down to an astonishing -260 degrees Fahrenheit.  If you have a refrigerator, you already know that it takes energy to cool something down. And the deeper the cooling, the higher the energy required.

In order to export LNG, it takes energy to simply turn that energy into a liquid.  How much?  Roughly 25%. That's right; a quarter of the embedded energy in the natural gas is lost before it even makes its way to a customer.

Here's the thing. The natural gas that we are currently fracking out of shale beds was laid down over tens of millions of years, and it is a one-time resource that we only get to burn once.  That is, it has a defined amount of energy that we can use in the form of work to do things such as move vehicles, erect buildings, fertilize crops, re-build a crumbling national infrastructure, or build out an infrastructure for our alternative energy future.

One thing we cannot do is burn it twice. You get to use the energy in natural gas exactly once.

That the Obama administration thinks that the best use of that embodied energy is to waste fully one-quarter of it on the act of refrigeration and compression so that we can ship those BTUs outside of our borders tells me that they do not really understand or appropriately value this finite resource.

Using the energy in natural gas to turn it into a liquid might be economically profitable, but it is energetically wasteful.  It's our view that the very last thing we can afford to be at this point in history is wasteful with our energy resources.

The Carbon Fallacy

In trying to pitch the idea, one of the oft-cited statistics politicians offer in favor using natural gas is that it lowers carbon emissions. This is true, but only if the natural gas offsets coal consumption for electricity production AND only if this occurs in isolation AND only if this offset is permanent. So if we just burn the natural gas now while it's cheaper, but then later get back to burning coal, the fracked natural gas will actually enhance, not decrease, total carbon emissions.

Despite these complexities, the current administration uses 'carbon lowering' as a reason to use more natural gas and presumably to support the export of LNG.

Rise in U.S. Gas Production Fuels Unexpected Plunge in Emissions

Apr 18, 2013


U.S. carbon-dioxide emissions have fallen dramatically in recent years, in large part because the country is making more electricity with natural gas instead of coal.


Energy-related emissions of carbon dioxide, the greenhouse gas that is widely believed to contribute to global warming, have fallen 12% between 2005 and 2012 and are at their lowest level since 1994, according to a recent estimate by the Energy Information Administration, the statistical arm of the U.S. Energy Department.

And this:

Natural Gas Is Key To Low-Carbon U.S., DOE Nominee Says

Apr 9, 2013


U.S. energy secretary nominee Ernest Moniz affirmed his commitment to President Barack Obama's "all-of-the-above" energy development strategy during his Senate confirmation hearing Tuesday, including the increased development and use of natural gas as a bridge fuel to a low-carbon future.


Moniz would have a say over the production and export of liquefied natural gas. The DOE is weighing whether to approve 16 applications to ship domestically produced natural gas to countries with which the U.S. lacks free trade agreements.


When pressed on whether he would approve LNG exports as energy secretary, Moniz said he favored the deliberate approach taken by current Energy Secretary Steven Chu.


"In the overarching public interest criteria, the status of the domestic natural gas market is right up there," Moniz told the panel. "I think we have a responsibility to make a judgment license by license."

To claim credit for lowered carbon emissions due to natural gas and then also support the idea of exporting LNG (where fully 25% of the base energy is combusted in order to simply liquefy the product) is hypocritical. These are two ideas that work against each other.  Either you use natural gas wisely and efficiently as you move away from coal resources and claim a carbon credit for these actions, or you support throwing 25% of natural gas' energy right into the atmosphere just to cool it for transport.  

So it's a fallacy to imply that exporting natural gas will help lower carbon emissions. In all honesty, total emissions will most likely be higher than otherwise because let's be realistic; the most likely path is for humanity to burn up all the natural gas and then burn up the coal next.

Further, where the U.S. carbon emissions have gone down due to less coal being burned, that happy circumstance resulted in Europe doing exactly the opposite:

Shale Boom a Bust for Europe's Gas Plants

May 8, 2013


FRANKFURT—The ripples of the North American shale boom continue to spread, as a growing number of European utilities are forced to mothball modern gas-fired power plants that can't compete with growing imports of cheap coal dislodged from the U.S.


Norwegian state energy company Statkraft said Wednesday it has idled a gas-fired power station in Germany that couldn't compete with its coal-fired rivals, while German utility E.ON  SE said it is seriously considering mothballing more gas-fueled plants, including a state-of-the-art facility in Slovakia.


Other European utilities have taken similar action, presenting policy makers with a dilemma—cheaper coal-fired power could provide some relief for the region's struggling economies, but might be incompatible with long-term goals for carbon emissions and renewable energy.


The closures across Europe are another example of the far-reaching effects of the North American energy-supply boom. Surging supplies of natural gas in North America, unlocked from shale rock by a new combination of technology known as hydraulic fracturing, have prompted many U.S. power generators to switch away from coal, pushing increasing amounts of the fuel into Europe as cheap imports.


In 2012, U.S. exports of coal to Europe rose 23% to 66.4 million short tons, according to data from the U.S. Energy Information Administration.

Does natural gas help to lower carbon emissions?  No, it merely pushes the carbon emissions elsewhere while the U.S. feasts on relatively cheap natural gas domestically.  The only thing that lowers carbon emissions is NOT burning coal, natural gas, or petroleum collectively. 

100 Years of Gas

In his 2012 state of the union address, Obama said, “We have a supply of natural gas that can last America nearly 100 years, and my administration will take every possible action to safely develop this energy.”

The idea that we have nearly 100 years of natural gas is quite powerful and comforting, because, after all, 100 years is pretty far out into the future.  The only problem with this statement is that it is not even close to correct.

As usual, the all-important caveat at current rates of consumption was left off.  The way you get 100 years' worth is you take 2010 consumption and you divide it into the total possible reserves and estimated resources, no matter how speculative or improbable their eventual extraction may be.

That is, 100 years is the highest possible number. But once you factor in increasing consumption (which is a sure thing, by the way), you get a much lower number.  How much lower?  Well, if we increased our consumption by 7% per year admittedly a high figure, but not unthinkable, especially if we use more for transportation purpose the 100 years collapses to just 29 years.

Such is the miracle of compounding.

To continue, we might not be able to extract all of the possible and speculative resources that are part of the 100-year calculation.  If it turns out that we're only going to be able to extract, say, 75% of everything we think is there, the rest simply won't be economically extractable.  If we combine this 75% figure with a yearly increase in consumption of 7%/yr, then we discover there's just 25 years of natural gas left.  That's just simple math.  While 25 years is at the extreme end of the dismal view, it does help to bracket the "100 years" claim. 

So let's say total gas left is somewhere between 25 and 100 years let's assume a mean value of around 50 years and this is before we entertain any thoughts of exporting LNG.  Any exports will only eat into these figures, possibly quite dramatically.

How dramatically?

Here is a partial list of the LNG export terminals that are in some stage of approval by the U.S. government:


If we add up all of the proposed projects, inlcuding an equal number not on the above list, we discover that their collective export capacity is just a hair under 30 billion cubic feet per day, or a whopping 43% of current U.S. production. 

Now I realize that they can't all be approved, or maybe I should say won't be approved, because that would absolutely destroy the domestic U.S. natural gas supply. But if they were, just for the sake of running the numbers, here is what happens to the "100 years of natural gas":

Assuming that the exports come out of increased production and not at the expense of domestic consumption, meaning that the ability to export just drives the gas drilling industry absolutely bonkers and they are able to meet that additional 30 billion cubic feet of demand (highly unlikely, by the way), then we get some very startling results.

Holding domestic consumption constant (which is, again, unrealistic), and assuming we get 100% of everything out of the ground including even the most speculative of resources, we find that exporting 30 billion cubic feet per day reduces the "100 years" to just 30 years.

But let's make this more realistic.  If we add a quite realistic 4% per year increase in domestic consumption to the equation, the 30 years falls to 25 years. If we then apply a modest haircut to the natural gas resources of 25%,  we find that the U.S. natural gas supply falls to just 19 years.

Nineteen years. That's quite different from 100 years, now isn't it?

Okay, it stands to reason that any export driven demand for natural gas will drive up the domestic price of natural gas, which will slow down if not reverse the recent trend of manufacturing concerns returning to U.S. soil.  They have done so because of the cheap price of natural gas.  End of story.

Rapid Depletion

In fact, it may be too early to yet claim that the U.S. has an energy bonanza that is so large we should plan on exporting it. The reason is that the shale plays are a very recent development.We are learning about them in real-time, and, unfortunately, a lot of what we know about them comes to us from the very same producers that benefit from telling a good tale.

The simple fact is that shale wells deplete at horrific rates, such that they lose anywhere from 80% to 90% of their initial production after just 3 years.  As long as we keep drilling them at a faster and faster pace, we'll have more and more natural gas until we begin to run out of new drilling spots, that is.

Consider this story: The largest shale gas play in the U.S., the one that produces more than any other spot, is the Haynesville shale play in Louisiana.  Let's travel back, way back in time, all the way to...2008...and hear what the CEO of Chesapeake Energy had to say about that particular play:

CEO: Haynesville Shale is fourth largest in the world

Jul 3, 2008


The Haynesville Shale is likely to become America's largest natural gas field and perhaps the fourth largest in the world, Chesapeake Energy Chairman and CEO Aubrey McClendon disclosed Wednesday in a conference call with its newest partner, Plains Exploration and Production Co.


McClendon's confidence in the Haynesville Shale's ability to produce such volumes of natural gas is based on two years of research. More than 70 well penetrations into the deep shale in an area considered the core were analyzed, along with hundreds outside of the core, he said.

How exciting!  Indeed, the Haynesville play turned out to be a monster producer and Chesapeake Energy was in there as a major player.  The hype was only true for a very short while.  All of that excitement back in 2008 had evaporated by 2011 when the Haynesville play hit its peak of output...just three years later.


Wow.  That was fast.

For its part, Chesapeake alone hit 2.0 billion cubic feet (bcf/d) per day from its Haynesville wells just about a year ago and is now producing just 1.3 bcf/d.  Part of the reason for the rapid decline is that very few wells are being drilled in the play right now because the price of natural gas is well below the cost to drill and produce natural gas from this formation.  But the dynamic is illustrated well by the Haynesville example; these shale plays produce quickly and decline just as rapidly.  In other words, making long-term plans on our energy export markets based on a few years of data with a brand new energy reservoir about which we know relatively little seems hasty at best.

One more example, this one from the first and formerly largest shale gas play in America, the Barnett Shale in Texas, shows a similar story.  From inception of significant drilling operations to peak was just 11 years.


Again, the story here is that even the very best shale gas plays are relatively short-lived, which is exactly what we’d expect from an energy source that depletes so rapidly.  The summary is that a commitment to export becomes a commitment to drill at a faster pace.


Without any question, exports of natural gas from the U.S. will simply accelerate the day when that finite resource runs out.  Further, there cannot be any question but that as additional demands are placed upon the domestic supply, prices will rise.

This will hurt our resurgent domestic manufacturing industries as well as future generations that will have to contend with less domestic energy than they might otherwise have had available to them.

In all of this, there is a very obvious and demanding issue of generational stewardship.  Is it really our 'job' to extract a finite natural resource so quickly?  Can we not think of anything else to do with these "one-time use" BTUs besides wasting 25% of the embodied energy simply to export it for money?

Imagine if the Americans of 100 years ago had figured out a way to export all of the U.S.'s natural gas bounty, and we were now struggling with the aftermath of those actions.  I, for one, would look quite unfavorably on those who so utterly failed to appreciate the limited nature of that abundance that they literally wasted it.

Perhaps our job is not to extract things so rapidly that it creates pricing problems for the overproducers.  Perhaps instead it is to use our finite resource as judiciously and as wisely as possible. 

My proposal would be to retain all natural gas for domestic use, and couple that abundance to a rational and forward-thinking energy policy that delivers a robust and resilient energy infrastructure to future generations.  They will thank us for giving them efficient buildings and rational transportation systems at a time when energy finally becomes truly scarce and proportionally expensive.

The time has come to give greater weighting to energy matters than to economic and political desires. To continue to be energetically wasteful at this time in history, when so much data is telling us that the effluent of our activities is measurably altering our support systems, is beyond embarrassing.  It's tragic.

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Sudden Debt's picture


Kiss My Icelandic Ass's picture

"Obama Administration's Natural Gas Policy Is Tragically Misguided "

Pardon me for laughing but are any of Obama's harebrained ideas anything BUT misguided? SMH.

freewolf7's picture

"All it will do is enrich a few while boosting prices for all domestic consumers and shortchanging the energy and environmental inheritance we pass along to our children."


Doubleguns's picture

Unfortunately we are running out of things to export. 17 trillion needs to be paid off with something. Wonder if we could at least start with Obama. Stamp him "Return to Sender" and send him to Kenya. 

TheSilverJournal's picture

Whoever wrote this article sounds like a central planning loving socialist. Pump that natural gas out of the ground and export it to wherever's most profitable.

economics9698's picture

Why do we make these logical arguments, I fully 100% agree with the author, when the heart of the matter is very simple.

What is best for Israel?

What is best for Israel is for America to be as dependent as possible on Middle East oil so the USA will be constantly bogged down in wars to keep the energy supply lines open.

The more wars, the more troops in the Middle East the better it is for Israel.  America energy independence is a threat to the Israeli state.

All our foreign policies and domestic policies are dominated by what is best for Israel, Warren Buffett, JP Morgan, and Goldman Sachs. 

It’s so pathetically simple. 

Until the Federal Reserve is ended the world revolves around Israel policies will continue.

Any questions?

PGR88's picture

You are right.  Everyone wants to tell everyone else how to manage their property.

kaiserhoff's picture

This is a steemng pile of wookie doo.

The Libs have nothing coherent left to say on any subject, and this sort of brainless, inaccurate, and contradictory crap is a prime example.

epwpixieq-1's picture

Sure. We can export him, but, who will pay for the pleasure of having him, we may end up with more debt based on this trade, compared with just decommissioning him

You know, sometimes you have to pay the other side to take something you do not want (lake toxic materials, etc) .

The problem is that even with garbage, people know how to deal with, I am particularity sure that no one knows how to deal with such a clown, or for that matter any brainless politician that is trying to rule/work things they do not understand.

AmCockerSpaniel's picture

It all depends on how much of the stuff we have after what we need??? We have this issue called the balance of payments. This has been running in the red big time, for a long time. We have to export something, or stop just buying. I would like the government setting limits on how much can be exported per year, with out an export tax to cut in.

Buckaroo Banzai's picture

This fucking administration is destroying the United States of America by every means possible.

"Barack Obama and Hillary Clinton, along with the rest of the regime players, murdered Ambassador Chris Stevens. It was a hit. It wasn't incompetence. It wasn't deer-in-the-headlights collective inaction. It wasn't a kidnapping plot gone wrong. It was a hit."


otto skorzeny's picture

I read Ann's stuff for my daily dose of Catholic guilt but her Islamophobia is extreme.

Buckaroo Banzai's picture

Extreme? Maybe. Factually correct? Definitely.

otto skorzeny's picture

Really? 1.6 billion rounds of HP and 3000 MRAPs means you have more to fear from DHS/LE goons than some goat herder from Afghanistan. Which one might kick in your front door w/o a warrant at any time? Know who the real enemy is.

August's picture

As an astute hedger wrote a few days ago....


War is when the government tells you who the enemy is.

Revolution is when you figure it out for yourself.

otto skorzeny's picture

I saw that also and it is one of the most profound things I have ever read.

gwar5's picture

Muslim Brotherhood (CAIR) is in the White House, so does it really surprise you DHS is targeting American Christians, Tea Partiers, Ron Paul supporters, gun rights advocates, and little old ladies in airports, while they they miss the obvious threats like the Ft Hood shooter and Boston bombers whom they had repeated warnings about? 


Bill Ayers has been marching with Hamas in ME with Hamas, the marxists have found common ground with the MB to kill the Great Satan. The Boston bomber was spilling the beans when DOJ suddenly rushed in and mirandized him to shut him up.

Obama is organizing and arming Al-Qaeda in MENA. That was the mission of the outpost in Benghazi. Your muzzies are killing non-muslims and moderate muslims all over the world from Thailand/Phillipines/India/Africa and this adminstration will not even say the words "Islamic extremists".  That's a big green light.

You watch too many fucking Sinbad and Alladin flying carpet movies.

otto skorzeny's picture

Spoken like a true mossad disinformation agent

Augustus's picture

Sure.  Mossad disinformation.

That is why western embassies were burned because of publication of a cartoon.

That is why there was a bombing of trains in London.

That is why the mullahs appove and encourage screwing goats.

Last report on Arafat's health stated that he remained dead.  Mossad.  Mossad.  Mossad.

Buckaroo Banzai's picture

Bingo. And isn't it interesting that we only target secular Arab states for destruction, and not the states run by Islamic fundamentalists? It's almost like we want to turn the entire ME into an Islamic extremist superstate.

The wars in the middle east are bullshit, but not for the reasons that most zero hedgers seem to appreciate, unfortunately.

Augustus's picture


There are no Secular Arab States.  You don't seem to appreciate that, unfortunately.

Rustysilver's picture

Buckaroo B,

Hillary herself said that she doesn't 3 AM phone calls. Besides, it doesn't matter what she said because the guys are dead.

Yen Cross's picture

       I miss Intrade.

      With all the nat gas/LNG deals going on, I'm sure something spectacular will happen over the next 3-5 years. the Australians are exporting out of the "Sea of Carpentaria".

                                                                  What could go wrong?

Augustus's picture

Probably less damaging that an oil tanker as the gas will not pollute the water and wash to shore.

Urban Redneck's picture

It's comforting that Rupert's Retards & the AP Asswipes just got around to getting the Sandia Report this week, since the report has been out since December of 2004 and the summary Report to Congress was published in May 2012  (my copy & paste job was from December when I went off on the F'ING FLNG)...  As to what can go wrong, think of Texas Fertilizer Plants - only bigger- much, much bigger.



A picture of the proposed FLNG next to one of the LNG tankers it would load

CFR (Terrorist Briefing Book) Liquefied Natural Gas: A Potential Terrorist Target?

SNL (Sandia Nerdspeak) Guidance on Risk Analysis and Safety Implications of a Large LNG Spill Over Water

Youtube - a 34,000 gallon train tank car going boom (imagine over 1,850 of these going off simultaneously)


Sweet dreams.


fnordfnordfnord's picture

So, what? Burn wood to keep warm so that the terr'ists dun blow us up?

otto skorzeny's picture

We should fuel our cars w/ nat gas like we do with corn to drive the price of heating our home w/ NG sky high.

thisandthat's picture

I stopped at carbon emissions - is it possible anyone still falls for that fallacy (bad carbon, bad...)?

Matt's picture

It is important whether you believe in it or not, because it is one of the key justifications for the administration's policies.

thisandthat's picture

When a policy is based on fraudulent arguments, any article decent and honest enough to deserve being published should first and foremost focus on exposing said fallacy.

Replace energy policy with monetary policy and carbon with QE and tell me what you think about this article.

THE DORK OF CORK's picture

Burn the gas

Export the coal.


You see we need it as we killed off the miners so as to extract labour value.

It was not very nice of us............but it was a mistake - water under the bridge and all that.

Yen Cross's picture

       Mr. Cork, is a man with insight...  While we're at it, lets export some unrefined crude oil to.

   What Keystone pipeline?


THE DORK OF CORK's picture

Steam coal will be fine...............


The carbon tax thingy is fucked anyhow.


Watch this space.............

England needs coal............


Global warming is all about the methane don't you know - not fucking carbon - who the fuck came up with that idea.



Yen Cross's picture


           You guys are getting killed across the pond. Leave the European Union,  if you have to. . The mayor of London is an ass hole!

        F/X flows are propping London in an insane way. M/E flows love London. (london Law, for bond/cds contracts)....ect

         Big time "cow bells" in London.


Augustus's picture

The Obama EPA had regulation ready to go that would hae required farmers to control cow farts.

There is a pretty funny article complaining about the EPA reg that did away with the vents in the small gas cans.  The fact that the gasoline will not flow from them properly was of no concern.

Jim in MN's picture

What was that crazy lady's name again?   Erhm......

kill switch's picture

What isn’t tragically misguided in this administration ,,,give it up for the sealed records at Columbia University, this fuck has his finger in the thermal nuclear button of this country and his records are sealed????? I want to know everything about this guy, yet he gets a pass on his total fucking history.



Seize Mars's picture


"The Obama Administration's XYZ Policy Is Tragically Misguided"

First, there is no "Obama Administration." It's the Rockefeller / Rothschild / Schiff / Warburg / Bush Administration. (BTW the Clintons thought they could murder their way into the club, but alas, you can't. Just google Arkancide.)

Secondly, nothing is tragically misguided. The Plan is right on schedule, and doing very well on most accounts.


Well, look at selling short like a motherfucker in about 3 years. And, go long on coal about the same time.

Save gas - fart in a jar. 

howenlink's picture

As though a President should come out in support of economic anything.

chistletoe's picture

the spot price of natty in Japan is now well north of $20/therm ....


we gotta give them something for all of those Toyotas ...

All Out Of Bubblegum's picture

The muppets don't understand it yet: America is the new Zimbabwe and the vampires are in the process of selling ALL of America to the rest of the world. Barring divine intervention or an immanentizing of the eschaton, in ten years, whoever is left living on the industrial Gulf Coast will be wage slaves for the energy interests that will be shipping product overseas and selling it for a fortune back to what's left of the consumer class in the good ol' USofA. 

People who are saving even lowly copper now will be looking like geniuses in five or six years.

palmereldritch's picture

Yep.  When it comes to sheeple awareness of NWO strategies to de-industrialize, rape, loot and export energy and economic independence from North America they're a couple of pegs below this guy:

The Matthaus's picture

AHHHH, would be scary if it were close to true. To put things in perspective, a 7%/yr growth rate for 25 yrs is extremely high for nat gas. The last 12yrs have been closer to a 1.25% avg   ( 2001 - 2012 using the EIA consumption data). Also I dont think Chris realizes just how much gas is actually used. 2012 vehicle consumption was roughly 33 bcf for the year. Total gas consumption for the year in the US was  25.5 TCF. Vehicle use being  0.13%, half of a quarter percent.

Resource nationalism is another thing entirely but its likely better to let markets sort out the allocation of scarce resources than politicians and bureaucrats.

Augustus's picture

There is only one approved method for generating heat.  Rub your hands together briskley.  Breathing warm air on the hands is prohibited as it releases CO2.

Professorlocknload's picture

"...better to let markets sort out the allocation of scarce resources than politicians and bureaucrats."


Yup. The problem is "Policy."

All one needs for proof is to look at "Monetary Policy, Defense Department Policy, Rent Control Policy, TSA Policy..." 

Bureaucratic "policy" is nothing more than a means of control over individual decision making processes.

RopeADope's picture

Manufacturing jobs were shipped overseas to lower domestic energy consumption. Exporting our energy resources is a slap in the face to middle class Americans that made that sacrifice. The Obama Administration has no idea what it is doing.

snblitz's picture

This article argues that trade is bad.  If I have more of something than I need it is good if I can trade it to someone who needs it more.  Both sides win.

Trading on the basis of a belief in future shortages is a fools errand. Just look a peak oil over the last 150 years.

Substitution is also available.  If we run low on natural gas we have a pile of money or whatever we traded for to invest in another form of energy.