In a famous scene in the 1987 movie The Untouchables, tough cop Jimmy Malone (played by Sean Connery) colorfully illustrates the resolve needed to bring gangster Al Capone (Robert De Niro) to justice. "You want to get Capone?" Malone asks Federal Agent Eliot Ness (Kevin Costner). "Here's how you get him: He pulls a knife; you pull a gun. He sends one of yours to the hospital; you send one of his to the morgue. That's the Chicago way, and that's how you get Capone." In the making of energy policy, supporters of oil and gas development seem reluctant to acknowledge they confront the Chicago way. They carry knives into a gunfight.
The militant argument for expedited LNG-export approval is an especially dull blade that betrays misunderstanding of the conflict. Indeed, the government has been too slow to permit plant construction and exports to countries not party to US free-trade agreements. But arguing for faster action as a way to weaken Russia is opportunistic, unsound, and mistargeted.
Without question, Russia's takeover of Crimea and apparent designs on other parts of Ukraine warrant concern. While effective responses are available, quickened permitting of LNG exports isn't one of them. US liquefaction plants won't start work in time to dissuade Russian expansionism and probably won't export enough LNG to materially threaten Russian gas sales.
More troublesome for Russia than the prospect of LNG from the US are the rapid development of unconventional gas resources in the US and the chance that similar development might occur elsewhere. The competitiveness of Russian gas already suffers from the diversion of LNG once destined for the US to other markets and from increasing US exports of coal. To the extent other countries, especially in Europe, achieve similar success producing gas from shale, pressure on Russia will increase.
What's most important is resource development, which should occur regardless of Russian behavior. But that's the real fight. It's a strategic struggle that can't be won by slicing arguments into tactical pieces.
Gunning for gas
Suddenly, natural gas no longer represents the "clean" hydrocarbon bridge to a future dominated by renewable energy. Policy discussions and political commentary treat it increasingly as an environmental threat because methane is a greenhouse gas. Later this year, the Bureau of Land Management will propose regulations to curb gas-flaring on federal land. The Environmental Protection Agency soon will begin studying methane emissions from oil and gas equipment in a project sure to generate new, costly controls.
Why is EPA mounting this effort when its own data show methane emissions dropped 3% from all sources during 2005-12 and 14% from natural gas systems, even though gas production has increased? The answer has to be that environmental pressure groups, deeply persuasive at EPA throughout the Barack Obama presidency, have drawn their guns on natural gas. As reported here earlier, 16 such groups wrote Obama a letter on Mar. 18 protesting LNG exports and urging the president to commit to "keeping most of our nation's fossil fuel reserves in the ground (OGJ, Mar. 31, 2014, p. 16)." They want to do more than block exports of natural gas; they want to kill gas development.
Influencing policy
On that goal, the pressure groups will fail. Curtailing production would be doubly costly, foreclosing wealth generation from resource development while denying energy consumers ready supply of affordable fuel. Those costs would become politically intolerable long before the goal could be achieved. But gas producers, processors, and transporters should find no comfort in futility of the ultimate aim. In an administration loath to disappoint activists, the antiproduction agenda influences policy until costs become tangible to consumers. Why else is the international section of the Keystone XL pipeline not already under construction?
The energy fight is not about pipelines or liquefaction plants. It's about resource development, opponents of which don't carry knives. Supporters of oil and gas production must understand the nature of the struggle.