Environmental and energy policies have emerged in the upcoming Massachusetts special election for the seat vacated by former Senator John Kerry, now U.S. Secretary of State. The focus has been on the construction of the proposed XL Pipeline, a pipeline proposed by TransCanada to move oil sands crude from Canada through the middle of the United States to facilities on the Gulf of Mexico for refining and exportation.
Much is being made of the two Democratic candidates’ positions on that proposal. But while that focus is important, from Massachusetts’ perspective there are far more important issues having a more direct impact on our energy needs and costs. One important issue is whether to curb the exportation of natural gas.
About a year ago in this blog (“Natural Gas Boom—Too Much of a Good Thing?” 1/28/12), we questioned the wisdom of prohibiting the exportation of natural gas because that could impact the willingness of developers to continue exploration in the face of such low domestic prices. Indeed, we speculated that the only reason the nation, and the New England region, continued to benefit from the oversupply of shale gas was the prospect of exportation. Cutting off the ability to export could actually reduce supply and increase domestic prices.
That debate has continued and is getting sharper. Representative Edward Markey, a candidate for the U.S. Senate, has introduced legislation prohibiting natural gas exportation for 10 years. Several large end users of natural gas, particularly Dow Chemical, have argued such a prohibition is important to keep the value of our abundance of gas supply here at home and keep prices low. As we asked over a year ago and continue to ask, how do we know that will keep prices low? How do we know it won’t have the opposite effect diminishing incentives to continue and expand exploration of natural gas supplies in the U.S. and reducing supply?
Recently, the former Democratic Senator from Louisiana, J. Bennett Johnston, raised the same question in the March 5, 2013 Wall Street Journal (subscriber access only). He eloquently laid out a long history of legislative interventions, all well-intentioned, that turned out to be wrong for energy policy. He, like we, reminded readers of the Fuel Use Act of 1978 that prohibited the use of natural gas for the generation of electricity and several other legislative actions, all intended to secure protections for consumers, only to have them backfire.
In the context of the gas exploration debate, Senator Johnston contends that there is no way to set a “sweet spot” whereby we reach the right balance between prices which maintain exploration with exportation. He concludes, “The free market might not always lead to everyone’s definition of the sweet spot, but experience has shown that it is a better allocator and regulator than bureaucrats and politicians.”
We agree. Massachusetts voters should demand that all candidates for the Senate address this issue with more than just a focus on the largely XL project. It will have a direct impact on our access to natural gas and the prices we pay for it.
As the region struggles with how to expand pipeline capacity to bring more gas here and power reliability issues associated with current supply constraints, it is imperative we know low cost supply will continue to exist. Otherwise, we could be building a house of cards on a fuel source that will, literally, evaporate.