The Left and the environmental movement are conspiring to destroy a multi-trillion-dollar global free market that was created by American innovation and disruptive technology.
This market is the global value chain of natural gas, with U.S. fields like the Appalachian basin fueling competitive economies everywhere. Millions of people across wide demographics will suffer life-altering consequences if the market-homicide machinations of the anti-carbon crowd are realized, with the biggest losers being the American middle class and the developing world poor.
Natural Gas 101
The U.S. went from being a net annual importer of natural gas a few years ago (as recent as 2016) to the largest global producer of natural gas and a net annual exporter today. What catalyzed this stunning rapid transformation? Innovative and disruptive technology in the form of horizontal drilling and advanced completions techniques. American ingenuity allowed methane, aka natural gas, to be liberated from shale rock deposits at prolific rates and low cost.
Unleashing abundant supplies of carbon-based energy at low cost has massive follow-on effects, from the micro to the macro. Cumulatively, the benefits across this virtuous value chain total in the trillions of dollars.
You see these benefits locally, often in rural locales.
In American gas basins, from the Appalachian to the Permian, landowners have enjoyed a windfall from gas rights leasing proceeds that they’ve reinvested into family farms, homes, kids’ education, and local businesses. Communities ravaged by global “free” (unfair) trade now see high employment in jobs that pay family-sustaining wages. The services industry in these areas, from hotels to car dealerships, enjoy steady consumer demand never before contemplated. Where no hope existed not long ago for these communities, attention has now turned to a future with promise.
You see the benefits regionally across our great land.
Pennsylvania retooled its power grid to feed off domestic natural gas and the state’s carbon dioxide intensity declined nearly 40 percent in just 12 years while its manufacturing sector is revived and businesses and homes enjoy lower energy bills. The southeast U.S. sees natural gas as an opportunity to expand its economic growth even further, and the region helps spur construction of new pipelines to transport the molecules from where they are produced to the Carolinas. Old-line manufacturing in automobiles, petrochemicals, and industrial products are resurrected across the Rust Belt by the jolt of cheap and reliable energy.
Benefits are evident across North America beyond our borders.
Ontario’s heavy industry is now fed by new pipeline infrastructure conveying Appalachian carbon-based molecules, making it more competitive and willing to invest additional capital. Mexico is the largest importer of U.S. natural gas, helping to raise the living standards for millions of its working poor. The U.S. shale industry and free market have done more for North American prosperity than the NAFTA and USMCA, combined.
America’s carbon manufacturing industry is redrawing the geopolitical map beyond North America.
Massive liquified natural gas (LNG) terminals are popping up all along the east and gulf coasts, to liquify natural gas transported from inland basins via those new pipelines. The liquified product is then loaded onto new ocean-voyaging transport ships to places like Poland, South Korea, Spain, Japan, and India. There, the natural gas is re-gasified and utilized for home heating, electricity generation, and manufacturing. Our carbon-based molecules are being utilized globally to help spur improved quality of life for billions of people.
Natural gas’ redrawing the geopolitical map broke OPEC’s back. Domestic carbon manufacturing allows the U.S. to withdraw from endless conflicts in faraway lands since we now deliver our own energy security. U.S. natural gas is the biggest strategic lever against the growing threat of the ominous Chinese communist state and its global ambitions, as well as Russia and Putin.
There are two underlying reasons why this miracle occurred in a very short time.
First, the free market was able to function without major government intervention. The industry innovated quickly and economies adjusted rapidly; bureaucrats in government couldn’t keep up to meddle.
Second, the free market allocated capital across the global value chain in a way where what were once fragmented, independent, and illiquid natural gas markets to become an integrated and liquid global market.
Before the shale revolution and cumulative capital investment, the demand for and price of natural gas in Japan had no relation on what the natural gas markets were experiencing in the U.S. Today, the value chain serves as a market stabilizer, equilibrating disconnects in supply, demand, and pricing across different regions of the map. That type of equilibrium improves the prospects of all economies and peoples of all nations, colors, creeds, and genders.
Despite the undeniable and epic benefits of the American shale revolution, the natural gas industry in 2021 faces a three-pronged attack. The masterminds behind the attack seek to derail the multi-trillion-dollar value chain that was created when innovation and disruptive technology were set loose in the free market. The success of the natural gas value chain only motivates the aspiring value-destroyers more.
The first prong of attack is heightened regulatory standards on natural gas production and reduced access to natural gas reserves. You see this attack every time an administrative state bureaucrat in the EPA issues a new regulation on the industry, and increasingly the standard embodied in the regulation is at a level of performance above that of activities outside of natural gas or oil production. You also saw it on day one of the Biden presidency when he signed an executive order putting a moratorium on natural gas development on federal (i.e., our) lands. Although these attacks have a cumulative negative impact, the industry has become adept at efficiently rising to meet such onerous challenges.
The second prong of the attack targets the industry’s access to capital and looks to cut off supply of the vital lubricant for any capitalistic endeavor. This attack will be evident when major banks bow to pressure from environmental groups to stop lending to the carbon economy, when foundations or endowments of universities chest-thump about their divestment from carbon producing companies, or when credit ratings firms assign poor credit ratings to such companies not because of quantitative metrics but instead because of subjective views of the industry’s social worthiness. The logic of this prong is simple: starve a growing industry of capital and you can slowly strangle it to death.
The third and final prong of the attack is the most insidious of all: thwarting the future demand growth for natural gas. This attack manifests through the throwing of regulatory and legal roadblocks into the paths of new pipeline projects that would convey natural gas from the producing basins to the growing demand centers.
You see this attack every time ill-advised politicians on state (à la California), regional (à la Regional Greenhouse Gas Initiative), national (à la Green New Deal), or international (à la Paris Climate Accord) levels commit to nonsensical, expensive, and unachievable renewable portfolio standards for power generation. Sometimes along with the bureaucrat-induced protected market share for renewables you also find excessive taxpayer subsidy, whether direct or indirect. These protected markets and subsidy for wind and solar are done in the name of saving the planet, yet they do nothing to improve the climate and act as a brutal regressive tax on those least equipped to pay it.
The Winners and the Losers
The collateral damage from the ideological-induced destruction of the natural gas value chain is deep and wide.
Middle-class Americans (including building trade workers in Appalachia, homeowners in California, and service providers in New England) will have either their jobs destroyed by onerous regulation or their disposable incomes reduced by higher energy bills (unfortunately, many middle-class Americans will endure both). Small business owners, whether in the gas fields or in regions where the demand for natural gas is growing, will face an even tougher road to grind out consistent profit. Kids in economically disadvantaged urban and rural school districts will see the clear path to a job paying family-sustaining wages right out of high school evaporate.
Democracies standing up to China or Russia will need to fend for themselves when it comes to their strategic energy security. And the global poor will pay the steepest price of all, by surrendering years of their life expectancy and having a better quality of life torn from their grasp.
The winners in this scheme constitute a rogues’ gallery of players who make a living off the backs of society’s doers.
Government bureaucrats will grow perpetually, using the regulations and market interventions as convenient cover. Corporations designed to suck subsidy and tax credits with little regard as to whether the underlying activity garnering the subsidy and credits has any economic rationale will flourish. The despots running nations aligned against the U.S. will capitalize on our foolishness to strengthen their hands and weaken us and our allies. The one-percenters will do just fine, paying a pittance more of their comfy incomes for energy but reaping substantial rewards as their investment portfolios position to feed at the trough of the scheme.
Adding insult to this tremendous injury is the realization that none of it will improve climate to any measurable extent. Perhaps that is not surprising when one realizes none of this has anything to do with the environment. Instead, it’s about killing off the greatest of stories before it’s ever told and replacing it with an unsustainable fiction that fits the sanctioned ideology. Let’s tell the true story and dispel the fiction.