Energy Horror Part 2: Boston Willingly Becomes a Putin Puppet

The second installment of the energy horror trilogy in many ways is the most disturbing.

Boston is one of the world’s great cities, both the cradle of the American Republic and a town of awesome people. But its political leadership has lost its collective mind, creating an Achilles’ heel in the form of energy insecurity. A strongman in Russia took note and is now in control.

The road to ruin began with a wider effort across the northeast, led by the dysfunctional mess known as New York. New York Governor Cuomo got things rolling when he inanely banned natural gas shale development and blocked new interstate natural gas pipelines in his state. Both moves were, of course, justified under the banner of the public good and cloaked with a faux wrapping of scientific study.

Not only did the duo of Cuomo moves create an economic dead zone in New York (while across the border, Pennsylvania’s energy industry thrived), it also cleared the path for similarly small-minded politicians and bureaucrats in other regional states and cities like Massachusetts and Boston to follow suit with policies that punished natural gas and ran to the false hopes of wind and solar.

The cumulative result of this regionally daft judgement was the eradication of infrastructure investment in pipelines and related assets needed to maintain and bolster grid and home heating reliability. The result was premeditated and desired, not accidental or unanticipated.

As the northeast and Boston were starving investment in their energy resiliency, the natural gas shale revolution in Pennsylvania and other states was rewriting the geopolitical map. The United States today sits as the largest natural gas producer in the world and probably the lowest cost producer of the product. One of the largest and lowest cost gas fields in the nation is the Marcellus and Utica formations close to Boston.

But Boston, of course, is not able to enjoy that domestic natural gas. Instead, Boston is importing liquefied natural gas (LNG) from Russia. That country is run by a man named Putin, who is not what one would consider to be woke or an eco-warrior.

Leaders in Boston, Massachusetts, New York, and the northeast are forcing their citizens and businesses to place their energy security in the hands of our adversary an ocean and two continents away. Instead of a simple pipeline linking Pennsylvania to Boston, the city’s elite chose to link the Russian Arctic to the Mystic River. Instead of relying on their neighbors in Pennsylvania to manufacture their energy, they place their faith in Putin.

Such stupidity has consequences.

One consequence will be much higher energy costs for homeowners, businesses, and consumers in Boston. Boston and New England experience natural gas prices that are more than double natural gas prices in nearby states like Pennsylvania and Ohio. High energy costs are one of the most regressive taxes known to bureaucrats, and Boston’s poor will suffer. Sad, considering the lowest cost natural gas in the world is a few states away in Pennsylvania.

A second consequence will be a less resilient grid and energy infrastructure for Beantown. That’s what happens whenever you decide to transition from a supply chain that was tight and domestic to one that is over 4,000 miles long and spans continents and oceans. And the new supply chain starts with someone who is not afraid to shut the gas valve in the dead of winter to prove a point or to exert leverage. Expect the lights and heat to go out at the worst possible times. Just ask Ukraine or Poland.

The third consequence is environmental harm. A logistics chain that spans over 4,000 miles will have a massive carbon footprint. The natural gas is sourced from a nation where the regulatory standards are largely a joke when compared to U.S. standards. Boston and Massachusetts running to wind and solar won’t help and will only exacerbate the environmental carnage, since both present massive life cycle carbon footprints at scale. Boston and the Bay State are guilty of a massive offshoring of global pollution via purchase of Russian natural gas that is extracted in ways that don’t follow anything close to best practices and subsidization of Chinese-mined and -manufactured solar and wind components that have massively harmful environmental footprints.

People outside of New England are surprised to learn that about 20% of New England households use heating oil to heat homes in winter. That’s about 85% of the U.S. households that do so. With the natural gas shale miracle in full swing in nearby Appalachia, Bostonians and New Englanders today heat their homes in a way more like Thoreau did with his cabin at Walden Pond in the 1800s than the rest of the country does in 2021.

What’s really scary is understanding that’s exactly what Boston’s anti-innovation leaders desired.

An Energy Horror Trilogy

Hollywood brought us epic trilogies through the years: Star Wars, The Godfather, Lord of the Rings, and Clint Eastwood’s the-man-with-no-name trio of westerns (A Fistful of Dollars, For a Few Dollars More, and The Good the Bad and the Ugly), to name the best. Who doesn’t love debating which of the three films of these masterpieces is best (excluding Godfather III, of course)?

In the genre of horror, the most frightening modern trilogy does not come from Hollywood but is brought to us by politicians, environmentalists, and bureaucrats. Unfortunately, the stories are real, not fiction.

There are a trio of real-world energy disasters. The calamities and victims are the result of consciously embracing ill-advised policies pursued in the name of saving the planet.

Yet the true intentions of these policies are to impose environmental fundamentalism over the free market. The winners are subsidy-seekers feeding at the public trough. The losers are the innovators and anyone who uses energy (which is everyone).

Channeling Siskel and Ebert, let’s provide a critical review of each installment of this trilogy.

Part One: California’s Grid Goes From First-Rate to Third-World

The first installment of the trio has been under development the longest. California bureaucrats and politicians have prided themselves on being at the fore of environmental extremism for decades. Much attention concentrates on developing nonsensical policies to address climate change alarmism, despite everyone knowing the policies will have little impact on climate.

The Golden State’s power grid has suffered the most under this approach. California’s grid used to consist of a resilient portfolio of in-state nuclear, coal, natural gas, oil, wind, and solar generation sources as well as a similarly diversified portfolio of out of state suppliers. The bulk of the transportation fleet ran off gasoline. The state’s energy infrastructure was the resilient backbone that a powerful economy rested upon.

Once the Left assumed power in the Sacramento legislature, urban areas, and the governor’s mansion, the resilient grid and energy infrastructure built on sound science and engineering began to devolve via policy and edict.

The California Public Utility Commission (PUC) was stacked with those more interested in green virtue signaling than the nuts and bolts of maintaining a reliable grid. The PUC president’s bio focuses on prior achievements of “green government,” renewable energy promotion, and social responsibility. The bios of the other four commissioners of the PUC tout environmental justice, decarbonization, sustainable communities, and environmental equity.

These bios of the California PUC commissioners expose the ineptitude of California’s political leadership, starting with Governor Newsom. That’s because the politically-appointed PUC presided over the worst utility debacle in the nation’s history: the epic fail of Pacific Gas and Electric (PG&E). The PUC’s leadership then, like now, obsessed on the optics instead of the fundamentals. That led to tragedy and an ongoing crisis that has no end in sight.

For years, the California utility enjoyed its focus on optics and racked up accolades from self-proclaimed experts. The utility was designated as an ESG outperformer and ranked as the top utility in responsibility. The company boasted that over a third of its power came from renewables, which helped deliver a string of best-possible governance ratings from experts. PG&E had all the impressive, yet hollow, optics a utility could hope for to curry favor with the politically-correct.

But PG&E was a severely dysfunctional organization in the arenas of governance, safety performance, and environmental stewardship. The utility’s rap sheet over the past twenty years includes convictions for over 700 misdemeanors that took the court clerk over an hour to read aloud (1997) and felony convictions stemming from misleading regulators and the public about the state of a gas pipeline that ruptured and killed eight people (2010).

Erin Brockovich became a movie sensation when she represented clients who were eventually awarded over $600 million from PG&E in court cases stemming from contaminated drinking water. From 2012 to 2016 PG&E supervisors looked the other way as employees fabricated thousands of on-time results to hit internal targets for responding to excavation work around buried power and gas lines, accumulating over 170,000 violations of state law.

Then, in 2017 and 2018, wildfires raged across California and it was determined that over 1,500 fires, several of them catastrophic, were caused by PG&E’s poor maintenance practices, deferred safety upgrades, slow responsiveness, and obsolete equipment. The death toll exceeded 100; and, 22,000 buildings were destroyed across 350,000 scorched acres. A company audit months after the fires reported nearly 10,000 problems with power lines throughout its system.

Before you knew it, the utility was facing tens of billions of dollars in liability. PG&E filed for bankruptcy in early 2019, bringing home the reality of wiped-out investors despite all those hollow credentials.

PG&E customers today suffer the largest intentional blackouts in history, exemplified when two million Californians had power cut for days in October 2019, during fire-prone windy periods as the utility post-bankruptcy looks to pass on risk to the rate payers. The CEO went on record that same month lamenting that it might be a decade before the self-inflicted blackouts end.

Of course, the jettisoning of risk to those the utility exists to serve will be justified on the ever-accommodating excuse of addressing climate change and serving corporate greed; Governor Newsom’s assessment of the root cause of the intentional blackouts was found in his quip that, “It’s about corporate greed meeting climate change.”

What won’t be named are the true root causes of the crisis by the governor. First, for years government bureaucrats, environmental groups, and politicians forced the regulated utility to divert billions of dollars from necessary line maintenance and equipment upgrades to various climate change and renewable energy adventures. The consequences were dire: a failed 100-year old metal hook designed to suspend high voltage transmission lines started the deadly 2018 Camp Fire.

A second root cause was those same bureaucrats and environmental groups prohibiting the utility and other businesses from practicing effective vegetation clearing practices, making the wildfires more intense and faster moving. The PUC may have set the stage for the catastrophes by prioritizing renewable energy and climate change mandates ahead of electricity grid safety and reliability oversight.

Intentional blackouts by a government-controlled utility have serious negative consequences, spanning from macro GDP to the individual. Each blackout event imposes $2.5 billion in costs for residents and businesses in the state. Intentional blackouts mean health risks for the elderly who won’t be able to use medical devices that require electricity as well as lost revenues and increased expenses for businesses such as restaurants and grocery stores when they can’t serve customers in the dark and lose refrigerated inventory.

Homeowners and businesses are now buying carbon-fueled generators in droves because everyone knows the utility cannot be trusted to supply safe, reliable electricity. Adding insult to injury is that intentionally turning California into a third world electricity grid does not prevent the inept utility’s decrepit infrastructure from starting more fires: PG&E disclosed in late 2019 that one of its transmission lines failed in the area of a Sonoma County fire that destroyed hundreds of buildings.

California’s political and bureaucratic ineptitude hits rock bottom and then digs deeper. Mandating electric vehicles is the latest malfeasance, which will stress grid capacity thinner and expose yet another vital link of the economy, transportation, to the same ills being experienced by the power generation link. While California residents and businesses will suffer more, the climate will not benefit by a single part-per-million of carbon dioxide reduction.

The energy nightmare continues for California residents.

The Premeditated Murder of the Greatest Story Never Told

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.

Three-Pronged Attack

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.

PCN “On the Issues” Interview – Feb 11, 2021

Nick joined the Pennsylvania Cable Network (PCN) for an “On the Issues” interview on Feb. 11, 2021. Nick discussed a range of issues, including the economic impact of the natural gas industry, natural gas pricing, the environmental benefits of greater natural gas utilization, federal and state energy policy, and much more.