Marcellus Shale Update – 3.01.2018

The curious inconsistency among our national energy policy, national security policy and national environmental policy is coming into sharper focus.  It likely will be amplified by events thousands of miles away in the Middle East.

Start locally.  Last month I wrote about the astounding fact that people in New York and New England are more comfortable paying the Russians to import gas thousands of miles over ships of questionable seaworthiness than they are building pipelines to secure a cheap, reliable energy supply and pay Americans.  This aversion to pipelines is not unique to New York and New England – witness Dakota Access in North Dakota, Keystone in Nebraska and Jordan Cove in Oregon.   In Lambertville, NJ (next to Trenton), Mayor Dave Del Vecchio signed off on new zoning restrictions aimed at stopping the Penn East Pipeline which would transport gas from Northeastern Pennsylvania to the Trenton area.  Other municipalities have expressed their intent to try to stop the project.  Despite the fact that Penn East has received FERC approval, in the post-Andrew Cuomo/Constitution world interstate pipelines construction is a free-for-all.  How that serves the national interest is anyone’s guess.

Now broaden the horizons internationally, and especially to the Middle East.  The papers are full of stories about an impending war between Israel, Iran and Hezbollah.  Having been “invited” into the Syrian situation, Iran has used the opportunity to build its own military bases and extend its “Ring of Fire” around Israel.  They may be close to accomplishing it.  The Israelis are more and more convinced that war will break out soon.  They will not let Iran and Hezbollah build missile factories right under their nose.  Add to this the military power Russia has established in Syria, and for good measure take a small dose of American-backed Syrian rebels, Kurds and Turks, and you have a giant mess.  With Iran constantly pushing for a military confrontation, it’s hard to see how one will be avoided.  Once underway, there is no margin for error, and war is an exceedingly messy and imprecise business.

Already Americans have directly killed Russians.  On February 7 Russian forces attacked the town of Deir al-Zor in Syria, held by American-led Kurdish and Arab forces. At least 100 and potentially many times more Russians were killed and wounded in American air strikes.  The Russians have kept this hush hush, but it shows the danger.

Meanwhile, Syrian President Bashar Assad is carpet bombing anti-government rebels using chlorine gas in the Syrian region of Eastern Ghouta.  Western diplomats like British Foreign Secretary Boris Johnson are demanding a response, but any must take into account Russian air defenses.

With rather clear cut human rights violations, and with Russia directly involved, it would seem that Europe would love to give Russia a black eye over the Eastern Ghouta outrage, at least diplomatically.  The problem remains European dependence on Russian oil and gas.   Russia is Europe’s main supplier.   As of 2015, the 28 EU Member States imported 902 Mtoe of energy from Russia.  If a conflagration happens, and if we end up directly involved with the Russians – each of which is very possible – don’t expect overwhelming European support in areas like sanctions against the Russians.  Thanks to our pipeline buildout confusion and delays in establishing export terminals, we may face the prospect that the only way to project American power is to put American young men and women in harm’s way.  This is not a pleasant prospect. And didn’t have to happen.  It is, however, a direct response to our failure to counteract a Russian energy stranglehold despite having the opportunity to do so.

In any war situation, the price of commodities, including oil and gas, is likely to skyrocket.  Thanks to shale gas, that price spike will be tempered, at least everywhere in the Country except New York and New England.  We are on our way to overtaking Russia as the world’s largest oil producer, but we have no way to get the oil and natural gas to the Northeast.  Thanks to Andrew Cuomo and the other New England Governors and politicians, their region remains remarkably exposed.

As one nation, can we simply cut a geographic region loose during a price spike and say there will be no help coming from the rest of the country and no imports permitted from Russia and Yemen due to the international situation?  This could devastate New England economically.  On the other hand, does the whole country have to suffer for the well-meaning yet naïve environmental extremism of that region?  Let’s hope we don’t find out, but it’s more and more likely we will.

Questions? Let Dan know.

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