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Huge 100-Year Natural Gas Investment

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You have to wonder just how serious the Obama administration is about fighting terrorism and saving the environment when the one solution that can help alleviate both-natural gas-faces developing government-induced headwinds. Terrorists would love to explode a ship importing liquefied natural gas (LNG) near a major population center. Why then don’t we move away from LNG, since natural gas, thanks to new discoveries, is more plentiful?

Another reason to shift energy policy towards natural gas is that it’s a cleaner hydrocarbon. Once again, common sense seems to be lost on Washington. All the rhetoric about the green movement is just a diversion for more government control and redistribution of wealth.

Just under a quarter of the energy consumed in the U.S. comes from natural gas, of which 98% is from North America and 2% is imported LNG from Trinidad and Tobago, Egypt, Norway, Nigeria, and Qatar.

LNG is received either offshore or onshore by one of eight import facilities. Some of these shipping routes and final destinations come dangerously close to major population centers-Boston, for example. And the shipping route for another proposed site in Weaver Cove, Massachusetts, which begins in Newport, Rhode Island, passes through thickly populated neighborhoods like thread through a needle. So why do we deal with LNG at all?

LNG supplies 20% of New England’s natural gas supply because of current pipeline and storage limitations. Both can be solved with new pipeline construction and recent discoveries. Take the new Rockies Express pipeline or REX East, which connects the Rockies natural gas market to the Appalachians and has closed the pricing gap between the two regions, creating a more vibrant market. The pricing spread between the two regions is now only $0.30 to $0.35/MMBtu, down from $1.80/MMBtu. And the Marcellus shale discovery is a game changer for the Northeast and the overall natural gas market as it ushers in a new era for North America’s natural gas supply.  

The Potential Gas Committee’s (PGC’s) biennial report, Potential Supply of Natural Gas in the United States, released in 2009, shows the U.S. with a total available recoverable natural gas supply of 2,074 trillion cubic feet (Tcf)-the highest natural gas resources evaluation in the PGC’s 44-year history. Since the U.S. consumes 22 Tcf per year, that’s about 100 years of supply. And if Canada is included, the supply is off the charts.

Terrorists would love to explode an LNG ship. Al Qaeda literally wrote the book on such attacks. The U.S. government holds al Qaeda operative Abd al-Rahim al-Nashiri responsible for masterminding the attack on the USS Cole when it was rammed by a small boat loaded with explosive. He’s incarcerated at Guantanamo Bay. In 2007, Jane’s Terrorism & Insurgency News reported that The Lebanese Daily Star quoted an unnamed Western counterterrorism official as saying “They actually have a naval manual on this. It tells them the best places on the vessels to hit, how to employ limpet mines, fire rockets or rocket-propelled grenades from high-speed craft and turn LNG tankers into floating bombs.”

Richard Clarke, the former White House counterterrorism chief, wrote in his 2004 book Against All Enemies that had a giant tanker been blown up in Boston harbor it would have wiped out downtown Boston.

The free market has found natural gas to be a winner. There’s no need for the U.S. to import LNG. If anything, we should be exporters. A shift to 100% North American natural gas could eliminate deliveries through high-population centers like the existing site in Boston. And future sites requiring delivery through densely populated neighborhoods like the one beginning in Newport, Rhode Island, would be rejected.

Last week, Obama’s interior secretary, Ken Salazar, announced he would bring more scrutiny and a greater public voice on how oil and gas leases are awarded on public lands, potentially slowing the development of the nation’s natural gas resources. Why does the Obama administration want to put on the brakes? Is it because their green initiatives are proving to be unsustainable-without taxpayer subsidies, at least?

I agree with the Independent Petroleum Association of Mountain States’ statement that “the changes will create an extra layer of red tape that will allow government bureaucrats to trump the expertise of geologists and engineers.” Sounds to me like that’s exactly what the Obama administration wants. Let’s hope they don’t blow another common sense solution.

E.J. Smith is Managing Director of Richard C. Young & Co., Ltd. an investment advisory firm managing portfolios for investors with over $1,000,000 in investable assets.

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E.J. Smith - Your Survival Guy

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E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.