US energy is their problem, and the UK’s

There’s some danger where the febrile atmosphere of US politics could run risks for the UK shale and climate debate. The US need some reality checks from both sides of the debate before their, and the UK’s, middle gets involved.

US fears from both sides are condensed here by Gregory Meyer, at the FT:

Folks in the fossil fuel industry are optimistic and jubilant, and climate change advocates are despondent,” says Jake Dweck, a lawyer at the Sutherland firm who represents both conventional and renewable energy companies.

Will industry glee mean equal joy for energy investors? That is more complicated. Returns under a Trump administration will vary by form of energy, among them oil, gas, coal or renewables. Businesses that extract fuel sources will perform differently than those that transport or refine them. Changes to tax or trade policy could have a greater impact than narrow energy reforms. The idea that expanding where companies can drill, easing the process of getting a permit and scrapping efforts to curb carbon emissions “will unleash an energy revolution,” as the Trump transition website put it, is untested. If more supplies do flow, they could depress energy prices and punish investors.

In short this can’t develop into an us vs them battle – but past history shows it might. Misconceptions from both sides  could easily make it so.  Both sides are wrong.  If either standpoint sets out to look for faults, they’ll surely find them.  But as politics move away from left/right to up/down,  the answer remains, still, somewhere in the middle.

About a third of people on each side say of the other that its proponents “are so misguided that they threaten the nation’s well-being.” They’re both right about that.

Firstly, a reality check for the industry side. The US oil and gas sector flourished under Obama, despite any purported federal ravages. The US onshore oil and gas sector is undeniably not in any need of being made great again. Back to the FT:

Climate was a priority for Mr Obama. He pushed through new rules to reduce methane leaks from oil and gasfields, curb flaring of waste gas on federal lands and improve fuel efficiency for cars. He blocked offshore drilling in swaths of the Arctic. He rejected the proposed Keystone XL oil pipeline from Canada into the US and halted construction of the Dakota Access pipeline in North Dakota, both of which had rallied environmentalist opposition.  Despite the crackdowns, US oil and gas companies managed to dramatically increase output during his term. Between January 2009 to January 2017, US crude oil production has risen from 5.1m barrels per day to about 8.9m b/d, while natural gas production increased from 57.5bn cubic feet per day to 72.3bn cu ft/d, according to the Energy Information Administration

The Arctic question for only one example, has been marginalised by shale. Producing oil and gas in the Alaskan Arctic when easier and closer markets are available isn’t going to happen. Europe has yet to learn the lesson yet for Barents Sea or Siberian gas, but markets have. Homegrown shale protects far off oil and gas in endangered ecosystems, not by banning them as Greenpeace campaign’s would have us believe,  but by making them uneconomic. Yesterday’s new mega resources becomes todays’ stranded assets.  No one needs to have a battle to keep them in the ground. They’re sunk and going to stay that way thanks to shale.

Another example, that of the  KXL pipeline  gets everyone excited but much of the same applies.  KXL  ironically is a far bigger issue for Canada than the US, and is all about getting their tar sands oil to market.  The lesson of the US shale revolution is that tar sands, just like the Arctic and even offshore Gulf of Mexico struggle to compete against shale.

As for coal, the fossil fuel UK greens can’t quite abandon, treating it as a kind of security blanket in reverse for their worst fears:

Not all energy will be made great again. Mr Trump the candidate pledged to revive the US coal sector, where miners have gone bankrupt in the face of competition from cheap natural gas, But the situation might only worsen if shale drilling accelerates. Many institutional investors have become leery of coal, which releases more heat-trapping carbon dioxide than other fossil fuels when burnt at power plants.  “Over the next 10 to 15 years, there really is no future for thermal coal,” says Norm MacDonald, portfolio manager of Invesco’s $1.2bn energy fund.

The US coal industry has been dying for years. It’s worth recalling the deep coal mines of Kentucky were dealt their first blows thirty years ago through open cast mining in Wyoming, an example also true in the UK and Germany. Coal is a dead industry, and the example of the shipping and printing industries shows a solution.  Containerisation and digitalisation made equally huge industries, backed by powerful unions, outdated.  It was clearly a public good that those hit by modernisation should be compensated for the greater good.  The greater good of the climate should mean that coal, everywhere should stay in the ground.  Shale has unleashed enough potential for natural gas to do just that.  A  program where miners are either retrained, or simply paid their salaries anyway- as newspaper printers and dockworkers were – is best for everyone.  Digging coal to keep them at work in a dangerous and dying industry that poisons people serves nobody’s interest.

It’s not the first time and it won’t be the last to note how some key demands of the climate movement have been delivered to them by shale.  The following is a useful analogy for any part of our lives, but is especially pertinent to shale.  I’m repeating it because it’s now just as fitting for the US onshore industry:

Oscar Wilde wrote in ” Lady Windermere’s Fan ”: “In this world there are only two tragedies. One is not getting what one wants, and the other is getting it”

An  example would be for the US industry,  proposing,  let alone welcoming, the loosening of methane and flaring rules. It would be not merely wrong but singularly pointless.   Washington bureaucrats  forcing them to produce and sell  more of their own product?  That’s no less absurd a proposition than many ideas of shale antis marginalised by the side of the road in the UK.

Fuel efficiency for cars is happening due to worldwide and local efforts.  It’s certainly not a case of the Federal Government taking away a  driver’s rights to guzzle as much gasoline as s/he pleases. Leaded gasoline was banned via market forces from California regulation of cars sold there, not from federal  regulation.  States work. The day after the US election I ran into Mark Brownstein  of the US Environmental Defence Fund here in London who  pointed out  US states have far more impact in climate initiatives  than the Federal Government and the renewables revolution would survive Trump.  I agreed , my only caveat being that a thermonuclear war started in a fit of Twitter pique could make the question of planetary survival moot.

If the US industry was smart, they would find centre ground with environmentalists in the North East who have stymied fracking in New York State and interfered with pipelines going to New England.   Blocking  clean burning gas and instead shipping it to Boston it via the carbon intense imported LNG  of Nigerian kleptocrats is crazy.  Madder still is to heat homes in fuel poverty while burning air polluting fuel oil or even wood. Sadly, as Gary Sernovitz noted in The Green and the Black, too often  Energy in Depth  acts like the Anti-Defamation League for Texas.  (He’s told me it was ironic how an English goy was the only one to get the joke.) Depicting the shale revolution as a political battle is as inaccurate as it is dangerous. For both sides

I was talking with people in the US about working on a green/gas alliance there before the election,seeing it as interesting work to do now my kids are growing up and supporting myself as I wait (endlessly) for the UK government to act in their own self interest.  Sadly,it would take a lot of money to convince my wife to even visit the US these days.

This returns to the thesis of a possible cross-contamination of the UK shale debate by the US one.  Let’s not forget that the Obama Clean Power Plan so vilified  by the industry, was also given very little support by the environmental movement, the Oscar Wilde theorem applying there first.  Natural gas allowed both the US wind and solar industry to flourish as, to use a scientific term,  humungous amounts of carbon were mitigated.  This lesson was wilfully ignored by Europe, but luckily China got it.  Thus there is  a diverse energy plan not only for the US, but thanks to China and the US, the same example enabled, not diminished the Paris Climate Treaty. Not that natural gas gets any credit. One reason that the environmental movement doesn’t get the role of natural gas is that the natural gas industry doesn’t tell them.  At the same time, there is a huge green claque who have two contradictory themes.  One is scaring people by positing any days weather forecasts as impending doom.   The other is to present even the most tenuous of clean energy stories as portent of an impending Jubilee that will imminently release us from fossil fuel slavery .

But politics is still very tribal, and a withdrawal from the Paris Treaty would  have negative impacts outside of the energy debate. The UK narrative would be any withdrawal would make the UKs leaving fossil fuels in the ground even more vital, and why would be want to listen to anything that Trump says.  The substantial amount of people demonstrating against Trump in London on January 21 could be open to influence by other members of the tribe, most especially the Friends of the Earth.  Since the FoE have long placed the shale is evil meme in the public consciousness and recent advances have not yet had time enough to lance the poison, the dangerous, “controversial” dirty shale urban myth is not yet finished: It’s only sleeping.  The FoE, still steadfastly refusing to debate on climate,  will take every chance to paint shale in a Trumpian hue.  That would be as inaccurate is it would be unfortunate.

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