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PowerSource Voice: Can U.S. natural gas be used to punish Russia for its actions in Ukraine?



It has been suggested by some members of the Pennsylvania congressional delegation that we take advantage of our plentiful supply of natural gas, liquefy it and ship to European countries as a substitute for Russian natural gas.

This suggestion is made to punish Russia for not respecting Ukraine’s sovereignty and to hit Russia in the pocketbook since it earns large sums from furnishing nearly 30 percent of Europe’s natural gas supply.

Is this a good idea? Probably, but, unfortunately, it is not practical.

True, the U.S. is awash in natural gas, largely because of shale gas, especially those volumes coming from the prolific Marcellus formation. Also, the Department of Energy recently has approved several export terminals that could be used to liquefy and ship gas to markets in Europe. And one of those terminals is located in nearby Maryland.

By way of background, the Marcellus shale is found in Ohio, West Virginia and New York and Pennsylvania. Before 2007, Pennsylvania had little proven natural gas reserves. Thanks to having stacked shale plays, it now has the second highest in the country after Texas.

Marcellus producers continue to hone their capabilities, use new technology and refine techniques to maximize well production. Currently, the Marcellus produces approximately 18 percent of total U.S. gas production.

Production is only part of the picture. For liquefaction to work, gas supply needs to be transported to these new facilities. Three pipelines serve the Cove Point — Transcontinental Pipeline, Dominion Transmission and Columbia Transmission. These pipelines have transportation constraint problems specifically during the winter months.

Pipeline expansion may not be enough to fix the problem.

As to the status of liquified natural gas exports, the shale gas revolution that now supplies almost half of U.S. consumption has enabled developers to apply to the U.S. Department of Energy for permission to export LNG to countries that either have signed free trade agreements or to non-free trade countries such as Japan. In order to obtain permission, a showing must be made that the exports will not be inconsistent with the public interest and will not adversely affect domestic natural gas supplies or prices.

In addition, an applicant has to convince the Federal Energy Regulatory Commission that the terminal and related facilities are in the public interest and will not have a negative impact on the environment. That entire process can take 18 months.

If an export terminal already has been approved and there are no court challenges, the construction or modification of an existing terminal could take an additional two years and at a cost of $1 billion to $2 billion.

Using our plentiful natural gas supplies to punish Russia is a decision for politicians and statesmen.

However, timing and practicalities must be considered before threats are made. 

Joe Baran is principal of oil and natural gas consulting firm Bertison-George LLC, and is based in Pittsburgh. William A. Mogel is a partner in Mogel & Sweet, a Washington D.C. law firm specializing in energy regulation and LNG exports.

PowerSource Voice is a regular feature offering insight and opinion on energy subjects. To contribute, contact Associate Business Editor Teresa F. Lindeman at tlindeman@post-gazette.com.

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