A NO TO FRACKING IN NC IS A YES TO THE GAS PIPELINE

July 31, 2017 § Leave a comment

The proposed Atlantic Coast Pipeline (ACP) will be a deterrent to hydraulic fracturing in North Carolina, if completed.  A recent report in the News and Observer discusses the merits of the ACP.  Importantly, inexpensive natural gas from the north will create a disincentive to produce it in our state.

Shale gas has been singularly responsible for pulling this country out of the recession during the early part of this decade.  The fact that our gas is up to a third in price to elsewhere in the world, has caused a manufacturing renaissance.  That means jobs.  More than half of the over $ 150 billion newly invested capital in chemical manufacturing has come from foreign companies, who are unable to compete by producing in their home countries.  However, we here in North Carolina, have not seen the impact of that investment.  In large part that is because we lack the natural gas.  We could get it from production in our state, or we could have it piped down from up north.  That second option is where the ATP comes in.  It is certainly the better of the two options.

Could we safely produce shale gas in NC?  In my view, yes, provided our state rules and regulations are followed.  But, ought we to do so?  I think not, based on a couple of factors.  One is that NC deposits are not believed to be highly prospective.  It will be hard to get responsible oil and gas operators interested when better pickings are available elsewhere.  The second is that I expect natural gas prices to remain depressed for several years.  This is bad for producers, but great for consumers.

In the NC portion, the pipeline diameter will be 36 inches, with a capacity of 1.5 billion cubic feet (bcf) per day.  That is roughly how much a single liquefied natural gas (LNG) facility would use.  So, clearly, there is no intent to use this as a lever for an LNG plant for export.  This is all to the good, because I don’t consider east facing coastal LNG exports to be a good bet, especially with low oil prices out several years.  The intended purposes are electricity production, consumer use through current distribution schemes, and other uses not yet planned.  This last is enabled by the fact that this is an “open access” pipeline.  The unspoken for capacity is another criticism leveled by some.  On the other hand, it represents an opportunity.

I believe that the state ought to attract capital to build chemical plants using this gas.  A good candidate would be ammonia plants.  We still import (from other states and abroad) all our ammonia fertilizer.  Together with our world class phosphate mine in Aurora, ammonium phosphate production and export could be feasible.  Chemical plants of this sort principally employ two-year degree personnel.  Our nationally acclaimed community college system could feed into that.  And skilled jobs in the eastern part of the state would be welcomed.

The referenced N&O story mentions some push-back.  One critic claims that Marcellus gas is depleting, implying that in a few years the ACP will run below capacity and not meet our needs.  The Marcellus is one of the largest gas fields in the world, and these are early days in the exploitation.  Furthermore, the Utica field may be larger yet, and the access is straightforward because it is directly underlying the Marcellus.  There is considerable clamor to permit more LNG plants for gas export.  Nobody is suggesting there will not be enough gas.  As noted above, each of these LNG plants uses about the same amount of gas as the ACP.  Which would you rather have, gas exports creating jobs elsewhere, or an Atlantic Coast Pipeline creating jobs in North Carolina?

Finally, for those folks who think hydraulic fracturing is a disease we ought not to contract in North Carolina, the ACP is the perfect inoculation.

Vikram Rao

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