Support for the Constitution and Leatherstocking Pipelines is based primarily on the false promise of affordable shale gas. False, since the price of this gas is too volatile to make it a reliable energy source in the future.
With so much drilling, and not much demand, there is now a glut of gas. Because of this, prices sank from more than $13 a unit in 2008 to under $2 in 2011. Today the price is about $4. Yet the break-even cost of production is more than $8. The volatile price will be determined not by local costs but worldwide supply and demand.
Gas companies have pressured the U.S. Department of Energy into considering the export of liquefied gas to foreign countries. Twenty export applications have been filed. The DOE secretary commented, “If the government does not allow more exports, companies will not have the economic justification to drill for the gas at all.”
Obama said the U.S. will be a net gas exporter by the year 2020. Then, prices will rise to come into balance with LNG prices worldwide. In Europe that price is $12. In Japan it’s $15. A VP at Dow Chemical commented that exports “would raise prices dramatically, and would have a very negative effect on this industry and a massive ripple effect economically.” The result will be that gas drillers will make more money, while natural gas prices will increase for Americans.
Many companies and institutions have shown interest in $4 gas. Will they still be interested when the price rises to $15?
The Leatherstocking pipeline’s source of supply, the Constitution pipeline, will be significantly delayed, making the Leatherstocking completion date many years away. By then the price of shale gas will be too high to be affordable.