With the introduction of new technology
to release natural gas from shale, the US suddenly finds itself with a surplus
of natural gas. As with any commodity, price has fallen with increased
availability and natural gas has become a product of export interest. Is said
that more than 20 natural gas export facilities are now being proposed in the
US. This development has created some consternation, especially among basic
chemical companies.
Large chemical complexes, such as Dow and DuPont, manufacture many chemical products to be used by other industries, such as paint manufacturers. The chemical companies also manufacture various plastics themselves. One of the basic raw materials is ethylene. The traditional source has been from petroleum with steam cracking of light hydrocarbons and cracking of petroleum residues. However, some natural gas contains a significant concentration of ethane, which justifies its separation and dehydrogenation to ethylene. With cheap natural gas, this latter process is economically preferred.
Dow Chemical and others are taking advantage of cheap US ethane by constructing US plants to dehydrogenate it to ethylene. However, development of a natural gas export business would decrease the availability of natural gas in the US and increase its price. This would obviously be a disadvantage to ethylene manufacturers, such as Dow. Because of this, Dow, Celanese, Eastman Chemical, and Huntsman have established a coalition named America's Energy Advantage, which will obviously lobby against export of natural gas. In effect, they want trade restriction.
It is also interesting that prior to this development, chemical companies have been strong proponents of free trade and have profited there from. They have manufactured many of their basic products outside the United States and have imported them duty-free for further conversion to more complex materials. Therefore, these chemical companies are now speaking in contradiction. On the one hand, they want free trade in order to bring into the United States foreign produced materials duty-free. Simultaneously, they want to restrict natural gas exports.
Large chemical complexes, such as Dow and DuPont, manufacture many chemical products to be used by other industries, such as paint manufacturers. The chemical companies also manufacture various plastics themselves. One of the basic raw materials is ethylene. The traditional source has been from petroleum with steam cracking of light hydrocarbons and cracking of petroleum residues. However, some natural gas contains a significant concentration of ethane, which justifies its separation and dehydrogenation to ethylene. With cheap natural gas, this latter process is economically preferred.
Dow Chemical and others are taking advantage of cheap US ethane by constructing US plants to dehydrogenate it to ethylene. However, development of a natural gas export business would decrease the availability of natural gas in the US and increase its price. This would obviously be a disadvantage to ethylene manufacturers, such as Dow. Because of this, Dow, Celanese, Eastman Chemical, and Huntsman have established a coalition named America's Energy Advantage, which will obviously lobby against export of natural gas. In effect, they want trade restriction.
It is also interesting that prior to this development, chemical companies have been strong proponents of free trade and have profited there from. They have manufactured many of their basic products outside the United States and have imported them duty-free for further conversion to more complex materials. Therefore, these chemical companies are now speaking in contradiction. On the one hand, they want free trade in order to bring into the United States foreign produced materials duty-free. Simultaneously, they want to restrict natural gas exports.
The National Association of
Manufacturers (NAM) apparently sees the inconsistency of this position and comes
down on the side of supporting natural gas exports. This has upset Dow, who then
left the NAM. The American Chemistry Council (ACC) apparently has views similar
to NAM, and said last year it would oppose any legislation that attempts to
restrict export of natural gas. Dow is also threatening to leave the ACC.
While I find the controversy interesting, I am much more concerned with its basis. That is, it is apparently assumed that the federal government has the right to restrict exports of natural gas. While the federal government may take that right, it would be completely inconsistent with the implication of the Constitution on private property. The production of natural gas is private property, and the government has no right to control it, unless it's a matter of national security, which it obviously is not.
If the federal government involves itself in this controversy and comes down on the side of restricting exports, I strongly hope that those organizations who had intended to go into the natural gas export business will sue the federal government in federal court, and if necessary carry the case to the Supreme Court.
While I find the controversy interesting, I am much more concerned with its basis. That is, it is apparently assumed that the federal government has the right to restrict exports of natural gas. While the federal government may take that right, it would be completely inconsistent with the implication of the Constitution on private property. The production of natural gas is private property, and the government has no right to control it, unless it's a matter of national security, which it obviously is not.
If the federal government involves itself in this controversy and comes down on the side of restricting exports, I strongly hope that those organizations who had intended to go into the natural gas export business will sue the federal government in federal court, and if necessary carry the case to the Supreme Court.
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