http://www.theglobeandmail.com/report-on-business/commentary/eric-reguly/austerity-pulling-plug-on-europes-green-subsidies/article1883888/

CCNet  - 28 January 2010, The Globe and Mail

The Climate Policy Network

Europe Pulling The Plug On Green Energy Subsidies

The Spanish and Germans are doing it. So are the French. The British might have to do it. Austerity-whacked Europe is rolling back subsidies for renewable energy as economic sanity makes a tentative comeback. Green energy is becoming unaffordable and may cost as many jobs as it creates. But the real victims are the investors who bought into the dream of endless, clean energy financed by the taxpayer. They forgot that governments often change their minds. -- Eric Reguly, The Globe and Mail, 27 January 2011

EU energy commissioner Guenther Oettinger is expected to be given the go-ahead to find new ways of financing green energy projects at an energy summit in Brussels next week, in a bid to reduce demand for national incentives and European Investment Bank (EIB) loans. Oettinger said at a European Parliament hearing on Wednesday that member states need to find new sources of financing because the EIB cannot continue to prop up the [renewable energy] industry as it moves forwards. "Don't kid yourself," he said. "We don't have the machine to print new money." --BusinessGreen, 28 January 2011

The European commission's emergency suspension last week of trading in carbon allowances to put a halt to rampant theft of credits by hackers has been extended indefinitely until countries can prove their systems are protected from further fraud. --Leight Phillips, The Guardian, 27 January 2011

As President Obama encourages the nation to spend heavily on creating a new, green-energy economy, he faces stiff resistance from lawmakers worried about deficits and what the administration's restrictions on existing power sources could do to the already rising cost of energy. --Doug McKelway, Fox News, 27 January 2011

Listen carefully to Mr. Obama's speech and you realize he spent plenty of it on carbon controls. He just used a different vocabulary. If the president can't get carbon restrictions via cap and trade, he'll get them instead with his new proposal for a "clean energy" standard. Mr. Obama has no intention of letting go of his carbon-free world. He instead went to plan B. It's cap and trade by another name.—Kimberley Strassel, The Wall Street Journal, 27 January 2011

What happens to renewable energy when alarmist climate science collapses? And even if the ideological rearguard action drags on for years, what about the fact that shale gas is about to make renewables look even more ridiculous in terms of both economics and emissions? –Peter Foster, National Post, 21 January 2011

1) Europe Pulling Plug On Green Energy Subsidies - The Globe and Mail, 26 January 2011

2) EU Carbon Trading Shut Down Indefinitely - The Guardian, 27 January 2011

3) Obama's Green Energy Agenda Under Assault In Congress - Fox News, 27 January 2011

4) Kimberley Strassel: Cap and Trade Returns From the Grave - The Wall Street Journal, 27 January 2011

5) Australia To Cut, Delay Clean-Energy Funding - Bloomberg, 27 January 2011

6) Peter Foster: Solar Fades As Shale Gas Flares - National Post, 21 January 2011

7) What Energy Crisis? Europe May Import Cheap Gas From The West - No Hot Air, 27 January 2011

1) Europe Pulling Plug On Green Energy Subsidies

The Globe and Mail, 26 January 2011

Eric Reguly

The Spanish and Germans are doing it. So are the French. The British might have to do it. Austerity-whacked Europe is rolling back subsidies for renewable energy as economic sanity makes a tentative comeback. Green energy is becoming unaffordable and may cost as many jobs as it creates. But the real victims are the investors who bought into the dream of endless, clean energy financed by the taxpayer. They forgot that governments often change their minds.

Spain is famous for its housing bubble, whose bursting drove the national unemployment rate to 20 per cent-plus. Less well known is the renewable energy bubble, inflated by a government bent on shaking down the taxpayer to subsidize clean energy – a social program disguised as a politically correct industrial program.

It worked. Sunny Spain became the world’s top solar power producer. Since 2002, about €23-billion has been invested in Spain’s photovoltaic (PV) industry, which sucked up €2.7-billion in subsidies in 2009 alone, or more than 40 per cent of the freebies doled out to the country’s entire renewables sector.

When the Spanish economy went into the toilet in 2008 and 2009, austerity measures were put into place. At first, it appeared the solar industry would be spared the worst of the cutbacks. That changed a bit, but only a bit, in November, when a royal decree reduced tariffs by up to 45 per cent on new PV plants; existing plants would remain untouched. Then – whammo! – a new royal decree landed with a thud just before Christmas. While it didn’t change the tariff, it retroactively limited the number of production hours that PV plants could qualify for the subsidies.

Spain’s solar industry lobby group, the Asociacion Empresarial Fotovoltaica, estimated that the second decree would effectively reduce tariffs received by PV plants by 30 per cent, forcing many of the PV companies to default on their debt. Infrastructure Investor magazine called the second decree “the Christmas Eve massacre.”

Other European countries are also taking a long, hard look at their renewable energy sector and wondering whether it’s affordable. In December, the French government unveiled a plan for a three-month moratorium on new solar projects that are eligible for subsidized tariffs. The goal was to prevent a speculative PV bubble while it mulls new regulations for renewable energy.

There is no doubt the replacement regime will be less generous. CRE, the independent regulator of the French energy and natural gas markets, recently estimated that taxes on electricity would have to almost triple to meet the rising costs of renewable energy. The question, of course, is whether rising energy taxes could kill more jobs than those created by renewable energy expansion.

Germany is scaling back subsidies, too, and revealed another reduction a few days ago to households that generate electricity with their own solar panels. In the United States, where the incentives generally come in the form of tax credits instead of subsidized tariffs, the appetite for long-term support seems to be waning, partly because of the natural gas glut. Ditto in Canada. In Ontario last year, the average price for power was 3.7 cents per kilowatt hour. The feed-in tariff for solar installations ranged from 44 cents to 80 cents, that is, up to 20 times the market rate. (Ontario revised that higher end of the range downward to 64.2 cents last summer.) Watch the next Ontario government drain the renewable energy slush fund.

Renewable energy is fraught with difficulties. In less-sunny climates, PV panels make little sense, though that hasn’t stopped Germany and Britain from installing them on rooftops everywhere. Wind power is becoming hugely popular in some parts of the world. But since the wind doesn’t always blow, backup power has to be installed. That means consumers have to pay for the capacity twice and the backup power is usually of the fossil-fuel variety. Denmark, which has a reputation as the cleanest of the clean countries, actually generates about half its electricity from coal, the grubbiest fuel. That proportion hasn’t varied in a decade in spite of the country’s relentless pursuit of wind power.

The austerity programs have piled on additional difficulties in the form of subsidy reductions. No government would announce “temporary” subsidies, for fear of scaring off investment in renewable energy. Still, that’s exactly what the subsidies are turning out to be. Investors everywhere are going to get slaughtered as debt-swamped governments trim or eliminate the freebies. The ailing share prices of renewable energy companies such as Spain’s Iberdrola Renovables gives you an idea of the (waning) investor sentiment.

The renewable energy bubble was inflated by government subsidies. Those same governments are now deflating them. Turns out the subsidies were too good to be true.

The Globe and Mail, 26 January 2011

2) EU Carbon Trading Shut Down Indefinitely

The Guardian, 27 January 2011

Leight Phillips

The European commission's emergency suspension last week of trading in carbon allowances to put a halt to rampant theft of credits by hackers has been extended indefinitely until countries can prove their systems are protected from further fraud.

While the suspension had been expected to end last night, Brussels now says that the freeze in trades had been imposed to give the commission executive some breathing space to figure out what to do.

"The suspension last week was only a transitional measure to give the commission and member states the time to assess the situation and decide the way forward," the commission's climate spokeswoman, Maria Kokkonen, said.

"Okay, this hurts, but it must hurt in order to make things more secure, more robust. Evolution through crisis."

A total of 30 countries that participate in the Emissions Trading Scheme, Europe's flagship climate change policy, must now send assessments of the situation performed by independent monitors.

On 19 January, the commission suspended "spot" trading in allowances after up to 2m permits worth around €30m were stolen by computer hackers. Brussels said that half the participating countries were not sufficiently secure. Permits went missing in Austria, the Czech Republic and Greece.

Full story

3) Obama's Green Energy Agenda Under Assault In Congress

Fox News, 27 January 2011

Doug McKelway

As President Obama encourages the nation to spend heavily on creating a new, green-energy economy, he faces stiff resistance from lawmakers worried about deficits and what the administration's restrictions on existing power sources could do to the already rising cost of energy.

In May, Secretary of Transportation Ray LaHood announced a new focus described by National Public Radio as "turning transportation policy on its head."

Lahood's declaration: that pedestrians and bicyclists should be treated as equals with drivers and that more federal dollars should be devoted to walking and cycling projects. One wonders how his remarks might have been received in Beijing, where the opposite is happening, the ubiquitous bicycle is giving way to the automobile in that country's headlong thrust towards 21st Century industrialization and increased competition with the United States.

The contrast symbolizes the president's dilemma.

In his State of the Union address this week, he called for a re-invention of our energy policy.

"We're telling America's scientists and engineers that if they assemble teams of the best minds in their fields, and focus on the hardest problems in clean energy, we'll fund the Apollo projects of our time."

It is our "Sputnik moment," the president said.

Sen. Tom Coburn, R-Okla., may have brought the president's enthusiasm back down to earth when he quipped there had been lots of "Sputnik" moments in years past, resulting in a lot of "space junk."

Coburn, and so many of the president's other critics contend that much of that "space junk" resides in the push for greener energies.

The U.S. is still overwhelmingly dependent on comparatively cheap fossil fuels for its energy needs. Fossil fuels power 83 percent of the U.S. economy. Any move to limit their use, critics contend, is deeply unwise as the economy tries to scrape itself out of a deep recession and stubbornly high unemployment.

Some point to Spain's experience with green technologies -- one that Obama once cited as a model -- as one example of the president's misquided policies. Researchers at Madrid's Juan Carlos University found that for every renewable energy job that Spain financed , 2.2 jobs were lost. In other words, nine jobs were lost in the broader economy for every 4 green jobs created there.

Here in the U.S., many worry that the same thing is already happening. Since the moratorium on oil drilling in Gulf of Mexico ended in October of 2010, only two new oil and gas drilling leases have been issued by the federal government. And huge swaths of domestic oil rich federal lands have remained off limits to oil and gas exploration and drilling.

Obama's call to re-examine all federal rules for bureaucratic inefficiency earlier this month came only days after his Environmental Protection Agency revoked a longstanding permit for a surface mine in West Virginia, one of the largest coal producers in the nation.

And since his executive order to re-examine the regulatory maze was issued, Obama's regulatory czar, Cass Sunstein reiterated the president's commitment to a congressional panel.

"Any rule that imposes significant costs, we have significant concerns about," Sunstein said. "We will be focusing very closely on the job impacts of new regulations."

But critics wonder if Sunstein's words will be matched by action. In the Obama administration, as in his State of the Union, environmental concerns get high billing. Only days before assuming the post of energy secretary, Steven Chu told the Wall Street Journal, "Somehow we have to figure out how to boost the price of gasoline to the levels in Europe."

Then-candidate Obama told the San Francisco Chronicle in January 2008:

"If somebody wants to build a coal power plant they can, it's just that it will bankrupt them because they are going to be charged a huge sum for all that greenhouse gas that's being emitted."

He was referring to proposed cap-and-trade legislation, which, under the weight of the last Congress' ambitious agenda, fell by the wayside.

University of Virginia political scientist Larry Sabato suggests the president should not try to revive his plan fir global warming fees for carbon emissions.

"He may or may not recognize it, but the fight is over," Sabato told Fox News. "That energy bill as currently constructed has zero chance of passage."

Energy analyst Kevin Book of Clear View Energy Partners says while the tone has changed, the Obama administration's energy message has not.

"If you're a good politician you learn how to speak out of both sides of your mouth," Brook said. "EPA is still tightening on regulations for conventional fuels here in the U.S., and even if we're not explicitly calling for a new law, there's still a very restrictive policy in place that will require some form of intervention."

That intervention is now beginning to happen in Congress, where the Republican-controlled House is commencing its attack on the administration's regulatory structure. Texas Republican Rep. Joe Barton released an opening volley directly at Obama's regulation czar on Wednesday.

"There has been an explosion of regulation and regulation issued in the first year of the Obama Administration," Barton said. "Quite frankly, I didn't see that your organization has done anything to slow that down."

The fact that his scolding came less than 24 hours after the State of the Union address suggest that stronger and more withering attacks lay ahead.

Fox News, 27 January 2011

4) Kimberley Strassel: Cap and Trade Returns From the Grave

The Wall Street Journal, 27 January 2011

Cap and trade is dead. Long live cap and trade.

The president presented his new, conciliatory face to the nation this week, and his State of the Union was as notable for what it didn't include as what it did. He uttered not one word about global warming, a comprehensive climate bill, or his regulatory attempts to reduce carbon. Combined with his decision to give the axe to controversial climate czar Carol Browner, political analysts took all this as further proof that Barack Obama was moving to the middle, making nice with Republicans.

Snort. Guffaw. Chortle.

Listen carefully to Mr. Obama's speech and you realize he spent plenty of it on carbon controls. He just used a different vocabulary. If the president can't get carbon restrictions via cap and trade, he'll get them instead with his new proposal for a "clean energy" standard. Clean energy, after all, sounds better to the public ear, and he might just be able to lure, or snooker, some Republicans into going along.

The official end of cap and trade, and Mrs. Browner, wasn't conciliation—it was necessity. The public now understands that cap and trade is an economy killer, and no small number of Democrats lost their seats in midterms for supporting it. Few in the party want to take it up again, and House Republicans won't let it pass. Mr. Obama would be crazy to continue calling for it.

Mrs. Browner, for her part, had become a political liability. As czar, she's had sweeping control over administration policy—all of it unaccountable. This worked under a Democratic Congress, but House Republicans had made clear they intended to call her to testify. This had the makings of an ugly fight over executive privilege and would have forced the White House to defend a lack of transparency. Better to let the lightning rod go.

But Mr. Obama has no intention of letting go of his carbon-free world. He instead went to plan B. Specifically, he called in his speech for the nation to "join" him in a "new goal: by 2035, 80% of America's electricity will come from clean energy sources." What the president was in essence calling for—in happier, fuzzier, broader language—is what policy wonks refer to as a "renewable portfolio standard." This is a government mandate requiring that utilities produce annually a specific amount of their electricity from renewable sources—wind, solar, biofuels.

It's also cap and trade by another name. Consider: The goal of cap and trade is to impose crushing taxes on fossil fuels—oil, coal, natural gas—thereby forcing utilities to switch to costly renewables. Under Mr. Obama's new proposal, the government skips the tax part and outright requires the use of costly renewables. The result is the same: dramatically higher energy prices, from carbon-free sources. Now you know why even climate warrior John Kerry was so sanguine about the president's failure to say "climate change" in his speech. "I'm very sympathetic," said the Massachusetts senator, who clearly got the strategy memo.

Many Republicans understand the situation. Michigan Rep. Fred Upton, chair of House Energy and Commerce, put out a statement following the speech that insisted "the answer is not to hyper-subsidize preferred industries or to force consumers and job creators to purchase energy they can't afford." Reached on the phone, Mr. Upton elaborated, telling me the president's remarks "smell like cap and trade all over again." He noted that 28 states already have their own renewable standards and so "why have a federal mandate?"

Then again, some Republicans—the self-styled energy progressives—have let it be known they'd be open to a new government diktat, if only the price is right. South Carolina Sen. Lindsey Graham has noodled with legislation to require an energy standard that includes nuclear energy (like that produced in his home state) along with renewables. Indiana Sen. Dick Lugar has floated what he calls a "diverse" energy standard that would mandate renewables, nuclear and . . . coal with carbon sequestration. (Indiana relies on coal.)

This is why Mr. Obama took care in his speech to refer broadly to a "clean energy" standard and make clear he was open to including in it "nuclear" and "clean coal"—along with renewables. He'll lure Republicans into negotiations, then cement their support with lavish energy pork for their home-state nuclear, clean-coal, wind, biofuels and solar projects. As a bonus, the plan gives cover to nervous coal state Democrats.

What the White House also knows—as do most sensible people—is that these promises mean little. The president has made grand nuclear gestures, but his regulators continue to sit on projects. Clean coal remains a pipe dream. Here's to betting that if and when the president's "clean energy" standard kicks in, the only mandated sources utilities have to choose from are wind, solar and biofuels.

The GOP has spent some long, sometimes uncomfortable, years explaining the perils of cap and trade. Yet they risk getting the same policy, all because they've yet to find the moxy to resist the "clean energy" drumbeat.

The Wall Street Journal, 27 January 2011

5) Australia To Cut, Delay Clean-Energy Funding

Bloomberg, 27 January 2011

James Paton

The Australian government said it will cut or delay A$500 million ($498 million) of funding for solar power and carbon capture and storage projects to help pay for reconstruction after the nation’s worst floods.

Australia, where coal accounts for more than 80 percent of electricity production, will cut the A$1.5 billion Solar Flagships program by A$60 million and defer a further A$190 million of proposed grants, according to documents released today by Prime Minister Julia Gillard’s office.

BP Plc, AGL Energy Ltd. and CLP Holdings Ltd. unit TRUenergy Holdings Pty are among companies short-listed by Australia in a competition for solar funding. The government, which has a target of sourcing 20 percent of the country’s power from renewable energy by 2020, must decide this year on a way to put a price on carbon emissions, Gillard has said.

While imposing that cost on burning fuels “needs to be the long-term economic reform for a carbon constrained future, shorter-term complementary programs are also essential,” said Seb Henbest, a Sydney-based analyst with Bloomberg New Energy Finance. “The government still needs to support nascent clean energy and efficiency industries and technologies.”

Australia will also delay A$160 million of spending aimed at encouraging carbon-capture ventures, the documents show. The government will reduce the amount of funding in the A$1.9 billion initiative by A$90 million, the documents show.

Gillard pledged to restart an effort to curb emissions after replacing Kevin Rudd as prime minister in June.

Full story

6) Peter Foster: Solar Fades As Shale Gas Flares

National Post, 21 January 2011

What happens to renewable energy when alarmist climate science collapses? And even if the ideological rearguard action drags on for years, what about the fact that shale gas is about to make renewables look even more ridiculous in terms of both economics and emissions?

China reportedly has some two-thirds of the US$39-billion global market for solar panels, but it doesn't use them very much. Why? Because they're uneconomic.

The Chinese subsidize their manufacturers to take advantage of the ultra-expensive alternative energy forced on western consumers via feed-in tariffs. Smart for them, dumb for us, but since everybody is subsidizing renewables, it's hard to condemn the Chinese. Indeed, the terms "solar panels" and "free trade" don't belong in the same conceptual time zone, even if they are reportedly an issue at this week's meetings in Washington between U.S. President Barack Obama and Chinese President Hu Jintao.

There are far bigger issues here than policy hypocrisy. What happens to renewable energy when alarmist climate science collapses? And even if the ideological rearguard action drags on for years, what about the fact that shale gas is about to make renewables look even more ridiculous in terms of both economics and emissions?

The feed-in tariffs that the Chinese are so assiduously avoiding at home are analogous to the medieval scam of coin-clipping, only in reverse. Governments hope that if a small amount of ludicrously expensive renewable electricity is loaded onto consumers' bills, they might not notice. The grand policy rationale behind this piece of economic self-mutilation is that alternatives will eventually yield a market bonanza, and any nation that has successfully promoted solar and wind "champions" will mop up all the business, as in the monopoly fantasies of Karl Marx.

This policy is nonsensical at many levels. Even if climate science is not entirely bogus, the costs of renewables are likely to do far more damage than bad weather. One of the biggest promoters of solar power, Spain, has already seen its subsidy system collapse. Studies have demonstrated that each "renewable" Spanish job was bought at the cost of two regular jobs.

Then there is the fact that Nobel Peace Prize-winning climate science has set the nations of the world at each other's throats. The height of corporate chutzpah displayed itself in Ontario last October when a group of solar companies -- led by Japan's Mitsubishi--complained about the local content rules required to receive Ontario's super-premium, consumer-crushing solar rates. The solar robber barons had the audacity to declare that these "restrictive" rules were bad for the Ontario economy, when the entire Green Energy Act is a bummer. Japan has taken the act (or at least the bits that don't serve its own interests) to the WTO, with European Union and U.S. support.

Similarly, the U.S. is now threatening China on solar panel trade, having already complained to the WTO about Chinese wind turbines. In response, China has pointed out that a US$60-billion chunk of the U.S. "stimulus package," (yet another shot-in-the-foot policy) consisted of renewable subsidies, with "Buy American" clauses attached.

Ironically, U.S. solar companies are moving to China to take advantage of their manufacturing subsidies. Last week, Evergreen Solar -- the third-largest U.S. panel manufacturer -- announced that it was shutting its Massachusetts plant and laying off 800 workers while beefing up its operations in the Middle Kingdom. The Massachusetts plant had received some US$58-million in state subsidies. The company has never made a profit.

One much-used but entirely bogus argument in favour of alternative subsidies is that they are justified by subsidies on fossil fuels. However, the US$312-billion of fossil subsidies handed out in 2009 were virtually all by petro-tyrannies or developing countries. According to the International Energy Agency, assuming all subsidy commitments are met, alternative subsidies will soar from US$57-billion in 2009 to US$205-billion (in 2009 dollars) by 2035, but that assumption is increasingly unlikely.

The bearer this week of the bad news if you're a climate bureaucrat--but good news if you're a consumer--was the IEA's chief economist, Fatih Birol. Dr. Birol noted sadly that shale gas was about to pull the rug from under renewables. The IEA now estimates that shale supplies -- which have half the emissions of coal--could last for 250 years.

Dr. Birol suggested that the U.S. shale gas boom had already contributed to a sharp drop in U.S. renewable investment, but the wind and solar fandango was already imploding. According to Dr. Birol, "There will be strong debates between energy and climate and finance ministries round the world about whether investment should continue to support renewables when the situation on gas has so radically changed." But while such ponderous debates take place, the market will be moving at the speed of profit-oriented thought, and catching on to the fact that aligning with renewable policies is looking dumber by the second.

Policymakers are still looking to take their final stand on the moral high ground. Part of the official Chinese response to the United Steelworkers' complaint was that "If the U.S. closes the door for trading with the rest of the world, including China, in renewable energy products, the U.S. may significantly delay the already long struggle for developing alternative energy sources, if not entirely destroy this opportunity for humankind."

This is an opportunity that needs destroying, and the Chinese may soon realize that they have backed the wrong renewable horse. At least they were never dumb enough to support using solar energy at home. And they have lots of shale gas.

National Post, 21 January 2011

7) What Energy Crisis? Europe May Import Cheap Gas From The West

No Hot Air, 27 January 2011

No Hot Air started talking up US gas exports last year, when the conventional wisdom was that it was to put it politely, insane.

Yesterday's crazy story, today's front page of the New York Times:

If Cheniere can obtain the necessary regulatory approval and financing, Mr. Souki says he can start exporting gas as early as 2015. He predicts he will eventually be able to export two billion cubic feet of liquefied natural gas a day from his facility, or about 3 percent of current domestic gas production. As other companies like Freeport LNG join Cheniere in exporting liquefied natural gas, Mr. Souki says the United States has the potential to become a premier global provider, capable of exporting 10 billion cubic feet a day, roughly the amount that Britain consumes.

That's 283 million cubic metres, which is actually equal on an annualised basis to 103 BCM.

How big a number is that: sit down if you're an LNG trader. The entire European (including Turkey) imports of LNG in 2009 was just under 70 BCM.

Cheniere of course is just ONE US terminal. There are others such as Cameron and Freeport also asking for export licenses. Kitimat in British Columbia is exporting to Asia from 2014. 10 BCF sounds too high, but based on his initial plans for 2.5 BCF from last year and throwing in other terminals, it's not completely out of the window either.

People say I'm crazy when I point out the obvious export potential of Cove Point Maryland or how if sufficient gas is found in New Brunswick that the Canaport facility in Saint John would be hugely profitable.

As a certain well known shale gas gentleman says:

You have to have self-confidence to be out there alone when most people say you are wrong,” said Aubrey K. McClendon, chief executive of the Chesapeake Energy Corporation, the second-biggest domestic gas producer, who has pledged large shipments for Cheniere to export. “He’s going to be successful and it’s going to be great news for the U.S.”

I don't believe this entire story though:

The central assumption behind the export strategy is simple: American gas prices are destined to be cheaper than European and Asian prices for years to come. At today’s prices, companies would be able to buy American gas at $4.35 per million British thermal units, and then sell the same gas in Europe or Asia for roughly double that price, since long-term contracts globally are still largely tied to high benchmark oil prices.

To take a gamble that high oil prices will, if they continue at all,  at least continue to competete against gas is the hole in the strategy here.

Skeptics predict that the current gas glut in the United States will spread around the world as shale is drilled in Europe and Asia, major producers like Russia increase exports and more L.N.G. export terminals are built in the United States.

“For heaven’s sake, Israel just discovered 16 trillion feet of gas,” said Mr. Gheit. “Indonesia, Qatar, Algeria, Nigeria and now Israel can all sell cheaper than the U.S.”

But that doesn't really matter, because the issue here is not gas. It's oil. Europeans are still getting their heads around the idea that gas isn't running out.  But in Texas the issue is how to get rid of it, and a lot of that is down to the potential success of the Eagle Ford and Haynesville shales close to the Gulf Coast.

The Eagle Ford is oil rich, but gas sits in the way.  No gas = no oil.  Oil = $70 a barrel (it will be that)?  It still makes sense to give the gas away.  It will cost money to keep gas in the ground.  Exporting will also push US gas up slightly as well, although prices are in such a downward spiral that it will help the industry, not hurt it. But who knows what the future may bring:

But even Mr. Souki admitted that the economics and global politics that underpin the spread between oil and gas prices were too unpredictable for him to pronounce complete confidence in his new plan.

The other day, as he stood in the terminal control room here watching operators working on a bank of computer monitors, he recalled that “I was convinced we would use this facility at full capacity.”

“History has demonstrated that, with all the facts in, in two years I could be totally wrong,” he said.

No Hot Air, 27 January 2011