The New Normal (Part V)
"We have to change the narrative. American natural gas is the most abundant clean energy we have today."
-Jerry Spalvieri, Buckeye Exploration
THE WINNING STRATEGY
With the majority of the Inflation Reduction Act ($400 billion of the $739 billion) dedicated to "Green Energy Transition", drastic changes will take place over the next 20 to 30 years. AFEC has developed a strategy for the future that will be a winner, regardless of the speed, effects, and success of the recently passed act.
In order to pursue a “Winning Strategy” during this proposed energy transition period, we must take a realistic look at the future of energy. Hydrocarbons enable modern life as we know it, yet proposed changes and transition to alternative energy cast a dark cloud over reliability and affordability of energy for the majority of Americans.
One thing we know for sure is that natural gas will continue to play a very important part of our overall energy supply over at least the next 15 to 20 years, and probably many years beyond. With that in mind, our strategy for the near term, regardless of the speed, is focused on producing more natural gas!
So, Where Do We Go From Here?
In light of all the negativity placed on natural gas as a high contributor of carbon emissions around the world, maybe we should go back and look at the narrative surrounding natural gas.
For the past two decades, natural gas has been touted as clean burning compared to oil, and especially coal. Now, the war on fossil fuels includes natural gas. It was referred to as clean burning from energy experts like Chesapeake Energy Co-Founder Aubrey McClendon, and the famous T. Boone Pickens, Oklahoma State University Alum and founder of Mesa Petroleum. Both experts in natural gas believed that electrical generation and CNG (compressed natural gas) are viable fuel for vehicles with much, much lower carbon emissions. Even Elon Musk, king of electric vehicles recently said, “Realistically, I think we need to use oil and gas in the short-term, because otherwise civilization will crumble” (8/29/22, Norway Energy Conference).
So, what does he mean by “short-term”? 20-30 years? Longer? If so, maybe we should concentrate more on exploration, drilling, and producing hydrocarbons while this proposed alternative energy transition is taking place.
Shortly following Elon Musk's statement, California Governor Gavin Newsome asked all California residents to cut back on electrical usage by turning down their air conditioners and not charging their EVs during the heat wave they were experiencing.
How ironic is that? Here is a state that is eliminating the sale of all gas vehicles by year 2035. If we can’t charge 1.3 million EVs for fear of black outs and brown outs now, what are we going to do when there are 30 million EVs in use? Where is the electrical grid energy source going to come from?
The answer is simple, the only place it can come from is clean-burning natural gas. With approximately 75% less carbon emissions than burning coal, natural gas must also be considered a green energy source for the future. That is to say nothing of the rapidly developing carbon capture and sequestration technology which now makes carbon-neutral natural gas usage a reality. Nothing else will answer our energy demands, even if we expand and combine all other alternative energy sources, like solar, wind, hydroelectric, etc.
We also cannot forget that some of these alternative energy expansions have been implemented in the past. In 2009, during the first Obama Administration, Solyndra was the hot solar panel energy company being promoted. $500 million dollars later, it failed.
Realistically speaking, only nuclear power could bridge the gap, and despite constant rumblings about building new nuclear power plants, only one new plant has been built in the last 20 years. Nuclear plants are time-consuming and expensive to decommission. In the past, reactors have cost between $300 million and $5.6 billion dollars to take offline. Of the 13 the US has shut down, none of them have yet to be fully decommissioned. Despite new and more cost-effective methods for decommissioning reactors, this problem will continue to grow, as the majority of our reactors are nearing the end of their useful lives.
In the US, there is resistance to nuclear energy because of past disasters. In light of what’s happening in Ukraine with Europe’s largest plant, one disaster could make large regions of the world uninhabitable. The NIMBYs (the "not in my backyard people") would be out in full force. And let’s just be honest, even if the United States were to totally eliminate all carbon emissions and achieve carbon net zero, would the world climate activists be satisfied? Would any so-called climate emergencies be solved?
The below graph, created by the Global Carbon Project, depicts the C02 emissions of select countries. The US has continued to lower its carbon emissions every year since 1992, while China’s carbon emissions have dramatically risen and are now nearly triple ours. In fact, the total emission cuts the US has made over the last 20 years, has been completely cancelled out by China's increases. This trend will continue, as China has continued to build new coal plants.
Just recently, China withdrew its membership in the Paris Climate Accord. Even more recently, the United Kingdom reversed its three-year ban on fracking. How do we ask Americans to make sacrifices such as giving up gas vehicles, paying higher energy costs, and lose their petroleum industry jobs when the rest of the world sees the flaw in that direction? It benefits every country but the US. One country in particular...
I’m sure China is ecstatically in favor of our recently proposed energy policies. After all, they own or control the vast majority of all rare earth elements required to make batteries and solar panels. It also takes more energy generated by coal and diesel fuel to mine, make, and produce these products necessary for energy transition.
So, while US emissions continue to decline, China’s will only increase, and erase every bit of the difference. In other words, a policy with a formula for greater carbon emissions at a much higher price than we are paying today.
So back to the question, “where do we go from here?” We have to change the narrative. We have to classify clean-burning natural gas as a “green energy.” The strategy for us at AFEC is to continue to explore, drill, and produce natural gas, along with associated oil and other important liquids, such as ethane, propane, butane, and pentane contained in the abundant natural gas beneath our feet.
The US is currently the largest exporter of LNG (liquified natural gas). There are also well over 3000 products, many of them essential, that are made from petroleum. Elon Musk is a smart guy. He is by far the top producer of EVs in the world. So, when he says, “civilization will crumble” if we don’t use oil and gas in the short-term, we would all do well to listen to his warning.
Another smart guy who believes this is Jerry Jones, owner of the NFL Dallas Cowboys football team. He has literally invested over a billion dollars since 2018 in natural gas and increased his ownership in Comstock Resources to 66% by contributing oil producing properties in exchange for a majority stake. (Source – CNBC Interview 9/26/22)
He also stated that, “the world largest LNG exporting facility in the Gulf is being completed and the United States is in the position to supply natural gas to the EU, and Germany in particular, this upcoming winter.”
These obviously are very bold statements, but let the truth be known, the immediate future of energy has to include natural gas development and production!
Let’s continue to produce our abundant, clean-burning
natural gas to supply the needs of our nation!