A natural solution?

Nicolas Loris is of the belief that natural gas is the answer to an ailing U.S. economy and the pursuit of national energy independence.

He posted on Sept. 21 a backgrounder on the issue. His abstract noted: “Natural gas is a plentiful domestic resource with tremendous potential to increase the U.S. energy supply. Tapping this resource will create jobs and boost an ailing economy. More affordable energy will support additional business formation and growth. The role of the government is to regulate — not over-regulate and hamper — natural gas production. Hydraulic fracturing (fracking) — which has never been shown to cause environmental damage—should not be held hostage to unfounded concerns and narrow interests. U.S. policymakers should focus on commonsense access and reasonable safety measures — not burdensome over-regulation and market-distorting subsidies.”

His advocacy of natural gas is certainly of interest to us in the Fort Smith regional economy and who still believe Arkansas’ Fayetteville Shale Play has the potential to be an economic driver for decades to come.

Before we continue our discussion of Loris’ beliefs, let’s attempt to kill the messenger.

Loris, before he joined the Heritage Foundation as a policy analyst, worked for the Charles G. Koch Charitable Foundation. Because of his affiliation with Heritage and the Koch boys, we are encouraged by example from the mainstream media and other members of the political establishment to discount or wholly ignore his research. You, Kind Reader, should know that Loris is on the fringe because he ardently advocates for individual responsibility and accountability, and is possessed of the belief that in many cases government is not only too big, but it’s unnecessary.

Now that we have determined Loris is likely an unacceptable extremist, let’s step back and analyze his analysis. To summarize his more than 2,000-word essay, Loris wants us to know that natural gas is abundant, affordable, has many practical and proven uses, and it’s here. It’s in Arkansas. It’s in New York. And Texas. And Colorado and Oklahoma and Pennsylvania and Louisiana and Ohio and Illinois and the Dakotas, just to name a few other states.

“Natural gas is a plentiful domestic resource that has tremendous potential to increase energy supply and help grow the economy,” Loris notes. “Tapping this resource will create jobs, directly, in the energy sector, and indirectly, through support activities, such as hotels, restaurants, and local suppliers. Even more broadly, more affordable energy supports further business formation and growth, since energy costs are a critical input cost for most businesses.”

Loris’ essay challenges environmental concerns with natural gas, and also challenges the energy industry’s support of incentives — tax credits, infrastructure subsidy, etc. — to promote the use of natural gas.

As to the controversial use of “fracking” to recover oil and gas from shale formations, Loris says the process is proven, with more than six decades of use to recover more than 7 billion barrels of oil and more than 600 trillion cubic feet of natural gas. He says federal regulations should not duplicate state regulations, and future regulations should assign more risk and liability to the drilling companies.

Hydraulic fracturing and other drilling techniques have become a source of controversy in the Fayetteville Shale and other unconventional shale plays. Environmentalists say the water and fluids used in the fracturing process pollutes groundwater and contaminates underground sources of drinking water. In Arkansas, some claim the deep wastewater injection wells have caused earthquakes.

Loris says Congress should get out of the game of picking “winners and losers in the marketplace when it comes to alternative fuel and vehicle use.” He advises: “If Congress truly wants to open the transportation sector to competition, it should eliminate the subsidies, mandates, and tax credits (with an offsetting tax reduction), and consider market-oriented policies — such as full expensing and lowering corporate tax rates.”

Mike Callan, president of Fort Smith-based Arkansas Oklahoma Gas Corp., addressed my curiosity as to what an energy industry insider might think of Loris’ positions.

“I concur with much of the article, with the exception of his position on subsidies. It is a little naïve to think we are going to expedite a shift  from petroleum to alternative transportation fuels (such as natural gas) without some incentive to do so,” Callan noted. “A market-forces driven transition only works when utilizing petroleum becomes cost prohibitive, and I don’t think we want to wait until then.”

Continuing, Callan said incentives and subsidies are a “necessary evil” in the path toward energy diversification.

“Elimination of subsidies may work in a perfect economic model, but the environmentalists promoting wind, solar and biomass are creative in their efforts to promote these alternatives (Solyndra?) over fossil fuels. Subsidies are a necessary evil in decreasing our reliance on petroleum, and subsidizing CNG (compressed natural gas) or LNG (liquified natural gas) as a transportation fuel makes the most sense.”

Using the research of Robert Bryce, Callan puts numbers to his belief of what makes the most sense.

“The average natural gas well produces 287.5 horsepower per acre (hp/acre) compared to 2.1 hp/acre for biomass, 6.4 hp/acre for wind turbines and 36 hp/acre for solar. If we have to subsidize, I know where I want my money,” Callan explained.

For what it’s worth, Bryce, an author who challenges the conventional wisdom on energy independence, has a simple energy policy: “The smartest, most forward-looking U.S. energy policy can be summed up in one acronym: ‘N2N’, for "natural gas to nuclear power.”

There is a smart U.S. energy policy contained within the experiences and research of Loris and Callan. It would probably be an energy policy that pushed the federal government to the background, gave state government more power to regulate, and created equilibrium between the institutional “incentives” we provide for oil — importation, domestic production, refining and retail sale — and the support necessary to prime the pump for an expedited market feasibility for the wider use of CNG.

One problem arises, however. Congress. They’ve proven recently their inability to, within a trillion-dollar budget, compromise over the spending of a couple of billion dollars. Obama and Congress couldn’t agree on how to change a light bulb, much less do anything responsible toward crafting a holistic and pragmatic energy policy.

I’d say we frack Congress, but that well is already polluted.

It’s a damn shame when the potential energy to power this country to a more independent and prosperous position is trapped in the wasted energy of whatever it is that now passes for federal governance.