The United States has a long-running love affair with natural gas, with fossil fuels acting as the lynchpin in the country's power generation mix, while nearly half of American homes use the fuel for heating. With the transition from fossil fuels to renewables in full swing in many states, natural gas serves as the bridge that will make the switch smoother and less jarring.
It's hardly been smooth-sailing for the industry, though, with natural gas prices plunging to multi-decade lows thanks to an oversupply from fracking.
But that's only part of the litany of problems facing the sector.
There's no shortage of environmentalists and climate advocates in dozens of cities--especially in liberal-leaning states such as Washington, California, and Massachusetts--that have been pushing for natural gas to receive a complete ban in homes and businesses. Meanwhile, lawmakers in New York to California have taken a firm stand against greenhouse gas emissions.
But now the industry is receiving support from a rather unlikely source--civil rights activists.
Top American civil rights activists are vehemently opposed to an abrupt switch from natural gas, putting them on a collision path with progressive Democrats and environmentalists who have been pushing for an outright fracking ban.
Clean Energy Bridge
According to news site Axios, civil rights activists Reverends Jesse Jackson and Al Sharpton, and National Urban League President Marc Morial recognize the need for a clean energy transition. However, they want the switch to be gradual, mainly due to humanitarian concerns.
Founder of Rainbow PUSH Rev. Jesse Jackson supports a fracking ban but has called for a "proper transition" so that poorer demographics can continue to access the vast and cheap resources it has helped to unlock:
"I support the call [to ban fracking] with a proper transition. In the meantime, those who are down and out have to have it in the meantime."
Meanwhile, influential civil rights leader Rev. Al Sharpton has voiced similar views:
"I think people are concerned about the affordability and they are concerned about being left in the cold," Sharpton told Axios in early March. "I think natural gas is a temporary — I don't think we ought to make it the end-all, be-all — solution, but in the interim, people in communities of color should not pay the brunt of suffering through cold winters."
Their sentiments seem to be backed by hard facts.
A 2016 study by the American Council for an Energy-Efficient Economy (ACEEE) found that low-income citizens shoulder a disproportionately high energy burden compared to higher income groups. The study reported that low-income households spend 7.2% of their income on utilities vs. 2.3% by high-income households with the energy burden highest in Memphis (13.2% of income), Birmingham (10.9%) and Atlanta (10.2%).
A big part of the high energy costs can be chalked up to inefficiencies, with the potential to eliminate 42% and 68% of the excess energy burden for African-American and Latino households, respectively, by bringing up efficiencies to the level of the average US home.
Not every climate change advocate is reading from the same script; some are calling for an even stronger push to renewables. Tamara Toles O'Laughlin, North America director for influential climate activist organization 350.org, has argued that people should not have to choose between alleviating energy poverty and switching to clean energy, labeling it a "false dichotomy".
"It is our duty as people who have any measure of privilege to take a position that evokes systematic change, because if we do not, then we'll all fail. Incremental decision-making only benefits the energy system that we're stuck in."
Heavy Push Back
The calls by the civil rights activists have added yet another string to the natural gas bow.
Vanquishing coal might have been the easy part; pushing out natural gas might prove to be a much more onerous task, if California is any indication.
California is regarded as one of the greenest states in the United States. Although its millions of vehicles still spew out tons of smog that pollute the air, the state has been very vocal and proactive than most at keeping greenhouse emissions low. For instance, the Golden Bear State produces more renewable energy than any other state in the nation and has even set an ambitious goal to generate 100% clean power by 2045. California has also become the first state to ditch coal for power generation.
But unlike the state's successful push to abandon coal, early efforts to phase out natural gas have been facing heavy pushback. Pushing out coal was relatively painless for California residents and businesses because it mostly affected out-of-state mines and power plants. It's a different story, though, with natural gas, with the state's powerful homegrown company, Southern California Gas Co.(OTCMKTS: SOCGP)--a natural gas utility that serves nearly 22 million people from the Central Valley to the U.S.-Mexico border--determined to stay put. SoCalGas--a subsidiary of San Diego-based Sempra Energy (NYSE: SRE)--has launched a sweeping campaign to preserve the role of its pipelines in powering society and convincing local officials that policies aimed at replacing gas with electricity would be wildly unpopular.
SoCalGas is fighting for self-preservation with revenue from residential gas sales clocking in at nearly $2.3 billion in 2017. But it also appears to have a much better clean energy value proposition than your average fossil fuel company.
The Los Angeles-based company also plans to produce biomethane using waste from dairy farms, landfills, and sewage treatment plants. It contends that doing this can kill two birds with one stone: replacing some of the natural gas in its system with renewable gas as well as limiting heat-trapping methane emissions. The company has already injected small amounts of renewable gas into its pipelines with plans to add more.
Natural Gas Rebound?
The natural gas camp will also be enamored by positive vibes coming from Wall Street, NaturalGasIntel writes.
Goldman Sachs says that a drop in Permian gas output, though too late to save the natural gas market this year, sets the stage for a natural gas rebound with prices rallying sharply in 2021.
"[A]s we enter the 2020/21 winter, we expect production declines to be visible enough that gas prices will rally sharply in our view to help summer 2021 reach comfortable inventory levels," Goldman Sachs led by Samantha Dart wrote in a report on Tuesday.
"Under current forward prices, we believe this would lead US natural gas balances to a record-low level that summer, nearing only 2.2 Tcf," the analysts wrote. "This would be the result of an estimated 2.4 Bcf/d summer-on-summer decline in production matched up against a 5 Bcf/d expected increase in demand."
"This exceptionally tight outlook suggests current forward prices are not sustainable," the bank concluded.
GS has predicted $3.50/MMBtu gas price by the winter of 2020-2021 and $3.25/MMBtu by the summer of 2021, more than double the current price of $1.72/MMBtu.
Bank of America Merrill Lynch is a bit less optimistic and sees 2021 pricing clocking in at $2.45/MMBtu--less than Goldman's 3.25-$3.50 prediction but still substantially higher from this year.
Ultra-longs can take some comfort in the IEA prediction that natural gas demand will increase another 40 percent to nearly 200 quadrillion Btu by 2050 as the global transition from coal gains momentum.
By Alex Kimani for Oilprice.com
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