Pushing the Economy Forward

The recent discoveries of natural gas reserves in the US is helping to expand the US economy and are also projected to continue driving this growth into the future. The fact of the matter is natural gas in the North American region is abundant and affordable which in turn significantly drives up job creation and again our economic growth.

The shale boom has made American factories more competitive than recent years and has sparked a domestic manufacturing renaissance, leading to capital investment, new high-wage manufacturing jobs, and an increase in US exports of added value product.

The U.S. is the world’s largest manufacturing economy, and growth in domestic manufacturing has a multiplier effect on the broader state of the economy.

Here are several examples of how the multiplier effect works:

First, manufacturing creates more jobs outside its own sector than any other industry. For every one manufacturing job, there are five additional domestic jobs. Hence, creating more jobs within the manufacturing industry will create five times more domestic jobs which will stimulate economic growth.

Second, manufacturing also creates value-added products for export. Meaning instead of exporting simple raw materials, every dollar invested in domestic manufacturing creates a portion of income from finished products.

Lastly, manufacturing drives innovation. Manufacturing companies are starting to realize it is more efficient to conduct research and development near or on their factory floors than anywhere else. The countries who investment more in these manufacturing sectors have a head start in the development of next generation products.

Now is the time when our policy makers have an opportunity to grow America’s vital manufacturing sector through a sensible, all-encompassing natural gas policy that will allow for the manufacturing companies to use natural gas for production and in turn push the economy forward.

Manufacturing is very sensitive to natural gas, which powers many of its operations and supplies the raw components of thousands of essential products. When the price of natural gas is high, companies cannot afford to operate and thus are not as efficient as a company who can operate with natural gas at a lower cost. This is why America is a manufacturing company’s dream place to operate; the US offers some of the lowest prices on natural gas out of any country. As the demand for natural gas in the US continues to rise, it pushes the economy to new heights and will continue to push the economy forward into future years.

The Power of Natural Gas Exploration Rights, Cyprus

As many of you may already be aware of, the small island country of Cyprus is currently in financial ruins and seeking a bailout plan.  While there is a pending bailout offer from the EU, many citizens are outraged by the contingents of it and are seeking another plan.  Amidst the outrage, sources have reported that the Russian energy company Gazprom has extended to Cyprus a bailout offer of their own.

 

Gazprom is the largest natural gas company in the world and is responsible for nearly 10% of Russia’s GDP (New York Times).  In other words, the company has billions and billions of dollars worth of revenue, which it is looking to invest into the further expansion of their natural gas business. 

 

Meanwhile, Cyprus’ neighbor to the Southeast, Israel, just discovered one of the largest offshore gas fields in the past decade, the Leviathan natural gas field.  After this discovery, exploration for natural gas in this Mediterranean region is rampant and Cyprus is likely to withhold the mining rights to a great amount of natural gas.  Thus, a natural gas giant such as Gazprom would be eager to obtain exclusive exploration and mining rights of Cyprus’ natural gas fields, exactly what Gazprom’s bailout plan entails.

 

Gazprom’s reported proposal to Cyprus entails a bailout option in which Cyprus would concede exclusive rights of it’s natural gas fields to Gazprom.  In turn, Gazprom would single handedly bail out the country of Cyprus, who would need around 10 billion Euros to re-stabilize its economy.

 

While this may initially seem like an easy and reasonable solution to Cyprus’ troubled economic state, there are many underlying affects and motives.  Gazprom effectively has a monopoly on the natural gas market in Europe, providing it with about 40% of its imported gas.  The bailout of Cyprus’ would give the country the means to sell rights of its natural gas reserves to be mined by different gas companies.  In theory, Cyprus would have the power to create its own gas industry, which if productive enough, could become and export business to the likes of many European nations.

 

If Cyprus were to create its own gas industry and export to Europe, Gazprom would be undercut and be potentially forced to lower their prices and loosen their grasp on the European market.  This occurrence would be very detrimental to the revenues of Gazprom.

 

As it stands now, Gazprom has not made a release stating its offer to Cyprus, nor has Cyprus given any definitive evidence suggesting consideration of the proposal.  This example however, shows how powerful the rights to natural gas exploration are and to what lengths some companies will go to claim those rights.

Subsidies for oil and natural gas companies – why they’re not so good for our future

Under President Obama’s new budget plan, one proposed new source of revenue is from taxes and royalties from oil, natural gas, and coal companies. Currently there are many tax breaks that oil, gas, and coal companies can take advantage of. One tax break, mentioned by the Wall Street Journal is the Section 199 deduction. According to the IRS, this incentive allows (mainly) energy companies to deduct from 6 to 9% of qualifying income. President Obama has asked Congress to repeal the tax breaks for oil, natural gas and coal companies in an effort to raise revenue for his proposed budget. The second part of the proposed plan aims at increasing royalties that are gathered from energy production by private companies on federal lands and in federal waters.

What’s the reasoning for removing tax breaks for the above-mentioned energy companies? Well, if these tax breaks were removed, 44 billion dollars of revenue would be raised over the course of ten years. The increase in royalties would lead to 2.5 billion dollars in increased revenue in the same time period. 46.5 billion dollars would put only a small dent in the budget deficit, but it’s a start. President Obama plans to use 2 billion dollars from all the revenue generated from eliminating tax breaks and increasing royalties to fund clean-energy research.

With removed tax breaks, it is quite likely that oil, natural gas, and coal companies will increase the prices they charge consumers in an effort to maintain after-tax profit margins. If that is the case, then consumers of electricity, heating, and gasoline will be negatively affected in the short-run. However, I believe there will be a positive long-term impact. Non-renewable energy companies may find that they need to diversify into renewable energies as tax obligations increase. Also, if consumers are in fact negatively impacted by higher prices, they may use less energy by driving less, making their homes more energy efficient, and investing in higher-MPG vehicles. This, of course, is all speculation.

What is known for sure is that the money for the proposed budget has to come from somewhere and the proposed actions will help the United States move towards cleaner energy and less dependence on foreign oil.

Oil and Coal companies should receive no subsidies. They should, actually, be taxed more heavily because they produce negative externalities: pollution. Natural Gas is the better, cleaner alternative to the above-mentioned fossil fuels, but it is still a non-renewable source of energy.

Giving Back to the Community

The Natural Gas industry is full of companies that are not only producing better gas and power for their communities, but are also giving back to the communities they are in.

Columbia Gas of Virginia

Columbia Gas of Virginia believes that the vitality of their business depends on the health and well-being of the communities where they live and work. Last year alone they donated over $300,000 to a variety of non-profit organization in their communities. They look for opportunities to provide funding and volunteer support in the areas of human needs, public safety, community development, environmental and energy sustainability, and leadership and science education.

Recently they have contributed to “RACE – Are We So Different?” with a grant of over $10,000 to the Science Museum of Virginia to partly cover the field trip expenses for over 300 schoolchildren. They also recently contributed to Science Matter, Big brother and Sister of Harrisonburg-Rockingham County, HeatShare Fuel Fun, and many more.

Virginia Natural Gas

Virginia Natural Gas aims to make the most meaningful impact they can in their communities. They try to focus on the areas of Energy Assistance, Education, Environmental Stewardship, and Community Enrichment within their communities.

One of the big events that they support is the Special Olympics Annual Polar Plunge.  Virginia Natural Gas led the corporate fundraisers list by raising donations from more than 300 supporters. Also their employees took part in the festivities for the 13^th year in a row by volunteering behind the scenes and taking the plunge themselves.

Along with the Annual Polar Plunge, Virginia Natural Gas has been helping their local Salvation Army.  They contributed a matching gift of $108,000 to the Salvations Army’s EnergyShare program. The donations help areas with low-income residents pay for their winter heating bills.

Briggy Bandz

Briggy Bandz is not a natural gas company, but they are a service company for the industry and they have been going above and beyond the call of business. The company produces Bandz that are used to cool the workers at the natural gas companies. The workers typically have to wear layers of proper protective equipment regardless of the temperature so they often face the threat of overheating. The company donates between $1 to 40% of each Bandz sold to many non-profit organizations. These organizations include Caleb Regenski Memorial Fund, Down Syndrome, Law Enforcement (Concerns of Police Survivors), Autism, and many more.

The Natural Gas Industry continues to strive to make the world a better place one community at a time.

California Invests in Natural Gas

Trucking companies in California have begun ordering and switching their massive fleets of trucks over to Natural Gas. In particular, Cummins has began shipping large new Natural Gas burning engines to companies in California. Leading companies such as Procter and Gamble have begun partnering with shipping companies switching over, noticing the great potential for cost minimization transportation expenses. The New York Times has published a new article going in-depth on the companies transferring to Natural Gas and the future plans for expansion.

Of all states California is by far the leader in expanding access to Natural Gas fueling stations. As well as developing an infrastructure that supports the transfer from traditional means of transportation to a more energy-efficient and sustained process. This has a significant cost in the short-term, but if the efficiency of energy extracted from Natural Gas continues to increase, California could see substantial returns on its investment.

For years California has struggled with its tense energy policies, in hopes that renewable technologies would take over as cost-effective measures and replace California’s vast energy industry. However, many of these processes have not developed at the speed California has hopped and Natural Gas can be an investment that allows the state to continue the production of its renewable resources while staying competitive.

This micro-experiment could lead to big changes on the national level. If California’s experiment with Natural Gas succeeds the state could be a model of how the Federal government could implement a policy of research and development into renewables while adapting our current energy infrastructure into a natural gas-powered energy structure.

There are some dangers to allowing Natural Gas to grow to such a grandiose extent. In many ways the country could fall back into the same trap it fell into with “Big Oil“. However, in a recent Energy Summit I attend I heard an interesting quote I believe applies to both situations and one every American should know.

“We didn’t leave the stone age for the bronze age because we ran out of stones.”

Representing that we won’t leave the oil age because we run out of oil or Natural Gas; it will be because we found something substantially better.

If we continue to invest in our future we will see substantial returns. It is obvious not all investments will pan out, but the benefits we could gain greatly outweigh the risk of inaction. Hopefully, California’s experiment will provide a model for the nation.