Whenever politicians open their mouths, expect to hear a lot of nonsense. Nowhere is that adage more true than when they are railing against the oil and gas industry.
Case in point: On Sept. 13, Connecticut Gov. Jodi Rell sent a letter to the chairmen and ranking members of the energy committees in the US Senate and the House of Representatives accusing the natural gas industry of “market manipulation” and urging Congress to take “immediate action to investigate manipulation of supply in the natural gas markets.”
The letter specifi cally accused one producer, Oklahoma City-based Chesapeake Energy, of fl eecing US citizens by reducing production in order to drive up prices paid by their captive customers.
In addition, Gov. Rell issued a press release announcing what he had done. I presume that’s so Connecticut voters will know he’s not asleep at his desk, but is taking on those rich Texas and Oklahoma gas producers.
Although excoriating the natural gas industry for driving up prices may play well in Hartford, this drivel is absolute nonsense and has no merit in fact. Such allegations may help the governor get re-elected, but they do nothing to address the need for a sound national energy policy that will empower domestic producers to drill more to assure America has a steady and reliable supply of natural gas and oil.
Chesapeake’s chairman and CEO, Aubrey McClendon, sent a powerful rebuttal to the Connecticut governor that he prefaced by saying that his advisors had suggested he ignore Rell’s statements as “meaningless political posturing.” McClendon, however, said he believed the charges against Chesapeake were serious and required a response from him to “set the record straight.”
That he did. McClendon’s response made it abundantly clear that, rather than manipulating the natural gas market, Chesapeake has attempted to keep prices affordable by spending $15 billion in the past fi ve years drilling new gas wells. Without such new drilling, domestic natural gas production would decline by about 33% annually due to depletion from existing wells, he pointed out, which would surely mean higher prices.
McClendon underscored that while it is impossible for any one participant to manipulate such a large market as that for natural gas, that trends in such markets can be amplified by large speculative investors. A primary source of such speculation may be from hedge funds, many of which are based in Connecticut and are among the governor’s major campaign contributors, he added. Finally, McClendon cited Gov.
Rell’s “continuing refusal” to approve any new LNG importation facilities in his state, which creates upward pressure on natural gas prices, thereby hurting the interests of consumers.
It’s too bad politicians like Rell don’t do their homework instead of trying to score points with their constituents with baseless allegations.
Don Stowers
Editor-OGFJ