Another New England Winter, Same Natural Gas Shortage
In the history of prophecy, only two revelations can be made with perfect accuracy: Winter is coming (not just for “Game of Thrones” fans in 2019), and New England energy prices will spike when it gets cold.
The reason energy prices are so easy to forecast in New England is simple: Hyper-localism and enviro-ideology have blocked construction of several needed natural gas pipelines into the region in the past decade, leaving it the only part of the country that has constrained supplies of natural gas.
There are some signs that New England’s governors are finally willing to do something about this. If so, voters should support their efforts to change, because the status quo means depending on perpetually mild winter weather.
While the winter so far has been relatively mild, meteorologists are looking at February as a time when severe winter weather will start to hit hard. If and when this happens, demand for heat will spike, and scarcity pricing will ensue for both heating fuel and electricity. Last January, during a weather pattern affectionately known as a “winter bomb cyclone,” energy prices in parts of New England spiked more than 400 percent.
Usually the response from politicians on energy prices has been to complain about price-gouging and capitalist pig-dog oil companies. This year, however, governors from Massachusetts and the other five New England states — Connecticut, Rhode Island, New Hampshire, Vermont and Maine — are trying something different: They’re asking Congress to grant the region an exemption to a 99-year-old shipping law — the Jones Act — so that cheap natural gas can be moved by ship from Texas and Louisiana to Boston.
If you’re saying to yourself, “Why can’t it be shipped already?” then you’re asking the right question. It turns out the Jones Act blocks shipments between U.S. ports from ships that aren’t built in the United States or owned by U.S. citizens. While this wasn’t an issue during the mid-20th century, over the past several decades the commercial ship-building industry in the United States has become completely uncompetitive. As a result, the Massachusetts Department of Energy Resources now complains that there are “no Jones Act-qualified carriers” to ship gas to the Northeast, and that even if there were, the shipping costs are 3-5 times higher than those of foreign vessels.
This unfortunate set of circumstances means that when natural gas supplies run short, New England receives most of its liquefied natural gas (LNG) from Trinidad and Tobago and sometimes from Russia — yes that Russia! Through the first nine months of 2018, the facility at Everett, Massachusetts, was forced to import 48 billion cubic feet of natural gas, enough to power 240,000 homes in the region for a year, from other countries.
The Jones Act hurts other economies even worse. Puerto Rico, in particular, has a moribund economy thanks in large part to high shipping costs created by Jones Act rules.
Unfortunately for Puerto Ricans, its citizens have to move to Florida or elsewhere to get political representation in Congress. But ignoring the energy security problems of a law that forces Boston and other New England cities to import natural gas from Russia are inexcusable for the six-state region, which has 12 senators and 21 members of Congress to properly represent its citizens’ interests.
Gaining an LNG exemption for New England is a very big lift politically, but at least some lawmakers are focusing on the right issues. A loosening of the Jones Act rules to allow cheap domestic gas from the Gulf Coast would lessen or even eliminate seasonal shortages over time. If this occurred, it would undermine assumptions by snickering red-state residents that New England’s economic future is destined for permanent decline compared to other regions because New England will always have the highest energy prices in the contiguous U.S.
William Murray is Federal Energy Manager with the R Street Institute.