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DDI 2008 Natural Gas GenericNatural GasGe

Maggie & Co.

NATURAL GAS GENERIC 1/7GENERAL UNIQUENESS ............................................................................................... 8

Uniqueness – NG Demand Increasing......................................................................................................................................9Uniqueness – NG Demand Increasing....................................................................................................................................10Uniqueness – NG Demand Increasing....................................................................................................................................11Uniqueness – NG Demand Increasing....................................................................................................................................12Uniqueness – NG Demand Increasing....................................................................................................................................13Uniqueness – NG Demand Increasing....................................................................................................................................14Uniqueness – NG Prices High.................................................................................................................................................15Uniqueness – NG Prices High.................................................................................................................................................16Uniqueness – NG Prices High.................................................................................................................................................17Uniqueness – NG Prices High.................................................................................................................................................18Uniqueness – NG Prices High.................................................................................................................................................19Uniqueness – NG Prices High.................................................................................................................................................20Uniqueness – NG Prices Low.................................................................................................................................................21Uniqueness – NG Prices Low.................................................................................................................................................22Uniqueness – NG Prices Low.................................................................................................................................................23Uniqueness – NG Prices Increasing........................................................................................................................................24Uniqueness – NG Prices Increasing........................................................................................................................................25Uniqueness – NG Prices Decreasing.......................................................................................................................................26Uniqueness – NG Drilling Increasing.....................................................................................................................................27Uniqueness – LNG Increasing................................................................................................................................................28Uniqueness – LNG Increasing................................................................................................................................................29Uniqueness – LNG Increasing................................................................................................................................................30Uniqueness – LNG Increasing................................................................................................................................................31Uniqueness – LNG Increasing................................................................................................................................................32Uniqueness – LNG Increasing................................................................................................................................................33Uniqueness – LNG Increasing................................................................................................................................................34Uniqueness – LNG Increasing................................................................................................................................................35Uniqueness – LNG Increasing................................................................................................................................................36Uniqueness – LNG Demand Increasing..................................................................................................................................37Uniqueness – LNG Demand Decreasing................................................................................................................................38Uniqueness – NG Demand Decreasing...................................................................................................................................39

GENERAL LINKS/INTERNALS .................................................................................. 40 Links – RE decreases NG Demand.........................................................................................................................................41Links – RE decreases NG Demand.........................................................................................................................................42Links – RE decreases NG Demand.........................................................................................................................................43Links – RE increases NG demand...........................................................................................................................................44Links – AE decreases NG Prices.............................................................................................................................................45Links – AE decreases NG Prices.............................................................................................................................................46Links – Wind Decreases NG Demand....................................................................................................................................47Links – Nuclear Decreases NG Demand.................................................................................................................................48Links – Solar Decreases NG Demand.....................................................................................................................................49Links – US key to global gas prices........................................................................................................................................50Internals – Global NG Market.................................................................................................................................................51Internals – LNG Global Market..............................................................................................................................................52Internals – NG Demand key to LNG......................................................................................................................................53Internals – NG Demand key to LNG......................................................................................................................................54AT: AE Decreases Natural Gas...............................................................................................................................................55

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NATURAL GAS GENERIC 2/7CANADA .......................................................................................................................... 56

SHELL – CANADA...............................................................................................................................................................57SHELL – CANADA...............................................................................................................................................................58SHELL – CANADA...............................................................................................................................................................59SHELL – CANADA...............................................................................................................................................................60Links – Supplier......................................................................................................................................................................61Links – Supplier......................................................................................................................................................................62Links – Energy Cooperation...................................................................................................................................................63Impacts – Relations.................................................................................................................................................................64Impacts – Relations.................................................................................................................................................................65Impacts – Afghanistan Module...............................................................................................................................................66Impacts – Afghanistan Extensions..........................................................................................................................................67Impacts – Military...................................................................................................................................................................68Impacts – Trade.......................................................................................................................................................................69Impacts – WOT.......................................................................................................................................................................70

CANADA AFF ................................................................................................................. 71 2AC – CANADA....................................................................................................................................................................72

LNG SAFETY DA ........................................................................................................... 73 SHELL – LNG SAFETY........................................................................................................................................................74SHELL – LNG SAFETY........................................................................................................................................................75Uniqueness – LNG Inevitable.................................................................................................................................................76Uniqueness – LNG Inevitable.................................................................................................................................................77Uniqueness – LNG Inevitable.................................................................................................................................................78Internals – LNG Demand key to Safety..................................................................................................................................79Internals – LNG Demand key to Safety..................................................................................................................................80Internals – LNG Demand key to Safety..................................................................................................................................81Impact – LNG Terror..............................................................................................................................................................82Impact – LNG Terror..............................................................................................................................................................83Impact – LNG Terror..............................................................................................................................................................84Impact – LNG Terror..............................................................................................................................................................85Impact – LNG Terror..............................................................................................................................................................86AT: LNG Safe.........................................................................................................................................................................87

LNG SAFETY AFF ......................................................................................................... 88 2AC – LNG SAFETY DA......................................................................................................................................................89

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NATURAL GAS GENERIC 3/7LNG ECONOMY DA ...................................................................................................... 90

SHELL – LNG ECONOMY...................................................................................................................................................91SHELL – LNG ECONOMY...................................................................................................................................................92Links – LNG-Renewables Tradeoff........................................................................................................................................93Links – High Prices key to LNG.............................................................................................................................................94Links – Demand key to LNG..................................................................................................................................................95Impacts – LNG key to Economy.............................................................................................................................................96Impacts – LNG key to Economy.............................................................................................................................................97Impacts – LNG key to Economy.............................................................................................................................................98AT: LNG Accidents................................................................................................................................................................99AT: LNG Accidents..............................................................................................................................................................100AT: LNG Accidents..............................................................................................................................................................101AT: LNG Accidents..............................................................................................................................................................102AT: LNG Terrorism..............................................................................................................................................................103

LNG ECON AFF ........................................................................................................... 104 2AC – LNG ECON...............................................................................................................................................................1052AC – LNG ECON...............................................................................................................................................................106AFF – Turn: High prices bad................................................................................................................................................107AFF – Impact Turn Booster: LNG Security Costs High.......................................................................................................108

INDONESIA ................................................................................................................... 109 SHELL – INDONESIA.........................................................................................................................................................110SHELL – INDONESIA.........................................................................................................................................................111SHELL – INDONESIA.........................................................................................................................................................112SHELL – INDONESIA.........................................................................................................................................................113Uniqueness – Indonesian Prices High...................................................................................................................................114Uniqueness – Indonesian NG Strong....................................................................................................................................115Internals – Indonesia Supplier...............................................................................................................................................116Internals – Indonesia Wants US Markets..............................................................................................................................117Internals – NG key to Relations............................................................................................................................................118Brink – Investment................................................................................................................................................................119Impacts – Economy...............................................................................................................................................................120Impacts – Stability.................................................................................................................................................................121Impacts – Stability.................................................................................................................................................................122Impacts – Stability.................................................................................................................................................................123Impacts – Stability.................................................................................................................................................................124Impacts – Turns the Case......................................................................................................................................................125Impact Booster – Stability.....................................................................................................................................................126

INDONESIA AFF .......................................................................................................... 127 2AC – INDONESIA..............................................................................................................................................................1282AC – INDONESIA..............................................................................................................................................................1292AC – INDONESIA..............................................................................................................................................................130AFF – US Not Key................................................................................................................................................................131AFF – Wind No-Link............................................................................................................................................................132AFF – Ethanol No-Link........................................................................................................................................................133AFF – Transition to Regional Markets Now.........................................................................................................................134AFF – Indonesia Declining...................................................................................................................................................135

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NATURAL GAS GENERIC 4/7INDIA-PAKISTAN ........................................................................................................ 136

SHELL – IPI PIPELINE.......................................................................................................................................................137SHELL – IPI PIPELINE.......................................................................................................................................................138Uniqueness – IPI Pipeline Coming.......................................................................................................................................140Uniqueness – Indian Demand High......................................................................................................................................141Brink – India-Iran Relations..................................................................................................................................................142Link – Demand key to IPI.....................................................................................................................................................143Link – Prices key to Pipeline.................................................................................................................................................144Link – Prices key to Pipeline.................................................................................................................................................145Internals – Iran Wants Pipeline.............................................................................................................................................146Internals – Iran Natural Gas Untapped..................................................................................................................................147Internals – India Natural Gas Demand..................................................................................................................................148Internals – India Natural Gas Demand..................................................................................................................................149Internals – India Natural Gas Demand..................................................................................................................................150Internals – India Natural Gas Demand..................................................................................................................................151Internals – Iran Supplies Natural Gas...................................................................................................................................152Impacts – Stability.................................................................................................................................................................153Impacts – Iranian-Pakistani Relations...................................................................................................................................154Impacts – CBMs....................................................................................................................................................................155Impacts – Iranian Economy...................................................................................................................................................156Impacts – Diplomacy............................................................................................................................................................157Impacts – IPI Key to Pakistan Industry.................................................................................................................................158Impacts – Pakistan Strategy/Security....................................................................................................................................159Impacts – Pakistan Economy................................................................................................................................................160Impacts – Indian Economy....................................................................................................................................................161Impacts – Indian Energy.......................................................................................................................................................162Impacts – Indo-Pak Relations...............................................................................................................................................163Impacts – Indo-Pak relations.................................................................................................................................................164Impacts – Indo-Pak Relations...............................................................................................................................................165Impacts – Conflict Res..........................................................................................................................................................166Impacts – CBMs....................................................................................................................................................................167Impacts – Regional Stability.................................................................................................................................................168AT: TAPI Better....................................................................................................................................................................169AT: US Pressure Prevents Pipeline.......................................................................................................................................170AT: US Pressure Prevents Pipeline.......................................................................................................................................171AT: Pipeline Unsafe..............................................................................................................................................................172

IPI PIPELINE AFF ....................................................................................................... 173 2AC – IPI PIPELINE............................................................................................................................................................1742AC – IPI PIPELINE............................................................................................................................................................1752AC – IPI PIPELINE............................................................................................................................................................176AFF – Relations Good Now..................................................................................................................................................177AFF – No Pipeline.................................................................................................................................................................178AFF – Nuclear Demand........................................................................................................................................................179AFF – Coal Demand.............................................................................................................................................................180AFF – Pipeline Inevitable.....................................................................................................................................................181AFF – Pipeline Bad – Terrorism...........................................................................................................................................182AFF – Pipeline Bad – Energy Security.................................................................................................................................183AFF – Pipeline Bad – Iran.....................................................................................................................................................184AFF – Pipeline Bad – Iran.....................................................................................................................................................185

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AFF – Iran Sanctions Bad.....................................................................................................................................................186AFF – TAPI Pipeline Better..................................................................................................................................................187

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NATURAL GAS GENERIC 5/7RUSSIA ........................................................................................................................... 188

SHELL – RUSSIA................................................................................................................................................................189SHELL – RUSSIA................................................................................................................................................................190Uniqueness – Natural Gas Dependence Growing.................................................................................................................191Uniqueness – Russia NG Use Increasing..............................................................................................................................192Uniqueness – Gazprom.........................................................................................................................................................193Uniqueness – Gazprom.........................................................................................................................................................194Internals – Energy key to Relations......................................................................................................................................195Internals – Russian Energy Dominance................................................................................................................................196Internals – Natural Gas Key to Relations..............................................................................................................................197Internals – Natural Gas Key to Relations..............................................................................................................................198Internals – Natural Gas Key to Relations..............................................................................................................................199Internals – Natural Gas Key to Relations..............................................................................................................................200Internals – US key to Natural Gas.........................................................................................................................................201Internals – Gazprom Investing in US....................................................................................................................................202Impacts – NATO Backlash...................................................................................................................................................203Impacts – NATO key to Relations........................................................................................................................................204Impacts – Neo-Imperialism...................................................................................................................................................205Impacts – National Security Risk..........................................................................................................................................206Impacts – Terror Coop..........................................................................................................................................................207Impacts – Terrorism..............................................................................................................................................................208Impacts – US-Russian War...................................................................................................................................................209Impacts – Russian Economy.................................................................................................................................................211AT: Non-Unique – Ukraine...................................................................................................................................................212

RUSSIA AFF .................................................................................................................. 213 2AC – RUSSIA.....................................................................................................................................................................2142AC – RUSSIA.....................................................................................................................................................................2152AC – RUSSIA.....................................................................................................................................................................2162AC – RUSSIA.....................................................................................................................................................................217AFF – Non-Unique................................................................................................................................................................218AFF – Energy key to Russian Influence...............................................................................................................................219AFF – Russian Influence Increasing Now............................................................................................................................220AFF – No I/L – Too Much U.S. Supply................................................................................................................................221AFF – Empirically Denied – Energy Relations....................................................................................................................222AFF – I/L Turn – Retaliation................................................................................................................................................223AFF – Relations Non-Unique...............................................................................................................................................224

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NATURAL GAS GENERIC 6/7FLARING ....................................................................................................................... 225

SHELL – FLARING.............................................................................................................................................................226SHELL – FLARING.............................................................................................................................................................227SHELL – FLARING.............................................................................................................................................................228SHELL – FLARING.............................................................................................................................................................229Link – Oil..............................................................................................................................................................................230Internals – Low Prices = Flaring...........................................................................................................................................231Internals – Low Prices = Flaring...........................................................................................................................................232Internals – High Prices Solve Flaring...................................................................................................................................233Internals – High Prices Solve Flaring...................................................................................................................................234Impact Booster – Methane....................................................................................................................................................235Impact Booster – Methane....................................................................................................................................................236Impacts – Warming...............................................................................................................................................................237Impacts – Military.................................................................................................................................................................238Impacts – Human Rights.......................................................................................................................................................239Impacts – Value of Life.........................................................................................................................................................240Impacts – Communities.........................................................................................................................................................241

FLARING AFF .............................................................................................................. 242 2AC – FLARING..................................................................................................................................................................243

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NATURAL GAS GENERIC 7/7INDUSTRIES DA .......................................................................................................... 244

SHELL – INDUSTRIES HYDROGEN................................................................................................................................245SHELL – INDUSTRIES HYDROGEN................................................................................................................................246SHELL – INDUSTRIES CAP AND TRADE......................................................................................................................247SHELL – INDUSTRIES CAP AND TRADE......................................................................................................................248Links – Hydrogen Cars.........................................................................................................................................................249Links – Hydrogen Links........................................................................................................................................................250Links – Cap and Trade..........................................................................................................................................................251Links – Cap and Trade..........................................................................................................................................................252Link Amplifier – Chemical Industry.....................................................................................................................................253Brink – Chemical Industry....................................................................................................................................................254Internals – Manufacturing.....................................................................................................................................................255Internals – Chemical Industry...............................................................................................................................................256Internals – Chemical Industry...............................................................................................................................................257Impacts – Chemical Industry key to All Things...................................................................................................................258Impacts – Chemical Industry key to National Defense.........................................................................................................259Impacts – Chemical Industry key to Economy.....................................................................................................................260Impacts – Chemical Industry key to Economy.....................................................................................................................261Impacts – Air Power..............................................................................................................................................................262Impacts – Air Power..............................................................................................................................................................263Impacts – Disease..................................................................................................................................................................264Impacts – Food Supply..........................................................................................................................................................265Impacts – Satellites................................................................................................................................................................266Impacts – Hegemony.............................................................................................................................................................267Impacts – Terrorism..............................................................................................................................................................268Impacts – Nanotech...............................................................................................................................................................269Impacts – Nanotech...............................................................................................................................................................270Impacts – Nanotech...............................................................................................................................................................271Impacts – Agriculture............................................................................................................................................................272Impacts – Manufacturing......................................................................................................................................................273Impacts – Steel......................................................................................................................................................................274Turns Case.............................................................................................................................................................................275

INDUSTRIES AFF ........................................................................................................ 276 2AC – Industries....................................................................................................................................................................2772AC – Industries....................................................................................................................................................................2782AC – Industries....................................................................................................................................................................279

RANDOMNESS ............................................................................................................. 280 Natural Gas Peak...................................................................................................................................................................281Natural Gas Peak...................................................................................................................................................................282Natural Gas Price Spikes.......................................................................................................................................................283Natural Gas Price Spikes.......................................................................................................................................................284Gas Markets Risky................................................................................................................................................................285Energy Regulation Bad.........................................................................................................................................................286AT: Wind Can Act as Hedge.................................................................................................................................................287AT: Resource War with China/India.....................................................................................................................................288

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GENERAL UNIQUENESSThis section contains uniqueness arguments for the rest of the file.

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Uniqueness – NG Demand Increasing

Demand of natural gas will rise even after peak(Walter Youngquist and Richard C. Duncan 12-_-03 “North American Natural Gas: Data Show Supply Problems”http://www.mnforsustain.org/natural_gas_supply_in_decline_youngquist_duncan_1203.htm )

Natural gas supply in North America in decline, and no early simple solution is anticipated. Those are the conclusions expressed in a study “North American Natural Gas: Data Show Supply Problems” just published in the journal Natural Resources Research by petroleum geologist Walter Youngquist, and electrical engineer Richard Duncan. Natural gas production in the United States peaked in 1971. Since then Canada has increasing supplied the United States to 15 percent of its needs in 2002. However, in 2002 Canadian gas production declined. That trend continued in 2003. Currently, 80 percent of all wells are drilled for gas not oil, but in spite of this increased effort the production decline has not been reversed. The amount of gas found per foot drilled has also declined 50 percent in the past decade indicating that the easy-to-find large fields have already been discovered. New gas wells are showing decline rates as high as 80 percent the first year. At the same time, demand for natural gas in Canada, the United States, arid Mexico is increasing. In the United States, 60 percent of all homes are heated with gas, and 70 percent of new homes are designed for natural gas. Because of its clean burning qualities, natural gas is the fuel of choice for electric power production. In 2002, 90 percent of all new power plants were gas-fired.

Demand for natural gas in the United States is rising.Alan Greenspan, Federal Reserve Board, 4-27-04, “Energy”, http://www.csis.org/energy/040427_greenspan.pdf, [Crystal Xia]

Today's tight natural gas markets have been a long time in coming. Little more than a half-century ago, drillers seeking valuable crude oil bemoaned the discovery of natural gas. Given the lack of adequate transportation, wells had to be capped or the gas flared.

As the U.S. economy expanded after World War II, the development of a vast interstate transmission system facilitated widespread consumption of natural gas in our homes and business establishments. By 1970, natural gas consumption, on a heat-equivalent basis, had risen to three-fourths that of oil. But in the following decade consumption lagged because of competitive inroads made by coal and nuclear power. Since 1985, natural gas has gradually increased its share in total energy use and, owing to its status as a clean-burning fuel, is projected by the Energy Information Administration of the United States to maintain that higher share over the next quarter century. Dramatic changes in technology in recent years, while making existing natural gas reserves stretch further, have been unable, in the face of inexorably rising demand, to keep the underlying long-term price for natural gas in the United States from rising.

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Natural gas markets are expected to increase over time.Alan Greenspan, Federal Reserve Board, 4-27-04, “Energy”, http://www.csis.org/energy/040427_greenspan.pdf, [Crystal Xia]

If North American natural gas markets are to function with the flexibility exhibited byoil, more extensive access to the vast world reserves of gas is required. Markets need tobe able to adjust effectively to unexpected shortfalls in domestic supply in the same way

that they do in oil. Access to world natural gas supplies will require a major expansion of LNG terminal import capacity and the development of the newer offshore re-gasification technologies. Without the flexibility such facilities impart, imbalances in supply and demand must inevitably engender price volatility.

As the technology of LNG liquefaction and shipping has improved and as safetyconsiderations have lessened, a major expansion of U.S. import capability appears to beunder way. These movements bode well for widespread natural gas availability in North America in the next decade and beyond. The near term, however, is apt to continue to be challenging

Demand for natural gas will continue to surge.Russel Gold, staff writer, 7-22-04, Wall Street Journal, “Oil billionaire takes a gamble to fix natural-gas shortage”, http://www.energybulletin.net/node/1193, [Crystal Xia]

But it wasn't Mr. Buffett. It was another billionaire named George B. Kaiser. A relative unknown even in his home state of Oklahoma, Mr. Kaiser is a publicity-shy businessman with a fortune built on oil and banks. Like Mr. Buffett, who has been acquiring natural-gas pipelines, Mr. Kaiser is making a huge bet that demand for natural gas will continue to surge because it's a clean-burning fuel for power generation. Right now, most of North America's natural-gas supply comes from North American wells. The gas goes from the wells through a network of underground pipelines to final users, without ever changing its gaseous form. That's the most efficient way -- but America is running out of its local supply. Imports are an obvious answer. But to travel over the seas, the gas first has to be changed into a super-cooled liquid, loaded onto tankers and then changed back into gaseous form. Currently, tankers unload their cargoes at one of four onshore terminals in the U.S., where the liquid is heated up. The capacity is limited, and with demand for natural-gas imports rising, more terminals are needed. But they face opposition by many communities worried that the fuel-filled structures or tankers could explode or be targeted by terrorists. Mr. Kaiser's new way of handling imports is called Energy Bridge. He's invested $660 million in the project since he took it over from El Paso in December 2003. Energy Bridge is scheduled to go into operation next January in the Gulf of Mexico, about 100 miles off the Louisiana shoreline. The technology works like this: Special tankers carrying liquefied natural gas from places like Egypt and Trinidad would idle in the gulf. The liquid would be heated while still on the tankers, returned to gaseous form and sent via an underwater pipeline into the U.S. pipeline network. The Energy Bridge, with its tankers far beyond the horizon, eliminates the risk of explosions on land and thus sidesteps not-in-my-backyard controversies. If everything works as planned, backers say, the gulf project could increase the U.S.'s import capacity by up to 20 percent. When El Paso put Energy Bridge up for sale, several of the world's biggest oil companies took a look but decided against buying it, partly because of its untested technology. Liquefied natural gas, or LNG, has never been turned into a gaseous form aboard a floating ship, and there were concerns about the impact of the rocking motion. While the process worked in a simulator built by El Paso in Alabama to mimic the motion of 12-foot swells, the technology still hasn't been tested under real-life conditions. Some people are also skeptical Mr. Kaiser will be able to buy enough liquefied natural gas, in part because most of the supply is already under contract. "You can't just sail up and say fill 'er up," says Ira Joseph, managing director for global LNG at PIRA Energy. "The LNG business doesn't work that way."

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Natural gas demand is increasing.Sophia Ruester and Anne Neumann, Department of Business and Economics, Dresden University of Technology, Chair of Energy Economics and Public Sector Management, 6-13-08, “The prospects for liquefied natural gas development in the US”, Science Direct, [Crystal Xia]

Due to supply security and environmental concerns, natural gas demand is increasing at a rate above average primary energy demand. Total US natural gas consumption is expected to increase from 21.9 to 23.4 tcf in 2030 for the reference case with regional differences in growth rates (EIA, 2008). About 26% of the natural gas is used as fuel in the power generation sector (primarily for utilities and independent power producers), 12% is used in the transportation sector, 26% in the industrial sector, and 22% and 14% by residential and commercial users respectively. There are about 500 electric utilities, 40,000 industrial consumers, 4.5 million commercial consumers, and 53 million residential consumers. Many of the larger industrial users have installed dual-fuel equipment, allowing them to take advantage of prices and/or contracts for interruptible power.

Natural gas demand is high now.Tux Turkel, staff writer, 7-15-08, “Natural gas rates expected to climb”, Maine Sunday Telegram, http://pressherald.mainetoday.com/story.php?id=199606&ac=PHnws, [Crystal Xia]

The dominant distributor of natural gas in southern Maine is asking state regulators for a midsummer rate increase of 17 percent, a prelude to what are expected to be even higher gas costs during the heating season.Northern Utilities projects that natural gas rates for home customers this winterwill be 15 percent to 20 percent higher than last year. The company also doesn't rule out the need to seek another rate hike beyond that projected increase.The increases are necessary, Northern Utilities argues in its filing to the Maine Public Utilities Commission, because the company is not collecting enough money from ratepayers to cover higher-priced gas. Worldwide demand for natural gas is driving up its cost.Locally, Northern Utilities is experiencing strong demand for its product from homes and businesses fleeing record-high heating oil prices. At oil's current price, gas would still be much cheaper than home heating oil this winter if regulators approve the projected rate increases for gas.

Demand for natural gas is high now.Kevin Miller, staff writer, 7-28-08, http://www.istockanalyst.com/article/viewiStockNews+articleid_2411666~ title_Regulators-Vent-Over.html, “Regulators Vent Over Delays in LNG Proposals, Bangor Daily News, [Crystal Xia]

Demand for natural gas is increasing throughout the U.S. as the price of oil continues to rise. The Federal Energy Regulatory Commission now is considering applications for LNG terminals all along the U.S. coast. Critics of the two Passamaquoddy Bay projects point out that several other proposals would be located closer to the big metropolitan areas of the Northeast.

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Demand for natural gas is rising – it’s a safer and better fuel.Mohammed Shahidehpour, Yong Fu, and Thomas Wiedman, Professor in the Electrical and Computer Engineering Department and Director of the Electric Power and Power Electronics Center @ Illinois Institute of Technology, Electrical Engineering from Shanghai Jiaotong University, Senior Member of the IEEE Power Engineering Society, 5-05, “Impact of Natural Gas Infrastructure on Electric Power Systems”, http://ieeexplore.ieee.org/iel5/5/30830/1428016/1428016.html, [Crystal Xia]

The natural gas infrastructure in the United States accounts for 25% of the nation's primary energy consumption (including heating and other applications). The consumption of natural gas has increased by roughly 14% in the past decade and is expected to grow by over 50% over the next 20 years, as shown in Fig. 1 [1], [2]. Fig. 2 shows that in the years 1997–2001, natural gas provided about 24% of the U.S. electricity generation [3]. The continuing and rapid growth in gas-fired electric power generating plants (e.g., combined-cycle units) will consume a larger share of the forecasted increase in natural gas demand in the coming decades. In Fig. 3 , the amount of natural gas used for electricity generation is projected to triple by 2020 [2]. Seven states (Rhode Island, New York, Delaware, Louisiana, Texas, California, and Alaska) currently obtain over one-third of their electricity generation from natural gas. The primary reason for this increase is that the natural gas is the preferred fuel for more than 96% of the 200 new generation projects in the United States. This dramatic shift to natural gas is further driven by improved efficiencies, lower capital costs, reduced construction time, more expeditious permitting, and environmental compliance of natural gas-burning combined-cycle units. The possibility of replacing coal and oil burning plants with natural gas plants could greatly improve the sustainability of forests, waters, and farmlands, which are negatively affected by acid deposition. It is imperative to recognize that no new nuclear capacity construction is projected in the near future and an estimated 15 GW of nuclear generation capacity is projected for retirement by 2015 as some licenses expire. Nuclear retirements could further increase the need for natural gas infrastructure in the 2015 time frame.

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http://ieeexplore.ieee.org/iel5/5/30830/1428016/1428016.html


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Demand will increase(Ehrenman, Gayle 4-_-03 “Demand--and price--rise for natural gas” Mechanical Engineering, http://findarticles.com/p/articles/mi_qa5325/is_200304/ai_n21329197 )

All told, America's demand for natural gas is expected to reach 36 trillion cubic feet in 2025, up from 22.6 trillion cubic feet in 2002, according to Senate Energy Chairman Pete Domenici (R-N.M.). Most of that gas will be used to generate electricity, Domenici said in a committee hearing on the rising demand for natural gas. He estimates that US. natural gas consumption for electricity will double in the next 22 years. "We can't meet that demand without new production on the Outer Continental Shelf or Alaska's North Slope," Domenici said in a prepared statement. "The lower 48 states alone can't supply this country with the gas it is going to need. If we decide not to increase production, we must accept our growing reliance on foreign natural gas as a way of life."

Demand production gap will grow(Ehrenman, Gayle 4-_-03 “Demand--and price--rise for natural gas” Mechanical Engineering, http://findarticles.com/p/articles/mi_qa5325/is_200304/ai_n21329197 )

While demand is growing by 1.8 percent a year, natural gas production is expected to increase by only 1.3 percent a year, creating a widening gap between demand and supply, according to Domenici. Natural gas currently represents 24 percent of all energy consumed in the United States, according to the Energy Information Agency. By 2020, it is expected to represent 26 percent and will account for 33 percent of all electricity consumed. Currently, the US. imports 16 percent of its natural gas; by 2025, that figure is expected to rise to 22 percent.

Natural gas demand is high now.PR Newswire, 7-15-08, “Summer Natural Gas Costs at Unprecedented Highs, Congressional Action Long Overdue to Address Rising Energy Costs” http://www.marketwatch.com/news/ story/summer-natural-gas-costs-unprecedented/story.aspx?guid={EA0206D0-1238-4213-A198-1A0D37E4141C}&dist=hppr, [Crystal Xia]

Summer 2008 natural gas commodity costs are now twice as high as the June/July costs in any previous year. The July 2008 price, which recently closed at more than $13 per dekatherm, even eclipses prices from the previous winter heating season, which averaged around $8 per unit, according to the New York Mercantile Exchange monthly settlement prices. In prior years, the price of gas has dropped significantly in the summer as the use of natural gas for space heating decreased. This pattern afforded utilities the opportunity to refill their storage fields at lower prices, which led to lower prices in the following winter (compared to the daily spot market) when the gas was used by customers. Now that more electric utilities are turning to natural gas to produce electricity, year-round demand for natural gas is more constant, and this increase in demand has led to unprecedented summer costs.

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Demand for natural gas is high now – offshore drilling proves

Market Watch, 7/14/08, “NOIA Applauds Lifting of Executive Prohibition of Federal Offshore Oil and Gas Drilling,” PRNewswire-USNewswire via COMTEX, http://www.marketwatch.com/news/story/noia-applauds-lifting-executive-prohibition/story.aspx?guid=%7B9DD97BD5-D6FE-44AE-BCF9-3A3AA1DB1A61%7D&dist=hppr

The National Ocean Industries Association (NOIA) commends today's historic action by President George W. Bush which lifts the 18-year-old Executive Withdrawal of much of the Outer Continental Shelf (OCS) for oil and gas exploration and drilling."The President took a major step today toward reversing a flawed public policy that for decades has prevented energy supply from keeping pace with increasing demand," said Tom Fry, president of NOIA.About 85 percent of the OCS has been off limits to hydrocarbon development for nearly three decades. In addition to today's revocation of the Presidential Withdrawal, a 26-year-old Congressional moratorium on hydrocarbon development must also be lifted in order to fully open up the OCS to oil and natural gas exploration and production."While the President's move will not solve all of the nation's energy challenges, it sends a strong signal to Congress that it is time to end the annual Congressional moratoria," said Fry. "It also acknowledges growing public support for increased domestic offshore production of hydrocarbons."The Minerals Management Service (MMS) estimates that there are 18 billion barrels of untapped oil and 76.5 trillion cubic feet of untapped natural gas in the portion of the OCS currently off limits to oil and gas production. "Those estimates are likely conservative, since the very policies that have put the majority of the OCS off limits to hydrocarbon development have prevented industry from using modern technology to assess untapped resources," said Fry. "In short, industry is relying on estimates based on 1970's technology."The 15 percent of Outer Continental Shelf currently open to hydrocarbon exploration and development supplies 27 percent of America's domestic oil production and about 15 percent of our domestic natural gas production."We are the only nation in the world that consistently limits access to our own domestic resources, despite a long record of safe and environmentally-responsible exploration and production of offshore oil and gas," Fry said. "In light of rapidly growing global demand for hydrocarbons, and the resulting negative impacts on the American economy and overall quality of life, the locking up of U.S. energy resources makes absolutely no sense."

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Uniqueness – NG Prices High

Natural gas prices at an all-time high.

Thomas Content, Journal Sentinel, 7-6-2008, High natural gas costs expected to boost heating bills this winter. <<http://www.jsonline.com/story/index.aspx?id=769652>>

The price of gasoline, above $4 for the past month, is on people’s minds — and it’s visible at nearly every major intersection. But another energy jolt may be coming as the price of natural gas, the primary fuel used to heat Wisconsin homes, is at historic highs for this time of year.Natural gas futures have jumped 82% since the start of the year. Heating oil and propane prices are also soaring.The increased natural gas prices already have resulted in electricity bills jumping twice since March for customers of Milwaukee-based We Energies and Green Bay-based Wisconsin Public Service Corp. Including increases authorized for three other state utilities, customers of the state’s five investor-owned utilities have seen rates rise by $210 million since the start of the year.Spokesmen for the state’s large natural gas utilities said it’s too early to predict what customers may pay this winter. The futures price of natural gas, which finished last week at its highest point in more than 2 1/2 years, could still fall below its current, abnormal high, they said.“Prices right now are in the scary range,” said Kerry Spees, spokesman for Wisconsin Public Service, an electric and natural gas utility. “It makes you look toward the winter with a little trepidation.”

Natural gas prices at their height since 2006.

USA Today, 3-11-2008, No Author cited, Associated Press contributor, Reuters. http://www.usatoday.com/money/industries/energy/2008-03-10-gas-prices_N.htm

Other energy futures also rose Monday. April heating oil futures rose 2.64 cents to settle at $2.9734 a gallon while April gasoline futures rose 2.06 cents to settle at $2.7149 a gallon.

April natural gas futures jumped 25.5 cents to $10.024 per 1,000 cubic feet, the first time a natural gas contract has closed above $10 since January 2006. Natural gas was following oil higher, but also rising in anticipation of cooler temperatures across the Midwest and Northeast, analysts said.

In London, Brent crude futures rose $1.78 to $104.16 a barrel on the ICE Futures exchange.

In a separate survey, the national average price of a gallon of gas rose 0.7 cents overnight to $3.222 a gallon, according to AAA and the Oil Price Information Service. Last May, prices peaked at $3.227 as surging demand and a string of refinery outages raised concerns about supplies.(See explainer, above left, for why the gas price reports differ).

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http://www.usatoday.com/money/industries/energy/2008-03-10-gas-prices_N.htm

http://www.jsonline.com/story/index.aspx?id=769652


Maggie & Co.


Forecasts for future increases in natural gas prices should be doubled or tripled

Global Power Report, 5/17/07, “Congress is under estimating carbon costs by low balling gas forecast, say consultants, pg lexis //EM

Energy-intensive industries said this week that Congress is under estimating the cost of a nationwide carbon cap-and-trade program because government forecasts have unrealistic assumptions for future natural gas prices. Current forecasts by the Energy Information Administration and others that long-term gas prices will stabilize at roughly $4.50/MMBtu should assume prices two or three times that figure for two reasons, officials with Industrial Energy Consumers of America told reporters at a briefing. IECA Executive Director Paul Cicio and Andy Weismann, a consultant to the trade group, said most forecasts today under estimate how quickly additional natural gas supplies can be expected from the proposed Alaska natural gas pipeline and new liquefied natural gas terminals. Cicio made his comments as IECA and other trade groups are ramping up a lobbying campaign aimed at getting Congress to lift government barriers to more LNG terminals and expanded domestic gas drilling, he said. Weismann said he does not see the natural gas pipeline project, which would deliver 5 Bcf of natural gas into the Lower-48 states each day, coming online before 2015. That is five years or more beyond what the EIA projects. If there are delays in permitting or funding the project, "that's a 5 Bcf/day hole in US supply, and I don't know how you fill that easily," Weismann said. He also said the projected $25 billion capital cost of the projects could actually be as high as $40 billion because the cost of raw materials such as concrete and steel have risen substantially in light of the construction boom in China and India. "One could easily argue that natural gas price forecasts should be two to three times as high as they are now," Weismann said.

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Despite natural gas price drop, the commodities boom isn’t over yet. This is only a short term correction

Stevenson Jacobs, AP Business Writer, 7/17/08, Associated Press Financial Wire, “Commodities Drop for 3rd day as Oil Keeps Falling” pg lexis //EM

Commodities turned lower for a third day Thursday, as steep drops in crude oil and natural gas prices fed beliefs that high energy costs are curbing Americans' fuel consumption and at least temporarily cooling the commodities boom. Crude oil had another day of sharp losses, falling more than $5 a barrel after a big sell-off of natural gas. Oil also fell more than $10 in the previous two sessions. The drop in energy helped send soybeans, silver, corn and other commodities sharply lower. "We're seeing some worries about demand destruction in oil, so I think that's creating some fear among investors and leading them to sell," said Tom Pawlicki, commodities analyst with MF Global Research in Chicago. Worries about the health of the American economy has weighed heavily on commodities this week. Investors are concerned that rising inflation and weak economic growth will slow consumer spending and curb demand for raw materials in the U.S. and overseas. Despite the sharp drop in futures prices in recent days, few analysts predict an end to the white-hot commodities boom of the last year. Pawlicki called this week's sell-off a "short-term correction" and predicted prices would turn higher in coming days and months as investors who have been bearish on stocks shift funds back into commodities. "I think it's too early to call a top to this market," Pawlicki said. The drop in crude prices weighed on agriculture futures Thursday, with corn, wheat and soybeans all dropping sharply. Also pressuring prices was more favorable growing weather in the Midwest and a vote by Argentina's Senate to block a hotly disputed grains-export tax that had prompted weeks of farming strikes and food shortages. Soybeans for November delivery fell 50.5 cents to $14.975 a bushel on the Chicago Board of Trade, after earlier falling to $14.90 a bushel. Corn for December delivery lost 28.75 cents to $6.485 a bushel, while September wheat dropped 24.5 cents to $8.095 a bushel. In energy markets, crude oil fell sharply Thursday, sent lower following the biggest one-day drop in natural gas prices in nearly a year. Light, sweet crude for August delivery fell $5.31 to settle at $129.29 a barrel on the New York Mercantile Exchange. Prices have fallen about $15 in the past three days. Natural gas futures for August delivery fell as much as 8.2 percent in the day, the biggest one-day drop in nearly a year. Natural gas fell 13.8 percent on Aug. 20, 2007, according to Nathan Golz, researcher at Wachovia Securities in St. Louis.

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Natural gas prices projected to rise as much as 50%.

Steve Brannish, Staff writer for Dayton Daily News, June 25, 2008, [Dayton Daily News] “Vectren: Natural Gas Prices Could Rise 50% this Winter,” [MM]<<http://www.daytondailynews.com/n/content/oh/story/news/local/2008/06/25/ddn062508natgasweb.html>>

DAYTON — Vectren Ohio is so alarmed about a sharp hike in the price of natural gas it expects this winter that it's warning customers in June to prepare for the worst.

While significant factors remain unknown — including the severity of the 2008-09 winter — the utility that serves 318,000 customers in 17 southwestern Ohio counties wants ratepayers to make moves now to avoid a budget crisis.

Vectren spokeswoman Chase Kelley said Wednesday, June 25, the cost of natural gas, which represents 70 to 80 percent of a customer's bill, could rise as much as 50 percent.

"Year-round demand on natural gas, spurred from an increase in the use of natural gas to produce electricity, continues to force prices higher," Kelley said. Vectren will issue winter bill projections in early fall to help customers, Kelley said.

Natural gas prices continuing to rise.

Elwin Green, Writer for Pittsburgh Post Gazette, June 30, 2008, [Pittsburgh Post Gazette], “Natural Gas Bills will Be Going Up.” <<http://www.post-gazette.com/pg/08182/893778-100.stm?cmpid=news.xml>>

[MM]Starting tomorrow, Pittsburgh's three natural gas utilities will all charge more for gas.

Dominion Peoples will increase its gas cost recovery rate, the amount that it charges consumers to pass on their costs for natural gas, to $15.89 per thousand cubic feet (mcf), up from $12.44. Equitable Gas will charge $16.47 per mcf, up from $13.97, and Columbia Gas customers will see an increase to $14.12, up from $9.84.

Spokesmen for the utilities attributed the increases largely to skyrocketing prices for natural gas, fueled by increased demand, in turn sparked by record prices for crude oil.

Besides its gas cost recovery filing, Equitable Gas also filed for an increase in its distribution rate that would produce $51.9 million that the company wants to use to update and maintain its infrastructure.

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http://www.post-gazette.com/pg/08182/893778-100.stm?cmpid=news.xml

http://www.daytondailynews.com/n/content/oh/story/news/local/2008/06/25/ddn062508natgasweb.html


Maggie & Co.


Natural gas prices on the rise as demand outstrips supply.

Portland Business Journal, 7-16-2008, “Natural Gas Prices Likely to Increase.” <<http://www.bizjournals.com/portland/stories/2008/07/14/daily22.html>> [MM]

Three Oregon gas utilities will seek rate increases this summer, with Northwest Natural Gas Co. predicting prices could rise 40 percent.

NW Natural (NYSE: NWN), Avista Utilities and Cascade Natural Gas briefed the Oregon Public Utility Commission on Tuesday, indicating all three would file requests in August. The companies each pass the cost of purchasing natural gas onto customers.

Portland-based NW Natural, the state's largest utility with about 657,000 customers in Oregon and southwest Washington, is expecting prices to jump between 35 percent and 40 percent.

Avista Utilities, part of Spokane, Wash.-based Avista Corp., which serves portions of southwest and northeastern Oregon, is expecting prices to creep up 10 percent to 15 percent.

And Cascade Natural Gas, with customers in central Oregon, expects prices to be 15 percent to 20 percent higher than a year ago.

Any change in customer rates would take effect Nov. 1 if approved.

Growing demand, tighter supplies and international market pressures this year are driving the cost increases, according to the PUC.

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Maggie & Co.


Natural gas prices will continue to rise this winter, multiple warrants

CNN, 7/3/08, “Avista warns of continued natural gas price hikes”, CNN money http://money.cnn.com/news/newsfeeds/articles/apwire/919e35e0554e2f663d1af503d11a7862.htm#TOP //EM

NEW YORK (Associated Press) - Normally, natural gas prices are low in the summer months and utilities stock up for sale in the winter. This year, though, a spike in energy prices is also hitting natural gas, which likely means higher prices for consumers this winter, Avista Corp. warned Wednesday. Kevin Christie, Avista's director of gas supply, said prices rose from an average of $7.39 per dekatherm in June 2007 to $12.81 per dekatherm last month, a 73 percent increase. A typical home in the utility's service areas in Eastern Washington, northern Idaho and Oregon uses about seven dekatherms a month. "The combination of an unusually long winter and cold spring created higher demand for natural gas, which depleted storage reserves across the country," Christie said in a release. High prices for crude oil, plus lower natural gas imports into the United States, are also pushing prices up, Christie said. The lack of lower spring and summer prices means natural gas rates for customers will likely increase when Avista files its annual "purchase gas cost adjustments" in September, although the amount of the increase remains undetermined, Christie said.

Natural gas prices are at record highsEnergy Information Administration, July 10, 2008, “Natural Gas Weekly Update”, http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp, Accessed July 15, 2008 CM

Natural gas prices continue to surpass historical norms for this time of year, exceeding $11 per MMBtu at trading locations throughout the Lower 48 States, with the exception of Rocky Mountain market centers. Nonetheless, price decreases during the report week were significant and appeared to represent at least a temporary shift in sentiment toward natural gas market conditions. Before the Independence Day weekend, spot prices at the Henry Hub had breached $13 per MMBtu for the first time since December 2005 in the aftermath of the hurricane season that year. With temperatures relatively moderate this report week for the country as a whole and a decline in the price of crude oil, the net change in the Henry Hub spot price this report week (after 4 consecutive days of price declines) was a decrease of $1.22 per MMBtu, or 9 percent. On a regional basis, spot markets along the Gulf Coast in Louisiana and East Texas registered an average price decrease of $1.19 and $1.16 per MMBtu, respectively. The average regional price yesterday was $12.79 in Louisiana and $12.53 in East Texas.

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http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp

http://money.cnn.com/news/newsfeeds/articles/apwire/919e35e0554e2f663d1af503d11a7862.htm#TOP


Maggie & Co.

Uniqueness – NG Prices Low

Natural gas prices are the lowest in the world, we’re not even on a competitive level with Asia and Europe

John Lowe, Executive Vice President Exploration and Production Connoco Phillips, 5/22/08, House Committee CQ Transcript, “Rep John Conyers Jr. Holds a Hearing on Retail Prices of Gas and Competition in the Oil Industry” pg lexis //EM

So we are competing every day, whether it's crude prices, whether it's natural gas prices. You see we have an empty LNG port in the Gulf Coast because the price of natural gas in the United States is well below what the natural gas price is in Asia and Europe. And so we cannot compete for that natural gas, the LNG, away from elsewhere in the world.

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Natural Gas prices are plunging, they have fallen 20% from their peak price

Midnight Trader, 7/17/08, Comtex News Network “Oil, Natural Gas Prices Tumble in Volatile Trading, Lifting Stocks” pg lexis //EM

Oil prices are tumbling for the third straight day and natural gas futures are selling off amid growing concerns that a weaker U.S. economy and consumer reaction to high gas prices will slash demand. Light, sweet crude for August delivery is down $3.50 at $131.10 a barrel on the New York Mercantile Exchange in extremely volatile trading. Oil is now down about $14 in the last three days.the AP reports. Natural gas prices are also plunging, down 82.6 cents at $10.572 per 1,000 cubic feet. It has tumbled more than 20% since its peak in July.

New LNG imports will reduce natural gas prices significantly

Nathaniel Gronewold, reporter, 7/17/08, E&E News Report, “Natural Gas: Rising LNG Imports Should Lower Prices Next Year -- report” pg lexis //EM

Waterborne Energy, a Houston-based market intelligence firm tracking worldwide imports and exports of liquefied natural gas (LNG) and liquefied petroleum gas, says a looming "production bubble" fueled by new overseas LNG supplies coming online later this year and next should see a rush of imports to the United States. The new supply should be enough to put significant downward pressure on U.S. natural gas prices , they predict. "We anticipate that between November 2008 and December 2009 about 2,868 bcf [billion cubic feet] of new LNG will be introduced to the marketplace," said Steve Johnson, Waterborne's president, in a report announcing the firm's findings. "This should begin to significantly impact the U.S. LNG market by the summer of 2009." According to his firm's latest assessment, this year has seen weaker-than-anticipated growth in LNG imports to the U.S. market primarily because many projects in development abroad have seen their estimated completion dates pushed back. Rising demand and some supply disruptions also hindered new LNG import development and helped push natural gas prices to record highs, the report says. But new LNG facilities being built in Qatar, Nigeria, Yemen, Russia and Indonesia should be completed and start producing gas beginning later this year and on into 2009, the firm says. The added capacity should push monthly global LNG production up to approximately 117 bcf by the end of March 2009, followed by even more capacity coming online in the later half of that year. The boost in global supply is "set to dramatically shift the dynamics of the global LNG market," Johnson predicts.

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Natural gas price spike is over, plummeting prices are caused by over-speculation, increased LNG imports and the biggest delivery drop in over a year

Adam Schreck, AP Business Writer, 7/17/08, Associated Press Worldstream, “Oil and Gas Prices in Extended Fall: Traders Seek Clues of Bottoming-Out or a Breather” pg lexis //EM

Oil is now more than 10 percent cheaper per barrel than it was on Monday; natural gas prices are down more than 20 percent just since the Fourth of July. Still, experts are not convinced that prices have turned a corner. "There's no bell that tells you when the market has turned," said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com. Light, sweet crude for August delivery dropped $5.31 to settle at $129.29 a barrel on the New York Mercantile Exchange. Prices have fallen nearly $16 in just the past three days. Natural gas futures for August delivery fell more than 8 percent Thursday, marking their biggest one-day drop in nearly a year, according to Nathan Golz, researcher at Wachovia Securities in St. Louis. Prices for the key Heating, cooking and power generation fuel settled 86.1 cents lower at $10.537, their lowest point since April. A number of market observers say there simply wasn't enough support for the recent run up in natural gas prices, and that this week's sell-off of oil has only helped speed the declines. "Any time oil goes up or down on Nymex, it's going to have a carry-over effect on natural gas," said Michael Rieke, senior managing editor for power and gas at energy research firm Platts. The immediate cause of Thursday's sharp natural gas decline was a larger-than-expected increase of U.S. supplies.

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Maggie & Co.

Uniqueness – NG Prices Increasing

Natural Gas prices will increase

Bloomberg. 07/02/08. “Natural Gas to Converge With Oil Price, Exporters Say.” [Takumi Murayama]

July 2 (Bloomberg) -- Natural gas, trading at a 40 percent discount to crude, may rise to reach the record price of oil as demand for cleaner-burning fuels increases, according to energy ministers from Qatar, Algeria and Iran.U.K. natural gas sells for 71.35 pence a therm, or the equivalent of $85 a barrel based on its energy content, compared with $141 for Brent crude. British natural gas rose 38 percent this year, lagging behind the 50 percent advance in oil.Natural-gas use worldwide rose 3.1 percent last year, almost three times faster than the 1.1 percent increase in oil, according to figures compiled by BP Plc. Gas is cleaner-burning than oil and creates half as much carbon dioxide as coal when used to generate power, helping ease the buildup of greenhouse gases blamed for climate change.``Gas is clean and it is an alternative to oil,'' Qatar Oil Minister Abdullah al-Attiyah said in an interview in Madrid this week. ``The price should be at least competitive to oil.'' Qatar holds 895 trillion cubic feet of gas reserves, the world's third- largest, after Russia and Iran.Rising global energy demand, environmental restrictions and slower progress in expanding nuclear power and wind farms are increasing demand for gas.Liquefied natural gas may become more expensive than crude oil as demand from Asia and Europe rises faster than supply, Sanford C. Bernstein & Co. said in a report last month.Winter Prices``Clearly, global demand for natural gas is racing ahead,'' Linda Cook, executive director of gas and power at Royal Dutch Shell Plc, the biggest non-government producer of LNG, said at the World Petroleum Congress today in Madrid. ``The question is whether supply can keep pace.''In Japan, utilities paid as much as $20 a million British thermal units for LNG imports last winter, which equates to an oil price of $120 a barrel, after an earthquake closed the country's largest nuclear power reactor. U.K. prices for the 2008-2009 winter trade at a similar level. ``Gas prices will follow oil prices; they will converge,'' said Algerian Energy Minister Chakib Khelil. The country is scaling back oil production growth to concentrate on gas.

Natural gas prices will continue to increase(South Florida Business Journal 3-5-08 “Fed report: Natural gas prices will rise” South Florida Business Journalhttp://www.bizjournals.com/southflorida/stories/2008/05/05/daily4.html )

U.S. natural gas prices are poised to head higher over the long term when commercial demand increases, according to a report by the Federal Reserve Bank of Dallas. "Higher oil prices, several cold spells, seasonal gains in demand, reduced inventories and expectations of increasing natural gas use to generate electricity are continuing to push prices upward," the bank said in its first quarter energy report.

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http://www.bizjournals.com/southflorida/stories/2008/05/05/daily4.html


Maggie & Co.

Uniqueness – NG Prices Increasing

Demand and Prices of natural gas will continue to increase.(Reuters 6-10-08 “Rising Natural Gas Prices and Lower Hydroelectric Power Supplies Expected to Increase http://www.reuters.com/article/pressRelease/idUS229743+10-Jun-2008+PRN20080610 )

Pacific Gas and Electric Company today alerted the California Public Utilities Commission (CPUC) that the skyrocketing price of natural gas across the nation and lower than expected hydroelectric power are resulting in higher costs for the electricity PG&E purchases on behalf of its customers. Starting in October 2008, these factors are expected to increase electricity costs to PG&E customers by approximately $482 million, resulting in a roughly 4.5 percent rate increase, to be collected over a 15 month period through December 2009. In 2009, high demand for natural gas - one of the cleanest fossil fuels available to generate electricity - is expected to continue upward pressures on the price of natural gas and in turn lead to further increases in customer electricity rates. As a result, electricity costs in 2009 are anticipated to increase by approximately $340 million. This will result in a less than 2 percent increase over the rates projected to be in effect this October. For the typical PG&E residential customer that uses 550 kilowatt hours (kWh) per month, October bill increases will be roughly 95 cents from $72.13 to $73.08. In January, the bill for a typical residential customer would increase by about 35 cents more. Customers with higher monthly usage will see even greater increases to their monthly bill as a result of California’s tiered rate structure.

Natural gas prices will remain high into 2009(Reuters 6-10-08 “Rising Natural Gas Prices and Lower Hydroelectric Power Supplies Expected to Increase http://www.reuters.com/article/pressRelease/idUS229743+10-Jun-2008+PRN20080610 )In 2008, natural gas prices have increased by 30 percent and are forecasted to remain high in 2009. Soaring natural gas prices are caused by a tight supply-demand balance in the national market, lower imports of liquefied natural gas, and the rising cost of crude oil. Because much of the nation's electric supply is generated by plants using natural gas, increased gas costs are also affecting electric prices.

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http://www.reuters.com/article/pressRelease/idUS229743+10-Jun-2008+PRN20080610

http://www.reuters.com/article/pressRelease/idUS229743+10-Jun-2008+PRN20080610


Maggie & Co.

Uniqueness – NG Prices Decreasing

Gas prices will collapse by winter(Sam Fletcher 4-20-08 Experts predict Natural Gas collapse later this summerhttp://www.priceofcrude.com/index.php/2008/experts-predict-natural-gas-collapse-later-this-summer/ )

They said, “Clearly, lower winter-ending storage levels have substantially improved the outlook for summer gas prices. In fact, bullish year-over-year LNG comparisons should help support US natural prices through the end of June.” However, Raymond James analysts cautioned, “We continue to see unprecedented growth in US gas production that should eventually overwhelm the US gas markets. This gas supply increase is driven by large independents and increasingly supported by growth from smaller private producers. According to our summer gas model (which assumes 10-year average weather throughout the summer), the US will be on the brink of having to shut in gas production. We continue to believe that there is a 50:50 chance that gas prices will collapse later in the summer. Regardless of weather, one certainty remains—unprecedented US gas production growth is showing little signs of slowing any time soon. This means an oversupplied gas market is still looming on the horizon. If it does not happen this summer, then it will likely show up next winter.”

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http://www.priceofcrude.com/index.php/2008/experts-predict-natural-gas-collapse-later-this-summer/


Maggie & Co.

Uniqueness – NG Drilling Increasing

High natural gas prices caused a twofold increase in drilling from just ten years ago.

Daniel Goldstein, THE AMERICAS; Pg. 7 Vol. 86 No. 78, 4-21-2008, “Oil and gas price surge spurs jump in Q1 drilling: API,” [LexisNexis Academic]. <<http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4190843381&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4190843351&cisb=22_T4190843383&treeMax=true&treeWidth=0&csi=8046&docNo=10>>

[MM]

Record high prices for crude oil and sharply higher prices for natural gas spurred a 4% jump in drilling activity in the first quarter of 2008, according to an American Petroleum Institute report released April 18.Completion for oil wells was the highest since 1986.An estimated 13,497 oil wells, natural gas wells and dry holes were completed in the first quarter of 2008, up 4% from the first quarter of 2007, the API report showed."Strong oil and natural gas prices continue to encourage more drilling activity, even as federal policy limits access to non-park land and most of the Outer Continental Shelf for development," said Hazem Arafa, director of API's statistics department, in a statement.API's estimates show the resurgence in oil well completion activity that began in 2000 is continuing into 2008. An estimated 4,577 oil wells were completed in the first quarter, up 12% year-on-year and the highest first quarter estimated oil activity since 1986.Natural gas continues to be the primary target for domestic drilling, with an estimated 7,459 natural gas wells completed in the first three months of 2008. That was down 1% from last year's first quarter but nearly double the drilling activity of a decade ago.Total estimated exploratory well completions, accounting for nearly 15% of total estimated well completions, increased 37% in the first quarter compared with the same quarter last year.

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Maggie & Co.

Uniqueness – LNG Increasing

LNG is growing in volume and in importance.David Nissen, director of the Program in International Energy Management and Policy at the Center for Energy @ Columbia University, 5-26-04, “Commercial LNG: Structure and Implications”, http://energy.sipa.columbia.edu/PDFs/Commercial%20LNG%20Repsol%20 presentation.pdf, [Crystal Xia]

Global trade in liquefied natural gas (LNG) trade is growing in volume and strategic importance. In the last eight years, growth in LNG volume with has been accompanied by an ongoing transformation in its business character. The traditional project-utility chain model supported funding of facility chains for new LNG trades with tight bilateral long-term contractual commercial relationships between the LNG export project as seller and the monopoly-franchised gas transmission merchant or electricity utility as buyer. Through a process that Joseph Schumpeter would have described as creative destruction, new projects are being formed by LNG merchants – major energy companies who control facilities and retain title to the LNG through the chain. This new business model, called commercial LNG , is still evolving . It is being driven by the confluence of three trends: growing size and scope of LNG trade, lower costs through the LNG facilities chain, and the erosion of utility monopoly franchises in competitive inland natural

gas markets.

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LNG is a promising technology – continuing to increase in the US.Sophia Ruester and Anne Neumann, Department of Business and Economics, Dresden University of Technology, Chair of Energy Economics and Public Sector Management, 6-13-08, “The prospects for liquefied natural gas development in the US”, Science Direct, [Crystal Xia]

The increasing supply–demand gap in the US is currently met by imports from Canada, Mexico, and offshore LNG. LNG imports more than doubled between 2000 (220 bcf) and 2006 (585 bcf, or 2% of total imports). The share of LNG in total supply—delivered from various sources mainly in the Atlantic Basin—is expected to increase to approximately 20% by 2020. In 2006, Canada contributed 3.5 tcf and Mexico only 2 bcf. Canadian production (and therefore supplies) is expected to decline. Mexican imports are expected to increase significantly when LNG will be delivered to Mexican facilities adjacent to the California border where the regasified LNG will supply southern California.

The US needs to secure natural gas and LNG.Sophia Ruester and Anne Neumann, Department of Business and Economics, Dresden University of Technology, Chair of Energy Economics and Public Sector Management, 6-13-08, “The prospects for liquefied natural gas development in the US”, Science Direct, [Crystal Xia]

The US will become a much larger player in the globalizing natural gas market as importing regions compete for supplies. Within this market environment, the challenge for North American investors is to secure the right amount of LNG delivered as needed. We observe that the global super majors are already engaged along the entire LNG value chain (Ruester and Neumann, 2006), controlling upstream liquefaction, midstream shipping, and downstream regasification capacities. There will be little spare capacity on the export side available for contract with new entrants. New business models like the operation of regasification terminals as “tolling facilities” will appear in the competitive US natural gas market.

Even though prices have increased and are expected to stay well above the levels of the pre-2000 era, the US will continue to rely on natural gas to both ensure supply security and mitigate emissions. Reports from the Intergovernmental Panel on Climate Change on the devastating pace of climate change make natural gas the fuel of choice for electric generation, thus calling for LNG capacity to be built now.

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US is importing exponentially more LNGLanny Waguespack 12/2/05 (http://www.bizjournals.com/houston/stories/2005/12/05/focus4.html)

Through all the smoke, one bright flame of truth exists: The U.S. energy industry is entering an era of increasing LNG imports. Long-term forecasts show that by 2012, LNG demand is expected to increase by more than 300 percent from a 2005 level of 2 billion standard cubic feet per day of natural gas to 13 Bcf Assuming all the approved terminal projects are built, this dramatic increase in demand is exceeded by an even more dramatic increase in capacity. The combined capacity of existing terminals plus all the approved projects could reach 16 Bcf of natural gas from LNG by 2012.

New gas reserves make LNG growth inevitable Lanny Waguespack 12/2/05 (http://www.bizjournals.com/houston/stories/2005/12/05/focus4.html)

At the same time, major gas reserves are being found in all the wrong parts of the world (from a U.S. parochial viewpoint). These "stranded" reserves are in areas that cannot utilize the huge volumes available, and the best way to monetize the gas is through liquefaction and ocean shipping to a major natural gas market such as Japan, Europe or the U.S. As a result, LNG imports are expected to rise from a current 3 percent of the U.S. natural gas supply to more than 20 percent by 2025, thus ensuring U.S. dependence on foreign natural gas supplies for a significant part of its energy needs, a la imported oil.

Economic viability will cause American LNG exports to growBusiness Wire 10/2/06 (http://findarticles.com/p/articles/mi_m0EIN/is_2006_Oct_2/ai_n16833582)

LNG (Liquefied Natural Gas) is an increasingly important source of energy for North America. Favorable economics, a changing regulatory climate and relatively strong natural gas prices make the importation of LNG a viable and profitable business opportunity. However, since US import terminal capacity is insufficient to meet growing long term demand, additional infrastructure is required to bring greater supplies to market.

LNG lacks the port facilities to expand nowBusiness Wire 10/2/06 (http://findarticles.com/p/articles/mi_m0EIN/is_2006_Oct_2/ai_n16833582)

However, since import capacity at the four operating US terminals is currently insufficient to meet projected US forward demand, additional regasification facilities are required to bring additional supplies to market.

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US has begun to rapidly consume LNG David Niles July 6, 2007 (http://www.energy-business-review.com/article_feature.asp?guid=03B5F7FB-E46E-4E3C-A406-7D72BD4B0C65)

US LNG use is growing rapidly, which will lead to increased competition and converging LNG prices.Although LNG currently makes up less than 1% of the total US fuel mix, consumption is increasing rapidly. Furthermore, increasing capacity investment and favorable regulation will further fuel growth, ultimately contributing to the US's emergence as the main LNG market in the Atlantic Basin. This will lead to greater competition and an eventual convergence of LNG prices in the Atlantic Basin. The use of LNG, which made up 3% of the US's natural gas consumption in 2006, has seen robust growth in recent years. Indeed, annualized LNG consumption between 1996 and 2006 grew at 13%, while gas consumption grew at an annual rate of just 1.4% over the same period. By 2020, LNG consumption is expected to grow by 89%, far outpacing predicted natural gas consumption growth of 39% over the same period. The high US demand for LNG can be attributed to the product's regular use in power generation. Indeed, over 100GW of gas-fired power generation has been added in the past decade. Furthermore, with strong economic and population growth, and the low emissions and operational efficiency of gas-fired plants, the growth in LNG demand is forecast to continue. In addition, dwindling domestic production and falling imports from Canada, the US's main foreign natural gas source, have led to LNG being seen as a viable alternative. To support the soaring demand, US LNG regulation has become decentralized and less intrusive. Short-term and spot market contracts are increasingly replacing long-term contracts, to the point that, in 2004, 70% of all US LNG contracts were short-term. As price competition between North America, Europe and the Pacific Basin heats up, suppliers will take advantage of arbitrage opportunities. Exporters will ship spot cargoes (i.e. those not bound by contract) to the import terminal with access to the markets that offer the highest netback (the net revenues from downstream sales, minus the marketing and downstream costs). Considering the fact that average US gas prices for May 2007 were almost 90% higher than on the UK's National Balancing Point, suppliers with flexible delivery terms will favor the US over other markets, despite higher transportation costs. In spite of the wide price differentials, the emergence of short-term contracts will increase competition in the Atlantic Basin, resulting in an eventual convergence of LNG prices. Importers will benefit as the increased competition will lead to greater transparency and stability, giving them another alternative to continental natural gas and higher energy security.

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LNG imports are projected to increase.Bloomberg News, 7-18-08, “Report: US LNG imports could get boost in 2009”, http://www.chron.com/disp/story.mpl/business/5894802.html, [Crystal Xia]

U.S. imports of liquefied natural gas may rise in 2009, reversing an estimated 38 percent drop this year, because of additional supplies from new projects, consultant Waterborne Energy said. Supplies may increase by 60.2 million metric tons a year (2,868 billon cubic feet), or 36 percent, Steve Johnson, president of Waterborne Energy, said in a statement. Supplies of LNG last year rose 7.3 percent, according to the BP Statistical Review of World Energy June 2008. "Few industry observers are talking about this production 'bubble,' set to dramatically shift the dynamics of the global LNG market," Johnson said in the statement dated July 17 on Business Wire. Between November 2008 and December 2009, about 2,868 billion cubic feet of new LNG will be produced and "should begin to significantly impact the U.S. LNG market by the summer of 2009," he said. U.S. LNG supplies slumped in 2008, with imports falling short of expectations because of rising demand, delays in new production and "unexpected" incidents. LNG projects in Nigeria, Trinidad, Norway, Russia and Qatar were either delayed or failed to boost output after start up.

US LNG imports are expected to rise.Business Wire, 7-17-08, “Waterborne Energy Predicts Record Spike in U.S. LNG Imports for 2009”, http://www.istockanalyst.com/article/viewiStockNews+articleid_2410132~title_ Waterborne-Energy.html, [Crystal Xia]

Waterborne Energy, a Houston-based consulting group that specializes in analyzing LNG markets, is forecasting a big year for U.S. LNG imports in 2009. "Surprisingly, few industry observers are talking about this production 'bubble,' set to dramatically shift the dynamics of the global LNG market," notes Steve Johnson, president of Waterborne Energy. "We anticipate that between November, 2008, and December, 2009, about 2,868 bcf. of new LNG will be introduced to the marketplace. This should begin to significantly impact the U.S. LNG market by the summer of 2009." Citing 2008 as an anomaly, Johnson notes that U.S. LNG imports fell short of expectations this year due to delays in new production, rising demand and other unexpected incidents. Johnson says several LNG projects, already behind schedule, are under pressure to commission facilities and get product online.

"We expect about 117 bcf. per month of new LNG production to be available globally by the end of March 2009."

2008 was an anomaly—the US LNG market will grow in 2009Business Wire 7/17/08 (http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080717005118&newsLang=en)

Waterborne Energy, a Houston-based consulting group that specializes in analyzing LNG markets, is forecasting a big year for U.S. LNG imports in 2009. “Surprisingly, few industry observers are talking about this production ‘bubble,’ set to dramatically shift the dynamics of the global LNG market,” notes Steve Johnson, president of Waterborne Energy. “We anticipate that between November, 2008, and December, 2009, about 2,868 bcf. of new LNG will be introduced to the marketplace. This should begin to significantly impact the U.S. LNG market by the summer of 2009.” Citing 2008 as an anomaly, Johnson notes that U.S. LNG imports fell short of expectations this year due to delays in new production, rising demand and other unexpected incidents. Johnson says several LNG projects, already behind schedule, are under pressure to commission facilities and get product online. “We expect about 117 bcf. per month of new LNG production to be available globally by the end of March 2009.”

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LNG is poised for short-term and long-term growthReuters 6/27/08 (http://uk.reuters.com/article/oilRpt/idUKN2743304320080627?pageNumber=3&virtualBrandChannel=10171)The United States could finally see a slight pick-up in liquefied natural gas imports this summer as skyrocketing domestic gas prices make it a more competitive destination, industry experts said. So far this year, LNG shipments to the United States have languished at just under 1 billion cubic feet per day, or 30 bcf per month, down 60 percent from the 2.56 bcf shipped here daily during the same six-month period in 2007. Despite a 75 percent spike in U.S. natural gas prices this year to about $13 per million British thermal units at the Gulf Coast and $14 per mmBtu on the East Coast, experts said some LNG buyers in Europe and Asia were still willing to pay more. "It looks like we could get a little more LNG in July, but not much," said Steve Johnson of Waterborne Energy, a Houston firm that monitors the global flow of liquefied gases. Johnson estimates U.S. LNG imports in July will total about 43 bcf, up 13 percent from June, with August gaining a bit more. But the pace would still be less than half of what was delivered during the same two months last year. A huge nuclear plant shutdown in Japan and a drought in Spain have helped siphon off spot LNG supplies this year that normally would have flowed to the United States. Delays at several new liquefaction projects, operational snags at several others, and unexpected demand from Latin America, particularly Argentina and Brazil, have only served to make the global LNG market even tighter this year. "Latin America is starting to affect us. They've been pulling LNG from Trinidad that most likely would have come here," Johnson said. Last year, record LNG imports of 2.1 bcf per day were a key factor in building U.S. gas inventories to all-time highs above 3.5 trillion cubic feet before last winter, when utilities typically stockpile gas to meet peak heating season demand. While LNG only provides just over 2 percent of total demand, a cold winter left inventories drained and helped back the sharp spike in U.S. gas prices since January. Total U.S. gas inventories have climbed back to 2.033 tcf but were still 16 percent below last year and 3 percent below average, according to U.S. government data released this week To get storage back to a comfortable 3.4 tcf by winter, weekly builds will have to average 72 bcf for the remaining 19 weeks of the injection season, well above the 65 bcf five-year average pace for that period. Stacy Nieuwoudt, vice president of Tudor, Pickering, Holt & Co in Houston, said help could come from Atlantic Basin LNG suppliers like Trinidad as high prices have nearly pushed the arbitrage to the United States open. "We're a lot closer today than we were two months ago, but the arb is still closed," she said. An uptick in late July deliveries of LNG to the United States was still possible, she said, pointing out that South Korea, a big winter LNG buyer, had recently backed away from spot purchases. Analysts said landed gas prices in Spain were hovering near $14 and Japanese utilities were still willing to pay close to $16 for spot LNG supplies. With the additional cost to ship LNG from Trinidad to Spain rather than to the United States running at about 35 cents and cargoes to Japan about $2 more expensive, U.S. East Coast gas prices would have to move well above $14 to attract more LNG. "We could see a small increase in LNG in the next month or two, but I don't see any big pick-up this year. There's only been minimal additions to liquefaction capacity, and demand is growing," said Stephen Thumb of Energy Ventures Analysis. Despite the bleak picture this year, most analysts agreed that U.S. LNG imports next year should pick up sharply and possibly challenge the record pace in 2007, as new LNG production capacity comes on line in the next 18 months.

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There is an increased market for LNG; it plays a key part in the industry.Steve Hargreaves, staff writer, 8-26-06, CNN, “Betting billions on liquefied natural gas”, http://money.cnn.com/2006/08/28/news/economy/lng/index.htm, [Crystal Xia]

Merrill Lynch, the world's largest brokerage firm, plans to invest in liquefied natural gas production plants as the United States and Europe import more of the fuel. Merrill Lynch is considering investing in plants in countries like Papua New Guinea, said Richard Jefferis, a managing director of Merrill Lynch Commodities in Houston. The company earlier this year bought capacity at a Sempra Energy liquefied natural gas import terminal being built in Louisiana, owns capacity at a British terminal and is studying another liquefied natural gas port in Europe. Merrill Lynch i s among investors positioning themselves for increased trading in liquefied natural gas, or LNG, a commodity traditionally dominated by rigid supply contracts that run for as long 25 years. Sempra, Exxon Mobil and other companies are building enough terminal capacity to double imports into the United States, where domestic production has failed to keep pace with demand.''In every business that we're in, we are physical players in the supply chain as well as financial players,'' Jefferis said in a telephone interview Friday. ''We look at LNG as something that we need to be in.'' Merrill Lynch handles about 5 percent of all physical natural gas volumes traded in the United States, about 7 percent of financial volumes and controls about 8 percent of U.S. storage. The company is looking to source liquefied natural gas from several projects including the plant in Papua New Guinea, Jefferis said, declining to say how much Merrill Lynch is investing in the liquefied natural gas venture or how large a stake it may takeLiquefied natural gas is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by ship to destinations not connected by pipeline. On arrival, it is turned back into gas for distribution to power plants, factories and households. Merrill wants to build its liquefied natural gas business to take advantage in trading of price differences between natural gas and oil, and between liquefied natural gas markets in the Atlantic and the Pacific regions, Jefferis said.

US LNG imports are poised to dramatically increaseBloomberg News 7/18/08 (http://www.chron.com/disp/story.mpl/business/5894802.html)

U.S. imports of liquefied natural gas may rise in 2009, reversing an estimated 38 percent drop this year, because of additional supplies from new projects, consultant Waterborne Energy said. Supplies may increase by 60.2 million metric tons a year (2,868 billon cubic feet), or 36 percent, Steve Johnson, president of Waterborne Energy, said in a statement. Supplies of LNG last year rose 7.3 percent, according to the BP Statistical Review of World Energy June 2008. "Few industry observers are talking about this production 'bubble,' set to dramatically shift the dynamics of the global LNG market," Johnson said in the statement dated July 17 on Business Wire. Between November 2008 and December 2009, about 2,868 billion cubic feet of new LNG will be produced and "should begin to significantly impact the U.S. LNG market by the summer of 2009," he said.

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The slowdown of other markets implicates an increase in US LNG importsJoe Silha 5/8/08 (http://uk.reuters.com/article/oilRpt/idUKN0837484620080508)

A 25-percent run-up in U.S. natural gas prices since mid-March has made the United States a more attractive destination for liquefied natural gas imports, according to a Houston-based consulting firm."For the first time in many months, the U.S. East Coast has emerged as a superior netback from Trinidad over most European markets. U.S. imports should experience a slow, steady increase through summer," Waterborne Energy said in its latest report. Waterborne Energy, a consulting firm that monitors the global flow of liquefied gases, estimates that U.S. imports of LNG should climb to about 43 billion cubic feet in June from about 36 bcf in both April and May. But that would still be about half of last June's total when the United States took in about 88 bcf. U.S. East Coast gas prices have climbed nearly 25 percent since mid-March to about $12 per mmBtu. While gas prices in Britain and Spain are close to that level, it takes twice as long to deliver LNG from Trinidad, a major spot supplier, to Europe and costs about 30 cents more, making the trip to the United States more profitable. Waterborne expects European imports of LNG to show signs of slowing later this month, while Far East demand should also taper off as heating needs slow in spring.

LNG imports are increasingJoe Silha 6/29/08 (http://www.kuwaittimes.net/read_news.php?newsid=MjE1NjA5MzUw)

The United States could finally see a slight pick-up in liquefied natural gas imports this summer as skyrocketing domestic gas prices make it a more competitive destination, industry experts said. So far this year, LNG shipments to the United States have languished at just under 1 billion cubic feet per day, or 30 bcf per month, down 60 percent from the 2.56 bcf shipped here daily during the same six-month period in 2007. Despite a 75 percent spike in US natural gas prices this year to about $13 per million British thermal units at the Gulf Coast and $14 per mmBtu on the East Coast, experts said some LNG buyers in Europe and Asia were still willing to pay more. "It looks like we could get a little more LNG in July, but not much," said Steve Johnson of Waterborne Energy, a Houston firm that monitors the global flow of liquefied gases.

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LNG is beating out renewables for the future of US energygreenparty.org 2004 Synthesis/Regeneration #35, Fall 2004, http://www.greenparty.org/LNG.html)

The United States derives 23% of its consumed energy from natural gas, and an increase to 28% is expected by 2020. Presently, 85% of US consumption is from domestic wells, with a little less than 15% piped from Canada. Only a fraction of a percent comes from liquefied natural gas ( LNG ), imported by ocean tankers. Today, however, this pattern is changing. Domestic wells are showing production decline. New finds are smaller and rapidly depleted. Obviously, from a ruling class point of view, the answer is to import more natural gas, just as 63% of US oil is now imported. An alternative solution through conservation, life-style change, and conversion to wind/solar energy is unacceptable to the ruling class ( because its elite social position is based on economic expansion ). In a July 10, 2003 statement to the Senate Committee on Energy and Natural resources, Alan Greenspan said, "As the technology of LNG liquefaction ( sic ) and shipping has improved, and as safety considerations have lessened, a major expansion of US import capability appears to be underway." A flurry of corporate proposals for new US LNG port terminals has surfaced, many for the West Coast where no such facilities now exist. An Institute of the Americas' conference held in La Jolla, California on January 29-30, 2004 considered a "boom in liquefied natural gas consumption in the United States, Mexico and Canada" ( The Washington Times ).

Declining domestic supply and increasing demand will require increased LNG exports in the USCanaport LNG No Date Given (http://www.canaportlng.com/need_for_lng.php)

By 2015, The Atlantic Basin will account for half of the global LNG trade, according to forecasts by industry consultant Poten & Partners. The most significant contributor to this growth in demand is the United States and Canada, which will make up 50 percent of the Atlantic Basin LNG demand by 2015. In the U.S., demand for natural gas is expected to increase by 1.5 percent a year between 2003 and 2025, reaching 30.7 trillion cubic feet per year in 2025. In parts of northeastern U.S., demand is expected to increase even faster -- by 1.9 percent a year in New York, for example. During the same period, natural gas production in the U.S. is only expected to grow at 0.6 percent a year, less than half the pace of growth in demand. These supply-demand dynamics would result in a significant supply shortfall. To bridge the widening supply-demand gap, the U.S. is expected to increase LNG imports to 8.9 trillion cubic feet by 2025. As a result, the percentage of U.S. natural gas supply provided by LNG is projected to increase from approximately 2 percent in 2003 to more than 20 percent in 2025, according to the U.S. Energy Department.

US demand is increasingFrank A. Verrastro, Director and Senior Fellow Energy and National Security Program Center for Strategic and International Studies, March 16, 2004 (LNG the Growing Alternative Emergence of a US Market & the Role of Qatar as an International LNG Hub)

The US is both an importer and exporter of LNG. LNG has been exported from Alaska to Japan for the past 30 years. While Algeria has historically been the US’ largest supplier of LNG, in the past few years it has been overtaken by Trinidad and Tobago, which now accounts for 2/3 of the nation’s LNG imports. In addition to imports from Trinidad and Tobago and Algeria, the US also receives LNG cargoes from Brunei, Malaysia, Nigeria, Oman and Qatar. As a consequence of growing gas demand, higher prices and limited supply options, renewed interest in US LNG imports has again surfaced. To date, more than 30 new LNG projects have been announced for North America with facilities proposed for a variety of sites along the east coast from Nova Scotia to Florida, in the Bahamas, along the Gulf Coast from Alabama to Mexico and along the west coast from Alaska to the Baja in Mexico.

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Uniqueness – LNG Demand Increasing

US is running low on domestically produced natural gas and Canada won’t have enough, the US will have to invest globally Jaeyoung Lee, P.E., Offshore Pipeline Consultant, “Natural Gas Demand in the USA - Why LNG & Gas Hydrate,” Published in KSEA Letters, Vol. 33, No. 2, June 2005, www.jylpipeline.com/KSEA_article_2005.pdf

Gas production in the United States has leveled off and is expected to decline in the coming years. Approximately 15% of natural gas used in the USA is imported from Canada. However, the supply piped in from Canada will be reduced due to the increase in Canada’s domestic demand and declined gas production. To meet the future natural gas demand in the USA, two solutions are suggested; Increase LNG import and develop a new energy source such as gas hydrate.

US demand for natural gas is high now and LNG is coming now

Jaeyoung Lee, P.E., Offshore Pipeline Consultant, “Natural Gas Demand in the USA - Why LNG & Gas Hydrate,” Published in KSEA Letters, Vol. 33, No. 2, June 2005, www.jylpipeline.com/KSEA_article_2005.pdf

Natural gas demand was boosted by the 1980s’ oil shock and has continued to grow. This growth is due to the clear environmental advantage of natural gas over other fossil fuels and its superior thermal efficiency. Now, approximately 25% of energy used in the United States is supplied by natural gas. Texas alone uses more natural gas than the combined countries of England and Japan [1]. Natural gas is used by the industry (40%), residential (22%, for heating, cooling, and cooking), business sector (15%), and electricity generation plant (14%). It is also used as a raw material to make paint, plastics, fertilizer, steel, fabrics, glass, etc. Natural gas demand will grow by more than 38% by 2025 [2]. One projection suggests that the United States could face a gap in natural gas supply of approximately 5 trillion cubic feet (tcf=1012cubic feet) in 2020 [3]. This means that approximately 41.7 million US homes will not receive natural gas since the average home in Houston uses about 120,000 cubic feet of natural gas per year. To fill the gap between the natural gas demand and supply, the investment on LNG (Liquefied Natural gas) value chain and research on gas hydrates are recommended.

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Uniqueness – LNG Demand Decreasing

Increased demand elsewhere will keep US LNG imports low.Platts 6/19/08 (http://www.platts.com/Natural%20Gas/News/8821458.xml?src=Natural%20Gasrssheadlines1)

Voracious demand in South Korea and Spain will keep liquefied natural gas deliveries in the US low, which will be bullish to US gas prices, analysts at US investment bank Goldman Sachs said. Analysts Samantha Dart and Jeffery Currie expect Henry Hub prices to average $12.80/MMBtu over the summer and peak at $13.80/MMBtu this coming Northern Hemisphere winter--before falling back to $10/MMBtu in June 2009—as Asian and European pulls US prices up. "The higher-than-expected increase in LNG demand from Asia and Europe in the first quarter of 2008 was met by higher-than-expected LNG supplies in the market, likely motivated by high spot LNG prices in the period, and lower-than-expected North American LNG imports," Dart said. "Both Mexico and the United States showed declines in LNG imports earlier this year relative to our expectations." The increased international demand for gas will, Goldman said, bolster US prices as US LNG deliveries will no longer take up the slack for US demand, which the analysts still see as increasing even as the US economy slows.

There’s no need for LNG in the USLoren Steffy 5/29/08 (http://www.chron.com/disp/story.mpl/business/steffy/5809026.html)

Given the persistent march of oil and natural gas prices, most energy company stocks have done pretty well this year. One glaring exception: Houston's Cheniere Energy. The company's shares are trading at about one-sixth what they were in January, and analysts are talking about bankruptcy. The stock closed Thursday at $5.04, down from $32.64 at the start of the year. Cheniere's troubles reflect changes in the global market for liquefied natural gas. A few years ago, LNG was the next big thing in energy, with rising demand for power generation expected to sop up domestic gas supplies. Hoping to capitalize on a need for imported gas, Cheniere borrowed heavily to build three LNG terminals along the Gulf Coast, including one in Sabine Pass that opened last month. The company also owns natural gas pipelines that connect to the terminals and has a marketing arm to sell gas imported gas. The LNG tankers, though, aren't lining up as Cheniere hoped. "If you believe the ships are going to come and they don't, you're in trouble," said Bernard Picchi, an analyst with Wall Street Access who's had a "sell" rating on Cheniere for most of the year. Demand in other parts of the world outpaced the nascent market in the United States. Japan, for example, turned to LNG to fuel peaking plants after an earthquake last summer shut down most of the country's nuclear power generation. That drove up LNG prices on the world market, and because other countries are willing to pay more than we are for LNG, little is being shipped to our shores. "There's virtually no need for LNG in the United States market at this moment," Picchi said. Other big LNG players, such as Sempra Energy and Exxon Mobil, have the deep pockets to weather the slump, which analysts such as Lasan Johong at RBC Capital Markets believe could ease beginning in early 2010.

US LNG imports are downBloomberg News 7/8/08 (http://www.chron.com/disp/story.mpl/headline/biz/5877203.html)

U.S. imports of liquefied natural gas may fall 38 percent this year as demand remains strong in Asia and Europe and projects are delayed, the Energy Department said today. U.S. LNG imports this year may total about 480 billion cubic feet, down from 770 billion cubic feet in 2007, the monthly Short-Term Energy Outlook said. The department last month estimated 2008 LNG imports would total about 530 billion cubic feet, a decline of 31 percent. The volume may climb to 790 billion cubic feet in 2009 as new supply enters the global market, the department said. This is down from June estimates of 850 billion cubic feet. Imports in the first half of 2008 were 60 percent below those of a year earlier. The flow of LNG into the U.S. is averaging about 1.1 billion cubic feet a day so far this month, down from 3.1 billion cubic feet a day a year ago, Stacy Nieuwoudt, an analyst at Tudor, Pickering, Holt & Co. in Houston, said in a note today. LNG is gas that is cooled to a liquid for transport by ship to markets not connected by pipelines. The fuel is received at import terminals and converted back to a gaseous form so it can be piped to users.

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Maggie & Co.

Uniqueness – NG Demand Decreasing

Demand satisfied now – new lease means we won’t need gas for 2 years anyway

Jon Hurdle, a freelance writer who has written for many business publications, 7/14/08, “Pa. invites bids for leases on possible gas field,” Reuters, http://uk.reuters.com/article/oilRpt/idUKN1447555220080714

Pennsylvania officials on Monday invited bids to lease land atop a geological formation that may hold enough natural gas to meet total U.S. demand for two years.The state's Department of Conservation and Natural Resources said it will hold a lease sale from pre-qualified bidders for 18 tracts of state forest totaling some 74,000 acres in two north-central Pennsylvania counties. The bidding will be open until Sept. 2.The tracts sit over the Marcellus Shale formation, a natural feature about a mile deep that has been known about for years but which has only recently been suspected of containing massive quantities of natural gas.The formation, which stretches some 600 miles between western New York State and West Virginia, could contain as much as 50 trillion cubic feet of recoverable natural gas, or enough to supply the entire U.S. for two years, at a wellhead value of $1 trillion, according to website geology.com.The recoverable quantity may represent about a tenth of the total gas in the formation, some scientists believe.The estimates came from Pennsylvania State University geoscience professor Terry Englander and New York State University geology professor Gary Lash, the website said."Given the enormity of the nation's energy demand, making less than an addition 4 percent of our state forest available for drilling is a reasonable decision that protects our forest ecosystem and helps meet energy demands," DCNR Secretary Michael DiBerardinis said in a statement."This lease sale responds to increased interest in the Marcellus Shale formation, a deep resource thought to contain large quantities of natural gas," the department's statement said. It noted that new technology and increased natural gas prices have made it possible to recover hard-to-reach fuel.

Demand low now – BC reserves are massive and recently tapped into

NORVAL SCOTT, correspondent of Dow Jones Newswires, 7/15/08, Reportonbuisiness.com, “With prices high, B.C. gas is hot,” http://www.theglobeandmail.com/servlet/story/LAC.20080715.RSHELLBC15/TPStory/Business

While B.C. contains huge amounts of natural gas, those assets are mostly locked in tight formations of shale rock that prevent the gas from flowing freely into wells. Recent technological breakthroughs allow the shale to be fractured more easily, enabling the gas to be extractedAs a result, companies such as Duvernay, which holds tracts of land in the Montney that could contain over one trillion cubic feet of gas, have seen their share price double over the past twelve months. Montney is estimated to hold 50 trillion cubic feet of reserves - more than in all of Alberta.While Duvernay was keen to continue developing its assets and wasn't looking to sell, Shell approached the company in July with its offer and negotiations proceeded smoothly from that point, Duvernay CEO Mr. Rose said in an interview. "Shell were really interested in us."

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GENERAL LINKS/INTERNALSThis section contains general links arguments for the rest of the file.

Links and internals for specific disadvantages are in that section of the file.

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Links – RE decreases NG Demand

Renewable energy is being used as a hedge against natural gas.

Business Wire, 3-7-07, “Renewable Energy Emerging as Viable Utility Hedge Strategy, Reports Energy Insights”, http://findarticles.com/p/articles/mi_m0EIN/is_2007_March_7/ai_n27289358, [Crystal Xia]

A recent analysis published by research and advisory firm Energy Insights finds that pronounced natural gas price volatility and greenhouse gas (GHG) policy evolution are legitimizing the acquisition of renewable energy (RE) as a viable utility economic hedge strategy. The report, entitled Renewable Energy as a Utility Hedge Strategy (doc # EI205166), contends that RE resources are increasingly offering utilities the means to shield themselves from possible financial losses caused by erratic fossil fuel prices and, in some cases, supply interruptions.

Renewable resources, especially wind energy, would act as a hedge against the natural gas industry.David Berry, member of the Energy Project, 11-21-03, “Renewable energy as a natural gas price hedge: the case of wind”, Energy Policy 33, ScienceDirect [Crystal Xia]

As the cost of electricity generated from renewable resources falls, that electricity becomes competitive with electricity generated from fossil fuels. One way in which renewable energy competes is as a hedge against natural gas price volatility and natural gas price increases in the electric industry. Wind advocates such as the American Wind Energy Association (2003b) have argued that wind energy can be used as a substitute for natural gas and that wind energy has a predictable price in contrast to natural gas. This paper evaluates the hedge value of wind energy given unstable or rising natural gas prices and evaluates the conditions under which wind energy is likely to be a beneficial hedge. Since the mid-1990s there has been increasing discussion by the electric industry, regulators, and government agencies of hedging natural gas prices with renewable energy. For example, Serchuk and Means (1997) stated that renewable energy has the advantage of removing price volatility in energy bills and Hoff (1997) analyzed the value of eliminating fuel price uncertainty that might be achieved by substituting renewable energy for conventional energy by evaluating the cost of a long-term fixed price fuel contract. Lehr et al. (2001) described the factors affecting the Colorado Public Utility Commission's decision to require a Colorado utility to acquire wind resources. One of the important factors in the Commission's decision was the price of natural gas and the point at which wind energy becomes the cheaper alternative for that specific utility; $3.50 per MCF ($3.24 per GJ) in that particular case. The applicability of wind energy as a price hedge depends on institutional and site specific conditions which can vary greatly within the United States and among nations. For example, the United States has a federal production tax credit and state and local incentives that result in lower prices for wind energy (Bird et al., 2003). Similar incentives may not exist elsewhere, thereby reducing the benefits of a wind hedge. In addition, the conventional energy costs which can be avoided by acquisition of wind resources depend on how natural gas and other fuels are used in the mix of generation. Some utilities may rely on natural gas for baseload generation and others may use natural gas only for intermediate and peaking purposes, for example. This paper assumes a pattern of fuel usage typical of the American Southwest, where natural gas is used in generators serving intermediate and peak loads while coal and nuclear resources are typically used for baseload generation. These characteristics may not be applicable in other regions. Section 2 reviews natural gas price behavior. The next sections discuss how wind energy could be used as a physical hedge and present the costs of wind energy. Then I analyze the conventional energy generation costs which can be avoided by acquisition of wind energy resources under three natural gas price scenarios for a hypothetical Southwestern US utility when a moderate size (150 MW) wind project is deployed. The results indicate that wind energy can be a cost effective hedge against natural gas price variability and against natural gas price increases under reasonable assumptions about wind costs, costs of generating electricity with fossil fuels, and possible future prices of natural gas. In Section 7, I examine some of the conditions under which wind energy would be an effective hedge against natural gas price volatility.

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Renewable energy trades off with natural gas – it discourages natural gas producers.Ryan Wiser and Mark Bolinger, research scientists @ Ernest Orlando Lawrence Berkeley National Laboratory

Concerns about the price and supply of natural gas in the US have grown in recent years, and futures and options markets predict high prices and significant price volatility for the immediate future. Whether we are witnessing the beginning of a major long-term nationwide crisis or a costly but shorter-term supply demand adjustment remains to be seen. Results presented in this article suggest that resource diversification, in particular increased investments in renewable energy, could help alleviate the threat of high gas prices over the short and long term. By displacing gas-fired generation, increased deployment of renewable energy is expected to reduce natural gas demand and consequently put downward pressure on gas prices. A review of the economics literature shows that this secondary effect is to be expected and can be measured with the inverse price elasticity of natural gas supply. Because of the respective shapes of long- and short-term supply curves, the long-term price response is expected to be less significant than the shorter-term response. The effect of this natural gas price reduction may not entirely represent an increase in aggregate economic wealth, and may in part reflect a benefit to natural gas consumers that comes at the expense of natural gas producers. Conventional economics does not generally support government intervention for the sole reason of shifting the demand curve for natural gas and thereby reducing gas prices. If policymakers are uniquely concerned about the impact of gas prices on consumers, however, or are concerned about the potentially harmful macroeconomic impacts of higher gas prices or on increasing imports of natural gas, then policies to reduce gas demand may be considered appropriate. It also deserves note that this secondary gas-price-suppression form of risk mitigation is additional to the direct risk-reducing benefit of replacing variable-priced natural gas with fixed-price renewable energy.

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Renewable energy could be used as a hedge against natural gasMark Bolinger, Ryan Wiser, and Williams Golove, Environmental Energy Technologies Division @ University of California – Berkeley, 6-02, http://www.osti.gov/bridge/servlets/purl/827949-WceXEP/native/827949.pdf

Against this backdrop, renewable energy resources such as wind power, which by their nature areimmune to natural gas fuel price risk,1 provide a real economic benefit: unlike natural gas-firedgeneration, 2 renewable energy is typically sold under fixed-price contracts . Building upon earlier analysisof this issue (Awerbuch 1993, 1994; Brower 1997; Hoff 1997; Kahn and Stoft 1993), this paper aims toquantify the hedge value of renewable energy by equating it with the cost of eliminating natural gas pricerisk through alternative means – specifically, through hedging with gas-based financial derivatives. Ourhope is that policymakers and regulators will use this information to establish practical mechanisms that

enable renewable technologies to capture the full value of the price stability benefit they provide.

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Links – RE increases NG demand

Gas consumption would increase with renewables due to lower prices.

R. Neal Elliot, Anna Monis Shipley, Steven Nadel, and Elizabeth Brown, @ American Council for an Energy-Efficient Economy, 12-03, “Natural gas price effects of energy efficiency and renewable energy practices and policies”, pg. 28, http://www.aceee.org/pubs/e032full.pdf, [Crystal Xia]

Increased renewable energy leads to increased natural gas demand

Wall Street Journal. 04/18/08. “Surge in Natural-Gas Price Stoked by New Global Trade.”[Takumi Murayama]

In a twist, the effort to build alternative-energy projects like solar arrays and wind farms also boosts construction of gas-fired plants. Because wind is unpredictable, it's often necessary to build back-up generators, and gas-fired plants have an advantage in that they can be started up relatively quickly, says Doug Kimmelman, senior partner with Energy Capital Partners, a private-equity firm focused on the power sector.In addition, regulatory approval and construction times are shorter for gas plants than coal or nuclear. For reasons like these, new gas-fired power plants continue to be built or planned

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Links – AE decreases NG Prices

Renewable or alternative energy will significantly reduce natural gas prices.

Ryan Wiser, Mark Bolinger, Matt St. Clair, Ernest Orlando Lawrence Berkeley National Laboratory, January 2005, <<http://www.osti.gov/energycitations/servlets/purl/838985-WxPCpP/native/838985.PDF>> *[Paraphrased: One acronym expanded for clarity].

Renewable energy (RE) and energy efficiency (EE) have historically been supported because of their perceived economic, environmental, economic-development, and national-security benefits. Recently, extreme price volatility in wholesale electricity and natural gas markets has led to discussions about the potential risk mitigation value of these clean energy resources. Deepening concerns about the ability of conventional North American gas production to keep up with demand have also resulted in a growing number of voices calling for resource diversification (see, e.g., Bernstein, Holtberg, & Ortiz 2002; Henning, Sloan & de Leon 2003; NARUC 2003; NPC 2003a). R[enewable] E[energy]* and EE are a direct hedge against volatile and escalating gas prices because they reduce the need to purchase variable-price natural gas-fired electricity generation, replacing that generation with fixed-price RE or EE resources (see, e.g., Bolinger, Wiser, & Golove 2003; Awerbuch 2003). In addition to this direct contribution to price stability, by displacing marginal gas-fired generation, RE and EE can reduce demand for natural gas and thus indirectly place downward pressure on gas prices. 3

Many recent modeling studies of increased RE and EE deployment have demonstrated that this “secondary” effect of putting downward pressure on natural gas prices could be significant, with the consumer benefits from reduced gas prices in many cases more than offsetting any increase in electricity costs caused by RE and/or EE deployment. As a result, this price effect is increasingly cited as justification for policies promoting RE and EE. Yet, to date, little work has focused on reviewing the reasonableness of this effect as it is portrayed in various studies, nor have studies attempted to benchmark that output against economic theory. This paper is a first attempt to address these two issues.

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Links – AE decreases NG Prices

Renewables decrease demand for natural gas.

Union of Concerned Scientists, 8-26-05, “Renewable Energy Can Help Ease Natural Gas Crunch”, http://www.ucsusa.org/clean_energy/clean_energy_policies/renewable-energy-can-help-ease-natural-gas-crunch.html, [Crystal Xia]

Because increased renewable energy use reduces the demand for natural gas, and creates new competitors to traditional power plants, increasing renewable energy would reduce natural gas prices. Achieving the 10 percent RES could reduce gas prices by 1.9 percent ($0.12 per million Btu) compared to business as usual in 2020. A 20 percent standard could reduce natural gas prices by as much as $0.25/million Btu, resulting in cumulative gas bill savings of $15 billion (Fig. 5) through 2025. Under current EIA forecasts, renewable energy begins to displace new coal-fired power plants (which become economically competitive) instead of natural gas facilities after 2020. As a result, renewable energy has less of an impact on natural gas prices in these later years, but it continues to provide total energy bill savings to consumers from lower electricity prices, and even greater air pollution reduction benefits.

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Links – Wind Decreases NG Demand

Wind power trades off with natural gas.

Peter Urban, Connecticut Post staff writer, 7-19-2008, “Delegation Fighting Offshore Drilling,” [Connecticut Post]. << http://www.connpost.com/localnews/ci_9928346>>

Pickens launched a media campaign last week to promote his plan to break America's addiction to foreign oil through a combination of more domestic drilling, conservation, nuclear power and renewable energy sources.

"We currently use natural gas to produce 22 percent of our electricity. Harnessing the power of wind to generate electricity will give us the flexibility to shift natural gas away from electricity generation and put it to use as a transportation fuel — reducing our dependence on foreign oil by more than one-third," Pickens says.

Shays has also introduced a comprehensive bipartisan energy reform bill, H.R.1945, that would: improve fuel efficiency of passenger vehicles, offer incentives to purchase energy-efficient appliances, and repeal tax breaks for industries, offer incentives for the purchase of energy-efficient appliances and encourage transit-oriented development corridors in urban areas. Lieberman has co-sponsored similar legislation (S.1554) in the Senate.

Shays has also introduced a bill, H.R. 6495, that would provide tax incentives for commuters to carpool, ride public transit, bicycle or telecommute.

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Links – Nuclear Decreases NG Demand

Nuclear energy will tradeoff with natural gas as taxes and penalties on burning fossil-fuels increase.

Kevin Spear, Sentinel Staff Writer, 7-18-2008, “Orlando Utility Commission customers should get ready for bigger bills,” [Orlando Sentinel]. [MM] <<http://www.orlandosentinel.com/community/news/ucf/orl-ouc1808jul18,0,5537378.story>>

OUC is negotiating to buy a big enough slice of the new plants to serve a total of 90,000 homes.

Also in OUC's long-range planning is spending about $500 million on renewable energy, including solar power, bio-fuels and methane gas produced by rotting garbage at Orange County's landfill.

Utility executives see the nuclear and clean-energy options as the best responses to a future likely to bring more price increases in coal and natural gas and a tax or penalty on burning fossil fuels that contribute to global warming.

Nuclear power will reduce use of natural gas.

Ronnie Dubs, St. Petersburg Times Staff writer, 5-21-2008, St. Petersburg Times, “We will need power from nuclear plants,” St. Petersburg, Florida, [LexisNexis Academic].

The Florida Public Service Commission should approve the construction of the nuclear plant proposed by Progress Energy. The case can be made that the situation is really different this time around and the PSC should approve this additional capacity in the face of an economic downturn. It is hard to argue with slower growth projections, but we should consider the following scenarios:

The first thing we need to seriously consider is the avoidance of new power generation capacity using natural gas. Although natural gas is the energy resource of choice for new power generation plants, we are now facing a downturn in domestic natural gas production capacity. Energy companies are drilling more holes than ever but they have been unable to increase domestic production of natural gas for a number of years. The addition of nuclear power plants will mitigate our dependence on costly domestic natural gas and imported LNG to replace domestic production.

The second strategic issue of alternate energy for transportation is very important for utility companies. The most compelling business case for cheaper transportation is the battery-operated automobile for commuting short distances. These new cars are designed for short commutes of less than 100 miles and they will require a battery charge-up after every trip. This demand is not yet quantified, but significant progress will be made in the next 10 years, the time it will take to complete a nuclear power plant.

The long-term nature of nuclear power plant development will allow us time to recover from a routine economic downturn and allow us to plan for new forms of transportation. I recommend that we add this nuclear capacity to avoid further commitment to natural gas at higher prices and to provide the added capacity for alternative energy platforms based on electricity. We should all think long-term and take control of our future by supporting Progress Energy's project in Levy County.

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Links – Solar Decreases NG Demand

Solar Power virtually stops the use of natural gas.

Sarah Lovanoza, (MBA in Sustainable Management) Staff writer Clean Technica, 3-27-2008, [Clean Technica]. <<http://cleantechnica.com/2008/03/27/solar-thermal-electricity-can-it-replace-coal-gas-and-oil/>>

[MM]

One of the most common arguments against large-scale use of renewable energy is that it cannot produce a steady, reliable stream of energy, day and night. Ausra Inc. does not agree. They believe that solar thermal technology can supply over 90% of grid power, while reducing carbon emissions.“The U.S. could nearly eliminate our dependence on coal, oil and gas for electricity and transportation, drastically slashing global warming pollution without increasing costs for energy,” said David Mills, chief scientific officer and founder of Ausra.You may be wondering, how will we have electricity at night or during cloudy weather?Will we use large banks of batteries or burn candles?The ability to utilize solar thermal technology after the sun sets is made possible by a storage system that is up to 93% efficient, according to Ausra’s executive vice president John O’Donnell.High efficiency is achieved because solar thermal plants do not need to convert energy to another form in order to store it and do not rely on battery technology. Flat moving reflectors or parabolic mirrors focus solar energy to generate heat. This heat generates steam that turns turbines, thus generating an electric current.

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Links – US key to global gas prices

US gas demand key to global gas prices

Booz & Company, leading global management consulting firm. 06/23/08. “The Emerging Global Gas Market.” [Takumi Murayama]

That is one of the conclusions of a comprehensive new analysis of global gas markets by a Booz & Company team of energy experts. The authors find that current projections of future U.S. energy consumption fail to take into account the impact of any new system to manage CO2 emissions. A so-called cap-and-trade regime, in which power producers would be forced to pay for CO2 emissions, could precipitate greatly increased demand for natural gas at the expense of dirtier fuels such as coal. Although nuclear power remains a long-term option, the lead-time on the installation of new nuclear plants will mean natural gas is the only viable alternative in the short to medium term.In turn, greater U.S. gas consumption could upset the current delicate balance of demand and supply in international markets, placing greater pressure on Europe to expand its efforts to secure long-term gas supply agreements with countries such as Russia. Heightened U.S.-Europe competition could also mark the end of today’s independent regional markets—where demand is more or less fully satisfied by local supply—and the rise of markets that are much more global and interdependent.The Middle East currently accounts for about two-fifths of global gas reserves, and its role as a central player is unlikely to diminish in the years ahead. Iran, by itself, has 15.5 percent of the global total, and Qatar enjoys 14 percent. The region is likely to continue to supply markets in Europe and the U.S., but there are a number of circumstances under which supplies could be limited or disrupted: if gas is used increasingly for oil production, if oil-associated gas is constrained by OPEC production quotas, or if political instability increases. No less significantly, ongoing economic growth in the Middle East could lead to increased demand from power production facilities and from industries such as petrochemicals and fertilizers. The report finds that falling Middle East supplies could be offset by other sources—by Nigerian liquified natural gas (LNG), in Europe’s case, or by Latin American supplies, in the case of the U.S. But the impact of reduced Middle East supplies could be momentous if combined with greatly increased U.S. demand.That scenario seems likely if a new administration introduces legislation that has the effect of raising the cost of carbon emissions. Assuming a carbon regime partway between the most and least stringent currently envisaged by U.S. lawmakers, the report predicts that the U.S. would need up to 84 bcm more natural gas by 2015 or 12 percent of OECD Europe demand. That additional demand could be met by marginal suppliers such as Nigeria, Trinidad and Tobago, Egypt, and Algeria—but would eat into volumes currently bound for Europe.More gas competition between the U.S. and Europe would increase pressure on Europe’s existing relationships with Russia, Algeria, and Norway and make new supply routes, including those with the Caspian region, that much more vital. Greater competition would also lead to more connectivity between U.S. and European markets, upward price pressure, and higher volatility on short-term markets and energy exchanges. The U.S., meanwhile, would need to further diversify its energy portfolio—for example, by looking to suppliers in West and North Africa.

US demand affects global natural gas prices

Elliott H. Gue, Editor of Energy Letter. 01/20/06. “The Great Gas Shortage.” [Takumi Murayama]

There are two implications of the global gas crunch. One, natural gas is fast becoming, like oil already is, a globally traded commodity. Gone are the days when a region such as North America or Europe could look at natural gas as a domestic market. This means that India, China, Europe and the US will be competing for the same global supplies of gas. This spells higher prices and will be a boon to companies (or countries) with large reserves of gas for export.

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Internals – Global NG Market

A global gas market is developing – producers rely on foreign as well as domestic consumers

René Snijder, Energy consultant, lecturer at the Energy Delta Institute in The Netherlands, member of the gas group of the Clingendael Institute and member of IGU committee B (Strategy and Regulation), with over 30 years experience in the natural gas industry, working for the NV Nederlandse Gasunie and two years for Shell, 3/11/2008 “The Future of Gas and the Role of LNG: Economic and Geopolitical Implications,” Real Instituto Elcano, http://209.85.215.104/search?q=cache:L5jbxi17HZQJ:www.realinstitutoelcano.org/wps/wcm/connect/resources/file/eb876d0ad931a07/WP14-2008_Snijder_Gas_LNG_Economic_Geopolitical_Implications.pdf%3FMOD%3DAJPERES%26attachment%3Dtrue+Indonesia+LNG+economy&hl=en&ct=clnk&cd=45&gl=us&client=firefox-a A global gas market is indeed emerging, particularly as a result of the growing LNG trade across the Atlantic Basin and the increasingly feasible possibility for LNG supplies to choose between market destinations in Asia, the US (both East and West Coasts) and the EU. Cost reduction and arbitrage potential are the main drivers for the emerging global gas market, given that prices in the three principal consumer regions are influenced by cargoes taking advantage of the arbitrage possibilities. Furthermore, investment in Russia no longer looks solely to the EU as the only potential market outlet. Pipelined gas to China or LNG production for export to the US are seriously being considered as alternative options for Russian gas. Norway is expected to deliver its first load of LNG to the US in early 2008.

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Internals – LNG Global Market

An LNG market is developing nowPaul W. Parfomak, CRS Specialist in Science and Technology, 5/24/04 (CRS Report for Congress Liquefied Natural Gas (LNG) in U.S. Energy Policy: Issues and Implications) [S. Page]

LNG’s effectiveness in moderating U.S. gas prices will be determined by global LNG supply, the development of a “spot” market, potential market concentration, and evolving trading relationships. There appears to be sufficient interest among LNG exporters to meet global demand projections, although it remains to be seen which new export projects will be built. An LNG spot market, which may help U. S. companies import LNG cost-effectively, also appears to be growing. Although some industry analysts believe the future LNG market may be influenced by a natural gas cartel, the potential effectiveness of a such a cartel is unclear. Whether exporters cooperate or not, an integrated global LNG market may change trading and political relationships. In a global market, individual country energy polices may affect LNG price and availability worldwide. Trade with LNG exporters perceived as politically unstable or inhospitable to U.S. interests may raise concerns about supply reliability

LNG will grow to meet increased demandPaul W. Parfomak, CRS Specialist in Science and Technology, 5/24/04 (CRS Report for Congress Liquefied Natural Gas (LNG) in U.S. Energy Policy: Issues and Implications) [S. Page]

Natural gas is widely used in the United States for heating, electricity generation, industrial processes, and other applications. In 2002, U.S. natural gas consumption was 22.8 trillion cubic feet (Tcf), accounting for 24% of total U.S. energy consumption. Until recently, nearly all U.S. natural gas was supplied from North American wells and transported through the continent’s vast pipeline network to regional markets. In 2003, however, due to constraints in North American natural gas production, the United States sharply increased imports of natural gas from overseas in the form of liquefied natural gas (LNG). While absolute levels remain small today, growth in LNG imports to the United States is expected by many analysts to accelerate over the next 20 years, reflecting growing domestic demand and expectations for a global expansion in LNG trade.

Natural Gas market expandingPaul W. Parfomak, CRS Specialist in Science and Technology, 5/24/04 (CRS Report for Congress Liquefied Natural Gas (LNG) in U.S. Energy Policy: Issues and Implications) [S. Page]

Projections of accelerated growth in U.S. LNG demand reflect a general expansion in the global natural gas market. According to the EIA’s most recent international forecast “natural gas is expected to be the fastest growing component of world primary energy consumption.” EIA projects global natural gas demand to rise by an average 2.2 percent annually for the next 20 years, with “the most robust growth... among the nations of the developing world,” much of it to fuel electricity generation. A significant part of this global gas demand growth is expected to be met by new supplies of LNG. Long-term projections of global LNG growth vary, but most major energy companies and industry analysts expect global LNG demand to roughly triple during this period, from 5.4 Tcf in 2002, to 15 Tcf or more in 2020. According to EIA projections, 15 Tcf would account for approximately 10% of global natural gas consumption in 2020

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Internals – NG Demand key to LNG

Demand for natural gas is key to LNG.

Energy Information Administration, 7-10-08, “What is liquefied natural gas (LNG) and how is it becoming an energy source for the United States?”, http://tonto.eia.doe.gov/energy_in_brief /liquefied_natural_gas_lng.cfm, [Crystal Xia]

LNG imports to the United States were generally not competitive with domestic supplies of natural gas and pipeline imports from Canada through the 1980s and 1990s, resulting in low levels of these imports during these decades. However, higher natural gas prices in the United States in recent years have attracted larger volumes of LNG imports to this country, including a record U.S. total in 2007 equaling 771 billion cubic feet (Bcf) of natural gas in gaseous form.1 Projected growth in the demand for LNG has resulted in companies adding LNG receiving capacity in the United States. Five LNG import terminals currently operate in the United States. All but one of these has recently expanded. In addition, EIA expects at least four new terminals to be operational in the next two years, more than doubling import capacity from 4.7 Bcf per day at the end of 2006 to over 11 Bcf per day at the end of 2008. This increase in LNG receiving capacity provides the potential for growing U.S. LNG imports in coming years, and EIA projects imports of more than 1 trillion cubic feet of LNG by the end of this decade (see figure, "LNG and Pipeline Import Projection").

Natural gas demand is key to the use and the development of LNG.

Business Wire, 8-5-07, “In Last Two Decades, LNG Demand Has Experienced 7.7% Annual Growth Spurred by Strong Imports by European Markets”, http://findarticles.com/p/articles /mi_m0EIN/is_2007_Oct_5/ai_n27398314, [Crystal Xia]

Natural gas has come a long way from being flared up as a byproduct to a serious alternative to oil and coal. Continued market growth in all major regions worldwide has driven the demand for natural gas production, which reached almost three trillion cubic meters (tcm) in 2006. With new discoveries in Kazakhstan, Turkmenistan and China, the natural gas reserves have shown upward trend reaching 6.2 tcf. The future market share of natural gas is all set to grow from the current share of 21% driven by the strong demand in Europe and emerging economies in Asia like India and China. In the absence of pipeline infrastructure, most of this demand has to be fulfilled by liquefying gas and supplying it as liquefied natural gas or LNG.

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Internals – NG Demand key to LNG

Future US demand will force LNG useAruvian Research 6/1/07 (http://www.marketresearch.com/map/prod/1513277.html)

According to the U.S. Energy Information Administration (EIA), the U.S. could face a gap in supply of natural gas of about five trillion cubic feet (Tcf) by 2020. Consequently, increased imports of natural gas will be required to meet future shortfalls. Canada may not be able to sustain increasing volumes of exports to the U.S. due to Canada’s own increasing demand for natural gas. The EIA expects LNG imports to reach 0.8 Tcf a year by 2020, or about three percent of our total consumption. The demand for LNG is expected to grow. To make LNG available for use in the U.S., energy companies must invest in the LNG value chain, which is a number of different operations that are highly linked and dependent upon one another. Natural gas can be economically produced and delivered to the U.S. as LNG in a price range of about $2.50 - $3.50 per million Btu (MMBtu) at Henry Hub in Louisiana, depending largely on shipping cost.

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AT: AE Decreases Natural Gas

Alternative energies supplement supply, they don’t replace natural gas but instead curb market volatility.

Progress Energy, St. Petersburg, Florida, 7-15-2008, “Progress Energy gets approval to take next step to secure Florida’s energy future.” <<http://www.progressenergy.com/aboutus/news/article.asp?id=19062>>

[MM]

The estimated average annual customer cost increase is expected to be between 3 percent and 4 percent from 2009 to 2018. When the plants begin commercial operation in 2016-17, fuel savings -- a direct cost savings benefit to customers -- is estimated to be approximately $1 billion a year. The prices of oil, natural gas and other fossil fuels have risen dramatically in the last couple of years and continue to be highly volatile . Despite what is expected to be a short-term economic downturn, Progress Energy Florida's service area remains one of the fastest-growing regions in the country. As the fourth-largest state, Florida ranks third nationally in per-capita energy consumption. Over the past three decades, the size of the average home has grown by 50 percent and uses 30 percent more electricity. Since the Crystal River nuclear plant came online in the mid-1970s, the company's customer base has more than doubled. Fuel diversity is important to ensure a reliable, stable supply of electricity for customers. Progress Energy Florida has the most diverse fuel mix of any utility in the state, and is committed to a balanced mix of power generation alternatives, including natural gas, coal, oil, nuclear and renewable sources. This is the best way to continue to ensure a safe, reliable and economical source of electricity. Nuclear power is one of three critical components of Progress Energy Florida's balanced solution to meet its customers' energy needs over the long term, which also includes the use of renewable energy sources, and one of the nation's best energy-efficiency programs.

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CANADA

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A. Natural gas demand is increasing.Sophia Ruester and Anne Neumann, Department of Business and Economics, Dresden University of Technology, Chair of Energy Economics and Public Sector Management, 6-13-08, “The prospects for liquefied natural gas development in the US”, Science Direct, [Crystal Xia]

Due to supply security and environmental concerns, natural gas demand is increasing at a rate above average primary energy demand. Total US natural gas consumption is expected to increase from 21.9 to 23.4 tcf in 2030 for the reference case with regional differences in growth rates (EIA, 2008). About 26% of the natural gas is used as fuel in the power generation sector (primarily for utilities and independent power producers), 12% is used in the transportation sector, 26% in the industrial sector, and 22% and 14% by residential and commercial users respectively. There are about 500 electric utilities, 40,000 industrial consumers, 4.5 million commercial consumers, and 53 million residential consumers. Many of the larger industrial users have installed dual-fuel equipment, allowing them to take advantage of prices and/or contracts for interruptible power.

B. Canada is the largest supplier of Natural gas

(United States Embassy Ottawa. 5-_-08. “Canada - United States Relations”, http://canada.usembassy.gov/content/content.asp?section=can_usa&subsection1=general&document=canusarelations)

The U.S. and Canada enjoy the largest energy trade relationship in the world. Canada is the single largest foreign supplier of energy to the U.S.--providing 17% of U.S. oil imports and 18% of U.S. natural gas demand. Recognition of the commercial viability of Canada's oil sands in Alberta has raised Canada's proven petroleum reserves to 179 billion barrels, making it the world's second-largest holder of reserves after Saudi Arabia. Canada is planning Arctic pipelines and liquefied natural gas terminals to provide more natural gas to the North American market. Canada and the U.S. operate an integrated electricity grid which meets jointly developed reliability standards and provide almost all of each other's electricity imports. Canada is a major supplier of electricity (mostly clean and renewable hydroelectric power) to New England, New York, the Upper Midwest, the Pacific Northwest, and California. Canadian uranium helps fuel U.S. nuclear power plants.

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C. Renewable energy trades off with natural gas – it discourages natural gas producers.Ryan Wiser and Mark Bolinger, research scientists @ Ernest Orlando Lawrence Berkeley National Laboratory


D) Energy is the basis for US Canadian Relations

(Sultz James, 3-21-05 The Security of Continental Natural Gas Supply 3rd Cross-Border Forum on Energy Issues, http://www.wilsoncenter.org /index.cfm?event_id=113225&fuseaction=events.event_summary)

Finally, James Slutz, Deputy Assistant Secretary for Oil and Natural Gas at the U.S. Department of Energy, concluded the presentations on a more general note, reminding the audience that “energy is the cornerstone of a strong U.S.-Canada relationship.” Slutz noted that demand for gas has increased during the last few years, especially as a source of power generation. He said that there is not just one solution to the supply problem (Alaska gas), noting that coal seam gas, once considered “unconventional,” is now really conventional and accounts for 9% of supply. He noted, too, that although the United States imports considerable amounts of gas from Canada, its gas exports to Canada have increased considerably during the last decade. He emphasized the increasing interdependence of both economies and recognized the need for further dialogue in meeting North America’s demand for natural gas.

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E) Canada is key to the war on terrorism

Maria Banda-Canadian Pugwash Group and Science for Peace Eric Fawcett Memorial Forum Saturday, April 17, 2004 “Development of Canadian Policy in the Shadow of U.S. Defence and Foreign Policy; Power of the Weak? Canada’s Diplomacy and the Bush Doctrine” (http://www.pugwashgroup.ca/events/documents/2004/2004.04.17-Banda_presentation.pdf)

American analysts are increasingly coming to recognize that the United States cannot win the War on Terror on its own. Despite its astounding military budget, the U.S. is not self-sufficient. Why was Washington insisting on Canada’s contribution in Iraq? Two reasons: Canada’s and its allies’ military contribution was critical to the coalition’s success; and, international support garners domestic legitimacy for the Bush government. Even Robert Kagan observed that the United States would otherwise face a crisis of legitimacy. Second, if allies are important in the military arm of the war on terror, they are vital in the support activities: there are certain things that U.S. cannot do—or cannot do well. Americans know how to bomb from high altitudes or win staggering military victories—but Afghanistan and Iraq have yet again confirmed that they cannot adequately deal with the aftermath of war: peace-building and nation-building efforts—from training of police forces and judicial reform to the creation of civil society. This has been the middle-powers’ métier, which President Bush’s appeal for U.N.’s help in post-war reconstruction has confirmed.

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SHELL – CANADA

F) Terrorism Risks Extinction

(Yonah Alexander 8/28/03 (; professor and director of the Inter-University for Terrorism Studies) “Terrorism myths and realities” Washington Times l/n)

Last week's brutal suicide bombings in Baghdad and Jerusalem have once again illustrated dramatically that the international community failed, thus far at least, to understand the magnitude and implications of the terrorist threats to the very survival of civilization itself. Even the United States and Israel have for decades tended to regard terrorism as a mere tactical nuisance or irritant rather than a critical strategic challenge to their national security concerns. It is not surprising, therefore, that on September 11, 2001, Americans were stunned by the unprecedented tragedy of 19 al Qaeda terrorists striking a devastating blow at the center of the nation's commercial and military powers. Likewise, Israel and its citizens, despite the collapse of the Oslo Agreements of 1993 and numerous acts of terrorism triggered by the second intifada that began almost three years ago, are still "shocked" by each suicide attack at a time of intensive diplomatic efforts to revive the moribund peace process through the now revoked cease-fire arrangements [hudna]. Why are the United States and Israel, as well as scores of other countries affected by the universal nightmare of modern terrorism surprised by new terrorist "surprises"? There are many reasons, including misunderstanding of the manifold specific factors that contribute to terrorism's expansion, such as lack of a universal definition of terrorism, the religionization of politics, double standards of morality, weak punishment of terrorists, and the exploitation of the media by terrorist propaganda and psychological warfare. Unlike their historical counterparts, contemporary terrorists have introduced a new scale of violence in terms of conventional and unconventional threats and impact. The internationalization and brutalization of current and future terrorism make it clear we have entered an Age of Super Terrorism [e.g. biological, chemical, radiological, nuclear and cyber] with its serious implications concerning national, regional and global security concerns. Two myths in particular must be debunked immediately if an effective counterterrorism "best practices" strategy can be developed [e.g., strengthening international cooperation]. The first illusion is that terrorism can be greatly reduced, if not eliminated completely, provided the root causes of conflicts - political, social and economic - are addressed. The conventional illusion is that terrorism must be justified by oppressed people seeking to achieve their goals and consequently the argument advanced by "freedom fighters" anywhere, "give me liberty and I will give you death," should be tolerated if not glorified. This traditional rationalization of "sacred" violence often conceals that the real purpose of terrorist groups is to gain political power through the barrel of the gun, in violation of fundamental human rights of the noncombatant segment of societies. For instance, Palestinians religious movements [e.g., Hamas, Islamic Jihad] and secular entities [such as Fatah's Tanzim and Aqsa Martyr Brigades]] wish not only to resolve national grievances [such as Jewish settlements, right of return, Jerusalem] but primarily to destroy the Jewish state. Similarly, Osama bin Laden's international network not only opposes the presence of American military in the Arabian Peninsula and Iraq, but its stated objective is to "unite all Muslims and establish a government that follows the rule of the Caliphs." The second myth is that strong action against terrorist infrastructure [leaders, recruitment, funding, propaganda, training, weapons, operational command and control] will only increase terrorism. The argument here is that law-enforcement efforts and military retaliation inevitably will fuel more brutal acts of violent revenge. Clearly, if this perception continues to prevail, particularly in democratic societies, there is the danger it will paralyze governments and thereby encourage further terrorist attacks. In sum, past experience provides useful lessons for a realistic future strategy. The prudent application of force has been demonstrated to be an effective tool for short- and long-term deterrence of terrorism. For example, Israel's targeted killing of Mohammed Sider, the Hebron commander of the Islamic Jihad, defused a "ticking bomb." The assassination of Ismail Abu Shanab - a top Hamas leader in the Gaza Strip who was directly responsible for several suicide bombings including the latest bus attack in Jerusalem - disrupted potential terrorist operations. Similarly, the U.S. military operation in Iraq eliminated Saddam Hussein's regime as a state sponsor of terror. Thus, it behooves those countries victimized by terrorism to understand a cardinal message communicated by Winston Churchill to the House of Commons on May 13, 1940: "Victory at all costs, victory in spite of terror, victory however long and hard the road may be: For without victory, there is no survival."

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Links – Supplier

Global demand for natural gas is soaring and Canada’s the one providing it – shell deal proves

Bloomberg News, 7/14/08, “Shell has deal to buy natural gas producer,” http://www.chron.com/disp/story.mpl/business/5887993.html

Royal Dutch Shell has agreed to acquire Duvernay Oil Corp. for $5.2 billion to expand gas production from hard-to-tap formations in western Canada.Duvernay shareholders will get $82.59 for each of their shares, a 42 percent premium over the closing price on Friday, according to a statement Monday from Calgary-based Duvernay. Shell also will assume Duvernay's debt, which was over $500 million as of March 31, according to a company filing.The premium "is quite substantial," said Dirk Hoozemans, who helps manage the equivalent of about $23.8 billion at Rotterdam-based Robeco Group. "Probably Shell wanted to address its North American gas position with the acquisition."Shell, in the year's biggest oil and gas deal, is paying the equivalent of about $9.10 per thousand cubic feet of proved natural-gas reserves, according to Bloomberg data. That's more than double the price offered last month by XTO Energy in its proposed $4 billion takeover of Hunt Petroleum Corp.Duvernay produces the equivalent of more than 25,000 barrels of oil a day, consisting mostly of gas, and is developing so-called tight-gas projects in rock formations in the Western Canadian Sedimentary Basin, Shell said in a separate statement. Daily output might reach 70,000 barrels by 2012, it said.Shell and rivals are turning to such unconventional sources for gas to meet growing demand as prices soar. Canada is the largest U.S. supplier of the heating and power-plant fuel.Gas futures traded in New York have jumped 60 percent this year.

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Links – Supplier

Canada provides most of the US imports of natural gas

Foreign Affairs and International Trade Canada , 2008http://geo.international.gc.ca/can-am/main/right_nav/natural_gas-en.asp

Canada is the world’s third largest producer and the second largest exporter of natural gas. In 2006, Canada provided 86% of all U.S. natural gas imports, representing 16% of U.S. consumption. Liquefied natural gas (LNG) accounted for 14% of U.S. natural gas imports and 2.6% of U.S. consumption. Canadian exports of natural gas go primarily to the U.S. Northeast, Midwest and Rocky Mountain regions, California and Pacific Northwest.

Canada is the largest supplier of Natural gas

(United states Embassy Ottawa. 5-_-08. “Canada - United States Relations”, http://canada.usembassy.gov/content/content.asp?section=can_usa&subsection1=general&document=canusarelations)

The U.S. and Canada enjoy the largest energy trade relationship in the world. Canada is the single largest foreign supplier of energy to the U.S.--providing 17% of U.S. oil imports and 18% of U.S. natural gas demand. Recognition of the commercial viability of Canada's oil sands in Alberta has raised Canada's proven petroleum reserves to 179 billion barrels, making it the world's second-largest holder of reserves after Saudi Arabia. Canada is planning Arctic pipelines and liquefied natural gas terminals to provide more natural gas to the North American market. Canada and the U.S. operate an integrated electricity grid which meets jointly developed reliability standards and provide almost all of each other's electricity imports. Canada is a major supplier of electricity (mostly clean and renewable hydroelectric power) to New England, New York, the Upper Midwest, the Pacific Northwest, and California. Canadian uranium helps fuel U.S. nuclear power plants

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Links – Energy Cooperation

Close cooperation is necessary in the energy sector

(United States Embassy Ottawa. 9-13-05, “Energy Secretary Hails Strong, Durable U.S.-Canada Partnership Thanks Canada for aiding hurricane victims, cites bilateral trade ties” http://canada.usembassy.gov/content/content.asp?section=can_usa&document=energy_091305)

The U.S. official said that Canada is the "leading supplier of imported oil, natural gas, uranium and electricity" to the United States. At the same time, he explained, "our cross-border electricity trade flows in both directions, and our [energy] systems are highly integrated." Because "neither of our nations can address its energy concerns alone," close cooperation is essential, he said. Not surprising, said Bodman, the U.S. Department of Energy "has a very strong relationship" with its Canadian counterpart -- Natural Resources Canada. "We meet regularly and are in constant communication at all levels throughout our respective departments," he told his audience. "Both departments are committed to exploring ways to expand cross-border infrastructure development and trade, and to ensuring the continued security of our integrated systems." However, he cautioned that bilateral energy integration must expand into fully regional integration to meet the challenges ahead. This is an important U.S. policy objective, said Bodman, because President Bush recognizes that "one of the most important things we can do to promote the security, stability and reliability of the U.S. and Canadian energy sectors is to develop a genuinely integrated North American energy market" that includes Mexico.

Energy is the basis for US Canadian Relations

(Sultz James, 3-21-05 The Security of Continental Natural Gas Supply 3rd Cross-Border Forum on Energy Issues, http://www.wilsoncenter.org /index.cfm?event_id=113225&fuseaction=events.event_summary)

Finally, James Slutz, Deputy Assistant Secretary for Oil and Natural Gas at the U.S. Department of Energy, concluded the presentations on a more general note, reminding the audience that “energy is the cornerstone of a strong U.S.-Canada relationship.” Slutz noted that demand for gas has increased during the last few years, especially as a source of power generation. He said that there is not just one solution to the supply problem (Alaska gas), noting that coal seam gas, once considered “unconventional,” is now really conventional and accounts for 9% of supply. He noted, too, that although the United States imports considerable amounts of gas from Canada, its gas exports to Canada have increased considerably during the last decade. He emphasized the increasing interdependence of both economies and recognized the need for further dialogue in meeting North America’s demand for natural gas.

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Impacts – Relations

Canada is the US's largest supplier of natural gas, which is key to maintaining overall relations.(Thomas A. Shannon and Sullivan, Daniel S., Assistant Secretary for Western Hemisphere Affairs and for Economic, Energy, and Business Affairs (respectively), June 23, 08, Investor's Business Daily, Energy Answers Await at Our Doorstep)

Canada is our single-largest energy supplier, providing 17% of U.S. oil imports. In 2007, Canada provided more petroleum than the two next top suppliers. Canada is also our top supplier of natural gas (16% of total supply in 2006) and a major supplier of electricity. Canada's mature democracy, open investment environment and strong rule of law make it an exceptionally stable and reliable energy supplier. The annual Energy Consultative Mechanism meeting that U.S. and Canadian officials convened on June 10 exemplifies the enduring strength and mutually beneficial nature of the U.S.-Canadian economic and security relationship. During these meetings we discussed the potential impacts of U.S. energy legislation on our continued energy relationship, as well as ways to facilitate the development of proposed pipelines to bring Alaska's natural gas to the lower 48 states. According to current estimates, when oil sands are included, Canada's energy reserves are second only to Saudi Arabia's, with a reported 179.2 billion barrels of proven oil resources. The bulk of these reserves (over 95%) are oil sands deposits in the Canadian provinces of Alberta and Saskatchewan. Canada produces up to 2 million barrels of oil a day from the oil sands deposits, which have become vital to North American energy security. Canada has also been working to reduce the greenhouse gas emissions from these deposits by using carbon capture technology and through more efficient use of natural gas in production. Additionally, oil sands producers are now recycling 90% to 95% of the water used in production and have instituted aggressive land-reclamation programs. The Canadian province of Alberta, where the majority of oil sands deposits are located, is the only jurisdiction in North America to legislate industrial reductions in greenhouse gas emissions. They project that these and other measures will yield a 50% reduction in absolute emissions over 2005 levels by 2050. But U.S.-Canadian ties go much deeper than energy. Canada is our top export market. Since the signing of NAFTA in 1994, total trade between Canada and the United States has grown by 250%, U.S. employment has increased by 25 million jobs, and U.S. manufacturing output has increased by 63%. At the North American Leaders' Summit in New Orleans this April, President Bush, Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon called on our governments to enhance cooperation to strengthen energy security and protect the environment. The leaders agreed to enhance our electricity networks, increase vehicle fuel efficiency and develop clean energy technologies, while noting steps already taken to harmonize energy efficiency standards for key products. In addition, the recently concluded Energy Consultative Mechanism meetings led to an agreement between the U.S. and Canada to stay in close contact and to establish a working group focusing on economic and environmental aspects of the world's largest bilateral energy relationship. Ultimately, increasing U.S. energy security involves looking for new sources of oil, developing alternative energy sources and improving energy efficiency through technology. But as energy challenges for the U.S. mount, it's reassuring to know that part of the solution is found with our good neighbor, Canada.

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Impacts – Relations

The Canadian Prime Minister is committed to continuing massive sales of natural gas to the US in order to preserve relations.(The Globe and Mail, Canada, September 22, 06, Reclaiming Canada's Role as a World Player)

With two calculated speeches, Stephen Harper has articulated a blessedly coherent vision of Canada’s expanding international role. At the Economic Club of New York, the Prime Minister spelled out what Canada brings to the United States, such as energy security, and what it expects in return, including an assurance that security measures will not impede border traffic. At the United Nations yesterday, he reminded his listeners of Canada’s role in the tough peacemaking mission in Afghanistan - and then warned that the UN cannot defeat terrorism if it cannot reform itself. Emphasizing his message, Mr. Harper told the Economic Club: “Make no mistake, Canada intends to be a player. It was an estimable performance. And it has effectively countered charges that Mr. Harper has toadied to U.S. President George W. Bush, tailoring his policies to reflect U.S. desires. The New York foray is his declaration of independence. No one, despite the discreet language of diplomacy, could misunderstand his intention to put Canada’s interests in the forefront. First, Mr. Harper outlined what Canada can do for the United States. Canada ranks fifth in total energy production. It is the largest supplier to the United States of oil, natural gas, electricity and uranium. Those are formidable advantages in a neighbour that is “modern, democratic, prosperous, peace-loving.” Or, as he reminded his prestigious Economic Club audience: “Canada is an emerging energy superpower, the only stable and growing producer of this scarce commodity in an unstable world.” There are huge advantages for both nations in deeper co-operation, as Mr. Harper noted. He wants to enhance the pragmatic North American Economic and Security Partnership with Mexico and the United States. Canada-U.S. economic integration is already strong: More than $1.5-billion in goods and services and 300,000 people cross the border each day. The Conservative government is also boosting border security. And then came the hook, an emphatic reminder of how easily this mutual prosperity could founder. Under the Western Hemisphere Travel Initiative, the United States will demand a passport or an equivalent secure document at its land borders starting Jan. 1, 2008. That requirement is a recipe for chaos, if only because Washington has not yet determined what technology it will use. “Let’s take the time to get it right,” Mr. Harper urged, asking his influential audience to pull strings. That theme of co-operation for mutual benefit is woven throughout. Mr. Harper repeatedly stressed Canada’s contribution to the battle against terrorism: Troops are on the ground in Afghanistan; Canada has earmarked nearly $1-billion in aid and technical assistance. “Those two actions - rebuilding a shattered society and providing a stable security environment - go hand in glove,” he told the UN General Assembly. “This is the United Nation’s strongest mission and, therefore, our greatest test. We cannot afford to fail.” The UN, he added, must ensure that its failings do not hamper its earnest efforts. Then came the second hook. Canada is doing its part abroad and it expects respect at home. And home includes the disputed waterways of the Northwest Passage. “We will defend our sovereignty over all our territory, including over the islands, waterways and resources of the High Arctic, even if that conflicts with American claims,” Mr. Harper said. Taken together, the two speeches constitute a realistic approach to a formidable world. There is idealism. There is the tough calculation of the bottom line. And there is no doubt that Canadian interests are central. Good.

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Impacts – Afghanistan Module

A. Canada is necessary to Afghanistan success(Doug MacArthur 2007 “Don’t Leave Afghanistan in American hands” http://findarticles.com/p/articl es/mi_qa4014/is_200701/ai_n18621753)

I argue that abandoning Afghanistan now would be strategically wrong and morally unacceptable. While it would be easy to withdraw and leave the Afghan people to their fate, Canada has an interest in what happens that transcends the tragedy of the death of soldiers and the desire to disentangle from U.S. foreign ventures. Canada's departure would almost certainly encourage other countries to do likewise, leaving the fate of the country in the hands of the United States. It is doubtful whether the United States has much continuing interest in the future of the country beyond that which military dominance can provide. To leave Afghanistan to the United States is not in the interests of the Afghan people or the world community. Afghanistan would most likely continue to be a pawn in the ever-growing battle between the United States and those who see the U.S. as an imperial power determined to impose its will around the world. Canada is needed in Afghanistan. Canada has been there since the beginning of the reconstruction effort and is in a unique position to provide the leadership needed to help the country develop democratic institutions and political, social and economic stability in tune with what Afghans want.

B. Failure in Afghanistan leads to Sunni-Shia war in Middle East(Nicholas Watt and Ned Temko 7-15-07 “Failure in Afghanistan risks rise in terror, say generals Military chiefs warn No.10 that defeat could lead to change of regime in Pakistan” http://www.guardian.co.uk/uk/2007/jul/15/world.afghanistan )

The consequences of failure in Afghanistan are far greater than in Iraq,' he said. 'If we fail in Afghanistan then Pakistan goes down. The security problems for Britain would be massively multiplied. I think you could not then stop a widening regional war that would start off in warlordism but it would become essentially a war in the end between Sunni and Shia right across the Middle East.'

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Impacts – Afghanistan Extensions

Canada is the largest contributor to the ARTF(The World Bank (no date give) accessed 7-18-08 “Afghanistan Reconstruction Trust Fund the Benefit of working together” http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/AFGHANISTANEXTN/0,,contentMDK:20152008~pagePK:141137~piPK:217854~theSitePK:305985,00.html )

Terming Canada's contribution as very important, McKechnie said, “Canada is the largest contributor to the Afghanistan Reconstruction Trust Fund (ARTF), which is administrated by the World Bank, in this fiscal year.” In the development area, McKechnie said, “Afghanistan has been very successful story. The economy has been growing at double digits since 2001 and is one of the fastest growing economies in the world.”

US action alone in Afghanistan fails(Samantha Power 4-17-08 “ Keeping Canada in Afganistan” http://www.time.com/time/magazine/article/0,9171,1731892,00.html)

The U.S. alone can't succeed in Afghanistan. But Canada's example shows that even our closest allies need to be convinced that the fight is theirs too. Before countries like Macedonia, Albania and Croatia gain admission to NATO, they should be reminded that membership carries responsibilities as well as rewards. NATO rules should be rewritten to ensure that countries that invest disproportionate military and financial resources (as Canada has done) should have some of their costs subsidized by the alliance. If a government does not want to send its troops to fight, it should still be obliged to contribute funding and civilian expertise, which remains in short supply.

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http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/AFGHANISTANEXTN/0,,contentMDK:20152008~pagePK:141137~piPK:217854~theSitePK:305985,00.html

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/AFGHANISTANEXTN/0,,contentMDK:20152008~pagePK:141137~piPK:217854~theSitePK:305985,00.html


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Impacts – Military

Canada and the US have a strong military relationship

(National Defense and the Canadian armed forces. July 27, 2006”Canada - United States Defence Relations” http://www.forces.gc.ca/site/newsroom/view_news_e.asp?id=836)

Canadian and American forces have successfully operated together on numerous occasions over the past decade, including combat operations. Canadian Forces’ ships, battle groups, fighter aircraft, patrol aircraft, and helicopters have operated as integral units of US-led operations in the Persian Gulf, in Afghanistan, and closer to home. Our commitment to Afghanistan and the US-led Operation Enduring Freedom continues to this day. Canadians and Americans under NORAD command were the first military responders to the September 11th attacks. US and Canadian military personnel also work together in varying levels of formal and informal cooperation in a wide range of smaller international operations.Combined Training Each year, Canada and the United States routinely participate in many cooperative land, air, and sea training exercises. These joint and combined training exercises play an important part of Canada-US defence cooperation by ensuring interoperability and operational effectiveness, helping our forces to function together seamlessly, building on each other's strengths to achieve objectives, while minimizing risks. A Strong Relationship The Canada-US defence relationship remains solid. There are currently approximately 600 Canadian Forces' personnel serving in the US, mostly in NORAD-related assignments. As well, Canadian government and industry representatives conduct over 20,000 visits annually to the US related to defence activities. Both countries can build on this legacy of successful cooperation and interoperability in order to continue to meet the needs of continental security and national sovereignty.

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Impacts – Trade

The US and Canada have a major trade relationship.

(Bureau of Western Government Affiars,, 5-_-08, “Backround Note: Canada Profile” http://www.state.gov/r/pa/ei/bgn/2089.htm)

The U.S. and Canada enjoy the largest energy trade relationship in the world. Canada is the single largest foreign supplier of energy to the U.S.--providing 17% of U.S. oil imports and 18% of U.S. natural gas demand. Recognition of the commercial viability of Canada's oil sands in Alberta has raised Canada's proven petroleum reserves to 179 billion barrels, making it the world's second-largest holder of reserves after Saudi Arabia. Canada is planning Arctic pipelines and liquefied natural gas terminals to provide more natural gas to the North American market. Canada and the U.S. operate an integrated electricity grid which meets jointly developed reliability standards and provide almost all of each other's electricity imports. Canada is a major supplier of electricity (mostly clean and renewable hydroelectric power) to New England, New York, the Upper Midwest, the Pacific Northwest, and California. Canadian uranium helps fuel U.S. nuclear power plants.

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Impacts – WOT

Canada is key to winning the WOT

(Bill Janzen 7-02 “Canada's Iraq Policy since 1990” Mennonite Central Committee Peace Office Newsletter, http://72.14.205.104/custom?q=cache:1109y8TyJXcJ:mcc.org/peace/pon/PON_200203.pdf+canada%27s+iraq+policy+after+1990&hl=en&ct=clnk&cd=1&gl=us&client=google-coop-np)

Canada's policy on Iraq is not radically different from that of the United States though, as in other cases, there are somewhat stronger elements of multilateralism, "soft power," and humanitarianism, and, of course, Canada is a much smaller player. In 1990 Canada supported the several U.N. Security Council (UNSC) resolutions and the subsequent U.S.-led military action to push Iraq out of Kuwait. Canada also supported the 1991 resolutions to continue the sanctions and to send in weapons inspectors, to press Iraq to dispose of its weapons of mass destruction. Canada has also demonstrated some concern for the Iraqi people. Already in 1991 Foreign Affairs officials responded quickly to the requests from NGOs for getting humanitarian shipments cleared. Canada also encouraged the development of the Oil for Food (OFF) program. In 1996 when Lloyd Axworthy, whose commitment to peace had led him to travel to Iraq in 1990, became Canada's Foreign Affairs Minister, he hired Dr. Eric Hoskins as a personal advisor. Hoskins had been on the 1991 Harvard Study Team and had done a lot to publicize the plight of the Iraqi people. Axworthy's interest was timely because, despite the OFF program and progress in weapons inspection, interaction between Iraq and the U.S. was deteriorating. Late in 1998 the U.S. withdrew the inspectors and started a bombing campaign with the U.K. Then, early in 1999, Canada started a two-year term on the UNSC. Canada now proposed three U.N. study panels, to focus on the humanitarian needs, the weapons situation, and Kuwaiti prisoners of war and related matters. Their reports helped in the long 1999 debate that culminated in UNSC Resolution 1284. This resolution removed the oil ceiling, thereby enabling Iraq to import many more goods. It authorized list based approval to ease importation of permissible goods. It called for a cash component so that some revenue from Iraq's oil exports would go to Iraq in cash, albeit under U.N. monitoring, to help pay civil servants and teachers. And it made the weapons inspection commission accountable to the U.N. Secretary General, rather than to the UNSC, restricting the influence of individual Council members. Also, the inspectors would be more representative of the international community. Despite these positive signs, the new resolution kept the basic concept that money from Iraq's oil sales, instead of going to Iraq, went into a U.N. account and was then used to pay international suppliers of goods ordered by Iraq. This prevented Iraq from buying weapons, but it also restricted its economic activity enormously! The cash component, meant to be an exception to this rule, was never operationalized because, say officials, Iraq did not accept monitoring. The new resolution also continued to allow any member of the sanctions committee, e.g., the U.S., to block a vast range of items on the ground of "dual use" suspicions including parts for water treatment systems and medical, electrical, and communications equipment. It also kept the provision that 30 percent of the revenue from Iraq's oil sales would be used to compensate parties, including big oil companies, for losses in the Gulf War. Though later reduced to 25 percent, it is a shocking amount given the needs of the Iraqi people. After this resolution was passed Canadian officials tried to strengthen its positive elements, particularly the list?based approval system, in part because, early in 2000, a Canadian Parliamentary committee recommended, unanimously, that nonmilitary sanctions be lifted. Also, Axworthy funded The Sanctions Decade, a 275-page study by the International Peace Academy, to have the Security Council look more self?critically at the use of sanctions generally. Canada also continued to make diplomatic visits to Iraq. And it provided some funding for UNICEF, the Red Cross/Red Crescent, and some NGOs, while saying that the Iraqi government could do much more to help its people. Canada also continued its diplomatic support for U.S. actions, including the bombing, and used its naval forces to assist in restricting Iraq's efforts to bypass the sanctions. Canadian officials argue that an "unfettered Iraq" would pose a danger to its neighbors and that despite their concern for the people of Iraq, constraints on its government are needed. For this reason they also support the new "smart sanctions." They favor regional disarmament but say that Iraq must do more first.

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CANADA AFF

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2AC – CANADA

1) Non-unique Demand satisfied now Jon Hurdle, a freelance writer who has written for many business publications, 7/14/08, “Pa. invites bids for leases on possible gas field,” Reuters, http://uk.reuters.com/article/oilRpt/idUKN1447555220080714

Pennsylvania officials on Monday invited bids to lease land atop a geological formation that may hold enough natural gas to meet total U.S. demand for two years . The state's Department of Conservation and Natural Resources said it will hold a lease sale from pre-qualified bidders for 18 tracts of state forest totaling some 74,000 acres in two north-central Pennsylvania counties. The bidding will be open until Sept. 2.The tracts sit over the Marcellus Shale formation, a natural feature about a mile deep that has been known about for years but which has only recently been suspected of containing massive quantities of natural gas . The formation, which stretches some 600 miles between western New York State and West Virginia, could contain as much as 50 trillion cubic feet of recoverable natural gas, or enough to supply the entire U.S. for two years, at a wellhead value of $1 trillion, according to website geology.com.The recoverable quantity may represent about a tenth of the total gas in the formation, some scientists believe.The estimates came from Pennsylvania State University geoscience professor Terry Englander and New York State University geology professor Gary Lash, the website said."Given the enormity of the nation's energy demand, making less than an addition 4 percent of our state forest available for drilling is a reasonable decision that protects our forest ecosystem and helps meet energy demands ," DCNR Secretary Michael DiBerardinis said in a statement." This lease sale responds to increased interest in the Marcellus Shale formation, a deep resource thought to contain large quantities of natural gas," the department's statement said. It noted that new technology and increased natural gas prices have made it possible to recover hard-to-reach fuel .

2) Non-Unique Demand low now NORVAL SCOTT, correspondent of Dow Jones Newswires, 7/15/08, Reportonbuisiness.com, “With prices high, B.C. gas is hot,” http://www.theglobeandmail.com/servlet/story/LAC.20080715.RSHELLBC15/TPStory/Business

While B.C. contains huge amounts of natural gas, those assets are mostly locked in tight formations of shale rock that prevent the gas from flowing freely into wells. Recent technological breakthroughs allow the shale to be fractured more easily, enabling the gas to be extractedAs a result, companies such as Duvernay, which holds tracts of land in the Montney that could contain over one trillion cubic feet of gas, have seen their share price double over the past twelve months. Montney is estimated to hold 50 trillion cubic feet of reserves - more than in all of Alberta.While Duvernay was keen to continue developing its assets and wasn't looking to sell, Shell approached the company in July with its offer and negotiations proceeded smoothly from that point, Duvernay CEO Mr. Rose said in an interview. "Shell were really interested in us."

3) A decrease in demand would allow Canada to fill its empty reserves-

4) Canadian production would not decrease because of the NAFTA proportionality clause

5) Canada would stop development of the non-economical northern tar pits in reponse to a decrease in demand

6) Empirically Canadian relations are resilient

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LNG SAFETY DA

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SHELL – LNG SAFETY

A. LNG use is inevitable Paul W. Parfomak, CRS Specialist in Science and Technology, 5/24/04 (CRS Report for Congress Liquefied Natural Gas (LNG) in U.S. Energy Policy: Issues and Implications) [S. Page]

United States demand for LNG has been increasing dramatically since 2002. This growth in LNG demand has been occurring in part because North American natural gas production appears to have plateaued, so it has not been able to keep pace with growth in demand. As a result, U.S. natural gas prices have become higher and more volatile. As Figure 2 shows, gas prices at the wellhead have risen from between $1.50 and $2.50/Mcf through most of the 1990s to an average of nearly $5.00/Mcf and a peak of nearly$7.00/Mcf in 2003. At the same time, international prices for LNG have fallen because of increased supplies and lower production and transportation costs, making LNG more competitive with domestic natural gas. While cost estimation is speculative, some industry analysts believe that LNG can be economically delivered to U.S. pipelines for approximately $2.50 to $3.50/Mcf. Recent forecasts by the Energy Information Administration (EIA), National Petroleum Council, and other groups project expansion in U.S. LNG imports over the next 20 years. Specific LNG forecasts vary based on methodology and market assumptions, but most expect LNG to account for 12% to 20% of U.S. natural gas supplies by2025. EIA’s reference forecast projects U.S. LNG imports to reach 4.8 Tcf in 2025, which equates to approximately 15% of total U.S. gas supply for that year, up substantially from the current market share of about 1%. Figure 3 details projected U.S. LNG imports relative to other natural gas supplies in EIA’s forecast.

B. Incentives for renewables trade off with LNG demandPaul W. Parfomak and Aaron Flynn. 1/28/04 (Import Terminals: Siting, Safety, and Regulation, RL32205) [S. Page]

Congress could try to reduce the need for new LNG terminals by acting to curb growth in U.S. LNG demand, or growth in natural gas demand overall. For example, Congress could change public and industrial incentives for conservation, switching to other fuels, or developing renewable energy supplies. But other fuels like coal and nuclear power pose their own hazards to communities and the environment, so their expansion may not be preferable to additional LNG infrastructure. Conservation and renewable energy sources are less hazardous, although they face significant technological and cost barriers to more widespread public adoption. Federal investments in renewables research or conservation subsidies might have to be large, and might not have enough impact to alleviate the need for LNG expansion altogether. Various provisions in recent proposed energy legislation would encourage the development of conservation and other alternatives to natural gas, but critics believe they would not likely go far enough to significantly affect near-term natural gas consumption.

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SHELL – LNG SAFETY

C. A growing domestic LNG market causes increased safety regulationPaul W. Parfomak and Aaron Flynn. 1/28/04 (Import Terminals: Siting, Safety, and Regulation, RL32205) [S. Page]

Liquefied natural gas (LNG) is a hazardous fuel frequently shipped in large tankers to U.S. ports from overseas. While LNG has historically made up a small part of U.S. natural gas supplies, rising gas prices, current price volatility, and the possibility of domestic shortages are sharply increasing LNG demand. To meet this demand, energy companies have proposed building dozens of new LNG import terminals throughout the coastal United States. But many of these terminals would be built onshore near populated areas, so local communities fear the terminals would expose them to unacceptable safety and security hazards. Potentially catastrophic pool fires or vapor cloud fires could arise from a serious accident or attack on LNG infrastructure. Faced with the widely perceived need for greater LNG imports, and persistent public concerns about LNG safety, Congress is examining the adequacy of safety provisions in federal LNG siting regulation.

D. Unsafe LNG risks pool fires, explosions, freezes, and terrorist attacks.Paul W. Parfomak and Aaron Flynn. 1/28/04 (Import Terminals: Siting, Safety, and Regulation, RL32205) [S. Page]

Natural gas is combustible, so an uncontrolled release of LNG poses a hazard of fire or, in confined spaces, explosion. LNG also poses hazards because it is so cold. The likelihood and severity of catastrophic LNG events have been the subject of controversy. While questions remain about the credible impacts of specific LNG hazards, there appears to be consensus as to what the most serious hazards are. Pool Fires. If LNG spills near an ignition source, the evaporating gas in a combustible gas-air concentration will burn above the LNG pool. The resulting “pool fire” would spread as the LNG pool expanded away from its source and continued evaporating. A pool fire is intense, burning far more hotly and rapidly than oil or gasoline fires. It cannot be extinguished — all the LNG must be consumed before it goes out. Because an LNG pool fire is so hot, its thermal radiation may injure people and damage property a considerable distance from the fire itself. Many experts agree that a large pool fire, especially on water (due to heat transfer), is the most serious LNG hazard. Other Safety Hazards. LNG spilled on water could (theoretically) regasify almost instantly in a “flameless explosion,” but an Idaho National Engineering Laboratory report concluded that “transitions caused by mixing of LNG and water are not violent.” LNG vapor clouds are not toxic, but they could cause asphyxiation by displacing breathable air. Such clouds rise in air as they warm, however, diminishing the threat to people on the ground. Extremely cold LNG could injure people or damage equipment through direct contact. The extent of such contact would likely be limited, however, as a major spill would likely result in a more serious fire. The environmental damage associated with an LNG spill would be confined to fire and freezing impacts near the spill since LNG dissipates completely Terrorism Hazards. LNG tankers and land-based facilities could be vulnerable to terrorism. Tankers might be physically attacked in a variety of ways to destroy their cargo— or commandeered for use as weapons against coastal targets. LNG terminal facilities might also be physically attacked with explosives or through other means. Some LNG facilities may also be indirectly disrupted by “cyber-attacks” or attacks on regional electricity grids and communications networks which could in turn affect dependent LNG control and safety systems.

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Uniqueness – LNG Inevitable

LNG is the inevitable response to surging natural gas demandsDavid J. Lynch 12/19/05 (http://www.usatoday.com/money/industries/energy/2005-12-19-lng-usat_x.htm) [S. Page]

Consumers facing high home heating bills due to natural gas prices that last week reached a record might wish Frederick were even busier. Once global gas trading becomes more commonplace, U.S. natural gas prices should sink. The large arms at left transfer 50,000 gallons per minute of LNG from ship to shore at Cove Point, Md. "As we're able to bring more supply into this country ... prices will, in fact, be lower," says Stacy Nieuwoudt, an analyst at Pickering Energy Partners in Houston. As the gap widens between surging demand for natural gas and plateauing production from domestic wells, the scene at Cove Point will be repeated around the USA. Imports of liquefied natural gas, or LNG, are expected to rise from about 1% of total gas usage in 2002 to 15% by 2015 and 21% by 2025, according to the Energy Information Administration (EIA). That year, total imports are expected to be almost seven times the current figure.

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The need for imports makes LNG inevitableEnergy Information Administration 2003 (The Global Liquefied Natural Gas Market: Status & Outlook. DOE/EIA-0637. Dec. 2003.) [S. Page]

Based on EIA long-term forecasts, U.S.13 natural gas consumption is projected to increase from 22.5 Tcf in 2002 to 26.2 Tcf in 2010 and 31.4 Tcf by 2025. Domestic gas production is expected to increase more slowly than consumption over the forecast period, rising from 19.0 Tcf in 2002 to 20.5 Tcf in 2010 and 24.0 Tcf by 2025. The difference between consumption and production will be made up by imports, which are projected to rise from net imports of 3.5 Tcf in 2002 to 7.2 Tcf by 2025.

LNG expansion is inevitable in the USEnergy Information Administration 2003 (The Global Liquefied Natural Gas Market: Status & Outlook. DOE/EIA-0637. Dec. 2003.) [S. Page]

EIA’s Annual Energy Outlook 2004 projects that four new LNG regasification terminals will be constructed on the Atlantic and Gulf Coasts from 2007 through 2010 to meet the 58-percent increase in LNG imports that is projected for that timeframe. The first new U.S. LNG terminal in more than 20 years is projected to open on the Gulf Coast in 2007. It is projected that additional terminals will be constructed to serve markets in Florida, the south Atlantic states, and the western Gulf Coast. EIA also forecasts that a terminal targeting the Florida market will be constructed in the Bahamas with the gas piped to Florida. Almost 60 percent of the increase in LNG imports would be served by expanded capacity at existing terminals. By 2010, the new terminals are projected to be collectively importing 812 billion cubic feet annually.

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Demand makes LNG growth inevitablePaul W. Parfomak, CRS Specialist in Science and Technology, 5/24/04 (CRS Report for Congress Liquefied Natural Gas (LNG) in U.S. Energy Policy: Issues and Implications) [S. Page]

Liquefied natural gas (LNG) imports to the United States are increasing to supplement domestic gas production. Government officials such as the Federal Reserve Chairman and the Secretary of Energy have spoken in favor of LNG imports to mitigate high energy prices. Through regulatory and administrative actions, federal agencies are trying to attract private capital for LNG infrastructure, streamline the LNG terminal approval process, and promote LNG trade. Were these policies to continue and gas demand to grow, LNG might account for as much as 20 percent ofUS gas supply by 2025, up from 1 per cent in 2002. Congress is examining the infrastructure and policy implications of greater U.S. LNG demand.

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Internals – LNG Demand key to Safety

Increased LNG demand forces congress to increase safety measuresPaul W. Parfomak and Aaron Flynn. 1/28/04 (Import Terminals: Siting, Safety, and Regulation, RL32205) [S. Page]

As some in Congress have suggested, Congress could call for additional LNG safety research to help reduce uncertainties about specific LNG terminal or shipping hazards. A number of LNG terminal hazard reports have emerged in the last two years, and more are underway, but there appears to be widespread agreement among federal agencies, LNG developers and community groups that additional “objective” LNG safety research would be beneficial. For example, physical testing (as opposed to computer simulations) of impacts and explosions on LNG tanker hulls by the USCG could fill important gaps in engineering knowledge about the potential effects of terrorist attacks. Executing such a research program would have to be done within the next year, however, in order to influence pending applications for new LNG terminal construction. Such studies could also still be subject to the same types of technical limitations and criticisms facing existing analysis, so while they may reduce key uncertainties, they may not eliminate them altogether. These studies could also be costly, especially if they involve field experiments on the scale of credible LNG accidents.

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LNG expansion has renewed focus on improving poor port securityScott Hadley 1/11/08 (http://www.venturacountystar.com/news/2008/jan/11/lng-opponents-cite-us-report-on-terror-danger/)

Critics of a proposed liquefied natural gas terminal offshore of Ventura County are pointing to a recent Government Accountability Office report as another reason to sink the terminal, which, they say, could become a target for terrorist attacks. The GAO report does not focus on liquid natural gas, but it tells how thinly spread the Coast Guard is in its ability to protect against terrorist threats. The report looks at the vulnerabilities of the nation's ports, offshore oil, tankers and LNG facilities. The danger is real, said Rep. Lois Capps, D-Santa Barbara "This Government Accountability Office report confirms what I've been saying all along — the LNG proposals off our coast present a significant threat to the safety of our community," Capps said. "Before these proposals move forward, we must ensure the Coast Guard has the resources and assets in place to prevent a potential terrorist attack. But even more important, instead of relying on dirty and dangerous foreign LNG, we must reduce our energy consumption by increasing efficiency at natural gas plants and increasing the use of renewable energy sources."

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The growing LNG market forces safety measuresBusiness Wire 10/5/07 (http://findarticles.com/p/articles/mi_m0EIN/is_2007_Oct_5/ai_n27398314)

By 2010, LNG is expected to make up to 20% of the gas supplies of the OECD countries. The production of LNG is estimated to double from current levels with majority of gas sector investment focusing on developing LNG supplies. There is a need to look at the safety and security aspects of the LNG infrastructure and towards increasing the current capacity of the LNG tankers and terminals.

The growing LNG market makes safety an important issuePrice Waterhouse Cooper No date given (http://www.pwc.com/Extweb/industry.nsf/docid/9918FB205DFCCF5D852571C6004F5508

LNG is one of the fastest growing energy markets worldwide. Given the number and scale of new LNG projects proposed or under construction, global production capacity could more than double by the end of the decade. According to the IEA, this growth will require a $250 billion investment in liquefaction plants, coastal regasification import terminals, and special LNG tankers over the next 30 years. Higher natural gas prices and growing efficiencies in the LNG value chain are making it economically feasible to ship LNG over long distances, transforming natural gas from a regional to a global market. The players in the LNG market include integrated oil and gas companies, national oil companies and governments, independent upstream players, utilities, infrastructure and transportation companies, and private investors. The upstream and downstream players hail from all corners of the globe -- Americas, Africa, Europe, Middle East and Asia Pacific -- but the fastest growing exporters of LNG are from countries in the Middle East and Africa. Although the economics of widespread use of LNG are becoming more attractive, there sill remain a number of issues for the market players, including safety and environmental considerations, geopolitical risks, and higher construction costs.

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Impact – LNG Terror

LNG is susceptible to explosions and terrorist attackPaul W. Parfomak, CRS Specialist in Science and Technology, 5/24/04 (CRS Report for Congress Liquefied Natural Gas (LNG) in U.S. Energy Policy: Issues and Implications) [S. Page]

Natural gas is combustible, so an uncontrolled release of LNG poses a hazard of fire or, in confined spaces, explosion. LNG also poses hazards because it is so cold. Because LNG tankers and terminals are highly visible and easily identified, they may also be vulnerable to terrorist attack. Assessing the potential risk from LNG releases is controversial. A 1944 accident at one of the nation’s first LNG facilities, for example, killed 128 people and initiated public fears about LNG hazards which persist today. But technology improvements and standards since the 1940’s appear to have made LNG facilities safer. Between 1944 and 2004, LNG terminals experienced approximately 13 serious accidents, with two fatalities, directly caused by LNG. Since international LNG shipping began in 1959, LNG tankers have carried over 33,000 cargoes without a serious accident at sea or in port. In January 2004, however, a fire at an LNG processing facility in Algeria killed an estimated 27 workers and injured 74 others. The Algeria accident has raised new questions about LNG facility safety.

LNG facilities are security risks that are vulnerable to terrorists.Audrey Hudson, staff writer, 1-3-07, “Security found lax at LNG sites”, Washington Times, LexisNexis Academic, [Crystal Xia]

The Aug. 16 break-in at the Lynn, Mass., facility operated by KeySpan occurred just five days after the nation went on high alert for a possible terrorist attack involving aircraft. The break-in was captured on videotape and showed two men cutting through the security fence and climbing on top of the massive storage tank. Their motive is not known. According to an investigation by the Massachusetts Department of Telecommunications and Energy, security lapses at the liquefied natural gas (LNG) facility allowed the break-in to go undetected for five days even though the site was visually inspected eight times. The breach was detected by the plant's alarm system, but the employee on watch may have been responding to a different alarm, the report said.

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LNG ships can be easily hijacked in the status quoCindy Hurst 6/17/08 (http://www.speroforum.com/site/article.asp?id=15510&t=Terrorism+threatens+natural+gas+supply)

LNG shipments often originate from politically unstable and unfriendly countries and regions. Some of the locations in which LNG originates include Qatar, Nigeria, Algeria and Egypt. “It’s the location of the ports, and where the LNG is loaded, and who gets on the vessel [that is important]," said William Doyle, Deputy General Counsel of the Marine Engineers’ Beneficial Association (MEBA). Many ships operate under grossly unregulated “open registry” or “flags of convenience” registries and often originate from ports with poor security systems in place. Due to a lack of any meaningful international regulatory oversight, it would be possible for someone to work under a different identity on board one of these tankers and avoid detection. Under the current system, no completely trustworthy and uniform system is in place for vetting foreign mariners. Background checks are conducted on Americans by the Coast Guard and the Transportation Security Administration (TSA). However, these same background checks are not performed on foreign crews. The Coast Guard does, on the other hand, require crew lists from all vessels entering U.S. ports. Unfortunately, no method is in place to ensure these crews are who they claim to be. Although this is an issue of security for all cargo ships, it is even more critical for ships carrying potentially dangerous cargo, such as LNG. In a testimony to Congress, Ron Davis, President of MEBA, listed a number of differences between U.S. and foreign mariners, saying, “U.S. merchant marines receive their credentials to work from the Coast Guard. Foreign mariners do not. U.S. mariners undergo extensive background checks through the FBI. Foreign mariners do not. U.S. mariners are vetted through the national driver record database. Foreign seafarers are not. U.S. mariners will be subject to terrorism background checks through the TSA. Foreign Seafarers are not.

Terrorists can use LNG ships as waterborne fireballsCindy Hurst 6/17/08 (http://www.speroforum.com/site/article.asp?id=15510&t=Terrorism+threatens+natural+gas+supply)

Davis stated that terrorists might one day intentionally ram an LNG ship into a strategic target such as one fully loaded with a highly flammable, explosive material onboard. Or, as William Doyle said, two or three terrorists infiltrating an LNG tanker could cause serious damage by one taking control of the ship and the other(s) detonating an onboard explosion as the tanker enters a busy harbor. Terrorists could attack an LNG tanker as well as they could any cargo ship. In a 2004 edition of Jane’s Terrorism and Security Monitor, Jane’s reported that the type of attack widely envisaged, based on analyses of compromised terrorist preparations, would include “an explosion onboard a cargo ship laden with fuel oil and ammonium nitrate fertilizer, in effect turning the vessel into a waterborne fireball.”

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An LNG attack would have a half-mile burn radiusKate Ramsayer 8/16/05 (http://www.dailyastorian.info/main.asp?SectionID=2&SubSectionID=398&ArticleID=26868)

A terrorist attack on a liquefied natural gas shipping tanker could result in a spill that, if ignited, would create a fire a half-mile wide that could burn the skin of people a mile away, Jerry Havens, a chemical engineering professor at the University of Arkansas, said during a visit to Astoria Monday. And while scientists are generally in agreement with those figures, there is no federal regulation that sets boundaries or exclusion zones based on the threat of a spill on water, said Havens, who has studied LNG for more than three decades. Four companies have proposed building LNG receiving terminals along the Columbia River, two at sites in Warrenton, one in Bradwood just downstream of Wauna, and one at Port Westward in Columbia County. “The public should not assume that the safety aspects associated with siting an LNG terminal are being sufficiently addressed by the government,” Havens said in an interview with The Daily Astorian. “I feel like it behooves them to educate themselves about what reality is.”

Security upgrades are needed—a major attack is coming nowCindy Hurst 6/17/08 (http://www.speroforum.com/site/article.asp?id=15510&t=Terrorism+threatens+natural+gas+supply)

A 2004 study conducted by the European Conference of Ministers of Transport jointly with the Organization for Economic Cooperation and Development (OECD), describes two scenarios involving terrorists striking at sea. In the first scenario, called the Trojan Horse scenario, terrorists develop legitimate trading identities that would allow them to ship and misuse “dangerous consignments.” In the second scenario, the hijacking scenario, terrorists seize control of an entire vessel and its cargo to use it in a mass assault. According to Jane's Terrorism and Security Monitor, the intelligence community fears that preparations for a major seaborne assault might already be in an advanced stage. In March 2003, during the night, about a dozen heavily armed men boarded the chemical tanker Dewi Madrim off the coast of Sumatra. The hijackers proceeded to take over the ship. Experts believed that this might have been a training exercise because the pirates navigated the ship for an hour through the Strait of Malacca then kidnapped the captain and first mate without demanding a ransom. Some experts believed that the hijackers could have been terrorists practicing operation of a large vessel in the crowded shipping lanes. According to an ABC News investigative report, fears in shipping and security circles were increasing with the notion that these armed terrorists, or even pirates, could take control of a vessel carrying LNG and transform it into a floating bomb. Admiral Kevin Eldridge, who was the commander of the U.S. Coast Guard’s 11th District in California, stated that an attack by ship on U.S. shores was “likely enough for us to put a lot of effort into the planning of it.” Eldridge continued, “There aren’t enough ships [and] there aren’t enough planes for us to set up a picket line, so that we know what’s coming.” He continued, “We’re pushing our borders out. Frankly, if we have a vessel in our port that has a problem, it’s too late.” According to Captain Conway, physically it would be extremely difficult for pirates to successfully scale the 50-foot hull of an LNG vessel. However, according to Anne Korin, co-director of the Institute for the Analysis of Global Security (IAGS), acts of pirates hijacking a ship have been facilitated by planting an insider within the ship. Stepped up and more realistic security measures on LNG terminals and ships must address the vulnerabilities--and soon.

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LNG attacks likely in major harborsJay Fitzgerald 11/7/03 (http://www.wildcalifornia.org/pages/page-115)

A terrorist attack on a giant liquefied natural gas tanker in Boston Harbor likely would devastate nearby neighborhoods in Boston, Charlestown, and Everett, a forthcoming federal study suggests. That directly contradicts two key reports that helped the U.S. Coast Guard justify the resumption of LNG shipments through the harbor in the months after Sept. 11, 2001. Boston Fire Commissioner Paul Christian said he believes the forthcoming study by the National Oceanic and Atmospheric Administration - assuming it withstands scientific review - would end the debate about what would happen if terrorists successfully struck one of the big, distinctive ships. "We are looking at a very intense fire," said Christian, who opposed letting LNG tankers return to the harbor two years ago. The preliminary NOAA study is undergoing peer review. The reports cited by the Coast Guard two years ago were quickly compiled without scientific review in the immediate weeks after the 9-11 terrorist attacks. They minimized the impact of a major spill if an LNG tanker was attacked, saying any resulting fires would be relatively small and contained. But NOAA's study, a summary of which was obtained by the Boston Herald, generally sides with a more devastating scenario long portrayed by Massachusetts Institute of Technology professor emeritus James Fay, said Bill Lehr, a researcher on the NOAA study. Fay, whose work has frequently come under bitter attack by industry groups, has warned that a strike against an LNG tanker - such as the boat bomb used against the USS Cole in 2000 - could spark a huge inferno that would kill and scorch nearby residents, set waterfront buildings ablaze and shoot searing electromagnetic waves into neighborhoods that could spark even more fires.

An LNG attack would be like another 9/11Tom Kisken and John Krist 8/30/05 (http://www.venturacountystar.com/vcs/county_news/article/0,1375,VCS_226_4040877,00.html)

People worried about attacks on LNG terminals or tankers point to the USS Cole, the guided missile destroyer rammed by a small boat full of explosives in an attack that killed 17 sailors. They refer to the June bombings in London's subways. More than anything else, they talk about Sept. 11, 2001. "Whoever thought the World Trade Towers would come down?" Jordan said. "It hasn't happened before. That doesn't mean it couldn't happen." The threat is real, agrees former White House terrorism adviser Clarke. Now a private consultant, he helped Rhode Island's attorney general craft a report asserting a planned LNG terminal in Providence could attract al-Qaida or possibly a homegrown terrorist group. The report claimed an attack on a chemical or gas tanker was considered the sixth most likely doomsday scenario by the U.S. Department of Homeland Security, asserting the government is expected to spend $1 billion to prevent such attacks.

Natural Gas terrorist attacks cause massive explosionsDavid J. Lynch 12/19/05 (http://www.usatoday.com/money/industries/energy/2005-12-19-lng-usat_x.htm) [S. Page]

A 2004 Sandia National Laboratory study explains why. If terrorists punched a hole in a tank and the leaking gas ignited, the resulting fire would melt steel and incinerate people more than four football fields from the crippled vessel, according to Mike Hightower, the study's co-author. Second-degree burns would be possible almost one mile away. Hightower stresses that special security efforts can reduce the consequences of such an attack. But one problem in assessing the risk of expanded LNG trade is a lack of data. The spills that could result from a deliberate attack would be 100 times larger than the accidents experts prepared for, the Sandia study says.

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LNG could be hit by terrorists.Amanda Griscom, energy analyst at the environmental consulting firm GreenOrder, 11-6-03, “Liquid Assets”, http://www.grist.org/news/powers/2003/11/06/assets/, [Crystal Xia]

But even if those regulations were vastly simplified and LNG imports were accelerated, even if natural gas plants began to displace ever more coal plants and air quality continued to improve, there would still be an irrefutably ominous aspect of this new global gas business: national security. "What makes LNG perhaps least attractive is the risk of terrorism or accident," said Amory Lovins, CEO of the Rocky Mountain Institute. "One thousand-foot LNG marine tanker being hit by a [missile] would be a megaton range firestorm. It's not something you want anywhere near a city."

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AT: LNG Safe

LNG safety isn’t perfect despite what the industry wants you to believe – fatal accidents have occurred before.Audrey Hudson, staff writer, 1-3-07, “Security found lax at LNG sites”, Washington Times, LexisNexis Academic, [Crystal Xia]

However, at a Cleveland storage facility in 1944, a dike failure leaked liquefied natural gas into the streets and storm sewers, causing an explosion that killed nearly 130 people. At the Cove Point facility in Lusby in 1979, a pump seal failed and the gas vapors were ignited by a worker switching off the circuit breaker, killing him and leaving part of the building in ruins. Liquefied natural gas is natural gas that is cooled to nearly 300 degrees below zero and is less dense than water, because the change in state reduces its volume 600 times, making it more economical to transport. Since the September 11 terrorist attacks, the departments of Transportation and Homeland Security have joint responsibility for LNG terminals, which some critics say pose security threats to nearby communities.

Status Quo LNG security failsCindy Hurst 6/17/08 (http://www.speroforum.com/site/article.asp?id=15510&t=Terrorism+threatens+natural+gas+supply)

During a hearing in the United States House of Representatives on 21 March 2007, Jim Wells of the GAO raised doubt that the Coast Guard can marshal the resources needed to meet its responsibilities. While it took 40 years to build the fleet of LNG carriers to 200 tankers worldwide, it will take less than four more years for that number to grow to 300. This rapid growth rate coupled with the anticipated growth rate of LNG imports into the U.S. presents a real security challenge. The U.S. faces today potential lack of security measures and resources to protect these new assets.

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LNG SAFETY AFF

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2AC – LNG SAFETY DA

1. Increased demand elsewhere will keep US LNG imports low.Platts 6/19/08 (http://www.platts.com/Natural%20Gas/News/8821458.xml?src=Natural%20Gasrssheadlines1)

Voracious demand in South Korea and Spain will keep liquefied natural gas deliveries in the US low, which will be bullish to US gas prices, analysts at US investment bank Goldman Sachs said. Analysts Samantha Dart and Jeffery Currie expect Henry Hub prices to average $12.80/MMBtu over the summer and peak at $13.80/MMBtu this coming Northern Hemisphere winter--before falling back to $10/MMBtu in June 2009—as Asian and European pulls US prices up. "The higher-than-expected increase in LNG demand from Asia and Europe in the first quarter of 2008 was met by higher-than-expected LNG supplies in the market, likely motivated by high spot LNG prices in the period, and lower-than-expected North American LNG imports," Dart said. "Both Mexico and the United States showed declines in LNG imports earlier this year relative to our expectations." The increased international demand for gas will, Goldman said, bolster US prices as US LNG deliveries will no longer take up the slack for US demand, which the analysts still see as increasing even as the US economy slows.

2. No tradeoff – Natural gas demand for heading will be filled by LNG even if energy demands are not.

3. <Insert Renewables Increase Demand>

4. Safety measures are coming now – assumes SQ measures

5. Domestic safety reform doesn’t solve – their evidence assumes ships are hijacked internationally.

6. <Insert LNG is safe>

7. <Insert LNG doesn’t explode in the air>

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LNG ECONOMY DA

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SHELL – LNG ECONOMY

A. US LNG imports are expected to rise.Business Wire, 7-17-08, “Waterborne Energy Predicts Record Spike in U.S. LNG Imports for 2009”, http://www.istockanalyst.com/article/viewiStockNews+articleid_2410132~title_ Waterborne-Energy.html, [Crystal Xia]

Waterborne Energy, a Houston-based consulting group that specializes in analyzing LNG markets, is forecasting a big year for U.S. LNG imports in 2009. "Surprisingly, few industry observers are talking about this production 'bubble,' set to dramatically shift the dynamics of the global LNG market," notes Steve Johnson, president of Waterborne Energy. "We anticipate that between November, 2008, and December, 2009, about 2,868 bcf. of new LNG will be introduced to the marketplace. This should begin to significantly impact the U.S. LNG market by the summer of 2009." Citing 2008 as an anomaly, Johnson notes that U.S. LNG imports fell short of expectations this year due to delays in new production, rising demand and other unexpected incidents. Johnson says several LNG projects, already behind schedule, are under pressure to commission facilities and get product online.

"We expect about 117 bcf. per month of new LNG production to be available globally by the end of March 2009."

B. Renewable or alternative energy will significantly reduce natural gas prices.


Renewable energy (RE) and energy efficiency (EE) have historically been supported because of their perceived economic, environmental, economic-development, and national-security benefits. Recently, extreme price volatility in wholesale electricity and natural gas markets has led to discussions about the potential risk mitigation value of these clean energy resources. Deepening concerns about the ability of conventional North American gas production to keep up with demand have also resulted in a growing number of voices calling for resource diversification (see, e.g., Bernstein, Holtberg, & Ortiz 2002; Henning, Sloan & de Leon 2003; NARUC 2003; NPC 2003a). R[enewable] E[energy]* and EE are a direct hedge against volatile and escalating gas prices because they reduce the need to purchase variable-price natural gas-fired electricity generation, replacing that generation with fixed-price RE or EE resources (see, e.g., Bolinger, Wiser, & Golove 2003; Awerbuch 2003). In addition to this direct contribution to price stability, by displacing marginal gas-fired generation, RE and EE can reduce demand for natural gas and thus indirectly place downward pressure on gas prices. 3

Many recent modeling studies of increased RE and EE deployment have demonstrated that this “secondary” effect of putting downward pressure on natural gas prices could be significant, with the consumer benefits from reduced gas prices in many cases more than offsetting any increase in electricity costs caused by RE and/or EE deployment. As a result, this price effect is increasingly cited as justification for policies promoting RE and EE. Yet, to date, little work has focused on reviewing the reasonableness of this effect as it is portrayed in various studies, nor have studies attempted to benchmark that output against economic theory. This paper is a first attempt to address these two issues.

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SHELL – LNG ECONOMY

C. High natural gas prices are key to LNG.

Amanda Griscom, energy analyst at the environmental consulting firm GreenOrder, 11-6-03, “Liquid Assets”, http://www.grist.org/news/powers/2003/11/06/assets/, [Crystal Xia]

And that's just the beginning. Natural gas demand is projected to increase by nearly 50 percent in the next two decades, and net imports are projected to increase by more than 200 percent, according to the Energy Information Administration, which develops official statistics for the U.S. Department of Energy. And the percentage of LNG in our total natural gas demand is expected to rise from less than 1 percent today to nearly 30 percent in 2025. "The growth in LNG is viable largely because it is now cost-competitive with piped-in gasoline," said Manning of KeySpan. "If natural gas were as cheap as it was in the '90s -- when it was roughly $2 per thousand cubic feet -- LNG wouldn't be an attractive alternative, but today it's more than double that."

D. LNG is a vital part of the world economy.

Energy Information Administration, 7-10-08, “What is liquefied natural gas (LNG) and how is it becoming an energy source for the United States?”, http://tonto.eia.doe.gov/energy_in_brief /liquefied_natural_gas_lng.cfm, [Crystal Xia]

International LNG trade has grown rapidly in recent years as new export facilities have started operations in several countries. In 2006, 13 countries exported natural gas in the form of LNG to 17 importing countries.2 International trade equaled the equivalent of more than 7.5 trillion cubic feet of natural gas in 2006. By the end of 2010, there will likely be five additional exporting countries for a total of 18 LNG source countries, although not all will be consistent suppliers of LNG to the United States.The United States is not the only country that is turning to new international sources of natural gas. Countries in Europe and Asia also rely heavily on LNG supplies. By far the largest volume of LNG consumption is in Asia, where Japan and South Korea are the largest importers, accounting for more than 55% of global LNG demand. In Europe, Spain is the largest importer with about 11% of global consumption. Prices in these countries in recent years have surpassed market prices in the United States, resulting in the occasional diversion of cargos from the United States to these countries.

E. <Insert Terminal Impact>

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Links – LNG-Renewables Tradeoff

Incentives for renewables trade off with LNG demandPaul W. Parfomak and Aaron Flynn. 1/28/04 (Import Terminals: Siting, Safety, and Regulation, RL32205) [S. Page]

Congress could try to reduce the need for new LNG terminals by acting to curb growth in U.S. LNG demand, or growth in natural gas demand overall. For example, Congress could change public and industrial incentives for conservation, switching to other fuels, or developing renewable energy supplies. But other fuels like coal and nuclear power pose their own hazards to communities and the environment, so their expansion may not be preferable to additional LNG infrastructure. Conservation and renewable energy sources are less hazardous, although they face significant technological and cost barriers to more widespread public adoption. Federal investments in renewables research or conservation subsidies might have to be large, and might not have enough impact to alleviate the need for LNG expansion altogether. Various provisions in recent proposed energy legislation would encourage the development of conservation and other alternatives to natural gas, but critics believe they would not likely go far enough to significantly affect near-term natural gas consumption.

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Links – High Prices key to LNG

High natural gas prices are key to LNG production and investment.Steve Hargreaves, staff writer, 8-26-06, CNN, “Betting billions on liquefied natural gas”, http://money.cnn.com/2006/08/28/news/economy/lng/index.htm, [Crystal Xia]

An estimated $30 billion a year is pouring into developing liquefied natural gas. Despite concerns over the safety and the cost of importing it, analysts say the fuel will make up a larger and larger share of America's energy mix and may help prevent seasonal natural gas price spikes. With high natural gas prices in the United States, some ask whether LNG, which is more expensive to bring to market, can be a long-term competitor to regular natural gas, dollar for dollar. Sheraz Mian, an energy analyst at Zacks Investment Research, paints the LNG challenge this way: "Will natural gas prices remain high enough for these types of projects to earn the returns investors are looking for?" Exxon Mobil (Charts), not a company known for taking chances on unproven technologies, is betting $14 billion they will. Why all the hype? Creating LNG involves cooling normal natural gas to 260 degrees below zero Fahrenheit, sending it around the world in superinsulated ships and then re-gasifying it at its destination. "It's one of the biggest investment trends in the world," said David Talbot, with the energy research firm John H. Herald. "That's what's happening. We're going increasingly from crude oil to natural gas." The reasons for the boom are primarily twofold. The first is that the United States is using more and more natural gas because it's both cleaner burning than oil and economical.

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Links – Demand key to LNG

Need for natural gas is vital to the LNG market.

Department of Energy, 7-16-08, “Liquefied Natural Gas”, http://www.fossil.energy.gov/progr ams/oilgas/storage/index.html, [Crystal Xia]

Natural gas plays a vital role in the U.S. energy supply and in achieving the nation's economic and environmental goals. Although natural gas production in North America is projected to gradually increase, consumption has begun to outpace available domestic natural gas supply. One of several proposed supply options would involve increasing imports of liquefied natural gas (LNG) to ensure that American consumers have adequate supplies of natural gas for the future. Natural gas consumption in the United States is expected to increase from about 22 trillion cubic feet (Tcf) in 2005 to 26 Tcf by 2030. Currently, most of the demand for natural gas in the United States is met with domestic production and imports via pipeline from Canada. A small but growing percentage of gas supplies are imported and received as liquefied natural gas. A significant portion of the world's natural gas resources are considered "stranded" because they are located far from any market. Transportation of LNG by ship is one method to bring this stranded gas to the consumer.

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Impacts – LNG key to Economy

LNG is key to the world economy. David Nissen, director of the Program in International Energy Management and Policy at the Center for Energy @ Columbia University, 5-26-04, “Commercial LNG: Structure and Implications”, http://energy.sipa.columbia.edu/PDFs/Commercial%20LNG%20Repsol%20 presentation.pdf, [Crystal Xia]

To give a sense of the prospects for LNG expansion, Figure 1 shows the probable quadrupling of LNG demand in the Atlantic basin , with volumes rising from 40 Mt/y in 2003 to 160 Mt/y a decade later. There will be major growth in demand in the Iberian Peninsula, significant growth in France despite her traditional focus on nuclear power, and the potential for massive LNG import growth in the United Kingdom as growing demand and declining production of natural gas moves the UK from exporter importer stature. In North America, maturing production of natural gas is failing to keep pace with demand. On the supply side, Figure 2 shows projected growth in LNG supply through 2015. The reserves are more than adequate, and there is a great deal of new and expanded supply project formation activity. Out of the eight current export projects serving Atlantic markets, four are expanding, in Nigeria, Oman, Qatar, and Trinidad. New projects are being built in Egypt and Norway, and new projects are proposed in Angola, Equatorial Guinea, Iran, Nigeria, Venezuela, and in Algeria (which is finally returning to the new project market after the debacles of the 1980s)

Natural gas contributes largely to the world economy.Ed Blanche, staff writer, 2-04, The Middle East, http://findarticles.com/p/articles/mi_m2742/ is_342/ai_n25084312, [Crystal Xia]

US demand for natural gas is projected to grow by 23% over the same period, and the forecasts for Europe and Asia are just as striking. Gas provides about one-quarter of the total energy for the US economy. In Europe, the figure is 20% and rising, mostly with gas piped from Russia, which has 30% of the world's known reserves and probably a lot more under the frozen and largely unexplored north.Qatar and Iran share another 25% in the vast North Field/South Pars field in the southern Gulf: Next comes Saudi Arabia and the UAE with sizeable reserves. For the UAE, with 212 trillion cubic feet of gas, mostly in Abu Dhabi, the gas fields will fill the economic gap left by the emirates' declining oil fields. Even Oman, whose modest oil production is also in decline, has used LNG exports--worth some $1.2bn in 2002--to offset falling oil revenue.

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Short supplies of natural gas would erode the economy(SIMON ROMERO 7-17-03 “Short Supply of Natural Gas Raises Economic Worries” http://64.233.179.104/scholar?hl=en&lr=&client=firefoxa&q=cache:ivrHsOCLzPkJ:www.ibew1298.org/News%2520Articles/NYT%2520Short%2520supply%2520of%2520nat%2520gas.pdf+natural+gas+collapse+canada+economic+collapse )

Prices for natural gas have risen sharply in the last year, reaching a peak at more than $6 per million British thermal units, compared with about $3.65 a year earlier. Stored supplies of natural gas have fallen to the lowest level since the federal government began keeping records in 1976, with levels about 30 percent below the average for the last five years. The effects of this latest surge in prices have led to renewed calls from the gas industry for the loosening of environmental restrictions on drilling and pipeline construction in the United States. Energy Secretary SpencerAbraham and the National Petroleum Council are convening a top-level meeting later this month to discuss the shortage and propose solutions. Last week, the Federal Reserve chairman, Alan Greenspan, warned the House Energy and Commerce Committee that short supplies of natural gas could contribute to erosion in the economy. Mr. Greenspan emphasized the potentially important role that liquefied natural gas, in particular, could play in American energy imports.

LNG is good for the economy.Amanda Griscom, energy analyst at the environmental consulting firm GreenOrder, 11-6-03, “Liquid Assets”, http://www.grist.org/news/powers/2003/11/06/assets/, [Crystal Xia]

Actually, recent improvements in engineering and construction brought LNG production costs down by as much as 30 percent. "Most of these reductions have occurred in the liquefaction part of the process," said Stoppard, "which is the most energy-intensive part." To import natural gas, it must be chilled to minus 260 degrees Fahrenheit, at which temperature it converts to a liquid and reduces in volume. Once liquefied, "an amount of [natural gas] that would normally fill a beach ball can fit inside a Ping-Pong ball," according to a Time magazine article entitled "The U.S. Is Running Out of Energy," from July 21, 2003. Once shipped to terminals in the U.S., the liquid is slowly warmed up until it returns to its gaseous state, then sent through pipelines. This might seem like a preposterously energy-intensive process, but in fact, it's surprisingly efficient. There's no refrigeration required, because once the gas is liquefied, it just sits in giant insulated thermoses. As the liquid is shipped, it warms very slowly and some gas escapes from the containers, but the waste gas is captured and actually used to run the ship's engine. The re-gasification process simply consists of warming the liquid to room temperature, and requires very little energy. "Over the course of the LNG process, from extraction to point of use, a surprisingly negligible amount of the original harvested quantity is lost -- less, in fact, than is lost piping gas thousands of miles from the upper reaches of Canada or from Mexico, as we do today," said Cavanagh. LNG also has a long-term pricing advantage over pipeline gas, in that it is based on 20- to 30-year contracts. Traditionally, natural gas prices have been highly volatile, mainly because they are susceptible to weather-driven swings. (Very cold winters or very hot summers cause dramatic spikes in demand for gas heat and electricity, respectively.) LNG facilities, which require investments of up to $5 billion in machinery and infrastructure, are built with long-term supply commitments; those commitments also help stabilize prices, which is good for consumers and for the economy.

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LNG is an important part of the future US economy and is essential to maintain energy stability. Daniel Yergin, Chair of Cambridge Energy Research Associates, 3-06, “Ensuring Energy Security”, Foreign Affairs, EBSCO, [Crystal Xia]

The challenge of energy security will grow more urgent in the years ahead, because the scale of the global trade in energy will grow substantially as world markets become more integrated. Currently, every day some 40 million barrels of oil cross oceans on tankers; by 2020, that number could jump to 67 million. By then, the United States could be importing 70 percent of its oil (compared to 58 percent today and 33 percent in 1973) and so could China. The amount of natural gas crossing oceans as LNG will triple to 460 million tons by 2020. The United States will be an important part of that market: although Lie meets only about 3 percent of U.S. demand today, its share could reach more than 25 percent by 2020. Assuring the security of global energy markets will require coordination on both an international and a national basis among companies and governments, including energy, environmental, military, law enforcement, and intelligence agencies.

LNG imports play a large part in the world economy.Sophia Ruester and Anne Neumann, Department of Business and Economics, Dresden University of Technology, Chair of Energy Economics and Public Sector Management, 6-13-08, “The prospects for liquefied natural gas development in the US”, Science Direct, [Crystal Xia]

As a globally traded commodity, LNG assumes a significant role in the energy supply of major coastal nations such as the US, Japan, South Korea, Taiwan, and some European states. This section focuses on LNG receiving infrastructure in the US. For a survey of the globalizing LNG market and the issues related to LNG supplies, see Jensen (2005). The oil crises in the 1970s led to the construction of four LNG receiving terminals in the US. In the intervening years, both Cove Point and Elba Island were mothballed and Lake Charles was also closed for a long period. Now the four terminals are all re-opened and were or are being expanded.4 Whereas LNG has been primarily used for peak demand, CCGT power plants have made it a less seasonal commodity. In the early years of the present decade, LNG imports increased substantially, even though capacity utilization (around 55%) is still modest (Simmons, 2005). However, the strong global price competition during the past two years has limited short-term deliveries to the US and the volumes contracted under long-term agreements. There is a general consensus that LNG imports will again rise as domestic production stagnates and declines, and imports from other sources (Canadian pipeline gas) decline. Historically, Algeria was the dominant supplier to the US, but the mix of suppliers has shifted to facilities at Trinidad/Tobago, which today account for over two-thirds of the LNG imported to the US. Additional deliveries come from Nigeria, Qatar, Oman, and Malaysia. Negotiations are underway with other suppliers, some of which are green-field operations and expect to deliver from Equatorial Guinea or Norway.

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AT: LNG Accidents

42 years of successful shipping empirically deny a risk of accidentsLNG World Shipping, 12/22/06, (http://www.lngworldshipping.com/content/news/compNews224.htm) [S. Page]

The LNG shipping industry has just completed 42 years of operations, during which time 47,000 cargoes have been successfully delivered and over 100 million nautical miles have been logged by laden LNG carriers. In the history of LNG shipping to date there has never been a major spill of LNG; no LNG containment system has been breached; and no crew member has ever been killed as a result of a cargo incident.

LNG is safe – LNG has been shipping for 45 years without incident.Steve Hargreaves, staff writer, 8-26-06, CNN, “Betting billions on liquefied natural gas”, http://money.cnn.com/2006/08/28/news/economy/lng/index.htm, [Crystal Xia]

While there are currently only five LNG terminals in the U.S., more than 40 are on the drawing board. But many of these won't get built, and it's not just economics blocking the way. Finding a place to build an LNG terminal is a challenge because many people are afraid of a massive explosion if a plant were built near their homes. Industry officials point to an impressive safety record. Bill Cooper, the executive director of the Center for Liquefied Natural Gas, says that, in the 45 years LNG has been transported by boat, there has never been a spill involving an LNG ship. He also notes that the contents are not under pressure, and it would take a rare combination of events to cause an explosion.

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AT: LNG Accidents

Reports of LNG safety concerns are all sensationalism—it’s the safest shipping sector in the worldBryan Mitchell 6/23/08 (http://www.thecuttingedgenews.com/index.php?article=587)

Your article "Liquefied Natural Gas Tankers Remain Giant Terror Targets" (Page One June 16) does nothing but perpetuate the myths about LNG shipping. The expert witnesses speaking in front of your congress have their own agenda to play up the risk, a risk which frankly is laughable. The union representatives know nothing of our (UK that is) vetting or monitoring procedures, scaring the US public with visions of floating bombs manned by any Tom, Dick or Harry that choses to board is just so ridiculous I can't believe the politicians don't see through it. No one can sail on board any ship I have ever worked on without an official seaman's registration book issued by their own country and more commonly now the flag state of the ship registration as well. The flag state issues the identification document after verifying the national ID and certification. I (and every other certificated officer in the UK) am subject to a revalidation process every 5 years, the British government has my full history of the 40 years I have spent at sea. We come to the US and suddenly I am a security risk? I am master on one of the largest, latest generation LNG ships scheduled eventually to come to the US and I can tell you I don't like the idea at all. The United States is the most hated shipping destination in the world, the authorities are inhospitable, the regulations so complex and unforgiving that the smallest mistake in completing a form leads to a fine of more than $25,000 and delays which can quickly end up costing hundreds of thousands of dollars more. Furthermore, my ship, like many of the sister vessels being built at the moment, is registered in the Marshall Islands which is US territory and a US 2nd register, we are also classed by ABS the American Bureau of Shipping. Yes my ship is registered with a flag of convenience, with the head office in Richmond, Virginia. True, I'm not a US citizen, so they got that bit right. The US is dependent on international not American shipping, without it the country would quickly stop, the only reason your union bosses insist on using the terror-threat card at every turn is for them to get their members on board my ship. Wake up, their is no terror threat from an LNG tanker bomber. LNG shipping has the best safety record of any sector in the shipping world; the ships are built to contain the cargo they hold. The cargo is almost impossible to explode and the notion that a ship can be blown up on demand is beyond belief and as for a Naval officer suggesting such a thing raises doubt on the creditablity of US naval intelligence services. LNG burns with a "lazy" flame, not an explosive one; in all probability any incident on a tanker would lead to fire nothing more, bad enough for those on board but this does not represent a major danger to surrounding areas. No large scale test has ever been conducted of the results of a leak of LNG, all results are an extrapolation of a test using very small quantities of LNG carried out in the early seventies. Everything being given as fact is far from it. Set the record strait (sic). Stop slandering me and my colleagues and be honest with the American public. LNG ships have been around for almost 50 years and there has never been a major accident, I am sure this record will continue.

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AT: LNG Accidents

LNG is the safest fuel in the worldFrank Katulak 2005 (LNG - A Safe Alternative Fuel Chemical Engineering Progress, Feb 2005)

Imagine a clean, non-toxic fuel that could be safely and efficiently used to heat homes and generate electricity, one that is naturally abundant and comes from locations around the world, not just the Middle East. This fuel wouldn't pollute land or water resources if it accidentally spilled while being transported and could not catch fire or explode in its liquid state, unlike other fossil-fuel counterparts. That's LNG, or liquefied natural gas. LNG is not new. It has been successfully transported and used for decades. With 113 facilities, the U.S. has more LNG operations than any other country. So attractive are LNG's characteristics, that the U.S. has embarked on a major initiative to expand LNG importation and use in the next decade and beyond as demand for natural gas continues to rise, while traditional domestic sources of natural gas and other fuels plateau. But glancing at recent news stories about LNG, one might conclude that the U.S. is literally playing with fire - that LNG is one of the most hazardous materials in existence or that its ships are natural targets for terrorists. How the industry got to this point will one day be fodder for a business school case study. In the meantime, let's look at the undisputable facts about LNG safety. LNG receiving and storage facilities, many of which are in populated areas, have an exceptional safety record by any measure. There was one tragic incident more than 60 years ago during the industry's in fancy, and it was a critical learning experience for the industry and government. Since then, well-developed design, construction, and safety codes have been established and in use. Small LNG vapor releases and minor fires have been reported at U.S. LNG operations, but the impact was limited. Incidents are rare, and primarily characterized as construction accidents where no LNG was directly involved. That is a record unmatched in the fuel industry. Yet despite this achievement, members of the media, activists, some academics and political leaders have come down with what one children's book author called a bad case of the "what ifs" regarding terrorism and LNG. In many cases, their concern does not seem to apply to other fuels, critical infrastructure or populated venues that frankly could be infiltrated more easily and with devastating effect. The problem with most of the theories about the consequences of an LNG incident is that they emphasize what could theoretically happen, and not what would likely happen in the real world. There's a big difference. While the potential consequences vary somewhat, credible independent scientific analyses show that even in a worst-case scenario, the most probable damage would be limited in size. Much of that is due to the unique characteristics of LNG. As a liquid, it cannot burn, much less explode. When it is warmed and turned back into natural gas, it is flammable within a limited range - in concentrations of 5-15% with air, and will not explode in an unconfined environment. Then there are the methods and equipment employed to transport LNG safely. Standards, codes and regulations have evolved to ensure safe and secure operations, utilizing multiple layers of protection. It's ironic that so much debate has evolved about the relative safety of LNG transport and storage, when LNG facilities might in fact be the most secure, extensively regulated maritime operations in existence. With that said, the LNG industry stands up well to scrutiny. Our company and others continue to work with the appropriate authorities to eliminate the chance of an incident of any kind, and we will gladly match our safety record and procedures with any other fuel industry. But at some point, the debate should subside and decisions made. According to the Federal Energy Regulatory Commission, current natural gas supplies are adequate, but construction of new infrastructure will be needed by 2010 or there will be shortfalls. The lead-time for even the simplest LNG infrastructure projects to deliver more supply is 3-5 years. The LNG industry has proven it can operate safely and reliably. The time for action is now.

Explosion risk is empirically denied

David J. Lynch 12/19/05 (http://www.usatoday.com/money/industries/energy/2005-12-19-lng-usat_x.htm) [S. Page]LNG can burn only in gas-to-air ratios of 5% to 15%, meaning explosions are not certain under all conditions. Yet, there have been accidents at some of the world's 190 onshore terminals, including a 1979 fire at Cove Point that killed one worker. In 1944, a fire at an LNG facility in Cleveland killed 128 people, the CRS report said. A fire in January 2004 at an Algerian facility killed 27 people.

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LNG ships are incredibly safe.Lloyd’s List International, 5-23-08, “LNG and LPG vessels are safest around, says P&I club”, LexisNexis, [Crystal Xia]

GAS tankers are today among the safest ships afloat but the sector still has a battle with a public image of vessels laden with potentially explosive and devastating cargo. A recent study by the leading marine mutual the UK P&I Club has shown that gas tankers have consistently fewer claims than any other shipping segment. That is reflected in the fact that out of 50,000 voyages made by liquefied petroleum and liquefied natural gas tankers since the 1960s, there has been no major loss incident. "Misinformed opponents of gas ships have portrayed them as bombs waiting to go off", says UK P&I Club loss prevention director Karl Lumbers. "In fact, they're among the safest ships afloat and have consistently fewer cargo claims than other types of ships." More than 900 specialist tankers take 50m tonnes of LPG each year worldwide, together with 20m tonnes of ammonia and petrochemical gases, while more than 200 vessels carry 150m tonnes of LNG.

LNG is safe and secure.William H. Lehr, Emergency Response Division @ National Oceanic and Atmospheric Administration, 2-20-07, Journal of Hazardous Material, Volume 140, Issue 3, pg 411, Science Direct, [Crystal Xia]

The safety record for such liquefied natural gas (LNG) is an admirable one. According to the United States Federal Energy Regulatory Commission (FERC), in the past 40 years there have been more than 33,000 LNG ship voyages without a significant accident or cargo security breach. However, the number of proposed re-gasification terminals before FERC for approval exceeds by an order of magnitude the number of existing terminals. Moreover, the post 9/11 environment requires that we not only consider the consequences of accidental releases but also deliberate terrorist attack on the LNG supply.

LNG is one of the safest energy sources around.Cindy Hurst, political-military research analyst @ Foreign Military Studies Office, 6-30-08, “Liquefied Natural Gas: A Growing Economic Target?”, http://www.thecuttingedgenews.com/in dex.php?article=572, [Crystal Xia]

William Cooper, Executive Director for the Center of LNG said, “The added security features for the tankers coming into port are such that a successful attack on an LNG tanker is slim to none.” Captain Scott Conway argues that LNG tankers are the safest tankers in the shipping industry. “There’s no way I’d bring my wife or child on an oil tanker, for example. However, we didn’t hesitate to bring our families on the LNG ships. That is how safe the ships were. They’re very well made.” After witnessing various experiments done on LNG and working closely with the liquid, Conway also views it as “an extremely safe, non-toxic, non-explosive cargo.” Despite these views, the debate continues, and as long as the uncertainties surrounding the safety of LNG remain unanswered, officials must continue to strive for maximum safety measures. The U.S. and other consumers of LNG should learn to manage and understand these risks in order to reach a solution that will best mitigate any possible incident. Anne Korin summed it up by saying, “We don’t know what would happen because there hasn’t been such an attack yet.” The goal should be to place a large enough buffer between tankers (and terminals) “from any dense urban areas so as to minimize appeal of the target, which lies in its potential to provide a mass casualty incident.” Finally, when it comes to LNG as an economic target, the best measure to mitigate this possibility is simply to ensure that appropriate measures are taken to keep dependency on LNG at a reasonable level.

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AT: LNG Terrorism

LNG boats are not terrorist targetsDavid J. Lynch 12/19/05 (http://www.usatoday.com/money/industries/energy/2005-12-19-lng-usat_x.htm) [S. Page]

But the big worry is a terror attack, a danger that industry representatives say has been exaggerated. At Cove Point, relatively isolated from residential communities, even if there were an explosion, the closest homes would be unaffected, according to Frederick. "While there's a perception these vessels are a terrorist target, terrorists are looking for body count. There's not a lot of body count involved in this," says Frederick. Since the 2001 terrorist attacks, the Coast Guard has toughened security measures on LNG shipments. Tankers bound for U.S. terminals now must provide 96 hours' notice of their arrival, up from 24 hours before Sept. 11, 2001. Background checks are conducted on crews, and tankers are boarded by the Coast Guard.

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LNG ECON AFF

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2AC – LNG ECON

1. LNG is facing opposition nowSophia Ruester and Anne Neumann, Department of Business and Economics, Dresden University of Technology, Chair of Energy Economics and Public Sector Management, 6-13-08, “The prospects for liquefied natural gas development in the US”, Science Direct, [Crystal Xia]

Industry, policymakers, and regulators agree that of the more than 40 proposals, a handful will become reality. Frisch et al. (2005) favor 14 terminals “since collective capacity would vastly exceed the total amount of LNG consistent with forecasted demand growth” but some industry watchers predict the amount will be less than ten. Since September 11, the public has grown more aware of risks to national security. Chemical plants and existing and planned nuclear and LNG facilities have come under intense scrutiny. Richard Clarke, a former Clinton administration official, has published several reports on the likelihood of terrorist attacks against on- and offshore facilities and tankers. Given the reluctance of US coastal residents to favor onshore facilities, receiving terminals on both coasts (and in Florida) will likely face prolonged battles for approval. An easily documented example of grassroots resistance is Hess LNG's Weaver's Cove (Fall River, MA). The onshore brownfields site is 4 miles from an existing pipeline. Following the project's announcement in 2000–2001, it quickly became apparent that the proponents had not done their homework. To offload, tankers would travel many miles through Rhode Island waters to reach the Fall River facility. Rhode Island officials were quick to fault the project, and local Massachusetts politicians joined the fray when it was revealed that existing bridges were too small for tankers to pass under. Fall River, an aging industrial city has struggled to redefine itself; residents and the former mayor made it clear to Massachusetts officials and to FERC early on that a nearby LNG facility would deter new business from relocating. Terrorist and safety concerns also figured in the opposition. News in March 2008 concerning a new plan to construct an offshore facility as part of the original proposal further incensed local officials who claimed that Hess LNG did not notify them before announcing the offshore addition. New LNG must also compete with existing facilities and expansions. A barrier to entry is the lack of available upstream deliveries. In contrast to market entrants, incumbent oil and natural gas majors currently simultaneously construct liquefaction capacities to correspond with regasification capacities (e.g. ExxonMobil in Qatar on the upstream side and in the US and UK parallel on the downstream side of the LNG value chain). At present, only minor non-contracted volumes are available for LNG trade. Spare capacities are likely to evolve only if existing sites are expanded.Finally, fluctuations in the price of oil coupled with continued political instability in the Mideast frequently make it difficult for proponents of new LNG to get their message through to the public and many decision-makers.

2. The LNG market is already slowed due to lack of production and international demand.Clifford Krauss, correspondent for the NYT, 5-29-08, “Global Demand Squeezing Natural Gas Supply”, New York Times, http://www.nytimes.com/2008/05/29/business/29gas.html, [Crystal Xia]

But now L.N.G. shipments to the United States are slowing to a trickle, and Cheniere and other companies have dropped plans to build more terminals. A longstanding assumption of American energy policy has been that natural gas would be plentiful abroad, and therefore readily available for importation, as production falls off in North America, where many fields are tapped out. But some experts are starting to question that idea, saying natural gas could be subject to the same explosion in overseas demand that has made oil so expensive. As it is, the supertankers that were supposed to deliver cargoes of gas from Africa and the Middle East to the United States are taking them to places like Spain and Japan instead, pushing up gas prices and depleting the nation’s stockpiles as the hurricane season approaches. “A few years ago people looked at L.N.G. as a solution to North America’s gas needs,” said Nikos Tsafos, an analyst with PFC Energy, a consulting firm. “But today we see that there is less L.N.G. around than people expected, and there is more competition for that L.N.G. from markets that are willing to pay more than the United States.”

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3. Gas consumption would increase with renewables due to lower prices.

R. Neal Elliot, Anna Monis Shipley, Steven Nadel, and Elizabeth Brown, @ American Council for an Energy-Efficient Economy, 12-03, “Natural gas price effects of energy efficiency and renewable energy practices and policies”, pg. 28, http://www.aceee.org/pubs/e032full.pdf, [Crystal Xia]

4. Increased renewable energy leads to increased natural gas demand

Wall Street Journal. 04/18/08. “Surge in Natural-Gas Price Stoked by New Global Trade.”[Takumi Murayama]

In a twist, the effort to build alternative-energy projects like solar arrays and wind farms also boosts construction of gas-fired plants. Because wind is unpredictable, it's often necessary to build back-up generators, and gas-fired plants have an advantage in that they can be started up relatively quickly, says Doug Kimmelman, senior partner with Energy Capital Partners, a private-equity firm focused on the power sector.In addition, regulatory approval and construction times are shorter for gas plants than coal or nuclear. For reasons like these, new gas-fired power plants continue to be built or planned

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AFF – Turn: High prices bad

High gas prices are a drag on the economy.

Stephen Brown, Director of Energy Economics and Microeconomic Policy Activity @ the Federal Reserve Bank of Dallas, 6-19-03 “US Natural Gas Markets in Turmoil: Testimony Prepared for a Hearing on The Scientific Inventory of Oil and Gas Resources on Federal Lands”, http://www.dallasfed.org/news/speeches/03brown_testimony.pdf, [Crystal Xia]

Sustained high natural gas prices are likely a drag on U.S. economic activity. Higher energyprices are indicative of increased scarcity of natural gas which is a basic input to production.6 Assuch, rising natural gas prices can result in a classic supply-side shock that reduces potentialoutput. Consequently, output and productivity growth are slowed. The decline in productivitygrowth lessens real wage growth and increases the unemployment rate at which inflationaccelerates.7 If market participants expect the near-term effects on output to be greater than thelong-term effects, they will attempt to smooth their consumption by saving less or borrowingmore, which boosts the interest rate. With slowing output growth and an increase in the realinterest rate, the demand for real cash balances falls, and for a given rate of growth in themonetary aggregate, the rate of inflation increases. Therefore, rising natural gas prices reduceGDP growth and boost real interest rates and the measured rate of inflation.8

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AFF – Impact Turn Booster: LNG Security Costs High

Security costs will increasePaul W. Parfomak, CRS Specialist in Science and Technology, 5/24/04 (CRS Report for Congress Liquefied Natural Gas (LNG) in U.S. Energy Policy: Issues and Implications) [S. Page]

To protect the public from an LNG accident or terrorist attack, the federal government imposes numerous safety and security requirements on LNG infrastructure. The nature and level of risk associated with LNG is the subject of ongoing debate among industry, government agencies, researchers and local communities. Whatever the specific risk levels are determined to be, they could multiply as the number of LNG terminals and associated tanker shipments grows. Likewise, the costs associated with mitigating these risks are also likely to increase. To the extent these costs are not borne by the LNG industry, they may represent an ongoing burden to public agencies such as the Coast Guard, law enforcement, and emergency response agencies.

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INDONESIA

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A. LNG market is booming – makes US investment in Indonesian LNG more viable

Andrew Symon, Visiting Research Fellow at the Institute of South-east Asian Studies, 6/13/04, “Asia-Pacific: Get set for an LNG explosion in the region,” Energy Bulletin, http://www.energybulletin.net/node/630

Until now, LNG has been only a relatively limited source of energy in Asia, geared primarily to Japanese needs, and, more recently, markets in South Korea and Taiwan. From its historical role as a high-priced fuel for niche markets, almost a 'boutique' fuel, LNG seems to be on the way to becoming a mass market fuel, attractive both commercially and environmentally.Energy demand and supply patterns in Asia could be revolutionised if much larger volumes of LNG were supplied at a lower price and under more flexible contract conditions, similar to those now found for coal and oil.Great benefits would flow to the region. Natural gas is a very efficient and clean fuel. There is minimal environmental impact from its production, shipment and combustion. Of all the fossil fuels, it produces the least emissions of carbon dioxide and other greenhouse gases and negligible sulphur dioxide and nitrous oxides.On the supply side, producer countries would clearly gain from greater exports. Also, countries with strong financial, shipping and trading centres could also find new roles in the LNG business. The equipment supply spin-offs are also important. Already the current boom in the LNG business is resulting in order books overflowing at Japanese and Korean shipyards.Yet, until now, natural gas supply in Asia has been limited by the distance of many demand centres from major gas fields. Long-distance pipelines have not been practical and LNG has been an expensive option. Just 10 per cent of Asia's primary energy consumption (including oil) is met by natural gas compared with 25 per cent in North America and approaching 40 per cent in western Europe. In Russia, it is more than 50 per cent.Historically, LNG production in the region focused on Japanese demand and, more recently, markets in Taiwan and South Korea. Japan fostered LNG development after the oil shocks of the 1970s, when it turned to LNG, although highly priced, in order to diversify its energy sources. Japanese finance underpinned gas field and LNG plant development in Indonesia, Brunei, Malaysia and Australia.Until recently, LNG production was dominated by the majors, such as Shell and Mobil (now ExxonMobil), with considerable direction and participation by governments and state-owned companies, such as Malaysia's Petronas and Indonesia's Pertamina.Buyers were also limited to the few large private power and gas utilities in Japan and the state-owned utilities and oil companies in South Korea and Taiwan. Contracts were very long term (20 to 25 years) and tended to be rigid. Prices were linked and closely indexed to changes in oil prices.These conditions, it was argued, were necessary to secure finance for the multibillion-dollar costs of LNG production facilities, upstream gas fields, shipping and regassification plants. Buyers, in turn, accepted these as the price of energy security.But much has changed in the last five years. The LNG industry is becoming much more dynamic as a result of new buyers and sellers. India and China have become LNG buyers. The US west coast seems certain to take LNG shortly and it must take LNG from the Asia-Pacific region, as the Panama Canal is too narrow to allow passage of LNG carriers from plants in the Caribbean, and west and north Africa. Shipments can move though from east to west through the Suez Canal. Mexico is also to take LNG, mainly to fuel power, and pipeline gas supply to California.South-east Asia may soon become an LNG consumer with the Philippines planning to take LNG from Indonesia. Singapore is also considering taking LNG and Indonesia itself may ship LNG into Java from Indonesian Papua.

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B. Renewable energy trades off with natural gas – it discourages natural gas producers.Ryan Wiser and Mark Bolinger, research scientists @ Ernest Orlando Lawrence Berkeley National Laboratory


C. Indonesia needs investment or it will fail as a gas supplier and its economy will suffer

Grace Nirang, reporter in Jakarta, and Christian Schmollinger, reporter, 8/10/06, “Natural gas running low in Indonesia,” International Herald Tribune, http://www.iht.com/articles/2006/08/09/bloomberg/bxgas.php

Indonesia is in danger of losing its dominance of the world's market for liquefied natural gas as its fields are running out of gas faster than expected and local politics are deterring new producers from investing in the country.Chevron, the American oil company, supplies gas to the world's largest liquefaction plant, located on the Indonesian part of Borneo Island. The company told the Indonesian government last month that there was not enough gas to meet commitments to customers in Japan, South Korea and Taiwan.Indonesian sales are expected to fall 19 percent this year, according to government shipment plans.Indonesia has been the world's top supplier of liquefied natural gas for three decades. But it has failed to find new supplies of gas just as prices and demand for the cleaner-burning fuel have surged to records. Some buyers are looking elsewhere, like Qatar, cutting revenue and hurting the government's efforts to lower its budget deficit."If we can't attract investment in the gas industry for new reserves, thenthere will be a decline as a major global supplier," Anton Gunawan, an economist for Citibank in Jakarta, said.

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D. Revenues from natural gas exports are substantial – 10 percent of total export revenues

US Embassy, Jakarta Indonesia, 9/1/03, “Natural Gas Changes in Indonesia,” Energy News, http://jakarta.usembassy.gov/econ/natural_gas2003.html

Indonesia has between 170 and 180 trillion standard cubic feet (TSCF) of natural gas reserves, the twelfth largest in the world. In 2002, the country produced 3.04 trillion cubic feet (TCF) of gas, number six in world gas production. Indonesia currently supplies 26 percent of the world’s LNG. LNG accounts for 54 percent of the country’s total natural gas production and is exported to Japan, South Korea and Taiwan. Pipeline gas exports to Singapore began in 2001, reaching 82 BCF last year, with a new Sumatra-Singapore pipeline inaugurated last month. Revenues from gas exports are substantial -- $5.6 billion in 2002, or about 10 percent of Indonesia’s total export revenues. Domestically, gas use comes primarily from fertilizer and petrochemical plants (34 percent) and the power industry (25 percent). Most of Indonesia’s gas comes from East Kalimantan (33 TCF in reserves) and Sumatra (29 TCF in reserves), but there are large uncommitted reserves in Papua (18 TCF) and other areas in the archipelago (46 TCF). The industry is dominated by seven major companies, which account for 90 percent of all production (see para 19).

E. Indonesian progress is fragile and contingent on its economy, loss in economy would collapse the hopes from democratic consolidation

Angel Rabasa, Senior Policy Analyst, RAND Corporation, and Peter Chalk, an expert on transnational crime and terrorism at the RAND Corporation, Washington, USA, Rand, 2001, 115 pgs, Indonesia's Transformation and the Stability of Southeast Asia, p. 70

The best-case scenario presumes that the political leadership in Jakarta will move the political reform process toward a stable democratic order; it is also contingent on whether the government will be able to get a grip on the economy, restore investor confidence, and bring about some improvement in the standard of living of ordinary Indonesians. If the Wahid government or its successor were able to manage these challenges successfully, the prospects for democratic consolidation would improve.

The current trend lines, however, do not appear to be encouraging. As of the end of 2000, the governing coalition had all but unraveled. President Wahid has seen the erosion of his support in Parliament and survived in his position only through the tolerance of Vice President Megawati’s PDI–P. The economic recovery, such as it is, is fragile. According to sources in Singapore, some of the ethnic Chinese capital that had fled Indonesia returned after Wahid’s election, but the flow of capital slowed because of lack of confidence in the Indonesian government’s economic management.2

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F. Smooth Indonesian transition key to Southeast Asian security and Asia-Pacific power balance

Angel Rabasa, Senior Policy Analyst, RAND Corporation, and Peter Chalk, an expert on transnational crime and terrorism at the RAND Corporation, Washington, USA, Rand, 2001, 115 pgs, Indonesia's Transformation and the Stability of Southeast Asia, p. Questia

Indonesia is undergoing a systemic political transition that could lead to a variety of outcomes, from the consolidation of democracy to regression to authoritarianism or disintegration. The stakes are high. With a population of 212 million and a land mass greater than the rest of Southeast Asia combined, vast natural resources, and a strategic location straddling critical sea-lanes of communication and straits, Indonesia is the key to Southeast Asian security. Therefore, Indonesia's choices and its evolution will frame the future of Southeast Asia and influence the balance of power in the broader Asia-Pacific region. Influencing Indonesia's transformation is the most critical challenge to U. S. foreign and defense policy in Southeast Asia. This study examines the trends and dynamics that are driving Indonesia's trans formation, outlines Indonesia's possible strategic futures and analyzes their implications for regional stability and U. S. security interests, and identifies options available to the United States and the U. S. Air Force to respond to these challenges.

G. Asian instability would collapse the global economy and cause nuclear war

Jonathan S. Landay, national security and intelligence correspondent, 3/10/2k “Top Administration Officials Warn Stakes For US Are High in Asian Conflicts” Knight Ridder/ Tribune News Service, p. lexis

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Uniqueness – Indonesian Prices High

Indonesian gas prices high now

The Star Online, 4/1/08, “Indonesia to get record price for LNG,” http://biz.thestar.com.my/news/story.asp?file=/2008/4/1/business/20807717&sec=business

Indonesia, the world's third-largest exporter of liquefied natural gas, will get record price for the fuel supplied to Japan in a contract extension starting 2011 as buyers seek to secure supply amid rising demand.The price of LNG from the Bontang plant on Borneo island will be “almost'' US$16 a million British thermal units, Iin Arifin Takhyan, vice-president at PT Pertamina, the appointed seller for the fuel, said in Jakarta yesterday.Benchmark LNG prices have more than doubled since 2002, partly as a slump in Indonesia's exports forced Asian power generators to seek replacements on the spot market. The Southeast Asian nation has contracts with a group of Japanese utilities including Kansai Electric Power Co. and Osaka Gas Co to supply a total of 12 million tonnes of LNG a year, which will expire by March 2011.The Southeast Asian nation will cut LNG supply to Japan by 75% to 3 million tonnes a year for the first five years after current contracts expire, Takhyan said. The supply will be reduced to 2 million tonnes annually in the five years after that.

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Uniqueness – Indonesian NG Strong

Indonesia is producing more LNG now – industry is doing well

Market Wire, Researched by Industrial Info Resources a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, 6/19/08, “Indonesia Plans $1.7 Billion Liquefied-Natural-Gas Terminals Project, an Industrial Info News Alert,” Reuters, http://www.reuters.com/article/pressRelease/idUS99212+19-Jun-2008+MW20080619

Indonesia's state-owned gas distribution firm, PT Perusahaan Gas Negara (Persero) Tbk (PGN) (JSX:PGAS) (Jakarta, Indonesia), plans to undertake a $1.78 billion project to construct three liquefied-natural-gas (LNG) regasification terminals in East Java, West Java, and Medan, North Sumatra, to address the growing demand for LNG in the islands. PGN will secure funds for the project from the company and through international loans. Construction of the terminals is scheduled to commence by the end of 2008 and will continue until 2011. Operating and maintenance contracts will last from the fourth quarter of 2011 to 2016.

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Internals – Indonesia Supplier

Indonesia is one of the largest natural gas exporters especially in Asia

Green Car Congress, 7/13/08, “Indonesia to Accelerate Shift to Natural Gas Vehicles,” http://www.greencarcongress.com/2008/07/indonesia-to-ac.html

However, according to the US Energy Information Administration (EIA), Indonesia is the tenth largest holder of proven natural gas reserves in the world and the single largest in the Asia-Pacific region.Historically, the EIA says, Indonesian natural gas production has been geared toward export markets, but the country has made an effort to shift natural gas toward domestic uses in recent years as a substitute for the country’s declining oil output. However, Indonesia’s limited natural gas transmission and distribution network remains an obstacle to further domestic consumption.

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Internals – Indonesia Wants US Markets

Indonesia is vying for US markets as LNG market gets more competitive


The global LNG market today faces declining production and transportation costs, excess supply, increased use of flexible contracts, and greater choice of suppliers. The Japanese Institute of Energy Economics forecasts that LNG supplies in Asia will rise to 180 million metric tons per year (mmtpa) by 2010, outpacing demand by about 60 MT. The benchmark prices that China negotiated in late 2002 with Australia and Indonesia (between $2.40-$3.00/mmbtu) for the Guangdong and Fujian LNG terminals confirmed the downward pressure on prices. Japan (the world’s largest LNG importer), whose import LNG prices for 2002 averaged $4.27/mmbtu, took particular notice. As a result, Indonesia’s traditional LNG markets (Japan, South Korea and Taiwan) are eyeing new sources of LNG and seek to negotiate lower prices or at least shorter contracts. (Note: Indonesia is not standing still, however. It is currently seeking marketing opportunities in the western U.S. and Baja California with U.S. companies such as Marathon, Sempra and ChevronTexaco.)

Indonesia is getting US markets for LNG and wants more

Tony Hotland, The Jakarta Post, Jakarta, 02/09/2004, “Mitsubishi mulls supplying Indonesia LNG to U.S. market,” http://www.thejakartapost.com/news/2004/02/09/mitsubishi-mulls-supplying-indonesia-lng-us-market.html

The Mitsubishi Corporation is mulling supplying liquefied natural gas (LNG) from Indonesia to the California market in the United States.Mitsubishi's energy business group manager in Jakarta Mauren Toruan said the firm's subsidiary Sound Energy Solutions had applied to the U.S. Federal Energy Regulatory Commission (FERC) and California's Port of Long Beach for a license to construct an LNG terminal at the port.""After the filing, we will start serious negotiations to secure five million tons per annum of LNG for the terminal and send a delegation to Indonesia,"" said Mauren.If the FERC and Long Beach authorities approve the LNG terminal project, Mitsubishi would start construction by the end of this year, aiming for completion in late 2007, he said.The planned US$400 million terminal is designed to provide around 700 million cubic feet of gas daily, which will meet 10 percent of demand in California.Mauren said the company favored Indonesia as the LNG supplier for its California terminal because of its flexibility in pricing.Indonesia is willing to sell its LNG according to the U.S. pricing scheme, rather than the Japanese pricing scheme -- upon which Indonesia has been selling LNG for decades to the Asia-Pacific market.""In the U.S., the price of natural gas moves separately from crude oil price ... LNG price in Japan is linked to crude oil price,"" said Mauren.Japan is a traditional LNG buyer from Indonesia, along with South Korea and Taiwan.Indonesia and other LNG producers in the region, including Australia and Malaysia, are eying the huge potential of the U.S. gas market.

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Internals – NG key to Relations

Natural gas markets tie countries together because of risk, countries sell based on geopolitical interests

René Snijder, Energy consultant, lecturer at the Energy Delta Institute in The Netherlands, member of the gas group of the Clingendael Institute and member of IGU committee B (Strategy and Regulation), with over 30 years experience in the natural gas industry, working for the NV NederlandseGasunie and two years for Shell, 3/11/2008 “The Future of Gas and the Role of LNG: Economic and Geopolitical Implications,” Real Instituto Elcano, http://209.85.215.104/search?q=cache:L5jbxi17HZQJ:www.realinstitutoelcano.org/wps/wcm/connect/resources/file/eb876d0ad931a07/WP14-2008_Snijder_Gas_LNG_Economic_Geopolitical_Implications.pdf%3FMOD%3DAJPERES%26attachment%3Dtrue+Indonesia+LNG+economy&hl=en&ct=clnk&cd=45&gl=us&client=firefox-a

Fifty-six percent of natural gas reserves are located in just three countries (Russia, Iran and Qatar). They have an economically viable choice to ship their gas to either Asia, the US or Europe – wherever the best market might be found–. This could be not only an economic choice but perhaps also one based on which market might best serve short- or long-term geopolitical interests. Furthermore, consumer countries might not have any guarantee that producing countries and their NOCs (national oil/gas companies) are able (or willing) to make all the necessary investments in time to supply the markets. Investment could transform a sellers’ market into a buyers’ market, thereby putting pressure on prices for not only their new supplies, but also –and even more importantly– their existing supplies. Due to the nature of the gas market, with its limited supply options, the risk exists that producers will be in a position to exercise market power, preventing a buyers’ market from developing. This would be to the detriment of consuming countries; on the other hand, producing countries will always need to maintain good long-term relationships with future markets.

Natural gas trade is largely tied to bilateral negotiations and trade relations


Of the internationally traded gas in 2005, 77% was pipeline gas. A different picture has emerged for this distinct trading realm: only 60 % of the pricing is based on the competing fuel principle while a very large share stems directly from the result of bilateral negotiations (for instance, that between the Ukraine and Russia). Trade based on spot prices for pipelined gas across borders is only 28%. LNG supplies can be more easily redirected between and among markets than pipeline gas. Of course there are often contractual rigidities, gas specifications and other hurdles to be taken into account, but they make for less of a barrier that could lead to supply interruption than does the physical and market context of pipeline gas. Pipeline deliveries create a mutual dependency and a long-term relationship with more potential geopolitical impact than LNG trade could ever bring to bear on the mutual relations between suppliers and consumers. As a measure of the potential geopolitical impact pipelines can have, one need go no further than the many disputes and debates on pipelines to Europe. Pipeline route, conditions and desirability are now controversial political topics, far more debated than the possible different geographic o national origins of LNG imports. This is perhaps a far more interesting topic requiring the attention of policy makers.

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Brink – Investment

Indonesian gas markets are suffering now and need new investors – courting the US now

James Irwin, reporter in Singapore, 3/30/04, “Facing Competition, Indonesia Courts LNG Buyers,” International Oil Daily, p. Lexis

Although Indonesia remains the world's biggest LNG producer, its once-dominant position is showing signs of strain. LNG production is flat at the Total-operated Bontang LNG plant and is in sharp decline at Exxon Mobil's Arun facility. With years to go until the BP-led Tangguh project in Papua starts operating, the country's LNG production has already slumped from a peak of 29 million tons in 1999 to 25.3 million tons last year.Overall, Indonesia's LNG fields continue to decline while new LNG fields like Tangguh are not expected to begin producing until 2007 or even 2008. Others, like the Donggi field, will start producing later than that.The increasing global supply of LNG is also making it hard for Indonesia to line up buyers. Competition has already heated up, courtesy of the Royal Dutch/Shell-led Sakhalin-2 project in eastern Russia, as well as from Australia's North West Shelf and Gorgon projects (IOD Mar.15,p4).With China-- and to a lesser extent India-- increasing their demand for LNG, countries like Russia and Australia look set to capture more of Indonesia's share.The US West Coast is also shaping up as an important LNG battleground for Indonesia, Russiaand Australia, whose energy minister, Ian Macfarlane, plans to personally pitch California's Governor Arnold Schwarzenegger on the benefits of Australian LNG at a meeting in June. Japan's Mitsubishi is considering sourcing 5 million tons of Tangguh LNG each year for its planned import terminal at Long Beach, California. Mitsubishi owns a stake in Tangguh, as well as Sakhalin.Indonesia's outlook is made worse by the fact that its long-term LNG contracts with two of the world's biggest LNG consumers – Japan and South Korea-- expire at the end of this decade. The two North Asian countries are deregulating downstream gas sales and looking for cheaper prices.Before flying to Vienna to chair this week's Opec meeting, Purnomo said he was trying to get China to double the 2.6 million tons/yr of Tangguh LNG that the country agreed to buy two years ago -- starting in 2007 -- as well as attempting to line up a deal to sell LNG to a proposed new terminal near Qingdao in Shandong Province, according to reports in Chinese media.As well as finding new markets for its LNG, Indonesia also desperately needs to attract more foreign investment to its energy sector to ensure the future success of its LNG industry. But government officials said this week that total foreign direct investment for the first two months of the year was down 66% compared with the same period of 2003, partly because foreign investors are spooked by rising political uncertainties ahead of the country's first direct presidential election in early July. Investors in Indonesia already face numerous obstacles including legal confusion, unclear regional autonomy legislation, corruption and security problems.Overall, the Indonesian government approved just $805 million worth of foreign investment in January and February this year compared with $2.4 billion during the same period of 2003.

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Impacts – Economy

Non-oil exports are key to Indonesian economic stability and international creditworthiness

Prema-Chandra Athukorala, Professor of Economics, Division of Economics, Research School of Pacific and Asian Studies, The Australian National University, “Post-crisis export performance: The Indonesian experience in regional perspective,” Bulletin of Indonesian Economic Studies; Aug 2006, Vol. 42 Issue 2, p177-211, Business Source Premier

The economic boom in Indonesia from the late 1980s until the onset of the financial crisis in mid-1997 was underpinned by rapid export growth, accompanied by a dramatic shift in the commodity composition of exports away from crude oil, then the principal export, towards non-oil primary products and manufacturing. Rapid growth of non-oil exports was the foundation of Indonesia’s success in maintaining international creditworthiness and macroeconomic stability following the end of the oil boom in the mid-1980s. The expansion of manufacturing exports, in particular, was instrumental in bringing about rapid employment growth. Against this backdrop, there is serious concern in contemporary Indonesian policy circles about the failure of export performance to regain its pre-crisis dynamism.1 The purpose of this paper is to inform this debate by examining postcrisis export performance in Indonesia from a comparative East Asian perspective, against the backdrop of pre-crisis experience and ongoing changes in patterns of international production. Particular attention will be paid to the perceived or real challenges arising from China’s meteoric rise as a major competitor in global markets, and from the phasing out of the Multi-fi bre Arrangement (MFA), which regulated world trade in textiles and garments for over 40 years. Non-oil exports like natural gas are key to Indonesian economy Prema-Chandra Athukorala, Professor of Economics, Division of Economics, Research School of Pacific and Asian Studies, The Australian National University, “Post-crisis export performance: The Indonesian experience in regional perspective,” Bulletin of Indonesian Economic Studies; Aug 2006, Vol. 42 Issue 2, p177-211, Business Source Premier At the end of the oil boom in the early 1980s, petroleum and petroleum and gas products (henceforth referred to as ‘oil’ for brevity) accounted for almost threequarters of total merchandise exports from Indonesia (table 1, fi gure 1). The collapse of oil prices in 1982, followed by another precipitous fall in 1985–86, therefore brought about a massive decline in total export earnings. Export earnings (in current dollars) contracted at an average annual rate of 7.4% between 1982 and 1986 (table 1), compared with a staggering 37.6% growth between 1973 and 1981. In the trough of 1986, total exports amounted to $15 billion (18% of GDP), compared with a peak level of $22 billion (31% of GDP) in 1982. But the Indonesian economy managed to regain export dynamism from about 1987 by shifting to non-oil exports of both primary products and manufactures. In the decade 1987–96, total export earnings grew at an average rate of 13% per year, with all years except 1993, 1994 and 1996 (when the growth rates were slightly below 10%) recording double-digit growth. Rapid export expansion, with manufacturing exports playing the pivotal role, was a key factor in Indonesia’s rapid economic growth. The dramatic shift in export composition towards manufacturing lessened the vulnerability of the economy to sudden external shocks, and thus provided a congenial setting for sound macroeconomic management. Rapid growth of labour-intensive exports also made a significant contribution to employment expansion and poverty alleviation (Hill 2000).

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Impacts – Stability

Indonesian economic collapse risks instability and violence that would hurt the global economy – key shipping lanes would be obstructed

Rajan Menon, Monroe J. Rathbone Professor of International Relations at Lehigh University, director of NBR's Eurasia Policy Studies program, and academic fellow and advisor for the International Peace and Security Program at the Carnegie Corporation of New York, 2001, “Another Year of Living Dangerously?,” The National Interest [Washington DC] No. 65 The Fall 2001 issue, http://www.geocities.com/baguala67/ni250901b.htm?200818

Indonesia may survive the combined assault of an ailing economy, deepening separatism, and a failing state. Such an outcome is certainly desirable, but it is not likely. American leaders must therefore brace for the possibility that Indonesia could still collapse in chaos and disintegrate in violence. Alternatively, the current instability could continue until economic recovery and political compromise give rise to a country of a rather different shape and size. With Wahid gone and Megawati in place, this is now somewhat more likely. Even the loss of Aceh and West Papua need not spell national disintegration; without such provinces Indonesia would still retain the critical mass to endure as a state. The second of these denouements is preferable to the first, but both will create strong shock waves.

Indonesia's size and location are the reasons why. The three major straits that slice through it are pivotal passages for the global economy. Malacca is by far the most important, particularly for energy shipments. Some 450 vessels and about 10 million barrels of oil pass through daily, and East Asian demand, driven by China, is expected to rise from 12 million barrels a day in 2000 to over 20 million barrels in twenty years. Japan, China, Taiwan and South Korea would suffer severely and soon if fallout from turmoil in Aceh (at its northern end) or Riau (at its southern end) blocked this passage. Its narrowness, 1.5 miles in the Phillips Channel in the Singapore Strait, and ten miles between Singapore and the Riau archipelago, adds to the danger. The Lombok Strait, which ships use to sail to northeast Asia through the Strait of Makasar between Borneo and Sulawesi, is next in importance, although it handles a far smaller volume of traffic than Malacca and is of negligible importance for energy shipments. The Lombok-Makasar route is, however, a critical corridor for Australia's coal and iron ore exports to northeast Asia and for manufactured exports moving south from there. It is also the most likely detour were Malacca rendered impassable or hazardous. By comparison, Sunda is a minor shipping channel; the consequences of its closure would be minimal for transcontinental trade.

Rerouting Malacca traffic through Lombok would strain the capacity of the world's merchant fleet, increase transportation costs, and create severe bottlenecks. The problems would be even worse if all three straits were unusable and ships had to transit northeast Asia by skirting Australia's northern coast. Market signals would eventually add other carrying capacity but the question is how quickly and smoothly the adjustment occurs, and what the economic and political consequences would be in the meantime. The ramifications of blocked or delayed maritime traffic, or even just panic over the possibility, would spread speedily throughout globalization's many circuits. Insurance rates would rise; coverage may even be denied if underwriters deem the risks excessive. The effects of obstructed energy, machinery and manufactured goods would register in capital markets, short-term investors would be scared off, and the flow of much-needed foreign direct investment into a region still convalescing from the blows of 1997 would slow.

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Political instability in Indonesia would cause the country to disintegrate and ethnic violence

Angel Rabasa, Senior Policy Analyst, RAND Corporation, and Peter Chalk, an expert on transnational crime and terrorism at the RAND Corporation, Washington, USA, Rand, 2001, 115 pgs, Indonesia's Transformation and the Stability of Southeast Asia, p.73

Unlike Pakistan or Turkey, where the military has regularly stepped in to redress perceived failures of civilian government, there is no tradition of military coups in Indonesia.4 Over the short term, therefore, only a catastrophic political failure—for instance, the breach of the constitution or impending dismemberment of Indonesia—could compel the military to assume control of the government. Should that occur, one could envisage a military government of two basic variants:

The first would be a military-technocratic government that preserved the balance between the secular and Islamic (“Green”) factions in the TNI; economic policymaking would be in the hands of nonpolitical technocrats. This would be the most moderate variant of a military led government and probably one that would become more attractive as the situation deteriorated.

The second would be an alliance of the military with one of the political sectors, possibly one or more of the Islamic parties. This variant would be closer to the Pakistani model. It would also be the most dangerous because it would exacerbate ethnic and religious tensions and accelerate the disintegration process. Some observers are troubled by the Pakistani mix of military rule and support for radical Islamic groups and are concerned about the possibility of the same mix occurring in Indonesia.5

In either case, a military-led government would be inherently unstable because the military would likely face the opposition of important sectors of domestic public opinion and the international community. Moreover, such a government would probably lack the political tools and experience to run a country as large and diverse as Indonesia. Over time, a military government would widen fissures within the military itself as the different military factions competed over the distribution of power and policymaking authority.

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Indonesian transition to democracy key to a stable South-east Asia – leads to multiple scenarios for violence and instability


The Republic of Indonesia, the world's fourth most populous state, is in a process of profound political transformation. Depending on how the process unfolds, Indonesia could evolve into a more stable and democratic state, revert to authoritarianism, or break up into its component parts—an Asian Yugoslavia but on an almost continental scale. Indonesia's evolution could drive the Southeast Asian security environment in either of two directions. A successful democratic transition in Indonesia would be a factor of stability in Southeast Asia and beyond. Indonesia would become the world's largest Muslim majority democracy—a development that could have a significant impact on the political evolution of Asia and the Muslim world. It could lead to the reconstruction of a Southeast Asian security system grounded on democratic political principles. A stable Southeast Asia would translate into reduced opportunities for potential Chinese hegemonism and, by the same token, could facilitate China's emergence as a more influential actor without destabilizing the regional balance of power. Conversely, political deterioration or breakdown, the rise of Islamic radicalism, or, in the worst-case scenario, violent disintegration, would drive the regional security environment in the opposite direction. Southeast Asia would become more chaotic and unstable, less inviting for investment and more prone to capital flight, and more vulnerable to a bid for regional domination by a rising China.

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Indonesian disintegration would set off a chain reaction causing multiple scenarios of instability in the region


Indonesia's neighbors have other worries, as well, as they watch this wobbly behemoth. For Malaysia, one is that the Malaysian Islamic Party, already powerful in northern Malaysia, could receive a fillip were militant Islam to become more significant in Indonesia's politics as a result of the turmoil-or were it to dominate its successor states. Thailand and the Philippines, which ave breakaway Islamist groups in their southern regions, fear that Indonesia's collapse could produce an undesirable demonstration effect. Papua New Guinea, which borders West Papua, could be swamped by refugees and also face an older problem: incursions from the Indonesian military in hot pursuit of Papuan guerrillas. Singapore and Malaysia have invested in pipelines carrying energy from Riau and from Indonesia's Natuna gas fields (located in the South China Sea between peninsular Malaysia and Sarawak) and are watching nervously. ASEAN, whose economic and political clout has fallen short of members' hopes, will be reduced to a salon if Indonesia, its keystone, crumbles.

Neither is it clear how Japan, China and Australia would react to various scenarios in Indonesia. Few convergent interests unite them, and history has done much to divide them. This augurs ill for cooperation on economic assistance, refugee relief, piracy, or peacekeeping to stem Indonesia's unraveling or to deal with the consequences if that proves impossible. Indeed, anarchy in Indonesia could start a scramble among these states that is driven more by fear, uncertainty and worst-case thinking than by the opportunistic pursuit of advantage. A process leading to sponsorship of competitive proxy proto-statelets that rise from Indonesia's wreckage is an extreme scenario, but cannot be ruled out.

Beyond the general tendency of states divided by suspicion to jockey for position when uncertainty or opportunity prevails, there are other specific motives for intervention. China could be drawn into the fray if Indonesia's seven-million-strong Chinese population, which has often been a scapegoat in times of trouble, were to be victimized. Beijing's increasing concern for secure energy supplies since becoming a net importer in 1993 has already made it more assertive in the South China Sea, and could provide another motive. Given Indonesia's uncertain future, Chinese maps depicting Beijing's jurisdiction over Indonesia's Natuna gas fields are a worrisome portent, particularly for Malaysia and Singapore, who envision energy pipelines from this site.

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Impacts – Turns the Case

Indonesian collapse would hurt US companies, economy, and strategic interests in the region – troop placement and trade


The consequences of Indonesia's breakup would affect American interests, as well. American energy and raw materials companies (Exxon-Mobil, Texaco, Chevron, Newmont Mining, Conoco and Freeport-McMoRan, among others) operate in Indonesia, particularly in Aceh, Riau, and West Papua, and many of the ships that traverse the Strait of Malacca are American-owned. The United States is also a major trader and investor in East Asia and is to some degree hostage to its fate, especially now that the American economy is slowing. Moreover, if Indonesia fractures, worst-case thinking and preemptive action among its neighbors could upset regional equilibrium and undermine the American strategic canopy in East Asia. The United States has a network of bases and alliances and 100,000 military personnel in the region, and is considered the guarantor of stability by most states-a status it will forfeit if it stands aside as Indonesia falls apart. America's competitors will scrutinize its actions to gauge its resolve and acumen. So will its friends and allies-Australia, Japan, Singapore, Thailand and South Korea-each of whom would be hurt by Indonesia's collapse.

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Impact Booster – Stability

Southeast Asia is geopolitically important – various reasons


Southeast Asia derives its geopolitical importance from the region's location at the crossroads between the concentration of industrial, technological, and military power in Northeast Asia, the Indian sub continent and the oil resources of the Middle East, and Australia and the Southwest Pacific. A high proportion of the trade of Japan, the Republic of Korea, Taiwan, and Australia, including much of their oil imports, transits the straits and sea-lanes of communication in Southeast Asia.1 From a military perspective, these sea-lanes are critical to the movement of U. S. forces from the Western Pacific to the Indian Ocean and the Persian Gulf. Southeast Asia is also important as the cultural as well as the geographic crossroads of Asia, where Sinic, Hindu, Islamic, and Western civilizations have met and interacted for almost a millennium.2 If national boundaries were replaced with ethno-religious boundaries, one would find a far-from-homogeneous Muslim arc from southern Thailand, through the Malaya peninsula, Sumatra, Java, the coastal areas of Borneo, to the Sulu archipelago and parts of Mindanao in the southern Philippines; strong Christian, animist, or mixed communities in the Moluccas, Sulawesi, Kalimantan (Borneo), Nusa Tenggara, and Irian Jaya (Papua); a Hindu majority in Bali; a predominantly Catholic population in the Philippines; diverse cultures, largely Buddhist, in mainland Southeast Asia; and Chinese communities spread throughout the region. Muslims constitute al most 90 percent of Indonesia's population, but as shown in Table 1.1, Christians and other non-Muslims constitute majorities or principal minorities in several provinces in eastern and central Indonesia.

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INDONESIA AFF

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2AC – INDONESIA

1. Indonesia is shifting to regional markets as they lose out in the global market


3. The nature of Indonesia’s gas industry is changing, however. New LNG producers in Qatar, Australia, Russia, along with Malaysia, now challenge Indonesia’s leadership in the LNG market. At the same time, a regional gas transmission network is developing, creating new gas markets and sources of revenue. Domestically, the reduction of fuel subsidies ease fuel price distortions, making natural gas more competitive as a fuel alternative. Gas should also play a significant role in meeting the country’s growing power demands. Finally, the Oil and Gas Law of 2001 has streamlined the process for domestic gas supply sales and created a new domestic market obligation (DMO) for gas. These changes create new opportunities in the domestic gas market, even as the global LNG market becomes more diversified.

2. Non-Unique Indonesia is losing its hold on the natural gas market – customers are switching away now

Grace Nirang, reporter in Jakarta, and Christian Schmollinger, reporter, 8/10/06, “Natural gas running low in Indonesia,” International Herald Tribune, http://www.iht.com/articles/2006/08/09/bloomberg/bxgas.php

Utilities in Japan, the largest Asian economy, are turning to other markets. Tokyo Electric Power and Tokyo Gas, the largest Japanese power and gas suppliers, have signed up with Royal Dutch Shell's Sakhalin project in Russia to diversify supplies. Osaka Gas is in talks with Inpex, an oil and gas producer based in Tokyo, about joining a $6 billion liquefied natural gas project in Australia.Japan buys 40 percent of the world's liquefied natural gas and depends on Indonesia for a quarter of its imports of the fuel, according to the Japanese Ministry of Finance. The gas is part of a strategy to reduce the country's reliance on Middle East oil."The Japanese must be pretty worried about what's happening in Indonesia," Andy Flower, a former BP executive who works as an independent consultant, said by telephone. "There's no way they can renew the contracts and fill the pipe."Calls from politicians, including Vice President Jusuf Kalla, to divert Borneo gas to other parts of Indonesia have fanned concern about its reliability as a supplier.Buyers are "already outraged by our failure to meet commitments," said Ari Soemarno, the head of the state oil company, Pertamina, which negotiates Indonesia's liquefied natural gas sales contracts. "We're still studying the impact of Chevron's statement."While buyers are seeking alternatives, suppliers like Chevron in Indonesia have become reluctant to invest in fields that could have to supply markets in Java at lower prices than Japan, said Christopher Newton, the chairman of Indonesian Petroleum Association.All export contracts from the Borneo plant at Bontang, known as Badak NGL, are up for renewal between 2009 and 2011.

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2AC – INDONESIA

3. Expanding into the US market might not be beneficial – pre-existing competition means selling would be on a spot-term basis

Andrew Symon, Visiting Research Fellow at the Institute of South-east Asian Studies, 6/13/04, “Asia-Pacific: Get set for an LNG explosion in the region,” Energy Bulletin, http://www.energybulletin.net/node/630

Future supply to the US could force radical change to the industry in the Asia-Pacific region. Producers would sell into what is already a very large and competitive domestic gas market supplied by Canadian and US fields. They would likely have to sell cargoes on short and spot-term basis, accepting US market prices and hedging against risk with various futures and other financial instruments.

4. Other countries have a massive natural gas demand – Malaysia proves

LOONG TSE MIN, staff writer in Kuala Lumpur, 7/14/08, “Long-term challenge to users of natural gas,” The Star Online, http://biz.thestar.com.my/news/story.asp?file=/2008/7/14/business/21813487&sec=business

According to Petronas estimates, the demand for gas in Peninsular Malaysia has increased by 97% since 1997, which has put a strain on supply facilities.Petronas had said that its offshore production facilities and the Peninsular Gas Utilisation (PGU) system were running at full capacity to meet increasing demand.“As our production is unable to meet demand, we have increased the purchase of gas from other sources beyond offshore Terengganu,” a spokesman said.In 2007, 23% of Peninsular Malaysia's gas demand was met through imports. By Petronas' estimates, demand that already outstrips supply will grow to 4,900mmscf (million standard cubic feet) per day by 2027. Meanwhile, gas supply from offshore Terengganu can only be sustained at 2,000 mmscf per day (see chart).Amirsham, at Friday's announcement, had said the issue was not the subsidy costs to Petronas, which the national petroleum company could afford, but one of economic viability and sustainability.“There is not enough gas in any country that you can point to, so it is important we have economic viability (of industries using the gas),” he said.

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2AC – INDONESIA

5. The US isn’t heavily invested in Indonesian gas anyway, lack of bidding proves

US Embassy, Jakarta Indonesia, 6/23/04, “Indonesia’s Natural Gas Opportunities and Challenges,” Energy News Archives, http://jakarta.usembassy.gov/download/Natural%20Gas%202003.pdf.

Lastly, Indonesia requires new gas production in order to meet the growing regional and domestic demand. Last year’s four percent gas production increase falls well short of the GOI’s predicted demand growth of 9-11 percent annually. Private investment will be the key to new gas production. Unfortunately, investment in new oil/gas exploration and development averaged $1.2 billion for 2001-2003, down from a peak of $2.1 billion in 1998. Although the GOI awarded 15 new exploration tenders in 2003, up from 1 in 2002 and 6 in 2001, major international and U.S. companies were largely absent from the bidding on these new oil/gas blocks.

6. Demand satisfied now – new lease means we won’t need gas for 2 years anyway

Jon Hurdle, a freelance writer who has written for many business publications, 7/14/08, “Pa. invites bids for leases on possible gas field,” Reuters, http://uk.reuters.com/article/oilRpt/idUKN1447555220080714

Pennsylvania officials on Monday invited bids to lease land atop a geological formation that may hold enough natural gas to meet total U.S. demand for two years.The state's Department of Conservation and Natural Resources said it will hold a lease sale from pre-qualified bidders for 18 tracts of state forest totaling some 74,000 acres in two north-central Pennsylvania counties. The bidding will be open until Sept. 2.The tracts sit over the Marcellus Shale formation, a natural feature about a mile deep that has been known about for years but which has only recently been suspected of containing massive quantities of natural gas.The formation, which stretches some 600 miles between western New York State and West Virginia, could contain as much as 50 trillion cubic feet of recoverable natural gas, or enough to supply the entire U.S. for two years, at a wellhead value of $1 trillion, according to website geology.com.The recoverable quantity may represent about a tenth of the total gas in the formation, some scientists believe.The estimates came from Pennsylvania State University geoscience professor Terry Englander and New York State University geology professor Gary Lash, the website said."Given the enormity of the nation's energy demand, making less than an addition 4 percent of our state forest available for drilling is a reasonable decision that protects our forest ecosystem and helps meet energy demands," DCNR Secretary Michael DiBerardinis said in a statement."This lease sale responds to increased interest in the Marcellus Shale formation, a deep resource thought to contain large quantities of natural gas," the department's statement said. It noted that new technology and increased natural gas prices have made it possible to recover hard-to-reach fuel.

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AFF – US Not Key

Other countries are the primary importers of Indonesian natural gas

Bill Powers, Editor of Canadian Energy Viewpoint, 7/31/04, “Indonesia and Oman,” Energy Bulletin, http://www.energybulletin.net/node/1560

While Indonesia’s oil production capacity continues to dwindle, the country’s natural gas production has remained flat. The US Department of Energy (DOE) estimates that Indonesia has reserves of 90.5 trillion cubic feet (tcf) and production of 2.5 tcf per year. Since the country consumes only 50% of its gas production per year, Indonesia has been able to maintain the title of the world’s leading exporter of liquefied natural gas (LNG). Japan, South Korea and Taiwan are the primary destinations for much of Indonesia’s LNG exports. Beginning in 2007, Indonesia will export 2.6 million tons of LNG a year to China.

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AFF – Wind No-Link

Wind turbines don’t necessarily trade-off with natural gas demands – gas might be reallocated to cars

Leonard Doyle, Washington correspondent of 'The Independent', 7/12/08, “The texan oil baron and the winds of change,” The Independent, http://www.independent.co.uk/environment/the-texan-oil-baron-and-the-winds-of-change-865830.html

Environmentalists are cheering wildly, but the Pickens Plan has little to do with their worries about the catastrophic dangers of global warming. Mr Pickens has a plan that everyone can get their heads around: He simply wants to end America's addiction to imported oil and use the country's abundant wind power and natural gas resources to keep the country rolling."We're paying $700bn a year for foreign oil," he said. "It's breaking us as a nation, and I want to elevate that question to the presidential debate, to make it the number one issue of the campaign this year."Neither presidential candidate is talking about solving the oil problem. So we're going to make 'em talk about it. Nixon said in 1970 that we were importing 20 per cent of our oil and that by 1980 it would be 0 per cent. That didn't happen. It went to 42 per cent in 1991 with the Gulf War. It's just under 70 per cent now. Where do you think we're going to be in 10 years when our economy is busted and we're importing 80 per cent of our oil?"Windy as Sweetwater is, there are places further north in the Great Plains which are more suitable for wind farming. Some 250 miles away, Mr Pickens is building what is described as the world's largest wind farm.He has pumped $2bn into the project so far, buying nearly 700 wind turbines from General Electric (GE) and he will spend another $10bn on the project before it starts generating electricity sometime in 2011.Filling the Great Plains with wind turbines to produce electricity is only half of the Pickens Plan. He wants to see America's petrol imports cut back as well by converting cars to run on natural gas. At present most of America's natural gas is used to produce electricity. Generate electricity from the wind and that can be diverted so that as many as a third of the vehicles will be running on natural gas within only a few years, he says.

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AFF – Ethanol No-Link

Ethanol demands natural gas for production – doesn’t change national demand

Wilf Gobert, an independent energy analyst based in Calgary and a senior fellow with the Fraser Institute, 7/14/08, Financial Post, “Energy policy makers' unintended consequences,” http://www.financialpost.com/trading_desk/energy/story.html?id=654277

However, the lobby against ethanol subsidies is growing rapidly. In Britain, the government says it will slow the introduction of biofuels to address concerns about the impact on food prices.The World Bank's economist says production of biofuels and the domino effect on grain inventories, export bans, and market speculation is responsible for 75% of the 140% rise in prices since 2002. This is a stunning estimate when the U.S. Administration says the impact has been 2% to 3%, and the U.N. Food and Agriculture Organization estimates up to 30%.In Canada, the C.D. Howe Institute waded in with a report that says Canada's biofuels policies are misguided, and are having unforeseen consequences. More importantly, the report suggests the evidence of the benefit of biofuels on greenhouse gas emissions is inconclusive. You may not realize that ethanol production requires substantial energy consumption, primarily natural gas.

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AFF – Transition to Regional Markets Now

Indonesia is focusing in on domestic and regional markets, global market is squeezing them out


Though LNG exports will remain an important component of Indonesia’s gas marketing strategy, gas demand will increasingly shift toward domestic and regional markets. Power needs and cheaper, environmentally-friendly gas will drive this shift. Short-term growth in domestic use, as evidenced by the jump in gas supply agreements, will be relatively easy. However, long-term growth will depend on more complex regulatory, legal and security improvements – the overall investment climate. A turnaround in the investment climate is essential, not only to ease financing and encourage gas development, but to improve the country’s economic health as well.

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AFF – Indonesia Declining

Indonesia is losing out in the LNG global market now09/2/2006 Natural Gas Reserves in Indonesia http://www.oilgasarticles.com/articles/434/1/Natural-Gas-Reserves-in-Indonesia/Page1.htmlIndonesia is facing a declining share of global LNG markets, despite its past status as the worlds leading LNG exporter. The decline can be attributed partly to questions over the reliability of Indonesian supply and lower investment in the Indonesian energy sector. Uncertainties over political support for the sanctity of contracts, regulatory transparency, and relatively unfavorable PSC terms have undermined investment support. As a result, Indonesian LNG exports have been partially replaced by exports from Oman, Qatar, Russia, and Australia on world markets. Since early 2005, exports from the export terminal at Arun in Aceh have been cut back below the level of contractual committments, due to continuing production problems in the area, despite the end of the insurgency there. The sector has also faced restructuring under the terms of Indonesias World Bank and IMF lending agreements, with BP Migas taking over the supervisory and management roles formerly filled by Pertamina.

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INDIA-PAKISTAN

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SHELL – IPI PIPELINE

A. The IPI Pipeline deal will succeed amid rising energy cost

Maha Atal 07.01.08, Buisness Week Intern, Iranian Pipeline Deal, www.forbes.com/energy/2008/07/01/india-iran-america-biz-energy-cz_ma_0701pipeline.html

India, Pakistan and Iran will sign a deal this month to build a natural gas pipeline to help feed the subcontinent's desperate need for energy, a major blow to American sanctions against Tehran and a defeat for U.S. influence in South Asia.

The $7.5 billion, 1,700-mile Peace Pipeline (IPI) project would bring gas from the South Pars Gas Fields through Balochistan (in Western Pakistan) into India. The project has stalled multiple times since first proposed in 1994 due to political tensions, changing governments, conflicts over prices, and most recently, the weight of American opposition.

The agreement comes amid growing tension between the United States and Iran, which the U.S. has sought to isolate from the world community. But rising fuel prices and a soaring Indian economy seem to have outweighed America's desires--as well as a rival plan for a U.S.-backed pipeline from Turkmenistan.

B. Renewable energy causes a reduction in the price of gas as demand is lessened.


It is not clear whether today’s inflated natural gas prices represent merely a short-term imbalance between supply and demand or a longer-term effect that reflects the true marginal cost of production (see, e.g., EMF 2003; Henning, Sloan & de Leon 2003; Holtberg 2002; NPC 2003a).5 In either case, economic theory predicts that a reduction in natural gas demand, whether caused by enhanced electricity or natural gas efficiency or by increased deployment of R[enewable] E[nergy]*, will generally lead to a reduction in the price of natural gas relative to the price that would have been expected under higher-demand conditions.6

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SHELL – IPI PIPELINE

C. IPI pipeline key to India-Pakistan-Iran relations

Shiv Kumar Verma, Political Geography Division, Center for International Politics, Organization and Disarmament, School of International Studies, Jawaharlal Nehru University, New Delhi. 06-07. “Energy geopolitics and Iran–Pakistan–India gas pipeline,” Energy Policy, Volume 35, Issue 6, pp. 3280-3301.

[Takumi Murayama]The political environment in South Asia is marked by an ambience of hope and anticipation. We are witnessing the most intensive diplomatic engagement between Pakistan and India since the military stand off of 2001–2002. From the depths of confrontation and crises, Pakistan and India have been able to take a series of confidence-building measures (CBMs) to establish a modicum of stability to their relations. Five features mark the new environment. First, there is a strong popular sentiment for peace in both countries and new stakeholders for peace have emerged. Second, there is a manifest sense in both countries that there is no military solution to the Jammu and Kashmir dispute or other problems. Third, there is recognition at both popular and official levels that neither country can achieve its full economic potential or achieve prosperity for its people, while engaged in confrontation. Fourth, the two countries realize that they need to carefully manage their relations in a nuclearized environment. Fifth, globalization is unleashing new dynamics and creating imperatives for cooperation, reshaping Pakistani and Indian political perceptions. The strategic relationship between Pakistan and India remains undefined and unstable. Pakistan has proposed a strategic restraint regime to define and stabilize this strategic relationship, both in the nuclear and conventional fields, based on the concept of minimum deterrence. The future of the dialogue and stability in South Asia depends on whether the two countries can address and overcome their divergences, especially on Kashmir and the nuclear–military balance, and build on the areas of convergence-trade, regional economic cooperation, and North–South issues. The Indo-US nuclear deal has raised serious questions for regional stability. Under the agreement, a large number of facilities and reactor including breeder reactors will be maintained outside safeguards, which will encourage India to continue and even accelerate its weapons program without any constraint or inhibition. This threatens to erode minimum nuclear deterrence and strategic stability as proposed by Pakistan. It could also trigger a new arms race in our region. A package approach for India and Pakistan, rather than the discriminatory one being pursued, would help to avert a nuclear arms in the region, promote restraint and preserve strategic stability while also ensuring that the legitimate needs of both countries for civilian power generation are met. A stable nuclear strategic relationship is essential for normal relations between India and Pakistan. A balance in conventional weapons is also an essential component of sustainable stability (Lodhi, 2006). As far as the IPI gas pipeline project is concerned, the Indian government is committed to favor this project in the current situation in the aftermath of the Indo-US nuclear deal and the prevailing nuclear scenario in Iran. The impetus is India's long-term energy demand. The Indo-Iran pipeline project has such broad geopolitical ramifications that it would be prefer or favor this project. 1. It would be a financially viable alternative. 2. India and Pakistan will experience the necessary burden of mutual dependency for the first time in decades. Iran will get to develop a stable and secure export market for its natural gas. 3. The IPI pipeline might become the catalyst for a wider network of pipelines crisscrossing the Asian heartland and connecting areas of supply with areas of demand in a manner unmediated by outside influence. 4. The involvement of Pakistan in this project is not a problem. But an opportunity for India because involving Pakistan in a trilateral or even multilateral energy grid is an excellent way of raising the level of economic interactions between the two neighbors who have traditionally been at loggerheads with each other (Varadarajan, 2006). 5. For Iran, the Indo-Iran pipeline project offers not only a long-term potential markets for its natural gas resources, but it also confers upon Iran a strategic value. 6. Moreover, the levels of competition have intensified in the global gas industry after years of mergers in energy sector against a background of emerging markets. In this regard, the stakes to export natural gas to emerging markets, such as India and China, are high. Like others, Iran's natural gas industry is also facing serious challenges on its export front from Russia, Qatar, and Turkmenistan. Faced with stiff competition from other pipeline gas projects, the countries in the region are hurrying up to negotiate the long-term gas pipeline projects (S. Pandian, 2005 and Pandian, 2005). 7. India will also be keen to resolve the issue of the tri-nation gas pipeline. Despite considerable US displeasure and pressure tactics, India has been committed to the idea of strengthening energy cooperation with Iran. Until such time as the pipeline becomes a financially feasible proposition, India is prepared to increase the quantity of gas imports from Iran (Kumaraswamy, 2006). Significantly, gas export is a two-way trade and India is not the only beneficiary. A broad picture of India's energy diplomacy vis-à-vis countries like Qatar, Saudi Arabia, and Russia might indicate that Iran would also be a loser if the gas deal falls through. A detailed outlook of the extent of Indian investment plans in other parts of the world might convince Iran. And though important, it is not India's only option. While it is legitimate for Iran to demand a higher $7.2/mbtu price for gas it wants to sell to India and Pakistan,

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India is, however, willing to pay no more than $4.2/mbtu for gas delivered at its border. Iran will not sell its gas at the proposed price. According to Tehran, if the Indian side is not ready to buy its gas at its real price, it has no obligation to sell it at the price lower than the real one. But India will not favor to be dictated to. Not by US and not by Iran. 8. The importance of nuclear power, which has become an economic commodity because of the high price of oil and fear of further rise. In such a context the US has offered its cooperation to India in the civilian nuclear field after eight nuclear reactors have been excluded from the civilian sphere. The US has also agreed to offer nuclear fuel for power production to India. But Pakistan will not be offered such a facility by the US in view of its proliferation record, said the US Secretary of State Condoleezza Rice while in Pakistan. The US Secretary for Energy Samuel Boodman who led the delegation to Pakistan immediately after President Bush's visit, said: India's needs are different, its problems are different and its programs are different. And he advised Pakistan to get gas not from Iran, but from Qatar at a cost of $8 billion for the pipeline. 9. Energy security has become a question of national strategy. It is an issue of great importance, and so once again today. But the subject now needs to be rethought, for what has been the paradigm of energy security for the past three decades is too limited and must be expanded to include many new factors. Moreover, it must be recognized that energy security does not stand by itself but is lodged in the larger relations among nations and how they interact with one another. But it is also fueled by the threat of terrorism, instability in some exporting nations, a nationalist backlash, fears of a scramble for supplies, geopolitical rivalries, and countries fundamental need for energy to power their economic growth (Yergin, 2006). However, India, wary of the physical security of the on-land pipeline, sought a guarantee from Iran that, if Pakistan stooped the gas supply in case of an armed conflict, Iran will supply an equal amount of LNG to India at the same price. In return, Tehran has agreed both to supply an equal amount of LNG to India at the same price in times of supply disruption, as well as to stop delivery of gas to Pakistan if Islamabad disrupts gas supplies to India. Iran also proposed setting up an international consortium of bankers and energy companies that would buy the gas from Iran and sell it to India. To ensure uninterrupted energy supply, it also suggested a tripartite agreement between India, Iran, and Pakistan with the inclusion of global financial institutions such as the World Bank and Asian Development Bank as guarantors. Furthermore, it was suggested that Islamabad’ s expectations of substantial transit fees was a reasonable enough guarantee against sabotage by Pakistan (S.G. Pandian, 2005 and Pandian, 2005)

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Uniqueness – IPI Pipeline Coming

The IPI Pipeline is the only viable pipeline option

S. G. Pandian, School of Business, University of Hull. 09/05. “Energy trade as a confidence-building measure between India and Pakistan: a study of the Indo-Iran trans-Pakistan pipeline project,” Contemporary South Asia 14(3), p. 312. [Takumi Murayama]

To ensure that its energy strategy revolves around its long-term objectives, India has considered various options to import natural gas either through pipelines or as LNG. The leading pipeline proposals, mostly trans-border in nature, include the importation of natural gas through pipelines from Iran, Oman, Qatar, Turkmeni- stan, Bangladesh and Burma (see Table 3). Among these projects, the Indo-Iran gas pipeline is under serious consideration by India (see below). However, India also has considered other proposals seriously, including one for a pipeline from Oman.25 Although India signed an agreement with Oman in 1994 for the import of gas by a sub-sea pipeline, the project eventually failed to materialise because of the high costs involved and the inability of the gulf state to meet India’s long-term demand.26 Similarly, Unocal has shelved its ambitious project proposal to construct a pipeline connecting its natural gas fields in eastern Bangladesh to the Indian capital of Delhi due to political opposition in the former. Although an overland pipeline from Myanmar is a viable option, the pipeline would have to pass through Bangladesh territory. As it was reported that Bangladesh wanted to buy natural gas from Myanmar to store it for themselves (to ensure the stock levels for 50 years) as well as to make profit out of re-selling Myanmar gas to India,27 it is difficult to see why it would allow a pipeline from Myanmar to pass through its territory to India. Although there are plans for an undersea gas pipeline between Myanmar and India, bypassing Bangladesh,28 it is unlikely to materialise given the high cost involved. India’s indifference to a trans-Afghan pipeline project has raised questions about the viability of the project. In the end, only the Iranian gas pipeline proposal has caught the attention of Indian policy-makers as other proposals are considered uneconomic and/or politically impossible.

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Uniqueness – Indian Demand High

Increasing gas production in India can’t meet increasing demand

Siddharth Srivastava, New Delhi-based journalist. 07/27/06. “Price imbroglio stymies Iran pipeline,” Asia Times. http://www.atimes.com/atimes/south_asia/hg27df02.html [Takumi Murayama]

In this context, India has been encouraging power and fertilizer plants to switch from naphtha to cheaper natural gas to cut costs. This has led to a surge in demand as domestic gas production accounts for just half of the country's consumption.Recently, the state-run Indian Farmers Fertilizer Cooperative switched a fertilizer unit to run on natural gas instead of naphtha to save on energy costs. The firm has already tied up with the state-run Gas Authority of India Ltd (GAIL) to supply gas from GAIL's main west-north Hazira-Bijaipur-Jagdishpur (HBJ) pipeline. The fertilizer unit in Phulpur is one of the largest in the country and produces about 1.42 million tons of urea annually. The push for gas continues on other fronts as well. One of the biggest and most significant discoveries in the hydrocarbon sector in India took place on June 17, 2005, when the state-owned Gujarat State Petroleum Corp (GSPC) consortium struck gas at its Krishna-Godavari No 8 well in the KG Block off the coast of Andhra Pradesh. The well has an estimated reserve of 20 trillion cubic feet (tcf), which makes it the largest gas reserve of India, the value of which is estimated to be Rs2 trillion ($42.6 billion) per the current rate of natural gas. The daily production is estimated to be in the range of 65 million to 70 million standard cubic feet per day, which is equivalent to India's current total natural-gas production. According to one estimate, the power produced by the gas from the GSPC find will be sufficient to meet the peak energy requirements of Delhi and Mumbai. The GSPC find eclipsed the 14tcf discovery, also in the KG Basin, in 2002 by Reliance Industries. Last month GSPC announced that it had found another huge reserve of high-quality oil and gas from the KG basin. The reserve found in the well KG17 has a gas flow of 4.8 million standard cubic feet per day and an oil flow of 862 barrels per day. The actual viability of the announcements is being verified by the federal Directorate of Hydrocarbons. However, India's current gas reserves of 82tcf are insufficient to meet soaring demand for fuel from power stations as well as buses and taxis that have converted to natural gas in India's cities. Imports are essential.

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Brink – India-Iran Relations

Iran and India relations are on the Brink, Pipeline Solves

Dr. Anjali Sahay Visiting Assistant Professor,PhD( Old Dominion University) AND Dr. Jalil Roshandel Associate Professor, PhD.(Universite des Science Sociales, Tolouse, France) March 28th 2008 Iran, Pakistan, India Natural Gas Pipeline: Implications and Challenges for the United States

In the case of Iran-India-Pakistan the same level of determination exists within the Iranian leadership, but it confronts impediments that are less visible in Iran-Swiss deal. Islamic values and what the Iranian leadership has preached all through the past 30 years becomes more noticeable in dealing with a Muslim country like Pakistan. Pakistanis political orientation that has put them in close relation with the U.S. might a concern for the Iranians. Iran was also very unhappy with the Indian behavior and votes against Iran at the IAEA’s Board of Governors meetings. In both cases India voted against Iran first in 2005 to condemn Iran for violation of its obligations under the NPT and again to report Iran’s file to the UN Security Council in 2006. 29 Elsewhere, Iran signed an agreement yesterday on setting up a planned 300,000 barrels per day oil refinery joint venture in Indonesia, together with a Malaysian partner. While this trend within the Indian polity (partially affected by Indo-US Relations) is an unfortunate development and often time criticized by the Iranian conservative trend, but the Iranians are hopeful that the “left” in India will push for more friendly ties with Iran. They are confident that economic interest inherent in the gas pipeline deal is strong enough to neutralize U.S. pressure on India.

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Link – Demand key to IPI

Increased international demand for gas will rekindle pipeline projects


[Takumi Murayama]While international pipeline activity has shown relatively slow growth over 2003–2005, proposed additions in 2006–2008 could result in a record number of new pipeline miles. Much of the interest in completing languishing planned projects will be rekindled by higher oil and gas prices, increased demand in developing nations, and the outlook for LNG's role in the US, Europe and other developing gas markets. Supporting this is the recently released BP 2005 Statistical Review of World Energy (Tubb, 2005). The Review indicates much of the recent demand for oil and gas was fueled by Asia, especially India and China, where Chinese consumption rose by 900,000 bpd, almost all of which was accounted for by imports. On natural gas, the review notes that international trade rose 9% in 2004. Pipeline shipments rose by more than 10%. Russia accounted for the largest increment, but growth was widely distributed across the world. Shipments of LNG rose by 5.4% last year, slightly below 2003. A strong energy consumption not only in China, but all developing nations, is reported in Exxonmobil's 2004 Corporate Citizenship Report. As the data show, by 2030, energy demand will grow by 50%. Close to 80% of the energy demand increase will occur in developing nations. Europe is also an emerging gas market. Indigenous supply cannot keeps up with demand and future gas supplies will be piped in from much greater distances. It is suggested that India's economic interest in the Indo-Iran pipeline project be in conflict with Pakistan's geo-strategic interests. As India view that Pakistan's geo-strategic interests are aimed at disrupting Indian economic interests, the Indo-Iran pipeline project could hardly be conducive to sustain confidence between India and Pakistan. In this regard, it is unlikely that India would entertain Pakistan's role in Indo-Iran pipeline project. Only upon mutual co-existence with India, Pakistan could benefit from its geo-strategic location.

The pipeline relies on the price of gas against alternative fuel prices

Bruce Loudon, Australian's South Asia correspondent. 05/18/07. “Iran-India pipeline infuriates US,” The Australian, p. 22.

THE controversial $10 billion Iran-Pakistan-India gas pipeline project that is being so strenuously opposed by the United States has been found to be technically feasible, but its economic viability now depends of pricing arrangements with Tehran, according to information disclosed in New Delhi last night.India's minister of state for petroleum and natural gas, Dinsha Patel, told members of the country's upper house of parliament, the Rajya Sabha, that the project had been found to be feasible.The price of gas against alternative fuel prices will determine the viability of the pipeline project.

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Link – Prices key to Pipeline

Iran not willing to sell gas at lower prices

Siddharth Srivastava, New Delhi-based journalist. 07/27/06. “Price imbroglio stymies Iran pipeline,” Asia Times. http://www.atimes.com/atimes/south_asia/hg27df02.html [Takumi Murayama]

Tehran is demanding $7.20 per million British thermal units, linked to global crude-oil prices. The Iranian position is considerably higher than India's offer of $4.25 per mBtu at its border with Pakistan. Though Pakistan has been voicing plans of going it alone in case India decides to drop out, that may not happen if the price issue is not resolved. Iran has rejected India's demand for a price equivalent to international long-term gas-supply contracts, saying that New Delhi should forget about buying Iranian gas at a low price. Tehran's stand has been emboldened by a Europe desperately seeking other sources of gas after last year's crisis due to the spat between Russia and Ukraine. Iranian Oil Minister Kazem Vaziri-Hamaneh characterized the Indian offer as based on "subsidized domestic prices" and said that Tehran will not sell its gas at the proposed price. Iran has forwarded a gas-pricing formula linked to Brent crude oil with a fixed escalating cost component.

Lower Gas prices make IPI “hiccups” terminal

Kaveh L Afrasiabi, PhD in political science, specializing in Iran’s foreign and nuclear affairs at the Center For Strategic Research. 07/10/07. “A blockage in the peace pipeline,” Asia Times. http://www.atimes.com/atimes/South_Asia/IG10Df01.html [Takumi Murayama]

Unofficially, there is a great deal of grumbling on the part of Iranian officials and energy experts about the generous discount by Iran to India - approximately a third below the average global prices. This is mainly because of two things. First, India has bargained hard, always maintaining the position that the gas price should be based on Iran's consideration of "India's ability to pay" and not simply market considerations. Second, Iran has agreed to lower the price in light of the perceived geopolitical dividend of the IPI, in bringing the subcontinent closer to Iran at a critical time when the US-led pressure on Iran over the nuclear row and regional issues is intensifying. But not all Iranian energy and political experts agree that Iran must necessarily agree to such "political prices," to echo a former official of Iran's Oil Ministry who recently told the author that India has no viable alternative and has such a dire energy need that it would be "shooting itself in the knee if it walked away from this deal". Nor is it entirely clear that the IPI deal would cause any dramatic shift in New Delhi's foreign policy, notwithstanding India's vote against Iran at the International Atomic Energy Agency and the US-India nuclear deal that, if implemented, would cement the strategic partnership between Washington and New Delhi. There is, after all, nearly always a bit of disjunction or lack of fit between economic and geostrategic considerations, as can be clearly seen in the current US-China relations. As a result, once we peel away the surface, the price "hiccup" in the IPI agreement appears to be as much over Iran's concern about regulating the price adjustments in the future as over its present underlying unhappiness and/or hesitations about the overly generous "special price" of the IPI pipeline. The longer the delay in the final agreement, the more that hesitation is likely to manifest itself. That's all the more reason for India in particular to act smart about it and not let this hiccup turn terminal.

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Link – Prices key to Pipeline

Iran is obdurate on selling at a high price

Sushma Ramachandran, economic and corporate analyst. 07/02/07. “Pipeline - A Pipedream For the Time Being,” Boloji. http://www.boloji.com/analysis2/0224.htm [Takumi Murayama]

Similarly, there is a feeling that Iran's obduracy on seeking high gas prices could be linked to India having voted against that country on the nuclear issue at the multilateral arena. This contentious issue is clearly an underlying motif in many bilateral discussions with Iran. There are therefore umpteen unresolved issues relating to the IPI pipeline. It is thus quite likely to remain a pipedream for some time to come.

Pricing Crucial to IPI deliberations

The Hindu Business Line. 07/23/06. “Pricing issue looms over IPI pipeline project.” http://www.thehindubusinessline.com/2006/07/24/stories/2006072402190300.htm [Takumi Murayama]

The trilateral talks scheduled for August 3-4 between Iran, Pakistan and India on the multi-billion dollar gas pipeline project is set to see some tough negotiation between the three nations on the gas pricing issue. With Iran declining to sell gas to India at the price proposed by New Delhi, and India reluctant to revise its offer much, there is apprehension in the Petroleum Ministry that the pricing issue would be crucial to deliberations on the project.

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Internals – Iran Wants Pipeline

Iran has largely invested in Pipeline

Neil Ford April, 2004, Journalist for The Middle East, Which way for Iranian gas? With global demand for gas increasing, Iran—home of the World's second largest reserves—is poised to become an important provider, findarticles.com/p/articles/mi_m2742/is_344/ai_n25086986/pg_2?tag=artBody;col1

Iran is so keen to get the project off the ground it has offered to supply 60% of the estimated $3bn construction costs. The latest proposal to be mooted was the construction of a 1,600km pipeline to Pakistan, with the potential to extend it to India at a later dare. But the smaller volumes required by Pakistan alone will probably nor justify the costs involved. The Indian government is currently believed to be considering the viability of an LNG deal with Iran. The country embarked upon a mass LNG programme in the 1990s but contractual and financing problems have left some terminals in limbo.

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Internals – Iran Natural Gas Untapped

Iran has struggled to develop Natural Gas Sector


A number of major buy back deals have been signed over the past seven years enabling growth in the gas sector. Yet despite the strides that have been made to promote domestic consumption and export, only a tiny fraction of Iran's gas potential has so far been developed. Most gas production comes from associated reserves on oil and gas fields, but over 60% of the country's 812 trillion cubic feet of gas reserves is located on non-associated fields, which remain largely unexploited. Russian state gas company Gazprom has offered to set up a joint venture with Iranian parastatals in order to make the most the country's reserves and gas could even be exported utilising Russia's vast gas transportation network.

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Internals – India Natural Gas Demand

India needs to import natural gas

Anjali Sahay Visiting Assistant Professor,PhD( Old Dominion University) AND Dr. Jalil Roshandel Associate Professor, PhD.(Universite des Science Sociales, Tolouse, France) March 28th 2008 Iran, Pakistan, India Natural Gas Pipeline: Implications and Challenges for the United States

Undoubtedly, India has vast reserves of the nuclear fuel thorium but technology is not yet developed for its commercial use. Furthermore, a lot would depend on the Indo-US nuclear energy cooperation deal before it can significantly contribute towards India’s energy sector. Since India is a relatively new entrant into the natural gas market when compared to other mature NG based economies like Japan, Korea, and the United States, and its share of to energy needs in India is only 9 percent, it becomes natural for India to find outside sources of natural gas. Cross-border gas pipelines that are still facing uncertainties include NG pipelines with Myanmar, Turkmenistan, and Iran. Although these have been under discussion for quite some time, the political climate remains unfavorable, thus delaying these projects indefinitely. Arguably, even when they do materialize, the country may face potential supply disruption if political issues emerge over medium term.

Indian gas demand is growing rapidly, necessitating importation

Ariel Cohen, Ph.D., Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Center for Foreign Policy Studies, Lisa Curtis, Senior Research Fellow for South Asia in the Asian Studies Center, and Owen Graham, Research Assistant in the Allison Center at The Heritage Foundation. 05/30/08. “The Proposed Iran-Pakistan-India Gas Pipeline: An Unacceptable Risk to Regional Security,” Heritage. [Takumi Murayama]

India generates 70 percent of its electric power and 50 percent of its total energy from coal.[13] Indian policymakers have been working to diver sify away from coal because Indian coal is extremely dirty and has low caloric value. India's soft coal produces about twice as much ash and particulate matter as U.S. coal produces. Gas-pow ered plants are much cleaner and more efficient, especially given the rising costs of emission-control equipment. Increasing dependence on gas has made demand for natural gas in India rise faster than demand for any other energy source.Most of India's domestic sources of gas are used in the expanding electricity sector. As of January 2007, India had 38 trillion cubic feet of proven natural gas reserves.[14] In addition to current stocks, several re cent discoveries in the Bay of Bengal have added to India's known domestic reserves. Despite these finds, India's gas reserves are insufficient to meet its growing demand, and India will rely increasingly on gas imports.India's LNG PortfolioIndia produces approximately 80 million cubic meters (mcm) of natu ral gas per day, but domestic demand is 170 mcm per day.[15] Thus, India must import approximately 90 mcm per day. According to energy con sultants Wood Mackenzie, Indian demand for natural gas is rising 8 percent per year and will reach 270 mcm per day by 2020. "Around 200 [mcm per day] of this is likely to come from a mixture of state-con trolled capped-price production, pri vate-sector production and already-contracted LNG supplies, which leaves a gap of more than 55 [mcm per day], which could be filled by LNG imports." [16]

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Indian natural gas demand is growing tremendously, requiring importation

S. G. Pandian, School of Business, University of Hull. 09/05. “Energy trade as a confidence-building measure between India and Pakistan: a study of the Indo-Iran trans-Pakistan pipeline project,” Contemporary South Asia 14(3), pp. 310-311. [Takumi Murayama]

On the basis of natural gas’ competitive position among various energy sources, it is becoming increasingly apparent that it will be the preferred fuel in future Indian power generation. As the country’s energy economists and policy-makers favour the use of gas, there is a concerted effort to replace coal and eventually direct the national fuel requirements towards natural gas. Although natural gas accounted for 7% of primary energy consumption in 1997–98, it is set to increase to 20% by 2025 (see Table 2). However, India’s conventional natural gas resources are limited and unlikely to meet its growing demand.16 The demand for natural gas is growing at about 260 million cubic meters per day (mmcmd),17 and is expected to rise to 231 mmcmd by 2006–07 and to 313 mmcmd by 2011–12.18 That compares with current domestic production, mainly through the state-owned Oil & Natural Gas Corporation (ONGC), of only 60 mmcmd, a number that is projected to remain flat for the foreseeable future.19Although new natural gas reserve finds would be helpful in meeting the rise in demand, they may not be sufficient to replace the gas import option. Thus, while a natural gas reserve find in the Krishna-Godavari basin by Reliance-Niko partners has revived a debate on the scope of domestic natural gas reserves in meeting India’s hopes of attaining self-sufficiency in the energy sector, energy experts are divided on the impact of this find on the country’s energy economics. However, it is important to highlight that the natural gas reserve find in the Krishna-Godavari block is not significant enough to review import options. Although the joint venture partners pegged the gas reserves at 7 trillion cubic feet (tcf)), the projected gas production is expected to be 1.4 billion cubic feet per day by 2005–06.20 As the demand for natural gas is expected to rise to 231 mmcmd by this time, Reliance-Niko’s natural gas supply could contribute only 17% of India’s domestic demand. Given that the domestic natural gas supply is not likely to keep pace with domestic demand, India will have to import most of its natural gas requirement.

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Natural Gas is preferred from lack of regulation


India’s energy strategy is aimed at ensuring its aspiration to diversify its economy from pre-dominantly oil and coal-based to a multi-fuel one. As of now, the country generates around 50% of its electricity from coal-fired power plants, around 32% from oil and the rest from natural gas, hydroelectric and nuclear resources.21 However, with India’s coal and crude oil production showing signs of stagnation and its long-term projections showing increased energy consumption, additional power requirements will have to be met through alternative energy resources. Since the capacity addition through thermal, hydroelectric and nuclear resources is unable to keep pace with the rapidly increasing demand for electricity, India has decided to make natural gas the fuel of choice for future electric power generation projects.22 Indeed, the country’s consumption of natural gas has risen faster than any other fuel in recent years, from only 0.6 tcf per year in 1995 to a projected 1.8 tcf in 2010.23 India’s willingness to diversify its energy sources stems, in part, from its vulnerability to regional conflicts disrupting energy supplies. Every major conflict in the Middle East has resulted in a serious disruption of energy supplies and therefore higher oil prices for India.24 Since the bulk of the country’s energy supply originates from the Middle East, any future conflicts and/or political realignments in the region may only exacerbate the problems of India’s energy security. However, unlike the oil trade, which is regulated by the cartel rules of the Organisation of Petroleum Exporting Countries (OPEC), trade in natural gas is unregulated. Hence, there is room for considerable flexibility in fixing natural gas prices through long-term contracts.

Indian natural gas demand is high now and will grow

BBC Monitoring South Asia. 07/04/08. “India likely to host next meeting on four-nation pipeline issue.”[Takumi Murayama]

India's current gas supplies of 91 mmscmd, including imported liquefied natural gas, fall short of potential demand of 170 million cubic meters. Demand may quadruple to 400 million cubic meters a day by 2025 if the economy grows at the projected rate of 7 to 8 per cent a year.

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Natural gas’s role in electricity production in India will grow

N.S. Murthy, M. Panda, and J. Parikh, Indira Gandhi Institute of Development Research (IGIDR). 05/97. “Economic growth, energy demand and carbon dioxide emissions in India: 1990-2020,” Environment and Development Economics, Vol. 2 Issue 2, pp. 175-176. [Takumi Murayama]

The trends in consumption of primary commercial energy are shown in Table 1. Figure 1 illustrates the same trends but in comparable energy units. The share of oil and gas in the total consumption of primary commercial energy has increased between 1950–1 and 1990–1, whereas the share of coal has declined. Yet coal continues to be the main source not only of the primary commercial energy used by industry, but also of the secondary energy used through the consumption of electricity. Recent years have witnessed a significant increase in the production and consumption of oil and natural gas. In 1990–1, India imported nearly 40% of the total of 54 million tonnes (mt) of crude oil that it consumed. In addition, about 6 mt of petroleum products were imported directly. Natural gas is likely to play a more important role than before in providing energy in the coming years. The production of electrical energy from hydroelectric sources has also risen steadily over the years, but its overall share in total primary energy has declined. Additions to the nuclear-based electric power generation capacity have been relatively modest.

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Internals – Iran Supplies Natural Gas

Iran is a major supplier of natural gasSarmadi-Rad, Director of Regional Economic Cooperation andMFA of Islamic Republic of Iran, JANUARY 2005, www.unece.org/ie/se/pdfs/wpgas/countries/iran.pdf, Iran’s Strategy for Export of Natural Gas

Iran’s unique geo-economic features distinguish it from other gas-richcountries in the region. It is centrally located among the world’s majoroil and gas producers of the world. It shares land and sea borders with15 countries. It has a vibrant economy with a major pool of skilledmanpower and a well-developed infrastructure. It has 70 million peoplewithin its national borders, and as such it has the largest population inthe region. It is endowed with the second largest natural gas reserves ofthe world. Thus, given its manpower and natural wealth as well as itslocation advantages, Iran is rapidly emerging as a major supplier ofnatural gas to the regional world markets. Our policy of peacefulengagement with our neighbors and trade partners is an addedadvantage.

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IPI Pipeline key to regional stability and conflict resolution

Shamila N. Chaudhary, American University – Trade and Environment Database, Iran to India Natural Gas Pipeline:Implications for Conflict Resolution & Regionalism in India, Iran, and Pakistan, 2000, www.american.edu/ted/iranpipeline.htm

The exportation of natural gas from Iran to India through Pakistan is a venture which may change the face of regional politics in South Asia. It is a study in how economic collaboration possesses the power to engender as well as transform social and political discourse between countries. The Indian government speculated whether Pakistan could guarantee security for the flow of natural gas in the pipeline. Furthermore, Pakistan's collaboration with Iran may foster conflict resolution as well. In the past, Iranian and Pakistani foreign policies have disagreed on the issues of Afghanistan and Shi'a-Sunni conflicts in the region. Thus, trade and the larger experience of economic globalization posesses the ability to exist as mediators in conflicts in the region and between regions. Natural gas trade between India, Iran, and Pakistan challenges the geopolitical, historical, and strategic realities of the three countries and the general regions of the Mideast and Asia. In this way, the relationship between the pipeline venture and globalization is multidisciplinary. It is not characterized solely by economic factors, even though the current economic realities in Iran, India, and Pakistan do foreshadow the future necessity of economic collaboration. The realities of this case study are representative of the notion that multidisciplinary globalization is changing the face of regional politics and altering the social and political landscape of regions.

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Impacts – Iranian-Pakistani Relations

IPI Pipeline is essential for Iranian-Pakistani Relations

Dr. Ali Mostashari, Strategic Initiatives Advisor, UN Development; and Research Affiliate, MIT. 01~03/07. “The Political Economy of the Iran-Pakistan-India Gas Pipeline,” Iran Analysis Quarterly Vol. 4 Number 1, p. 30. [Takumi Murayama]

For Iran, the project would provide both a new energy market as well as potential political support from India in the current nuclear crisis. Therefore, Iran has not refrained from providing open incentives for the deal to go through. In 2005, Iran had awarded Indian gas companies major energy contracts in the order of $40 billion (Asia Times Online, January 11, 2005). Improvement of relations with Pakistan is also an important plus for the project from Tehran’s perspective. By strengthening its ties with Pakistan, one of America’s closest allies in the region, Iran could ensure that sufficient in- betweens exist in times of crisis. Additionally, given the ethnic and religious unrest in Iran’s eastern borders with Pakistan, Iran wants to ensure that Pakistan has an equal interest in stability in the Baluchestan area, and discouraging any incentives for support to separatist Sunni groups.

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Impacts – CBMs

IPI Pipeline key to regional confidence building measures


From the perspective of India, there are major economic interests in securing energy supplies in an increasingly tight market. India's demand for natural gas is projected to grow from 49 billion cubic meters (bcm) in 2006-07 to 125 bcm by 2024-25. India’s options to meet this demand are essentially two-folds: the IPI pipeline or the alternative Turkmenistan-Afghanistan-Pakistan (TAP) pipeline to which India was formally invited to join in February 2006. The TAP, while a politically easier option, may be problematic because of safety concerns when it passes through Afghanistan, and the potential inadequacy of Turkmen natural gas resources to provide for India’s demand in the longer term. Pakistan also regards the deal positively, because it would not only guarantee a source of income for them, but also increase stability in the region. Pakistani Prime Minister Shaukat Aziz was quoted as saying that “the Iran-Pakistan-India gas pipeline is a win-win proposition for Iran, India, and Pakistan that could serve as a durable confidence-building measure, creating strong economic links and business partnerships among the three countries”.

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Impacts – Iranian Economy

IPI Pipeline essential for Iranian survival

Dr. Ali Mostashari, Strategic Initiatives Advisor, UN Development; and Research Affiliate, MIT. 01~03/07. “The Political Economy of the Iran-Pakistan-India Gas Pipeline,” Iran Analysis Quarterly Vol. 4 Number 1, pp. 32-33. [Takumi Murayama]

Now more than ever, decisions in the energy market are more about political economy than economic realities. Iran’s isolation by the West has pushed its trade strategies towards Russia, India and China. In the same way, Iran has tried to use its control over substantial energy reserves and its ability to disrupt energy transit routes as a defensive way to deter U.S. and Israeli military and economic action, it is trying to use the same assets to expand its trade with India, China and Pakistan. If the proposed Iran-Pakistan-India (IPI) project is successful, Iran would be presented with the opportunity to expand its trade ties with other nations in the region to go beyond the energy provider role and circumvent the threat of unilateral economic sanctions by Europe and the United States.The pipeline could also be expanded to other countries in the region, expanding Iran’s reach into hitherto untapped markets. On the other hand, if the IPI project fails, the near-term prospects for Iran’s Eastward shift become severely limited. In the longer term and thinking beyond the current power structure, an Eastward shift, whether through this project or others can help diversify Iran’s trade portfolio and open up new markets for Iran’s non-energy based products. Given the long-term investment in such a project, the result may favor Iran’s national interest beyond the existing power structure. Conversely, if the Eastward shift fails to materialize, it will be a grave setback for Iran with negative economic and social impacts beyond the current context.

Bad Iranian Economic causes Civil Conflict


With the world's second biggest gas reserves, Iran has long threatened to become a major player in the international gas market. Global demand is rising relentlessly and the country is well placed to supply markets in East Asia and the European Union (EU). However, a combination of regional geopolitical problems and domestic affairs has slowed the development of the sector.Iran's internal struggle over economic reform and liberalisation has prevented the introduction of changes to the constitution and the investment environment that would allow private companies to play a large role in developing Iran's gas resources. The state owned National Iranian Oil Company (NIOC), is struggling to develop all existing oil discoveries and has commited billions of dollars to pipeline projects that will take many years to pay off. The support of foreign, private, companies is required if the many proposed schemes are to get off the ground. This is as true of pipeline projects as it is of liquefied natural gas (LNG) initiatives.

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Impacts – Diplomacy

Pipelines are key to diplomacy, NOT for energy security


For India, a country with negligible and rapidly depletable oil resources, it would mean safeguarding and sustaining its developmental and global power aspirations. A secure but costly form of importing energy would be liquefied natural gas (LNG), delivered by ship. The seas are international waters. The Indian navy and navies of rich countries will try to ensure open seas. Even Turkmen gas could be piped down to the Iran coast and liquefied. However, pipelines are less secure. A deep-water pipeline in international waters, though, is relatively secure and relatively costly. A cheaper pipeline in shallow waters will pass through the Exclusive Economic Zone (EEZ) of counties and so security will require credible national guarantees. Such guarantees can be abrogated in times of hostilities. Even onshore pipelines are not entirely secure: militants and other such irredentist elements operating within national boundaries can blow them up. This has already happened in Assam and Baluchistan and might happen in tremendously volatile Afghanistan too. Onshore pipelines through Pakistan may be the cheapest form of transporting gas from Iran and Turkmenistan. But low cost is not security as conventionally understood. Though important, it cannot be called energy security. The gas pipelines will reduce the cost of delivered gas compared with transported LNG, but at an increased risk of disruption. Albeit there are modest risks, the potential diplomatic gains are huge, and so this is a worthwhile diplomatic gamble. But worthwhile gambles are not security (Challency, 2005). We need to increase the efficiency of thermal power stations, but every 1% increase requires an additional 5 million tons of coal. Most Indian coal is of low quality. This approach alone will necessitate enormous quantities of coal needed to feed existing and future power plants and to gasify coal to substitute oil and natural gas.

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Impacts – IPI Key to Pakistan Industry

Trans-Pakistani route is beneficial for Pakistani industry


To address the growing natural gas demand, Pakistan is pursuing various natural gas import options, including the importation of LNG and natural gas through pipelines from the leading energy suppliers in the Middle East and Central Asia. The importation of LNG is economically competitive with pipelines only at distances greater than 3000–6000 kilometres. Therefore, the option to import gas via LNG will be more costly, both in terms of investment and delivery costs of imported gas.39 Given the cost disadvantage of importing the LNG, Pakistan was considering various pipeline projects. No Pakistan-centric pipeline would be economically feasible, as the demand growth for gas resources is feeble and unsustainable in the long-term. The gas pipeline projects in which Pakistan is interested would not materialise unless the desired destination of the pipelines would be India. Slower demand growth would mean that the Iran–Pakistan and Turkmenistan–Pakistan gas pipeline projects are commercially not viable, as Pakistan could not absorb the imported gas. In this regard, Pakistan has concluded that it would be in its interest to provide on-land transit for the Indo-Iran pipeline project. Such a project, apart from offering an attractive transit fee for the pipeline to pass through its territory, would also offer Pakistan the gas at subsidised rate to fuel its sluggish industrial growth.

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Impacts – Pakistan Strategy/Security

IPI is good for Pakistani strategy

Maha Atal, Forbes. 07/21/08. “IPI vs. TAPI.” http://www.forbes.com/business/global/2008/0721/028.html [Takumi Murayama]

In today's economy, says Ambassador Pickering, "energy is increasingly more important to development," not only as a resource for cars and computers but also as a powerful commodity market. For Pakistan the IPI would bring $200 million a year in transit fees and give it a form of strategic advantage over its larger, wealthier neighbor.

IPI can help Pakistan’s energy demand

FARS News Agency. 06/28/08. “Pakistan Steps up Pressure over IPI Pipeline.” http://english.farsnews.com/newstext.php?nn=8704080876 [Takumi Murayama]

But with energy prices going up, Pakistan is clearly looking at the pipeline as a viable energy option. "Energy prices have gone berserk and all countries are suffering. Subsidies on petroleum products for both countries are immense and contribute to the fiscal burden. This project can help us mitigate our problems vis-à-vis energy," said Qureshi.

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Impacts – Pakistan Economy

IPI pipeline key for Pakistani economy


The latest positions in Indo-Pak ties clearly put economic factors on the front burner. [The IPI pipeline is likely to cost $7.4 billion mainly due to increase in steel prices. India estimates that the project cost may go to as high as $8.16 billion if there is a 10% escalation in raw material costs over the next 5 years when the project is slated for construction. The capex may come down to $6.67 billion if there is a 10% decrease in raw material cost.] (Aiyar, 2005a). The real attraction is the US$5 billion potential in trade through the proposed Iran–India gas pipeline traversing Pakistan. This pipeline is expected to save India US$300 million a year in energy transport costs, while Pakistan would get an estimated US$700 million in annual transit fees. However, the stake of Pakistan is very high, if the proposed project passes through Pakistan, as this project would have enormous implication for Pakistani economy. Pakistan's perennial foreign exchange crisis forced it to concede that it is in its financial interest to get itself involved in the Indo-Iran gas pipeline project. The pipeline would accrue to Pakistan an income of $14 billion in 30 years, including $8 billion in transit fee, $1 billion in taxes, and $5 billion in savings (S. Pandian, 2005 and Pandian, 2005).Although the transit fee would not wholly redress Pakistan's acute foreign debt crisis, it would partly alleviate this problem. Finally, Pakistan, like India, suffers from a growing oil-pool deficit. Pakistan's power generation is heavily dependent on fuel oil, and it is a net oil importer with an oil import bill of over US$1 billion/annum. The country aims to slash its imports from the Gulf by one-third in order to save at least US$1 billion a year in its annual energy import bill. To reduce the fiscal strain on the Pakistan's economy, the government has opted for a policy option of substituting fuel oil with natural gas for power generation, a move expected to save an estimated US$600–700 million/annum. It is estimated that at current levels of power generation, over 800 mfc/day of additional gas is required to replace fuel oil in all its thermal power plants (S.G. Pandian, 2005 and Pandian, 2005). In this regard, Pakistan has concluded that it would be in its interest to provide inland transit for the Indo-Iran pipeline project. Such a project, apart from offering an attractive fee for the pipeline to pass through its territory, would also offer Pakistan the gas at subsidized rate as local gas comes at the rate of $3.4/million British thermal unit (mbtu) against imported gas at $5, the difference being is $1.6 mbtu. This difference would be met through transit fee. Moreover, if gas import plans cannot be implemented and gas supplies remain limited to LNG imports in the next 5 years, the new thermal plants will be based on furnace oil with the provision that these could be switched over to gas at a later stage. This will, however, put additional foreign exchange burden on the import of fuel. The policy has also clearly defined the order of priority for all sectors for additional gas supplies. The policy has been prepared on the basis of an integrated analysis of Wapda and KESC systems scheduled development of hydel, coal, and nuclear energy projects and expected low water availability during dry period. This situation will remain intact even after materialization of 500 mmcfd (million cubic feet per day) LNG import by 2010 and hence additional supplies would be diverted to other priority sectors. Moreover, CNG stations, captive power and general industrial sector will start running short of gas from fiscal year 2015. Pakistan was meeting 18% of its oil needs from local production and the country had to import the remaining 82% requirements for which it had to pay international prices. The Pakistan government has incurred losses amounting to Rs. 66 billion by capping the prices over the past year and would meet 50% of the expected Rs. 4 billion losses even after the new increases. However, Pakistan government has increased oil prices 114 times in its six years. On the basis of comparative prices local cost of gas comes to $3.4/mBtu against $5 for imported gas. Gasification of coal will make the cost $5.5/unit, while the cost of the high sulfur fuel oil comes to about $7.5/unit; fuel oil will cost $8.1/unit, Naptha $ 1.4, and high-speed diesel $12.6/unit. See Table 2 and Table 3.

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Impacts – Indian Economy

Pipeline key for Indian economy and solving its energy crisis


However, the IPI gas pipeline project is significantly about the perceived value of secure energy supplies versus stable prices and the willingness to eventually pay a security vis-a-vis India's energy concern in the long run. India, would rather prefer to import gas from Iran. India's interest in the proposed Indo-Iran gas pipeline project is based on the presumption that the project's long-term prospects are higher than what it would achieve by other options. It would also be in India's interests to buy gas resources from one source, which is nearer and never-ending, rather than from several sources. Iran claims to have 16%% of the world's gas reserves, enough to last for 500 years at the present rate of exploitation. It is suggested that Iran's massive natural gas reserves can supply India's gas demands for up to 200 years. For India, the economic feasibility is not the only criterion but also the safe and continuous supply of gas. In this regard, it is obvious that India's concern for the safety and security of the pipeline projects takes precedence over the economic viability and technical complexity. The most important aspect of the pipeline project is the medium of the transfer, which needs to be cost effective and secure. According to a Broken Hill Proprietary (BHP) study, the supplying of gas via pipeline could save India an estimated US$10 billion over 10 years. It is also suggested that the piped Iranian gas constituted the most affordable long-term energy supply to India. By facilitating the trans-Pakistan gas pipeline project, Pakistan did not want to act as an instrument in fostering a long-term relationship between India and Iran, which would obviously challenge and reduce Pakistan's stake in the region. The benefit of the gas pipeline project with India are long-term as Iran, with huge natural gas reserves, is capable of addressing India's growing energy crisis. Pakistan expressed its eagerness to participate in the pipeline project because of its own self-seeking interests. Iran sought to bring in Pakistan as a partner in the pipeline project to ensure an economically feasible overland transit route. India has sought to repel and play down the role of Pakistan as an equal partner in the project for the fear of its energy supply being disrupted in case of a military conflict with Pakistan (S. Pandian, 2005 and Pandian, 2005). Also the domestic social and political atmosphere in Pakistan seems to be in perennial disarray, too volatile to dispel concerns against its economic stability and instill confidence in the long-term commercial viability of any pipeline passing through its territory. However, the problem associated with oil and gas security and the Gulf, after all, are of a complexity that demands comprehensive solutions. Internationalizing al least the energy issues could begin to disengaged the US from the current slippery slope on which it is increasingly perceived as a regional combatant aggressively pursuing unilateral national and security interests to the detriment of regional stability. Asian leaders are becoming increasingly worried about their economies growing dependence on Gulf oil and gas and are likely to be receptive to any multinational initiative that would make supplies from the region more secure or provide a framework for developing alternatives energy substitutes. However, the fate of the Iran pipeline is still hanging fire. Apart from US opposition to the project, there are also differences on the pricing of the gas. The two countries (India and Iran) have also not been able to decide on a price for the pipeline gas. Tehran is seeking at least $7.2/mBtu price for gas it wants to sell to India and Pakistan through the pipeline, while New Delhi is willing to pay not more than $4.2/mBtu for its share (Mishra and Goswami, 2006). Furthermore, Pakistan's weak financial position makes it difficult to secure financing for ambitious pipeline projects. The oil and gas pipeline projects in which Pakistan is interested would not materialize unless the desired destination of the pipeline would be India and world's second largest market for natural gas. Therefore, Pakistan’ s willingness to eventually pay a security at the cost of causing overwhelming advantages to India is doubtful. On the strategic side, it is in India's interests to ensure economic instability in Pakistan. For Iran and Pakistan, the gas pipeline project has socio-politico-economic and geo-strategic components. The Pakistan economic gains of Iran gas pipeline project would be a continuous transit income and the option to procure gas at a subsidized rate (S. Pandian, 2005 and Pandian, 2005). Thus the crux of the matter is that there are major politico-strategic factors relating to all the involved players, including the US, which weigh against the on ground implementation of the project. It is to be seen when such hitherto dominating irritants get nullified by a cooperative, win–win and predominantly economic approach on the part of these states, especially, India and Pakistan.

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Impacts – Indian Energy

IPI Pipeline Key to Indian Energy Security

Times of India. 07/12/08. “Natural gas solution, N-power overhyped.” [Takumi Murayama]

The Working Group's report does not give a break-up of thermal capacity, so one does not know how much of the planned capacity addition is coal-based and how much gas-based. However, it does say, "natural gas is the fastest growing primary energy source amongst fossil fuels". It also acknowledges that India is likely to have only about 49 billion cubic metres (BCM) of gas production by the end of the 11th Plan against an estimated demand of about 114 BCM. "Therefore, it is reasonable to expect that sizable quantity of natural gas would need to be imported to meet the demand in future, either as LNG or through trans-national pipelines," the Working Group report says. That would indicate that it is deals like the India-Iran gas pipeline that could really hold the key to India's energy security. Whether such a deal will be possible in the event of India getting into a strategic embrace with the US, which has indicated its disapproval of the pipeline project, is another matter.

The IPI pipeline is the cheapest option for India


Iranian gas delivered via a trans-Pakistan pipeline will be cheaper than the importation of the LNG. Indeed, at the cost of US$2.20/2.50 mmbtu, the Iranian gas is expected to be cheaper than anything offered by Petronet.52 There are also reports of Iranian gas delivered at the Indian border at the cost of $1.80 per mmbtu.53 Moreover, from a cost perspective, a single natural gas pipeline extending from Iran to India overland through Pakistan would be comparatively cheaper than constructing two or more independent pipelines from different suppliers. India’s interest in the proposed Indo-Iran gas pipeline project is based on the presumption that the project’s long-term prospects are better than what it could achieve by other options. It would also be in India’s interests to buy gas resources from one source that is near and never-ending, rather than from several sources. Indeed, Iran claims to have 16% of the world’s gas reserves, enough to last for 500 years at the present rate of exploitation,54 and sufficient to supply India’s gas demands for up to 200 years.55 The trans-Pakistan pipeline project also offers the best value as compared with other pipeline options and/or the importation of LNG from external sources, whether single or multiple.56 It is also suggested that the piped Iranian gas constituted the most affordable long-term energy supply to India, and save the country an estimated US$10 billion over 25 years.57

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Impacts – Indo-Pak Relations

The Pipeline catalyzes a new Indo-Pakistani relationship, beneficial to both economies


Any economic CBM requires the actors to benefits in various ways. The proposed Indo-Iran trans-Pakistan pipeline project will have profound economic implications for India and Pakistan. While the project addresses India’s long-term energy needs, it significantly improves Pakistan’s economic and geo-strategic interests. It will provide the latter with much-needed foreign currency in the form of transit fees for the passage of gas through its territories. The pipeline would also provide Pakistan with the opportunity to obtain cheap gas from the same pipeline. The country’s importance in the region will also improve as a Indo-Iran pipeline may well encourage similar delivery methods across its territory. The thaw in Indo-Pakistan relations in recent months has encouraged India to hold talks with Pakistan regarding the overland pipeline project. India also has agreed to drop its insistence on linking progress on the proposed overland gas pipeline with trade concessions from Pakistan. Despite these marked developments in Indo-Pakistan bilateral relations, it is difficult to sustain the situation given broader disagreements between two countries over the issues of Kashmir and terrorism. The removal of threats in the region requires a reduction of tensions through the creation of CBMs. A pipeline project involving India and Pakistan would act as a CBM by increasing their economic interdependence. As India has already extended most favoured nation status to Pakistan without expecting reciprocity, its preference for a trans-Pakistan pipeline project would further act to gain Islamabad’s confidence. Pakistan Prime Minister Shaukat Aziz has stated that ‘the confidence-building measures and the dialogue we’ve initiated at all levels is helping to create a conducive atmosphere . . . [and] the [proposed] pipeline creates linkages and interdependencies and builds trust and interaction’.58 The strategic shift to include Pakistan in the Indo-Iran pipeline project has the capability to forge a new relationship between India and Pakistan. The trans- Pakistan pipeline has immense potential to create a conducive atmosphere and add new meaning to the bilateral relationship. Such a relationship would also facilitate India’s long-term commercial interests in Central Asia. The beneficial effects of trans-Pakistan pipeline project would also spill over into areas such as commodity trade, science and technology, and human resource development in both India and Pakistan.

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Impacts – Indo-Pak relations

IPI Pipeline Key for solving Indo-Pakistani tensionS. G. Pandian, School of Business, University of Hull. 09/05. “Energy trade as a confidence-building measure between India and Pakistan: a study of the Indo-Iran trans-Pakistan pipeline project,” Contemporary South Asia 14(3), p. 318. [Takumi Murayama]

India and Pakistan are both confronted with the problem of an increasing shortage of natural gas. As they have the advantage of bordering the Persian Gulf and Central Asia, two of the world’s major natural gas rich regions, this geographical proximity can provide the basis for mutually beneficial economic cooperation between India and Pakistan in energy trade. The trans-Pakistan pipeline project will draw India and Pakistan closer into an energy partnership and break down barriers against commercial engagement between the two nations. A pipeline agreement supported by India and protected by Pakistan against any disruptions of flow would bring political as well as economic benefits. Thus, the trans-Pakistan pipeline project could be a key CBM in resolving irritants in their political relations, forging and intensifying a new relationship between India and Pakistan.

Energy Trade key for Indo-Pakistani relations in other areas


However, the development of positive institutional arrangements in South Asia has always foundered the historical absence of mutual trust, confidence and cooperation between SAARC members India and Pakistan. The current thaw in Indo-Pakistan relations shows that it remains imperative to identify potential areas of cooperation between these two countries so as to reduce threats to the region as a whole. It is essential that India and Pakistan undertake confidence-building measures (CBMs) capable of locking the parties into an irreversible relationship of peaceful co-existence. Although there have been military CBMs between the two countries, their importance have been undermined as the beneficial effects of such measures have not been readily visible. In this regard, India and Pakistan must search for non-military CBMs. Non-military CBMs have often been used to reduce threat perception and build confidence between potential adversaries. This is particularly true in the case of economic CBMs, whose visible effects help countries build confidence and establish mutual trust. Although it cannot be concluded that the economic relationship plays a pivotal role in strengthening the foundation on which the political relationship is built, it could be argued that economic factors have considerable leverage in influencing the political relationship. Franco-German, Sino-US and Sino-Japan relations are evidence that extensive economic relationships have a spill-over effect in positively influencing the political understanding and, subsequently, regional security between countries. Successful CBMs must be verifiable, and require that the agreeing parties have the political will to initiate and maintain agreements.2 In this regard, there are two possible dimensions for non-military CBMs between India and Pakistan; namely, free trade and energy trade. The experience of these two countries in establishing free trade is far from impressive. Although the dynamics of international relations have changed, with trade and investment issues occupying an important role in foreign policy issues, the primacy of economic issues in Indo-Pakistan relations has not been realised. Pakistan and India have both resisted becoming economically dependent on the other and, unlike other contiguous countries, their economies are insulated from each other. Yet, contrary to trade in commodities or other items, the energy trade between India and Pakistan is capable of acting as a CBM in their relations. The creation of irreversible economic interdependence through trade and investment would enhance regional security in South Asia. Energy trade in this regard gains more significance, as it has all the potential to lock India and Pakistan into an irreversible economic interdependence. Such an effort would help India and Pakistan to intensify relations in other potential areas of cooperation.

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Impacts – Indo-Pak Relations

IPI pipeline increases Indo-Pakistani relations


However, the gas pipeline could bind the two countries in economic linkages that would be quite hard for either side to snap for political reasons (Krepon and Haider, 2005). As regards Indo-Pak relations, the traditional pattern of hostility has not only continued, but has also considerably escalated. The Indo-Pak rivalry has revolved around three long-standing issues: Kashmir, communal tension, and the military. Many observers of this process are worried that overt nuclear rivalry will not produce a stable deterrence configuration between India and Pakistan (Buzan, 2002). In sum, the grand vision of friendship through economic integration is a gamble. But it is not a very dangerous gamble and may succeed. New Indo-Pak wars are possible, but extremely unlikely. Three wars over Kashmir have proved that war achieves nothing. And nuclear bombs are powerful deterrents (Kargil war may be seen as a mere border incident). Since war risk is small, it may be worth taking a small risk on the pipeline for an optimistic but possible peace gain. But it is not an energy security. If Iran pipeline is extended further to China it is beneficial to India from security point of view, because Pakistan cannot cut off supply to India without cutting it off to China. Whether China wants such a long pipeline through so many country remains to be seen (Aiyar, 2005a). But China shows little interest in this project because China feels that this project is full of challenges, such as US opposition. In addition, to China and India are rivals not only in Iran's energy sector but also in global level. However, if India is to emerge as the world's largest economy by the middle of this century as envisaged by Goldman Sachs, it has to solve two interrelated challenge: stem its growing energy deficit, and contain active and emergent security threats. In fact, energy needs are beginning to dictate military planning for its long-term energy strategy. For the first time, India has begun to integrate its energy policy with foreign policy by consciously promoting oil diplomacy geared towards seizing energy-related opportunities overseas. What is not happening is the blending if India's energy policy with defense policy. At best the two are parallel policies with little convergence and perspective sharing between ministries.

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Impacts – Conflict Res

The IPI pipeline creates a spillover, stopping future conflictsSarmadi-Rad, Director of Regional Economic Cooperation andMFA of Islamic Republic of Iran, JANUARY 2005, www.unece.org/ie/se/pdfs/wpgas/countries/iran.pdf, Iran’s Strategy for Export of Natural Gas

The natural gas pipeline to Pakistan and India, “Peace Project” is beingseriously followed up. For this project the techno-economic study of an1883-km pipeline to carry 45 mcm/day of Iranian gas to Pishin inPakistan via the Port of Asaluyeh in Iran has been completed. Thefeasibility and commercial viability of this pipeline is no longer inquestion.At the same time, Iran is planning to develop its natural gas pipelinenetwork by extending it to its eastern and western borders to become amajor hub for natural gas transactions. Expansion of cross borderpiped gas trade volume to a net of about 40 bcm/y by next 10 years isone of the main strategic goals of Iran. The existing pipeline networkplus the ones under construction or study in Iran will eventually linkCentral Asia, the Persian Gulf states, Azarbaijan, and Turkish gaspipelines through Iran to everyones’ benefit. Further extension of thisloop to the East could supply Pakistan and India, and in the West a newline from Turkey to Europe would complete the link between Asia andEurope. Such a network will allow unprecedented major swaps withremarkable advantages for seasonal adjustments.

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Impacts – CBMs

IPI pipeline is key confidence building measure

Gal Luft is Executive Director of the Institute for the Analysis of Global Security. Iran-Pakistan-India pipeline: the Baloch wildcard, January 12th 2005, www.iags.org/n0115042.htm

A land based pipeline would be four times cheaper than any other option, even after taking into account transit fee payments to Pakistan. But for a long time political tensions between India and Pakistan made it difficult for Delhi to accept an energy project that would create dependence on a neighbor with whom its relations are far from stable. Recent improvement in the relations between the two neighbors has bought India to finally consider joining forces with Pakistan for the mutually beneficial pipeline project, estimated to cost around $4 billion. A third of the gas would be delivered to Pakistan and the rest to India.

For Iran, India’s participation in the project is of paramount importance. In addition to a broader market for its gas Iran hopes to gain political support from India as it is facing strong international pressure to terminate its nuclear program. In return for India's agreement to buy large quantities of gas, Iran has awarded Indian gas companies major service contracts and also granted them participation in refining and other energy related projects to the tune of $40 billion. Iran’s relations with Pakistan are also strategically important. With American troops stationed in neighboring Afghanistan and Iraq, Iran is trying to check U.S. influence in the region by strengthening its ties with Pakistan, one of America’s most needed allies in the war on terror. The Pakistanis, for their part, would like to see their territory used as a transit route to export natural gas to India. This would not only guarantee a source of income for them but also increase stability in the region. Pakistani Prime Minister Shaukat Aziz said the Iran-Pakistan-India gas pipeline is "a win-win proposition for Iran, India, and Pakistan," that could serve as a durable confidence-building measure, creating strong economic links and business partnerships among the three countries.

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Impacts – Regional Stability

The Pipeline improves IPI economies, which creates regional stability


Since the discovery of natural gas reserves in Iran’s South Pars field in 1988, the governments of Iran, Pakistan, and India have increased their efforts in realizing a natural gas pipeline project that will serve the twin purpose of increasing Iran’s gas exports and meeting high energy demands in South Asian countries. Billed as a ‘peace pipeline’ by the three countries, the Iran-Pakistan-India (IPI) gas pipeline assumes special significance for both economic and political reasons. Not only will energy-deficient countries like India and Pakistan benefit greatly from importing natural gas from Iran, but also, a project of this scope will strengthen the dyadic relations amongst them for greater regional stability. As the owner of the world’s second largest proven natural gas reserves after Russia, Iran is keen to exploit this resource as a source of revenue. India remains the biggest potential customer of this pipeline project with an ever increasing population to meet its energy needs. Pakistan, that refuses to establish normal trading ties with India will also benefit greatly by the pipeline by earning hundreds of millions of dollars in transit fees and other annual royalties from both Iran and India.

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AT: TAPI Better

Security and supply concerns make TAPI a horrible choice

Bruce Pannier, Radio Free Europe/Radio Liberty. 04/28/08. “Energy: Turkmen, Iranian Presidents Moving Ahead With Rival Pipelines,” Payvand. http://www.payvand.com/news/08/apr/1293.html

[Takumi Murayama]Analysts point to two major drawbacks with TAPI. The first is the route through Afghanistan, where it will be difficult to ensure security for the pipeline, especially as it turns eastwards and approaches Kandahar, where fighting between militants and the Afghan government and foreign forces is still a daily occurrence. Turkmenistan and Pakistan have been trying for more than a decade to get the pipeline built, but security problems in Afghanistan have always held up the deal. If security could be guaranteed, Afghanistan stands to receive large and badly needed revenues from transit fees.The second problem is the question of how much natural gas Turkmenistan actually has. The April 28 edition of the Russian daily "Kommersant" points out that Turkmenistan has a contract with Russia's Gazprom to export up to 50 bcm of gas annually to Russia for two more decades, a contract with China that starts in 2009 for 30 bcm annually, and a deal with Iran for 8 bcm annually. Berdymukhammedov also promised earlier this month to send 10 bcm to Europe Union countries, though the details of that agreement are still unclear. The acceptance of the TAPI deal would bring annual Turkmen natural-gas exports to well over 100 bcm annually -- a huge amount of natural gas to export when Turkmenistan's proven reserves of gas are not fully known.

TAPI’s budget is underestimated and it’s still uncertain whether Turkmenistan even HAS gas


Meanwhile, the American-backed alternative languishes. The TAPI plan, to bring gas from Turkmenistan through Afghanistan and Pakistan into India, would keep Iran out and diminish Russian influence in Central Asia.But projected costs have doubled since 2002 to $7.6 billion, though energy experts remain skeptical of the new number given that the pipeline would pass directly through war-torn Afghanistan. Former World Bank economist and energy expert John Foster believes TAPI proponents are underestimating their budget in order to compete more aggressively with the IPI plan. "There are some games going on with that number," he says.There are doubts, too, about TAPI's output: The Asian Development Bank, financiers for the project, has yet to reveal data regarding Turkmenistan's energy resources. As a result, says Deora, "TAPI is at a very primitive stage. We're not even sure if there's gas there, or how much." India's growing economy, he says, cannot wait any longer for an energy lifeline. India accounted for a third of the 3% rise in global energy consumption in 2007.

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AT: US Pressure Prevents Pipeline

India has no reason to give in to US pressure

G. Parthasarathy, former High Commissioner to Pakistan. 05/15/08. “Iranian gas pipeline: Facts and fiction,” The Hindu Business Line. http://www.thehindubusinessline.com/2008/05/15/stories/2008051550180800.htm. [Takumi Murayama]

Should India worry about US pressures over the IPI pipeline? In August 2006, the US Congress unanimously passed the “Iran, Libya Sanctions Act” (ILSA), which provides for imposition of US sanctionson companies, irrespective of their “corporate nationality” that invest more than $ 20 mm annually in the Iranian oil and gas sector. Despite this legislation, Iran has attracted more than $ 30 bn of foreign investment in its energy sector since the sanctions were imposed. The European Union has opposed the ILSA sanctions and passed a Resolution on November 22, 1996 directing its companies not to comply with the sanctions. A number of European Companies, including Total of France and Italy’s ENI, have ignored the sanctions, as have Petronas from Malaysia and the Russian energy giant, Gazprom.In these circumstances, there is no reason for India to hesitate to proceed with the IPI pipeline, merely because of apprehensions of the adverse impact of possible American sanctions. If Washington expresses displeasure, it can be politely told that, given our need for environmentally friendly sources of energy we have no option but to seek access to natural gas to meet our energy needs.

Both Pakistan and India have fought off US pressure


Already some 1,100 kilometers of the 2,600km pipeline that pass through Iran's territory is about 50% built, and that certainly is good news. More good news is that both Pakistan and India have successfully fought off US pressure to stop the project that Washington deemed geopolitically beneficial to Iran.

Indo-Pakistani gas demand is worth complicating US ties


[Takumi Murayama]IPI's disadvantage is the U.S. objection to the pipeline -- but both Pakistan and India have indicated publicly that their countries' demand for energy is such that Islamabad and New Delhi are prepared to endure the possibility of complicating ties with Washington. The ABD has not come out in favor of IPI, and many potential international investors may be frightened of facing Washington's wrath for being part of IPI.A distinct advantage for IPI is that there are two major companies that have expressed interest in joining the project -- Russia's Gazprom and the China National Petroleum Corporation. Gazprom has supported the IPI project for several years but China's interest is relatively new and may have to do with a proposal from Pakistani President Pervez Musharraf earlier this month that his country could build a "Karakorum" pipeline to deliver gas or oil to China through mountain passes in the Himalayas. Such pipelines could bring not only Iranian natural gas but also gas and oil delivered to Pakistani port cities along the Arabian Sea.

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AT: US Pressure Prevents Pipeline

India going ahead with IPI despite US pressure


India, Pakistan and Iran will sign a deal this month to build a natural gas pipeline to help feed the subcontinent's desperate need for energy, a major blow to American sanctions against Tehran and a defeat for U.S. influence in South Asia.The $7.5 billion, 1,700-mile Peace Pipeline (IPI) project would bring gas from the South Pars Gas Fields through Balochistan (in Western Pakistan) into India. The project has stalled multiple times since first proposed in 1994 due to political tensions, changing governments, conflicts over prices, and most recently, the weight of American opposition.The agreement comes amid growing tension between the United States and Iran, which the U.S. has sought to isolate from the world community. But rising fuel prices and a soaring Indian economy seem to have outweighed America's desires--as well as a rival plan for a U.S.-backed pipeline from Turkmenistan.Though Iran and Pakistan finalized a deal earlier this spring, India remained noncommittal. IPI advocates say the reluctance is due to American pressure: The 2006 U.S.-India nuclear agreement puts pressure upon India to cooperate with American foreign policy goals, and bolstering the Iranian economy through oil imports is hardly on Washington's to-do list.

IPI will go forward, and the US will not retaliate


American opposition or not, the IPI project seems to be headed for a formal contract signing this summer. On paper, India and Pakistan may have addressed U.S. objections by allowing each nation to organize its own leg of pipeline construction. In previous rounds of talks, Gazprom and British Petroleum (nyse: BP - news - people ) surfaced as potential bidders.Behind the scenes, however, officials admit that the South Asian nations are simply ignoring American directives. Dr. Noor Jehan Panezai, MP, who represents the region in Western Pakistan where the pipeline will run, welcomes the plan as an employment package for her constituents. "Indians and Pakistanis," she says, "will choose our own projects. We have decided that the United States has no business in our problems."Given the crucial role India and Pakistan play in American strategy, experts say it's unlikely that Washington will punish its allies politically or financially for dealing with Iran. Until the deal is inked, however America may exert its best efforts behind the scenes. "The current administration," says Pickering, "might try to impose conditions on India, and I'm sure they are trying to dissuade Pakistan."If the IPI deal wins out, then it will send an uplifting message about Indo-Pak collaboration, but also a sobering one about America's international clout.

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AT: Pipeline Unsafe

Security over the pipeline is not a problem


Although the trans-Pakistan route for the Indo-Iran pipeline is capable of addressing India’s long-term energy demand, New Delhi has been apprehensive about the security of the on-land option. Although Pakistan has assured the safety of the pipeline in an undertaking to Iran, India is guarded in its understanding of Islamabad’s guarantees. Various measures have been proposed to allay India’s fears. As a supplier, Iran has agreed to provide sovereign guarantee for the supply of gas. India, wary of the physical security of the on-land pipeline, sought a guarantee from Iran that, if Pakistan stopped the gas supply in case of an armed conflict, Iran will supply an equal amount of LNG to India at the same price. In return, Tehran has agreed both to supply an equal amount of LNG to India at the same price in times of supply disruption, as well as to stop delivery of gas to Pakistan if Islamabad disrupts gas supplies to India.40 Iran also proposed setting up an international consortium of bankers and energy companies that would buy the gas from Iran and sell it to India.41 To ensure uninterrupted energy supply, it also suggested a tripartite agreement between India, Iran and Pakistan with the inclusion of global financial institutions such as the World Bank and Asian Development Bank as guarantors.42 Furthermore, it was suggested that Islamabad’s expectations of substantial transit fees was a reasonable enough guarantee against sabotage by Pakistan.

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IPI PIPELINE AFF

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2AC – IPI PIPELINE

1. No pipeline now – US-Indian agreement

Shiv Kumar Verma, Political Geography Division, Center for International Politics, Organization and Disarmament, School of International Studies, Jawaharlal Nehru University, New Delhi. 06-07. “Energy geopolitics and Iran–Pakistan–India gas pipeline,” Energy Policy, Volume 35, Issue 6, pp. 3280-3301. [Takumi Murayama]

Iran's proven oil reserves at the end of 2003 were estimated to be 130,700 million barrels, representing 11.4% of world reserves and some 18.0% of those in the Middle East. With proven reserves of 26,690,000 million cubic meters at the end of 2003, Iran is the world's second richest country in natural gas resources after Russia, with some 15% of the global and 37% of the Middle East region total, which is a major discover for Iran (Fisher, 2005). The South Pars offshore fields, which is an extension of Qatar's North Field, are officially the largest natural gas reserves in the world. In the 21st century, the most important factors that will decisively determine the fate of Iran gas pipeline are United States and China in the Persian Gulf. Both are the largest consumers of oil and gas in the world. So a new Iran–Pakistan–India–China–Russia scenario begins to emerge, which links global oil and gas security to geopolitics. The question is: can these two issues be reconciled? This paper will endeavor to analyze the importance of Iran as a gas supplier to east, especially, India and China. It will argue that such dependence on a volatile region like Iran and the perception of scarcer energy resources in the South Asian region have the potential to lead to conflict in both regions unless these issues are dealt with geo-economics rather than geo-strategic calculations. However, the recent understanding between the United States and India seems to cancel the whole pipeline project as long as present Iranian regime remains in power. The broad geopolitical conditions that would favor or block the Iran–Pakistan–India (IPI) pipeline project and Iran's situation as well as the role of the United States in Asia and the state of relations between India and Pakistan are also pertinent issues that are going to be influential in fructifying the proposed pipeline. The moot question relates to Pakistan's subsidizing the purchases of Iranian gas and how would it finance this commercial juggernaut. Pakistan would not have an interest in the stable flow of gas in transit unless it is to finance some of its own purchases from the fees. There is competition for gas from the Gulf, and from Iran. This is not only a matter of political and military strategies, but as much as question of commercial and financial incentives. China seems to have understood that, as exemplified with the deal with Iran. The question is, to what extent India would be able and willing to offer a competing deal. So far, due to Indian foreign policy changes, Iran seems to have suspended the emerging deal with India. In the midst of such dynamics it is to be seen as to what extent India prefers a close relationship with the United States at the expense of gas trade with Iran.

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2. The Pipeline fails - Iran is unreliable since its own demand is increasing


Iran is an important economic power in the nat ural gas and petroleum industry, but numerous deficiencies in its oil and gas sector have caused the overall economy to lag far behind its potential and call into question Iran's future as an oil and gas exporter, including its ability to supply gas to Paki stan and India through the IPI pipeline.Iran has the second-largest gas reserves in the world after Russia and the second-largest petro leum reserves after Saudi Arabia. Iran has an esti mated 974 trillion cubic feet in proven gas reserves and 136 billion barrels in proven oil reserves.[35] Oil provides more than 70 percent of Iranian govern ment revenue.Yet instead of reinvesting this money in the oil and gas sector, the Iranian government has generally spent it on ambitious weapons purchases, its nuclear pro gram, support for terrorism, and economic subsidies. The Iranian regime is investing only about half of the funds necessary just to maintain hydrocarbon pro duction, much less to expand production.Iranian exports are declining by 10 percent to 12 percent annually according to a National Acad emy of Sciences (NAS) study. If current trends con tinue, Iran's oil exports will drop by half in less than five years and disappear entirely by 2015. This projected decline in production would be the result of a lack of investment in the oil sector and a short age of natural gas for reinjection (to enhance oil recovery), caused by continuing massive growth in domestic demand for natural gas due to subsidized consumption.[36] Iran's domestic demand for natural gas is grow ing by nearly 9 percent annually, while its produc tion is growing by 4.5 percent per year.[37] Thus, domestic gas demand has increased at the expense of reinjection, accelerating oil depletion rates. Despite its massive gas reserves, Iran has been forced to import 23 mcm per day from Turkmeni stan. However, on December 31, 2007, Turkmeni stan stopped daily deliveries of gas, forcing Iran to begin importing from Azerbaijan.[38] These trends indicate that Iran will be an unreli able oil and gas supplier and a high political risk. The NAS study concludes that without major changes, Iran will cease to be a net oil exporter by 2014 and will therefore be incapable of supplying gas to Pakistan and India through the IPI.[39]

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3. IPI Pipeline allows Iran to develop nukes and continue support of terrorism


Indian support for the IPI undercuts U.S. efforts to isolate Iran economically by challenging U.S. sanctions against Iran's oil and gas industry. Over the long term, pursuing the IPI will increase Iranian influence in South Asia, which could contribute to greater instability in the region, especially if Iran develops a nuclear weapons capability and contin ues to support international terrorism.Iran continues to flout international pressure to cease its uranium-enrichment efforts and discon tinue its nuclear program. In March 2008, the U.N. Security Council took notice and passed Resolution 1803, the third round of sanctions on Iran, adding to the sanctions adopted in 2006 and 2007.[30] Resolution 1803 follows the December 2007 release of the controversial National Intelligence Estimate, which stated that Iran had halted its nuclear weapons program in 2003. While this may be the case, the report also recognizes that Iranian entities are continuing to develop a range of techni cal capabilities that could be applied to producing nuclear weapons and that Iran's uranium enrich ment and ballistic missile programs are continu ing.[31] Both programs are vital for building a nuclear weapons arsenal. Moreover, Iran remains the world's biggest supporter and financer of terrorism.

4. IPI Pipeline Bad: Terrorism, Iran Nukes, and killing US soft power


In addition, emerging strategic relations between Iran and India could lead to cooperation in the nuclear field. Furthermore, revenues generated by Pakistan could be further used to support terrorist activities, depending on who channels the funding. While the US recognizes the growing energy needs of India and Pakistan, it has repeatedly expressed concerns over international participation in energy projects with Iran. Moreover, the revenues acquired could be used to further Iran’s alleged nuclear weapons program, support for terrorism in addition to a concern on Iran’s human rights record. It is not clear who will be finally involved in the implementation of the project, but China, Russia, Japan, and some Europeans could potentially fit in the long term. Last but not least, Russian involvement in the building of the pipeline project in addition to their involvement in the Caspian Sea projects can further complicate the situation by reducing US involvement in the region.

5. <Insert terminal impacts>

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AFF – Relations Good Now

Indo-Pakistani Cooperation is better now


[Takumi Murayama]Reports from Islamabad on April 25 indicated that India and Pakistan were close to finalizing their part of the deal. Ahmadinejad is trying to push the potential partners to sign that deal. For its part, Iran has already started constructing the pipeline on its territory and could have its section to the Pakistani border completed by 2012.The IPI pipeline would be some 2,600 kilometers long and would cost an estimated $7 billion. The IPI pipeline would initially carry some 30 bcm annually, but within three to four years after starting up that amount would increase to 70 bcm. Iran first proposed the pipeline in the 1990s, but tensions between Pakistan and India kept the project on hold until now. In their meetings last week, Pakistani and Indian officials stressed that cooperation between the two nuclear neighbors is better now.

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AFF – No Pipeline

US will intervene to stop the pipeline


While differences on the pricing structure between India and Pakistan are the current official stumbling block (Times of India, March 22, 2007), the U.S. opposition to the IPI project and the potentials of being impacted by U.S. sanctions is also influencing India’s current reluctance to go ahead with the project. Not surprisingly, India faces pressures from the United States to isolate Iran and to rely on an alternative route, the Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline project, if it wanted to keep its good relations with the U.S (Jamali, 2005). The Financial Times reported in January 2006 that Washington had “warned India that Delhi’s own nuclear deal with the US could be ditched if the Indian government did not vote to refer Tehran to the United Nations Security Council ( Financial Times, January 26, 2006). The impact of U.S. pressure was seen in another decision-making venue involving Iran, when India endorsed the referral of Iran to the Security Council during the February meeting of the IAEA. This resulted in Iran’s refusal to ratify the previously agreed liquefied natural gas (LNG) deal with India for the time being. More recently, there was a perceived shift in the U.S. rhetoric on the issue when President Bush indicated that the administration may soften its stance on the issue during a visit to Pakistan in March 2006, when he said "our beef with Iran is not the pipeline, our beef with Iran is the fact that they want to develop a nuclear weapon."(India Daily, March 4, 2006). However, the administration openly supports the TAP project and could use economic, strategic and nuclear incentives to Delhi for forsaking the IPI project if it feels that an agreement is near.

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AFF – Nuclear Demand

Nuclear power is a better option for India with increasing gas prices


[Takumi Murayama]Therefore, nuclear power looks like becoming critical to India's economy and long-term energy security. First, India's rise as an economic power means that its energy needs will rise massively. The BRIC report of Goldman Sachs projects India's GDP to rise by 40 times between 2000 and 2050. If energy consumption rises at just half this rate, it means India will need 20 times more energy in 2050. It will be difficult or impossible to meet these needs through conventional fuels. Secondly, the price of fossil fuels has shot up, with oil more than doubling to US$80/barrel and gas more than tripling to US$7/mBtu in the US. Oil prices are notoriously volatile and could fall sharply in a few years. But they will surely rise again later. The emergence of China, India, and other Asian countries as major consumers means that global supplies of fossil fuels will increasingly come under pressure. By contrast, nuclear energy is unconstrained by fuel worries: a small amount of uranium generates many megawatts, and plutonium can be extracted from the spent fuel to yield fresh fuel in mixed-oxide reactors. Nuclear power plants are extremely capital intensive, costing twice as much as thermal plants of comparable output. They need an additional 10–15% for de-commissioning when they become too old to operate. But they have the big advantage of very low running costs. By contrast, running costs can be half the total costs in a thermal plant, and keep rising with fuel prices.

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AFF – Coal Demand

Coal demand in India will increase

Bill Holland, associate editor for Platts Gas Daily. 11/07/07. “Economics govern future of IPI gas pipeline; Analysts see India's coal resources as more obvious gas source,” p. 2. [Takumi Murayama]

"The politics are going to be too much for India," said Mark Rowley, oil and gas attorney at the London office of law firm Baker Botts. Rowley is a veteran of cross-border pipeline projects, having been involved with both the Caspian and the Baku-Tbilisi-Ceyhan oil pipelines."Pipeline gas is an option [for India] but not the most obvious one," Rowley said. "India has vast coal resources–that's much more obvious than putting a pipe through Pakistan."Rowley said there was a high likelihood that the Iran-Pakistan portion of the pipeline would be built, but doubted that India would ever rely on its historic enemy Pakistan to meet its energy needs."Coal is king," Frost & Sullivan Asian Pacific Energy Practice Director Ravi Krishnaswamy told executives at the Asian Business Forum's Asian Power Conference in Singapore last month. India's coal-fired power generation will increase significantly, particularly if government plans to find developers for 10 ultra-mega power projects between 2012 and 2017 come to fruition. Each UMPP would generate 4,000 MW or more, Krishnaswamy said.India needs gas mainly as feedstock for its petrochemical and fertilizer industries. Gas-fired power plants account for only 8% of the country's 15.4 quadrillion Btus of annual energy consumption, according to the US Energy Information Administration.

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AFF – Pipeline Inevitable

The IPI Pipeline is inevitable – Indian demand

Bill Holland, associate editor for Platts Gas Daily. 11/07/07. “Economics govern future of IPI gas pipeline; Analysts see India's coal resources as more obvious gas source,” p. 2. [Takumi Murayama]

India currently produces 996 Bcf/year of gas and consumes 1.1 Tcf/year, importing the difference as LNG through two terminals. But its demand for natural gas has risen faster than that for any other fuel over the last five years, the EIA said.Energy security analyst Gal Luft of the Institute for the Analysis of Global Security, a think-tank based in Washington, DC, believes the pipeline will have to be built. "India doesn't have much of a choice, Iran is the only game in town" for satisfying the subcontinent's growing energy needs, Luft said. "At the end of the day, they need the gas and it will come from Iran."

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AFF – Pipeline Bad – Terrorism

Terrorists can attack the IPI Pipeline, jeopardizing the Indian economy. LNG is better.

Gurmeet Kanwal, Director, Centre for Land Warfare Studies, New Delhi. 07/06/08. “IPI pipeline a good option - but a security nightmare,” IANS, http://feeds.bignewsnetwork.com/index.php?sid=378963

[Takumi Murayama]Though this option through Pakistan is economically the most viable, India must consider whether good economics should be allowed to be jeopardised by bad security. India must not allow the supply of a strategic resource to be held hostage to the machinations of capricious jihadi elements. Also, the Baloch people are concerned that Pakistan will not equitably share with their underdeveloped province the revenues earned from the pipeline. A new wave of vigorous insurgency has engulfed most of Balochistan and the gas pipeline is bound to be targeted.Though the government of Pakistan has stated several times that Pakistan is willing to give a unilateral undertaking that it will not allow the disruption of the supply of gas to India, President Pervez Musharraf had admitted that his government had no control over some jihadi organisations that are responsible for internal instability in Pakistan. Since then, internal instability has deteriorated further. How then will the Pakistan government ensure the physical security of a pipeline that runs for almost 1,500 km through open terrain even if it is inclined to do so?The diameter of the gas pipeline would be 50 to 55 inches. Though such pipelines are mostly buried underground, they are laid just below the surface and their route is well marked to facilitate maintenance, making them prone to easy disruption. The compressor stations that are usually overground are also vulnerable to sabotage, though these are easier to guard.Any terrorist group or disgruntled individual fanatic with a medieval mindset could disrupt the pipeline with a few grams of plastic explosive or a few hundred grams of high explosives that are available in abundance in Pakistan. In fact, explosive charges, detonators and cordite are so freely available in some areas in Pakistan that one can buy the stuff from the neighbourhood grocer. Under such circumstances, ensuring the security of the pipeline would be a challenge for the most committed police or paramilitary force.The entire length of the pipeline would need to be fenced off on both sides to deny easy access to prospective saboteurs. Since wire fencing can be easily cut, it would need to be kept under electro-optical surveillance throughout its length, combined with continuous physical patrolling. All these measures would cost a massive amount to implement and would still not guarantee 100 percent security.A more suitable option may be to form an international consortium of stakeholders to build and operate the pipeline, buy the gas from Iran and deliver it at India's border. Such a consortium will incur heavy costs to ensure the security of the pipeline. Also, higher insurance costs, other opportunity costs and the need to maintain larger strategic reserves might well make the overland option too expensive.Perhaps the best option at present is to continue with LNG while simultaneously exploring the possibility of a secure overland route with unimpeachable international guarantees. If India can get natural gas at the border and has to pay only for what it gets - cash-on-delivery - without sinking its money into capital investment, the Iran-Pakistan-India pipeline might still be a good option. Decisions made today will affect India's energy security and have an impact on the growing economy for decades to come and must, therefore, not be made lightly.

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AFF – Pipeline Bad – Energy Security

India still concerned about supplies and security of IPI

FARS News Agency. 06/28/08. “Pakistan Steps up Pressure over IPI Pipeline.” http://english.farsnews.com/newstext.php?nn=8704080876 [Takumi Murayama]

Even though petroleum minister Murli Deora reiterated India's commitment to the pipeline project, the government is concerned over the issue of assured supply of gas and security of the pipeline. New Delhi wants both issues to be negotiated at the trilateral level. Sources said these issues have still not been taken up for discussion till now. Mukherjee, who had earlier discussed the pipeline project during his trip to Islamabad, merely hoped that the outstanding issues would be sorted out. "We are hopeful it will be possible to resolve this technical, commercial and all other aspect so that it can contribute to the problems arising from high energy crisis," he said.

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AFF – Pipeline Bad – Iran

The IPI Pipeline is part of an Iranian Energy Strategy to help its economy


But broadly speaking, the "external obstacles" to this project pale in comparison with the tangible benefits to all three countries, such as securing a reliable gas supply for energy-strapped India, bringing much-needed cash to the Pakistani government, and helping Iran with its "energy strategy". Concerning the latter, it is noteworthy that Iran has some 15.7% of the world's natural-gas reserves, second only to Russia, although its current share in the global gas market is negligible. That's partly as a result of the lack of adequate (badly needed) investment in the gas sector and partly due to existing external obstacles such as the US sanctions. Iran's planned export of natural gas to India is part of a broader, long-term energy strategy that relies both on pipelines and the more technologically challenging liquefied natural gas (LNG) exported to China, Turkey and Europe. India has already signed a separate $22 billion LNG deal with Iran. Iran plans to increase its gas exports through pipelines to 303.6 million cubic meters per day (mcm/d) by 2025 from some 13mcm/d in 2006. Iran's LNG exports are also expected to grow to 18mcm/d by 2025. Therefore, Iran's total natural gas export will reach around 18 billion cubic meters (bcm) in 2025, assuming that the pipeline does not turn into a pipe dream at the end of the day.

Iran will disrupt energy supply if the US interferes


The increasing energy needs of China and India at the beginning of the new century and continuous supply disruptions in Iraq and elsewhere have led to an increasing importance of energy as a geopolitical weapon of choice. Many of today’s energy resources lie within the control of governments which the United States does not see as allies. Russia, Iran, and Venezuela and Bolivia, while having different relationships to the U.S. and exercising different strengths in the energy market, can affect an already tight energy market the U.S. is quite dependent on. Specifically with regards to Iran, there have been numerous implicit and not-so implicit threats by Tehran that U.S. and Western military or economic measures will be countered by disruptions of the energy supply (Calgary herald, June 5, 2006). Not surprisingly, with increased tension between Iran and the West markets have reacted with even higher energy prices, pushing prices to heights unseen since the late 1970s and that despite the current existence of adequate energy stocks and supplies in the West.

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AFF – Pipeline Bad – Iran

IPI Pipeline allows Iran to develop nukes and support terrorism


This pipeline would give Iran an economic life line and increase its leverage and influence in South Asia. U.S. policymakers argue that allowing the IPI pipeline to proceed would encourage the Iranian regime to defy the will of the international commu nity, develop nuclear weapons, and support terrorism . Furthermore, inadequate investment in Iran's oil and gas industry and increasing domestic demand could render Iran incapable of supplying natural gas through the IPI.

U.S. Opposes IPI Pipeline because of Iran, 3 reasons


However, the US opposes the gas-pipeline deal; first, in its perception it would help ease Iran's economic difficulties because of the handsome revenues it would generate. As it is, the US is concerned about the bonanza that oil-rich countries including Iran are reaping due to skyrocketing global oil prices. Secondly, the pipeline would set a dangerous precedent for other countries to follow. Iran is suitably placed as the natural transit corridor for the transport of Caspian Sea oil and gas. The US has, therefore, gone overboard to draw transit routes for Caspian oil that bypass Iranian territory. The prime example of this approach has been the construction of the Baku-Ceyhan oil pipeline. In this case, the US made an extraordinary effort to route the pipeline towards the Turkish port of Ceyhan, so that Iranian territory was avoided. In this politically driven deal, the companies involved had to spend millions in extra costs to construct the pipeline through unfriendly terrain and conflict proven zones. Thirdly, and most important, the pipeline would help anchor friendly ties among Iran, Pakistan, and India. This would greatly undermine US strategic leverage with India and Pakistan against Iran in the future. Therefore, determined to keep Iran as isolated as possible, the US even prior to Mr. Ahmadinejad's emergence had tried to persuade the Europeans and Iran's Arab neighbors to restrict economic and political links with it. The Europeans have largely disregarded Americans exhortations, and Iran's relationship with them has grown over the years. European companies have pumped in billions of dollars in Iran–Libya Sanctions Act adopted by the US, which bars investments of more than US$40 million into Iran's hydrocarbon sector. Defying US pressure, Japan, Washington's trusted ally, has also decided to put US$2 billion into developing Iran's giant Azadegan oil field, which has estimated deposits of 26 billion barrels. In October 2002, Iran urged Caspian oil producers to ignore US sanctions and to pipe their oil through Iran. The Golden Gate from the Caspian Sea to the Persian Gulf is now open and companies in the Caspian Sea can be sure their resources will be delivered in international markets (Bhadrakumar, 2005).

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AFF – Iran Sanctions Bad

US sanctions on Iran hurt Russo-US relations


Sanctions against Iran have thus far discouraged US oil corporations from accepting the Iranian pipeline offer. The Persian route would be, as even US oil executives concede privately, shorter, cheaper, and safer than any of the other planned pipelines through Russia, the south Caucasus, or Afghanistan. And while European companies active in Iran also face heavy fines in the United States, very few of them feel similarly bound by the US sanctions. The French Prime Minister said that no one accepts that the United States can now impose their laws on the rest of the world. European companies have taken advantage of the absence of US competition on the Iranian oil market. In its efforts to keep the US out of the Caspian region, Iran has found an unexpected ally in Russia. United States activities in this region have led both countries to temporarily set aside their centuries old enmity. Now that they no longer share a common border after the fall of the Soviet Union, their relations have grown almost cordial. Despite sharp criticism from the US, Moscow encourages Russian companies to sell arms to Iran, and to assist the country in building its first civilian nuclear power plant at Bushehr. The US$800 million project, to be completed by 2004, has been a major concern for US officials and non-proliferation experts who fear that Iran could covert nuclear waste from the plant into weapons grade radioactive material, thereby accelerating its efforts to develop its own nuclear weapons. The Russian assistance to Iran has now become the biggest stumbling block in the current US–Russian rapprochement (Kleveman, 2003 L. Kleveman, Persian trump card: Iran, The New Great Game: Blood and Oil in Central Asia, Atlantic Books, London (2003).Kleveman, 2003).

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AFF – TAPI Pipeline Better

ADB and other investors make TAPI a better choice


[Takumi Murayama]But TAPI enjoys two advantages that the IPI does not -- support from the Asian Development Bank (ADB) and no Iranian participation. The ADB's support gives the project a greater international profile and, since Iran is not involved, TAPI may also find other investors -- including U.S. companies that are forbidden by U.S. law to deal with Iran, and European investors who fear U.S. sanctions if they commit to IPI instead of TAPI.

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RUSSIA

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SHELL – RUSSIA

A. The world’s dependence on Russia is increasing – especially the U.S.Marshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 3-7

But it is not only Europe that finds itself each day becoming more and more dependent on energy exports from Russia. Although the United States is separated from Russia by oceans, it also is beginning to import and consume more and more Russian energy. As in Europe, the United States is trying to reduce its overreliance on energy imports from the Middle East. As part of this diversification, in 2005 the United States imported dose to $8 billion worth of Russian petroleum. In woO, that jumped by 25 percent to $1o billion. True, that represented only 3 percent of our petroleum imports small, but an increase from the 2.2 percent of 2004 and a hint that we are likely to increase imports in the future.' More than that, in woo, LUKoi1, one of Russia largest private oil companies, purchased nearly 3,000 filling stations in the United States from Getty Oil and Mobil and is now busily converting them into LUKoil outlets. It also should be noted that in woO, Russia became the world's largest producer of petroleum, producing more than Saudi Arabia. This is not the first time Russia has produced more petroleum than anyone else. It also reigned as the world's largest producer in the late 1970s and 198os. Even this was not unprecedented. As Table Intro. r indicates, Czarist Russia from 1898 to 1901 also produced more oil than the United States, until then the leader.

B. Plan prevents need to import LNG from RussiaRyan Wiser and Mark Bolinger, research scientists @ Ernest Orlando Lawrence Berkeley National Laboratory


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SHELL – RUSSIA

C. Cooperation on LNG is key to U.S.-Russia relationsGeorge W. Bush, the president of the United States, February 24, 2005, “President and President Putin Discuss Strong U.S.-Russian Partnership”, http://www.whitehouse.gov/news/releases/2005/02/20050224-9.html, [T-Jacob]Another important and interesting opportunity is our cooperation in the supplies of liquified natural gas. In the year 2010, 2011, a large amount of liquified natural gas can be supplied from Russia to the United States. Our investment corporation is becoming generally bilateral. The first steps -- but constant steps are being made by Russian companies that are starting to invest their capital into American economy. We have also discussed the status and prospects of Russia's cooperation in science, high-tech; in particular, in the exploration of outer space. In conclusion, I would like to say that I highly appreciatethe outcome of this summit. Later this year, we are going to meet a few more times within the framework of various international fora. I would like to take this opportunity to thank the President of the United States who has accepted the invitation to participate in the festivities on the occasion of the anniversary of the great victory on May 9th in Moscow. This is a natural manifestation of respect of historic memory and the memory of the alliance that bonded our two countries in the years of the second world war.

D. US-Russian relations are key to preventing nuclear terrorism and proliferation David Kramer, Deputy Assistant Secretary for European and Eurasian Affairs, July 12, 2006, “The Future Obit of US Russian Relations”, Speech: US State Depart . David, Deputy Assistant Secretary for European and Eurasian Affairs, “The Future Orbit of US Russian Relations”, Speech: US State Department, July 2. [T-Jacob]

Our cooperation will include the physical protection of nuclear materials, suppressing illicit trafficking of those materials, responding and mitigating the consequences of any acts of nuclear terrorism, and cooperating on the development of the technical means to combat nuclear terrorism, denying safe haven to terrorists, and strengthening our national legal frameworks to ensure the prosecution of such terrorists and their supporters. This initiative serves U.S. national security interests. We have invited partner nations to meet in the fall to elaborate on and endorse a statement of principles for this initiative. It's one we hope to expand.

E. Nuclear terrorism results in extinctionMohamed Sid-Ahmed, Egyptian Political Analyst, August, 26, 2004, Al-Ahram Newspaper, http://weekly.ahram.org.eg/2004/705/op5.htm | SWON. [T-Jacob]

What would be the consequences of a nuclear attack by terrorists? Even if it fails, it would further exacerbate the negative features of the new and frightening world in which we are now living. Societies would close in on themselves, police measures would be stepped up at the expense of human rights, tensions between civilisations and religions would rise and ethnic conflicts would proliferate. It would also speed up the arms race and develop the awareness that a different type of world order is imperative if humankind is to survive. But the still more critical scenario is if the attack succeeds. This could lead to a third world war , from which no one will emerge victorious. Unlike a conventional war which ends when one side triumphs over another, this war will be without winners and losers. When nuclear pollution infects the whole planet, we will all be losers.

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Uniqueness – Natural Gas Dependence Growing

America’s dependence on natural gas is growingGary J. Schmitt, Resident Scholar and Director of Program on Advanced Strategic Studies, Executive director of the President's Foreign Intelligence Advisory Board, Executive director, Project for the New American Century (a foreign and defense policy think tank), Ph.D., University of Chicago, April 2006, “Energy Security, National Security, and Natural Gas”, http://www.aei.org/publications/pubID.24223/pub_detail.asp, Accessed July 15, 2008 CM

But the president ís contention that America’s economy is “petroleum-based” is not entirely accurate. Although oil makes up approximately 40 percent of total U.S. energy consumption, coal and natural gas each now supply about 25 percent of the total energy consumed by the United States. So, while oil is a major element in America’s energy supplies, it is by no means the only significant factor. Disruption in natural gas or coal supplies would pose major problems to the American economy. Moreover, there are increasing signs that when it comes to natural gas we are headed down a road similar to one we now face with oil--and with security implications that echo oil ís as well. In short, like addicts the world over who try to free themselves from one addiction only to find themselves hooked on another, so too Americans may soon find imported oil is not the only energy-source problem about which we have to worry.

Gas Goes Boom

Until recently, the United States was in pretty good shape when it came to natural gas. Prices were low and supplies sufficient. In 2000, for example, North America consumed nearly one-third of the world ís annual output of natural gas. Unlike oil, for which the United States, Canada, and Mexico together produced only 60 percent of the supplies they consumed, the three countries produced nearly 100 percent of the natural gas consumed. Bound together by free trade agreements, the continental market for natural gas more than doubled through the 1990s.

If energy experts inside and outside the government are correct, the proportion of total energy consumption accounted for by natural gas is likely to grow substantially over the next decade and a half. If current trend lines and government policies are sustained, about 90 percent of the projected increase in electricity generation will be fueled by natural gas plants. Indeed, between 2000 and 2004, America’s electricity-generating capacity grew by approximately one-fifth, and virtually all of that growth was gas-fired. By 2020, predictions are that more than one-third of the country’s electricity will be generated through burning natural gas. The reasons are well understood: power plants that burn natural gas cost less and are far easier to build than nuclear power plants and have fewer waste and emission problems than nuclear or coal plants, respectively. With the expanding use of natural gas for residences and its use as the primary feedstock in the manufacturing process for a wide variety of products, demand for natural gas is expected to rise anywhere from 40 percent to 50 percent between 2000 and 2020.

The problem is that the available supply of natural gas is not keeping pace with this growing demand. In North America, production from existing wells is declining, and new wells show a more rapid rate of decline than in the past. As the natural gas producers themselves have remarked, they have to run harder to stay even--which means digging more but less productive wells.

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Uniqueness – Russia NG Use Increasing

Natural gas use increasing and producing increasing in RussiaEnergy Information Administration, June 2008, “International Energy Outlook 2008”, http://www.eia.doe.gov/oiaf/ieo/highlights.html, Accessed July 15, 2008

Worldwide natural gas consumption in the IEO2008 reference case increases from 104 trillion cubic feet in 2005 to 158 trillion cubic feet in 2030. Natural gas is expected to replace oil wherever possible. Moreover, because natural gas combustion produces less carbon dioxide than coal or petroleum products, governments may encourage its use to displace the other fossil fuels as national or regional plans to reduce greenhouse gas emissions begin to be implemented. Natural gas is expected to remain a key energy source for industrial sector uses and electricity generation throughout the projection period. The industrial sector, which is the world’s largest consumer of natural gas, accounts for 43 percent of projected natural gas use in 2030. In the electric power sector, natural gas is an attractive choice for new generating plants because of its relative fuel efficiency. Electricity generation accounts for 35 percent of the world’s total natural gas consumption in 2030.

Much of the world’s growing demand for natural gas is projected to be met by increased production from non-OECD nations. In the IEO2008 reference case, non-OECD countries account for more than 90 percent of the world’s total growth in production from 2005 to 2030 (Figure 5). A significant portion of the non-OECD production (excluding Russia and the other nations of Eurasia) is expected to be in the form of export projects— particularly liquefied natural gas (LNG) projects. The Middle East and Africa are at the forefront of the trend toward LNG: natural gas production in the two regions combined increases by 21.0 trillion cubic feet between 2005 and 2030, but their combined demand for natural gas increases by only 9.9 trillion cubic feet. Significant increases in natural gas production are also projected for the countries of non-OECD Asia, but those supply increases are expected to be used largely for consumption within the region rather than for export.

Natural gas use increasingSen. James M. Inhofe, R-Oklahoma, July 8, 2008, “Inhofe Praises Pickens Call for Increasing Use of Natural Gas, Wind Power”, http://www.jiminhofe.com/News/Read.aspx?guid=6fecb8a3-85b2-4f4c-adbd-c79cea69358a, Accessed July 15, 2008

“Pickens is right when he says natural gas must play an increasing part of our nation’s energy future. That is why I plan to introduce legislation to further reduce regulatory barriers to compressed natural gas (CNG) use and give states the flexibility to develop their own natural gas conversion programs. The promise of natural gas as a mainstream transportation fuel is achievable today, not 15 or 20 years from now. Most importantly, many state and local governments, businesses, and consumers have been able to cut their fuel bills by more than half when utilizing natural gas as a transportation fuel. From CNG powered cars, to semi-trucks running on liquefied natural gas (LNG), no other commercially viable fuel burns cleaner. The federal transportation bill in 2005, which I authored, included a 50-cent-per-gallon excise tax credit for the sale of CNG or LNG for use as a motor vehicle fuel.

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Uniqueness – Gazprom

Because of high gas prices, Russia is looking to export to the U.S.International Herald Tribune, June 18, 2008, “Russia's Gazprom sees 2008 gas export price outside ex-Soviet Union at US$401”, http://www.iht.com/articles/ap/2008/06/18/business/EU-FIN-COM-Russia-Gazprom.php, Accessed July 15, 2008 CMMOSCOW: Gazprom's revenues from natural gas exports should increase sharply this year on the strength of rising prices, a senior official at the state-run Russian monopoly said Wednesday.

OAO Gazprom earned a record US$39.5 billion (€25.5 billion) from last year's sales outside the former Soviet Union and expects this year to bring in US$64 billion (€41 billion), said Alexander Medvedev, deputy board chairman and head of Gazprom's export arm.

Gazprom — the world's largest exporter of natural gas — last year accounted for about a quarter of global exports including shipments to the former Soviet republics, and 40 percent of imports to Western and Central Europe, the company said in a statement.

Natural gas export prices are increasing with rising demand, particularly in developing countries, the United States and Japan, as well as rising costs of alternative heat sources, it said.

Gazprom is expanding worldwideReuters 3/1/08 (http://royaldutchshellplc.com/2008/04/01/reuters-gazprom-eyes-quarter-of-global-lng-market-by-2030/)

Russia’s Gazprom (GAZP.MM: Quote, Profile, Research) wants to supply a quarter of the world’s liquefied natural gas needs by 2030 to diversify away from pipeline gas supplies and become a global energy player, a Gazprom executive said on Tuesday. Gazprom, the world’s largest gas producer, will add some 90 million tonnes of the super-cooled fuel to its production by 2030, Gazprom’s deputy head Valery Golubev told reporters at an energy forum in Moscow. Gazprom already supplies a quarter of Europe’s gas needs via major pipelines but has no LNG production of its own.

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Uniqueness – Gazprom

Gazprom is using western companies with expertise in LNG to export to the U.S.Guy Chazan,staff writer Wall Street Journal, July 14, 2008, “Oil Sees End of Sweet Deals”, http://online.wsj.com/article/SB121599585371849677.html?mod=googlenews_wsj, Accessed July 15, 2008 CMLONDON -- The terms of a Russian contract to develop one of the world's largest untapped natural-gas fields reveal the lengths to which Western oil companies will go these days to gain a foothold in the dwindling pool of new hydrocarbon resources.

In Russia's sector of the Barents Sea, the Shtokman field is hundreds of miles offshore in Arctic, iceberg-strewn waters. But despite the immense technical and investment challenges it poses, its 3.8 trillion cubic meters of gas has proven a huge draw for oil companies desperate for new reserves.

Last year, Russia's natural-gas giant OAO Gazprom finally chose two Western energy firms -- Total SA of France and Norway's StatoilHydro ASA -- to help it develop Shtokman, after years of negotiations. But the terms are unusual for the oil industry, and unfavorable for Gazprom's partners. The consortium developing the field -- early estimates of costs top $20 billion -- won't own the gas in the ground and will have to sell all that is produced to Gazprom.

"In most cases ... the starting point is that we want to market the gas ourselves," Helge Lund, chief executive of StatoilHydro, said in an interview. With Shtokman, "the companies involved are basically taking a risk on future gas prices."

Some analysts wonder what exactly Total and StatoilHydro will get out of their involvement in Shtokman if they can't own and freely sell its gas.

The situation reflects the bind major oil companies find themselves in. Much of the world's hydrocarbon resources are in places like the Middle East that are largely off-limits to foreign investors. In countries that haven't completely slammed the door, reserves are often in the hands of state-run companies like Gazprom that are becoming more assertive in their dealings with foreigners.

In the past, Western companies owned the oil and gas in the ground, merely paying taxes and royalties to the host countries. But those arrangements are becoming outmoded. Some in the industry think the future lies in the kind of technical-service contracts in which oil-field-service companies like Halliburton Co. and Schlumberger Ltd. specialize. Under such deals, major oil companies would be unable to book energy reserves, even though reserve growth is still one of the key metrics analysts and shareholders use to evaluate an oil company's performance.

Some companies have strongly resisted the move to service contracts. But a few acknowledge the need for a rethink. Tony Hayward, chief executive of BP PLC, told a conference in Madrid recently that the oil industry needed to "move beyond the historical model that requires ownership of reserves and production." He called for a new era of "reciprocity," where the majors form partnerships with national oil companies and help them expand internationally.

Shtokman reflects that new reality. Total said it will be able to book the field's reserves -- but it won't own them. Gazprom insisted on retaining sole ownership of the Shtokman license and will also take a 51% stake in Shtokman Development Co., which will finance and build the infrastructure at the field. Total has 25% and StatoilHydro 24%.

The contract only relates to a third of the Shtokman license area, though initial talks suggested it would cover the whole field. Negotiations on Shtokman began in earnest in 2006, after five companies were shortlisted: Total, Statoil, Norsk Hydro (which later merged to become StatoilHydro), ConocoPhillips and Chevron Corp. BP and Royal Dutch Shell PLC had taken a look at the project but decided it wasn't worth it. Then in October of that year, Gazprom said foreign companies could still take part, but only as contractors. Chevron said the terms were unacceptable and dropped out.

A year later, after inconclusive talks with contractors, it changed its mind again. Gazprom wanted to produce liquefied natural gas at Shtokman and export it to the U.S., and to do that it needed the help of a company like Total, a world leader in LNG. Also, StatoilHydro was one of the few companies experienced at operating in the Arctic. But this time, the terms being offered to Western oil majors were much tougher.

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Internals – Energy key to Relations

Putin understands that Russia’s superpower status depends on its energy – not its militaryMarshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 97-98

Putin's concern for Russia's struggling economic and lost superpower status long predates his appointment as prime minister. In a dissertation submitted in June 1997 to the St. Petersburg Mining Institute and in a subsequent article "Mineral'no syr'evye resursy v strategi razvitiia Rossiiskoi ekonomiki," published in Zapiski Gornogo Instituta in 1999 and translated by Harley Balzer in Problems of Post Communism in January 2006, Putin outlined a plan, a sort of "owner's manual" for Russia's recovery and return to economic and political influence. The thesis itself was probably written just before and after his boss Anatoly Sobchak, L governor of St. Petersburg, lost his reelection in 1996. Since Putin worked for Sobchak, this loss meant that Putin was also without a job.

In his dissertation Putin called on the Russian government to reassert its control over the country's abundant natural resources and raw materials. "The process of restructuring the national economy must have the goal of creating the most effective and competitive companies on both the domestic and world markets." He viewed this as probably the best way to reestablish Russia's status as a superpower, an energy superpower. Instead of allowing the country's oligarch controlled corporations to focus exclusively on making a profit, Putin proposed that they should be used instead to advance the country's national interests.

To reclaim some of the assets spun off to private interests under Yeltsin, Russia should commandeer these companies and once again integrate them vertically into industrial conglomerates so they could compete better with Western multinational corporations such as Exxon Mobil and Shell. In Putin's words, "Regardless of who is the legal owner of the country's natural resources and in particular the mineral resources, the state has the right to regulate the process of their development and use. The state should act in the interests of society as a whole and of individual property owners, when their interests come into conflict with each other and when they need the help of state organs of power to reach compromises when their interests conflict."'

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Internals – Russian Energy Dominance

Through its energy monopoly Russia has dominance that has never been seen before by a single country Marshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 14-15

True, Russia may no longer be a military world superpower, but there is little doubt that despite President Putin insistence that it is not one, Russia today is again a superpower. Only now it is an energy superpower.

Nor are Putin and those around him leaving this to chance. At first glance it may seem that much of this is just a matter of luck. But as we shall see, a more careful examination shows that this use of the natural resources and the way they are exploited by what Putin has come to call "national champions" is all part of a carefully thought out grand strategy. Part of that strategy calls for the reimposition not only of state control but of state ownership (renationalization) of at least 50 percent plus one share of the stock of many of the petroleum, metal, and manufacturing companies that were privatized in the mid ' 99os. Led by Rosneft where the state has always held majority ownership, companies like Yukos and Sibneft have been effectively renationalized. (I low far-reaching this has been we will see in greater detail in Chapter 5, Table

.4.) That explains why the share of crude oil production produced by the state dominated companies in the year 2000, the year Putin took over as president, had fallen to as low as 10 percent. However, by 2007, just before he gave up the presidency, state dominated companies' share of crude oil production had risen again to close to 10 percent.

With its natural gas and oil pipelines that tie Europe to Russia like an umbilical cord, Russia has unchecked powers and influence that in a real sense exceed the military power and influence it had in the Cold War. No matter how many nuclear weapons it may have had, the USSR was prevented from using them by the knowledge that the United States had a comparable number and would counter the USSR's use of them and vice versa. This was referred to as Mutually Assured Destruction (MAD), which meant no one country would dare attack the other. Now, however, if Russia decides to reduce or suspend the flow of gas through its pipeline to Ukraine and/or to Europe, there is virtually nothing to restrain it from doing so. There is no comparable Mutual Assured Restraint or MAR. It is also noteworthy that this gives Russia more economic clout with Europe than Saudi Arabia. Because the Saudis export relatively little natural gas, there are no consuming countries dependent on a Saudi pipeline for this commodity. This is an important strategic difference.

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Internals – Natural Gas Key to Relations

Natural gas is key for future relationsDr. Alexandar Todorev, Department of Psychology Woodrow Wilson School of Public & International Affaris at Princeton University, October 9, 2005, “Energy dialogue between Russia and the US”, http://www.globalpolitician.com/21271-russia-america-oil-energy, Accessed July 15, 2008 CM

The US - Russian energy cooperation Statement, pledged by Bush and Putin in Bratislava, not only fully confirmed the current directions of development of bilateral relations (to enhance energy security, diversify energy supplies, improve the transparency of the business and investment environment, reduce obstacles to increased commercial energy partnerships, and develop resources in an environmentally safe manner) but also outlined five additional priorities: to further intensify and develop energy dialogue, to extend Russia's pipeline system for increasing deliveries of oil and gas export to US market, to increase US investment in the production of Russian natural gas for the USA, to unify tax, legal, and administrative rules for the private companies from the energy sector in both countries and to initiate concrete joint projects no later than 2008.

Russia already has natural gas infrastructure in the U.S.Shell, October 14, 2004“Sakhalin Energy signs pioneering LNG supply deal with Shell for North American markets”, http://www.shell.com/home/content/media/news_and_library/press_releases/2004/sakhalin_release_14102004.html, Accessed July 15, 2008 CM

Moscow, Russian Federation, 14 October 2004: In a pioneering deal, Sakhalin Energy Investment Company Ltd (Sakhalin Energy) announced today that it has signed an agreement to supply 37 million tonnes of LNG over a 20 year period to Shell Eastern Trading Ltd (Shell) for the North American natural gas market. This represents the first sales of Russian natural gas to North America.The landmark deal marks the beginning of Sakhalin Island as a strategic new source of natural gas for both Mexico and the US West Coast markets. It confirms Sakhalin Energy as a world-class player in the LNG market, and firmly places Russia in a new strategic position as a global supplier of natural gas.

LNG from Sakhalin Energy will be purchased by Shell to supply the new Energía Costa Azul plant that will be constructed in Baja California, Mexico. Natural gas from the new terminal will be used to satisfy Mexico’s growing energy needs, with excess natural gas exported from the Mexican terminal to California in the US where, as in Mexico, there is an increasing requirement for new natural gas supply sources. The agreement calls for significantly higher volumes of LNG deliveries during the first three years, with a plateau supply of 1.6 million tonnes per annum (approximately 0.2 BCF/d).

“Sakhalin Energy and Russia have created a fundamental shift in global natural gas supplies,” commented Ivan Malakhov, Governor of the Sakhalin Oblast. “Russia has been a reliable supplier of natural gas into the European market via pipeline for many years. Now, with Sakhalin Energy’s decision, in partnership with the Russian Government, to opt for LNG as the most flexible way to export natural gas from the Russian Far East, the traditional supply dynamics for natural gas have been transformed. An exciting chapter in Russian energy supply has been opened”.

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Russia dependent on supplying US with LNG.

George W. Bush, the president of the United States, February 24, 2005, “President and President Putin Discuss Strong U.S.-Russian Partnership”, http://www.whitehouse.gov/news/releases/2005/02/20050224-9.html, [T-Jacob]Another important and interesting opportunity is our cooperation in the supplies of liquified natural gas. In the year 2010, 2011, a large amount of liquified natural gas can be supplied from Russia to the United States. Our investment corporation is becoming generally bilateral. The first steps -- but constant steps are being made by Russian companies that are starting to invest their capital into American economy. We have also discussed the status and prospects of Russia's cooperation in science, high-tech; in particular, in the exploration of outer space. In conclusion, I would like to say that I highly appreciate the outcome of this summit. Later this year, we are going to meet a few more times within the framework of various international fora. I would like to take this opportunity to thank the President of the United States who has accepted the invitation to participate in the festivities on the occasion of the anniversary of the great victory on May 9th in Moscow. This is a natural manifestation of respect of historic memory and the memory of the alliance that bonded our two countries in the years of the second world war.

American imports key to U.S.-Russia relationsRobert Pirog, Specialist in Energy Economics and Policy Resources, Science and Industry Division, June 20, 2007, “Russia Oil & Gas Challenges”, http://64.233.167.104/search?q=cache:YShflEIW-I8J:www.fas.org/sgp/crs/row/RL33212.pdf+natural+gas+exports+russia+america&hl=en&ct=clnk&cd=80&gl=us&client=safari, Accessed July 15, 2008 CM

The Russian Federation is a major player in world energy markets. It has more proven natural gas reserves than any other country and is among the top ten countries in proven oil reserves. 1 It is the world’s largest exporter of natural gas, the second largest oil producer and exporter, and the third largest energy consumer. Given that the United States also is a major energy producer and user, Russian energy trends and policies affect U.S. energy markets and U.S. welfare in general.

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Russia natural gas is key for relations, economics and securityRobert Pirog, Specialist in Energy Economics and Policy Resources, Science and Industry Division, June 20, 2007, “Russia Oil & Gas Challenges”, http://64.233.167.104/search?q=cache:YShflEIW-I8J:www.fas.org/sgp/crs/row/RL33212.pdf+natural+gas+exports+russia+america&hl=en&ct=clnk&cd=80&gl=us&client=safari, Accessed July 15, 2008 CM

CRS-5 10 See, for example, Yigal Schleifer, “Russian oil ships stuck in Bosporus strait traffic jam,” Christian Science Monitor, January 25, 2005. Limited depth, heavy traffic, and environmental considerations have resulted in restrictions by Turkish authorities on travel through the Bosporus. The Baku to Ceyhan pipeline has an advantage in that Ceyhan, a Turkish Mediterranean Sea port, can handle very large carriers, while the Novorossisk and Supsa (in Georgia) ports are restricted to smaller tankers that can transit the Bosporus straits. Ceyhan can remain open all year, whereas Novorossiyskis closed up to two months. 11 Kazakhstan and Azerbaijan have agreed to allow Kazakh oil to flow through the BTC pipeline. See “Kazakhstan Inks BTC Deal,” The Oil Daily, June 19, 2006, p. 7. 12 “AIOC: Oil Production Up, BTC Now Handling All Exports,” FSU Oil & Gas Monitor, April 25, 2007. 13 Martin Clark. “Beijing Triumphs with Inauguration of Kazakhstani Crude Pipe,” FSU Oil& Gas Monitor, December 21, 2005. deepwater tanker terminal at Murmansk on the Barents Sea. This could allow for between 1.6 and 2.4 million bbl/d of Russian oil exports to reach the United States via tankers within only nine days, much faster than shipping from the Middle East or Africa. LNG facilities at Murmansk and Arkhangelsk (to the southeast) also have been suggested, possibly allowing for gas exports to American markets.Given that the United States as well as Russia is a major energy producer and user, Russian energy trends and policies affect U.S. energy markets and U.S. economic welfare in general in a broad sense. Other things being equal, should Russia considerably increase its energy production and its ability to export that energy both westward and eastward, it may tend to ease the supply situation in energy markets in both the Atlantic and Pacific Basins. In the Atlantic arena, more Russian oil could be available to the United States. In the Pacific area, there would tend to be more supply available to countries trying to assure themselves energy supplies, such as China and Japan. This may ease the global competition for Persian Gulf oil. On the other hand, the Russian government’s moves to take control of the country’s energy supplies noted earlier may have the effect of making less oil available on the world market. This could occur if Russia’s tendency to limit foreign company involvement in oil and gas development limits the introduction of the most modern technology, or if Russia intentionally limits energy development and production. Possibly as important as Russian oil and gas industry developments is the associated potential for U.S. suppliers of oil and gas field equipment and services to increase their sales in Russia. As noted above, potential growth of both oil and natural gas production in Russia is limited by the lack of full introduction of the most modern western oil and gas exploration, development, and production technology. Although U.S.-Russian economic relations have expanded since the collapse of the Soviet Union, as successive Russian leaders have been dismantling the central economic planning system, including the liberalization of foreign trade and investment, the flow of trade and investment remains very low. U.S. suppliers of oil and gas field equipment had established a modest beachhead in Russia. However, where as U.S. exports of oil and gas field machinery and equipment accounted for14% of U.S. all goods exports to Russia in 2002, they accounted for only 7% in the first 11 months of 2006.Similar to U.S. trade with Russia, U.S. investments there, especially direct investments, have increased since the dissolution of the Soviet Union, but the levels are far below their expected potential. Even so, as of September 30, 2006, the United States was Russia’s third largest source of foreign direct investment, with investments largely concentrated in the transportation, energy, communications, and engineering sectors. 59 In this context, however, Russian economic policies and regulations have been a source of concerns. The United States and the U.S. business community have asserted that structural problems and inefficient government regulations and policies have been a major cause of the low levels of trade and investment with the United States. While they consider the climate to be im proving, potential investors complain that the climate for investment in Russia remains inhospitable. They point to lack of effective intellectual property rights protection, burdensome tax laws, jurisdictional conflicts among Russian federal, regional and local governments, inefficient and corrupt government bureaucracy, and the lack of a market-friendly commercial code as impediments to trade and foreign investments. And, more specifically, the forced break up of Yukos has clouded prospects for private investment. In addition, Russian energy trends and policies have possible implications for U.S. energy security. In its oversight role, Congress may have an interest in Russia’s large role as a supplier to world energy markets in general, in Russia’s role as a possible major exporter of energy to the United States, and in the changed patterns of world energy flows that could result from the completion of new Russian oil and natural gas export pipelines and related facilities or the expansion of existing export pipelines and related facilities.

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Both sides want a natural gas dealThe New York Times, ERIN E. ARVEDLUND, June 11, 2004, “U.S. Seeks Pacts With Russia To Raise Natural Gas Exports”, http://query.nytimes.com/gst/fullpage.html?res=9C07E2DF1530F932A25755C0A9629C8B63, Accessed July 15, 2008 CM

In an effort to increase natural gas supplies to the United States, American officials are pursuing long-term export agreements with Russia.

At the same time, the natural gas monopoly Gazprom, the main player in Russia, is grappling with complaints from minority shareholders that its business and profits are not transparent enough.

United States Deputy Energy Secretary Kyle E. McSlarrow met this week with executives from Gazprom, the oil producer Yukos and Transneft, the oil pipeline monopoly, 10 days after Energy Secretary Spencer Abraham met with Kremlin officials and Russian companies. Their hope is to increase Russia's energy exports to the United States and accelerate Gazprom's projects to liquefy gas in the Arctic.

The United States is so serious about pursuing natural gas deals with Russia that the United States Export-Import Bank may help finance a $15 billion project to develop Russia's giant Shtokman field.

''The subject of investment has been discussed, including in the context of proposals which U.S. ExImbank may put forward,'' Russia's deputy industry and energy minister, Ivan Materov, said. Mr. Materov also said that Russia was interested in large American energy companies participating in the project.

His American counterpart, Mr. McSlarrow, said that liquefied natural gas, or L.N.G., projects have emerged as a way to stave off an anticipated shortfall in North American natural gas supply.

''Under everybody's scenario, L.N.G. imports will have to increase,'' Mr. McSlarrow said at a news conference this week. ''I think Russia realizes that it ought to be a major player when it comes to L.N.G.''

The Shtokman deposit, on the shelf of the Barents Sea north of the Arctic Circle, has estimated reserves of 3.2 trillion cubic meters of gas and 31 million tons of gas condensate. The license to develop it belongs to Gazprom and a subsidiary of government-owned oil company, Rosneft.

Gazprom wants to sign a deal to develop Shtokman and build a liquefied gas plant, and potential partners mentioned include Norsk Hydro, ConocoPhillips, ChevronTexaco, ExxonMobil and Shell.

''All the U.S. companies would like to do business with Gazprom,'' said an American official, who spoke on condition of anonymity.

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Internals – US key to Natural Gas

US key to controlling Russian natural gas.

Ida Garibaldi, visiting research fellow at the American Enterprise Institute, March 25, 2008, “Energy: NATO between Russia and Europe” http://www.aei.org/publications/pubID.27911,filter.foreign/pub_detail.asp, [T-Jacob]In last two years the matter of European energy security has become of outmost importance for the United States and its allies. Indeed, Russia's recent use of energy to bully Ukraine and Belarus indicate that European energy security represents a serious strategic challenge for the trans-Atlantic alliance. It is easy to imagine Moscow pushing any EU member to choose between continued supply of energy or support for a specific U.S. policy. It is in Washington and its allies' interest to back European energy security now before Russia has too great a hold on the continent. NATO and the next Bucharest summit are the right place to do it. The imports 58.3 percent of its total need for natural gas and 82.8 percent of its total oil needs--of which over 45 and 29.9 percent come from Russia, respectively. Brussels and Moscow share mutual concern for the stability of their energy relationship. The EU is Russia's biggest energy export market and a source of steady profit, while without Russia the gas stoves and heating would go out across Europe. Whether this reciprocal dependency will be sufficient to maintain the durability of the relationship is an open question.

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Internals – Gazprom Investing in US

Gazprom is investing in U.S. infrastructure Russian Embassy, No Date Given, "Russian-American Business Cooperation", http://www.russianembassy.org/EMBASSY/Rus-Am-business.htm, Accessed July 15, 2008 CM

The investment cooperation is becoming a two-way street. Russia’s accumulated direct investments in the U.S. economy exceed $4 bln. In 2000, Russian oil company, LUKoil, purchased the Getty gas station network (1330 stations). Later, in 2004, it bought 795 additional stations from ConocoPhillips. In 2003, Norilsk Nickel bought (for $373,6 mln.) a 56 percent stake in Steelwater Mining company, producer and seller of palladium and other platinum metals. In 2007 Norilsk Nickel extend its presence on the U.S. market by purchasing of the OM Group nickels assets for $400 mln. In 2004, Severstal bought Rouge Industries – fifth largest steel producer in the United States. In 2006, Gazprom set up its subsidiary Gazprom Marketing and Trading USA in Texas, which will be involved in marketing supplies of liquefied natural gas (LNG) to the U.S. market, as well as buying regasification plants. In 2007 Evraz Group became the owner of the 100 percent shares of Oregon Steel Mills ($2,3 bln.).

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Impacts – NATO Backlash

Manipulation of energy results in NATO backlash.

Ida Garibaldi, visiting research fellow at the American Enterprise Institute, March 25, 2008, “Energy: NATO between Russia and Europe” http://www.aei.org/publications/pubID.27911,filter.foreign/pub_detail.asp, [T-Jacob]American Senator Richard Lugar has argued that NATO should treat the manipulation of energy supply (and its use as a weapon) as a trigger to apply Article 5 of the Treaty of Washington, which states that an attack against one member of the alliance should be considered an attack against all members. Including the use of energy as a weapon under NATO's Article 5 would work as a deterrent against aggressive behavior; developing (and publicizing) NATO's ability and willingness to supply a member that has come under attack by a hostile supplier would also greatly reduce the likelihood of such an attack in the first place. In the short and medium terms, NATO could do more to demonstrate its attention to European energy security. These include encouraging Romania (a member) and Ukraine (a potential future member) to thoroughly question Russia and Gazprom about the construction of the South Stream pipeline, which would pump gas from Russia directly into Europe, bypassing Turkey. Because the pipeline would cross Romanian and Ukrainian economic zones in the Black Sea, Bucharest and Kyiv have the right under international law to inquire about the project's environmental impact, shipping and maritime safety, as well as request changes in the pipeline's route. This could give Washington, Istanbul, and Brussels an opportunity and the time to build consensus around a trans-Caspian pipeline to bring natural gas from Central Asia to Turkey and the European Union bypassing Russia. It could also revitalize Nabucco, a EU project to build a pipeline to bring gas from Iran and Azerbaijan to Western Europe bypassing Russia and diminishing European dependence from Moscow.

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Impacts – NATO key to Relations

Lack of NATO involvement worsens US-Russia relations.

Ida Garibaldi, visiting research fellow at the American Enterprise Institute, March 25, 2008, “Energy: NATO between Russia and Europe” http://www.aei.org/publications/pubID.27911,filter.foreign/pub_detail.asp, [T-Jacob]European energy dependence from Russia and the EU's vulnerability to the Kremlin's political blackmail are not the only reasons that should push NATO to care about European energy security. Al Qaeda's attack off Yemen's coast on the French oil tanker Limburg in October 2002 showed that NATO can play an important role in protecting its members' energy security from Islamic terrorism as well. In particular, maritime surveillance of resource routes and maritime escorts of particularly sensitive targets would help deter attacks and in the event of an attack would facilitate the dispatch of a rapid response. The largest summit in NATO's history, the Bucharest meeting will focus on NATO's operations in Kosovo, Afghanistan, Operation Active Endeavor, and a potential future enlargement. It is a full agenda for a two-day meeting, one that does not have any room left for a comprehensive discussion on energy security. However, the United States and its European allies should at least make time to lay out the time frame for future talks on energy security. The longer the United States and its European allies wait to involve NATO, the more entrenched Russia's presence in Europe will become with potentially destructive consequences for the trans-Atlantic relationship.

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Impacts – Neo-Imperialism

Gas cutoff precludes Russian neo-imperialism, threatening energy security.

Ida Garibaldi, visiting research fellow at the American Enterprise Institute, March 25, 2008, “Energy: NATO between Russia and Europe” http://www.aei.org/publications/pubID.27911,filter.foreign/pub_detail.asp, [T-Jacob]The Russia-Ukraine gas dispute has raised concerns about Russia’s domestic and foreign affairs, Ukraine’s sovereignty, and issues of U.S. and international energy security. The Administration appeared to take a cautious approach toward the Russia-Ukraine dispute over gas pricing, but responded forcefully to the January 1 cutoff. In common with European governments, the United States emphasized Russia’s culpability. State Department spokesman Sean McCormack criticized Russia for using “energy for political purposes,” and for acting while Europe was in the midst of an extreme cold spell. He stressed that while the Administration supported a gradual increase in prices to market levels, it disagreed with a “precipitous” increase and cutoff. Secretary of State Condoleezza Rice likewise on January 5 stated that Russia had not appeared to be a “responsible actor in the international economy” by making “politically motivated efforts to constrain energy supply to Ukraine.” She warned that such efforts also raised concerns about Russia’s suitability for the 2006 chairmanship of the G-8.10 Some observers argue that U.S. concerns about the gas cutoff should not interfere with higher priority U.S.-Russian cooperation in combating terrorism or addressing such issues as nuclear proliferation in Iran and North Korea.11 Others suggest that the cutoff is emblematic of rising Russian neo-imperialism, which threatens energy security and sovereignty in the Soviet successor states and the wider Euro-Atlantic region. Some of these observers warn that the West is again faced with containing Russia.12

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Impacts – National Security Risk

Russian gas cutoffs create significant national security risk and foreign policy challenges.

Ida Garibaldi, visiting research fellow at the American Enterprise Institute, March 25, 2008, “Energy: NATO between Russia and Europe” http://www.aei.org/publications/pubID.27911,filter.foreign/pub_detail.asp, [T-Jacob]The Russian gas cutoff may increase U.S. government concerns about energy security, including the diversity of liquefied natural gas (LNG) suppliers. In testimony on February 2, 2006, John Negroponte, the Director of National Intelligence, warned that the gas cutoff was “an example of how energy can be used [by Russia] as both a political and economic tool,” and that such actions by key producer states and others “pose significant U.S. national security risks or foreign policy challenges.”13 Deputy Assistant Secretary of State Matthew Bryza appeared to reflect such concerns during a mid-January 2006 visit with Turkmen President Saparamurad Niyazov. Reportedly, the two sides discussed cooperation on developing and exporting Turkmen energy resources, in order to “enhance competition on European markets.” The visit also may have reflected greater U.S. advocacy of multiple oil and gas pipeline routes in the Caspian Sea region, including those that do not traverse Russia or Iran. The gas cutoff may affect decisions by U.S. firms about investing in the Russian LNG industry for future imports.14

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Impacts – Terror Coop

Gas cutoffs decrease US-Russia cooperation on counter-terrorism.

Ida Garibaldi, visiting research fellow at the American Enterprise Institute, March 25, 2008, “Energy: NATO between Russia and Europe” http://www.aei.org/publications/pubID.27911,filter.foreign/pub_detail.asp, [T-Jacob]The gas cutoff has heightened concerns among some in Congress that U.S.-Russian cooperation on counter-terrorism and other strategic issues is threatened, and that Russia is failing to democratize, respect the independence of fellow Soviet successor states, and meet other conditions of U.S. assistance. The cutoff may also strengthen views among some Members that Russia is not a suitable host for a planned July 2006 G-8 (group of eight industrial democracies) summit in Moscow on energy security. Senator John McCain reflected such concerns when he called in early February for the G-8 leaders to boycott the summit, in part because of Russia’s autocratic handling of the gas dispute.16

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Impacts – Terrorism

US-Russian relations are key to preventing nuclear terrorism and proliferation

David Kramer, Deputy Assistant Secretary for European and Eurasian Affairs, July 12, 2006, “The Future Obit of US Russian Relations”, Speech: US State Depart . David, Deputy Assistant Secretary for European and Eurasian Affairs, “The Future Orbit of US Russian Relations”, Speech: US State Department, July 2. [T-Jacob]Our cooperation will include the physical protection of nuclear materials, suppressing illicit trafficking of those materials, responding and mitigating the consequences of any acts of nuclear terrorism, and cooperating on the development of the technical means to combat nuclear terrorism, denying safe haven to terrorists, and strengthening our national legal frameworks to ensure the prosecution of such terrorists and their supporters. This initiative serves U.S. national security interests. We have invited partner nations to meet in the fall to elaborate on and endorse a statement of principles for this initiative. It's one we hope to expand.

Nuclear terrorism results in extinction

Mohamed Sid-Ahmed, Egyptian Political Analyst, August, 26, 2004, Al-Ahram Newspaper, http://weekly.ahram.org.eg/2004/705/op5.htm | SWON. [T-Jacob]

What would be the consequences of a nuclear attack by terrorists ? Even if it fails, it would further exacerbate the negative features of the new and frightening world in which we are now living. Societies would close in on themselves, police measures would be stepped up at the expense of human rights, tensions between civilisation s and religions would rise and ethnic conflicts would proliferate. It would also speed up the arms race and develop the awareness that a different type of world order is imperative if humankind is to survive. But the still more critical scenario is if the attack succeeds. This could lead to a third world war , from which no one will emerge victorious. Unlike a conventional war which ends when one side triumphs over another, this war will be without winners and losers. When nuclear pollution infects the whole planet, we will all be losers.

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Impacts – US-Russian War

Russia war with US

Helen Caldicott, founder of Physicians for Social Responsibility, 2002, “The New Nuclear Danger”, p. 7-12. [T-Jacob] If launched from Russia, nuclear weapons would explode over American cities thirty minutes after takeoff. (China's twenty missiles are liquidfueled, not solid-fueled. They take many hours to fuel and could not be used in a surprise attack, but they would produce similar damage if launched. Other nuclear-armed nations, such as India and Pakistan, do not have the missile technology to attack the U.S.) It is assumed that most cities with a population over 100,000 people are targeted by Russia. During these thirty minutes, the U.S. early-warning infrared satellite detectors signal the attack to the strategic air command in Colorado. They in turn notify the president, who has approximately three minutes to decide whether or not to launch a counterattack. In the counterforce scenario the US. government currently embraces, he does [the U.S.] launch[es], the missiles pass mid-space, and the whole operation is over within one hour. Landing at 20 times the speed of sound, nuclear weapons explode over cities, with heat equal to that inside the center of the sun. There is practically no warning, except the emergency broadcast system on radio or TV, which gives the public only minutes to reach the nearest fallout shelter, assuming there is one. There is no time to collect children or immediate family members. The bomb, or bombs-because most major cities will be hit with more than one explosion-will gouge out craters 200 feet deep and 1000 feet in diameter if they explode at ground level. Most, however, are programmed to produce an air burst, which increases the diameter of destruction, but creates a shallower crater. Half a mile from the epicenter all buildings will be destroyed, and at 1.7 miles only reinforced concrete buildings will remain. At 2.7 miles bare skeletons of buildings still stand, single-family residences have disappeared, 50 percent are dead and 40 percent severely injured.' Bricks and mortar are converted to missiles traveling at hundreds of miles an hour. Bodies have been sucked out of buildings and converted to missiles themselves, flying through the air at loo miles per hour. Severe overpressures (pressure many times greater than normal atmospheric have popcorned windows, producing millions of shards of flying glass, causing decapitations and shocking lacerations. Overpressures have also entered the nose, mouth, and ears, inducing rupture of lungs and rupture of the tympanic membranes or eardrums. Most people will suffer severe burns. In Hiroshima, which was devastated by a very small bomb-13 kilotons compared to the current iooo kilotons-a child actually disappeared, vaporized, leaving his shadow on the concrete pavement behind him. A mother was running, holding her baby, and both she and the baby were converted to a charcoal statue. The heat will be so intense that dry objects-furniture, clothes, and dry wood-will spontaneously ignite. Humans will become walking, flaming torches. Forty or fifty miles from the explosion people will instantly be blinded from retinal burns if they glance at the flash. Huge firestorms will engulf thousands of square miles, fanned by winds from the explosion that transiently exceed 1000 miles per hour. People in fallout shelters will be asphyxiated as fire sucks oxygen from the shelters. (This happened in Hamburg after the Allied bombing in WWII when temperatures within the shelters, caused by conventional bombs, reached 1472 degrees Fahrenheit.)" Most of the city and its people will be converted to radioactive dust shot up in the mushroom cloud. The area of lethal fallout from this cloud will depend upon the prevailing wind and weather conditions; it could cover thousands of square miles. Doses of 5000 rads (a rad is a measure of radiation dose) or more experienced by people close to the explosion-if they are still aliv-will produce acute encephalopathic syndrome. The cells of the brain will become so damaged that they would swell. Because the brain is enclosed in a fixed bony space, there is no room for swelling, so the pressure inside the skull rises, inducing symptoms of excitability, acute nausea, vomiting, diarrhea, severe headache, and seizures, followed by coma and death within twenty-four hours. A lower dose of 1000 rads causes death from gastrointestinal symptoms. The lining cells of the gut die, as do the cells in the bone marrow that fight infection and that cause blood clotting. Mouth ulcers, loss of appetite, severe colicky abdominal pain, nausea, vomiting, and bloody diarrhea occur within seven to fourteen days. Death follows severe fluid loss, infection, hemorrhage, and starvation. At 450 rads, 50 percent of the population dies. Hair drops out, vomiting and bloody diarrhea occurs, accompanied by bleeding under the skin and from the gums. Death occurs from internal hemorrhage, generalized septicemia, and infection. Severe trauma and injuries exacerbate the fallout symptoms, so patients die more readily from lower doses of radiation. Infants, children, and old people are more sensitive to radiation than healthy adults. Within bombed areas, fatalities will occur from a combination of trauma, burns, radiation sickness, and starvation. There will be virtually no medical care, even for the relief of pain, because most physicians work within The United States owns 103 nuclear power plants, plus many other dangerous radioactive facilities related to past activities of the cold war. A 1000- kiloton bomb (1 megaton) landing on a standard iooo megawatt reactor and its cooling pools, which contain intensely radioactive spent nuclear fuel, would permanently contaminate an .' area the size of western Germany3 The International Atomic Energy Agency now considers these facilities to be attractive terrorist targets, ' post-September 11,2001. Millions of decaying bodies-human and animal alike-will rot, infected with viruses and bacteria that will mutate in the radioactive-environment to become more lethal. Trillions of insects, naturally ' resistant to radiation-flies, fleas, cockroaches, and lice--will transmit disease

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from the dead to the living, to people whose immune mechanisms have been severely compromised by the high levels of background radiation. Rodents will multiply by the millions among the corpses and shattered sewerage systems. Epidemics of diseases now controlled by immunization and good hygiene will reappear: such as measles, polio, typhoid, cholera, whooping cough, diphtheria, smallpox, plague,tuberculosis, meningitis, malaria, and hepatitis. Anyone who makes it to a fallout shelter and is not asphyxiated in it, will need to stay there for at least six months until the radiation decayssufficiently so outside survival is possible. It has been postulated that perhaps older people should be sent outside to scavenge for food because they will not live long enough to developmalignancies from the fallout (cancer and leukemia have long incubation periods ranging from five to sixty But any food that manages to grow will be toxic because plants concentrate radioactive elements.*/ Finally, we must examine the systemic global effects of a nuclear . , war. Firestorms will consume oil wells, chemical facilities, cities, and forests, covering the earth with a blanket of thick, black, radioactive , I I ' smoke, reducing sunlight to 17 percent of normal. One year or more ' ) , will be required for light and temperature to return to normal per-"r haps supernormal values, as sunlight would return to more than its , , usual intensity, enhanced in the ultraviolet spectrum by depletion of the stratospheric ozone layer. Sub freezing temperatures could destroy the biological support system for civilization, resulting in massive starvation, thirst, and hypothermia.5 To quote a 1985 SCOPE document published by the White House Office of Science and Technology Policy, "the total loss of human agricultural and societal support systems would result in the loss of almost all humans on Earth, essentially equally among combatant and noncombatant countries alike . . . this vulnerability is an aspect not currentlya part of the understanding of nuclear war; not only are the major combatant countries in danger, but virtually the entire human population is being held hostage to the large-scale use of nuclear weapons. . . .",! i The proposedSTART I11 treaty between Russia and America, even if it were implemented, would still allow 3000 to 5000 hydrogen bombs to be maintained on alert."he threshold for nuclear winter? One thousand loo-kiloton bombsblowing up loo cities7-a I c distinct possibility given current capabilities and targeting plans. On January 25,1995, military technicians at radar stations in northern Russia detected signals from an American missile that hadjust been launched off the coast of Norway carrying a US. scientific probe. Although the Russians had been previously notified of this launch, the alert had been forgotten or ignored. Aware that US. submarines could launcha missile containing eight deadly hydrogen bombs fifteen minutes from Moscow, Russian officials assumed that America had initiated a nuclear war. For the first time in history, the Russian computer containing nuclearlaunch codes was opened. President Boris Yeltsin, sitting at that computer being advised on how to launch a nuclear war by his military officers, had only a threeminute interval to make a decision. At the last moment, the US.missile veered off course. He realized that Russia was not under attack.' If Russia had launched its missiles, the US. early-warning satellites would immediately have detected them, and radioed back to Cheyenne Mountain. This would have led to the notification of the president, who also would have had three minutes to make his launch decision, and America's missiles would then have been fired from their silos. We were thus within minutes of global annihilation that day. ,' Today, Russia's early-warning and nuclear command systems are deteriorating. Russia's early-warning system fails to operate up to seven hours a day because only one-third of its radars are functional, and two of the nine global geographical areas covered by its missilewarning satellites are not under surveillance for missile detection.9 TO make matters worse, the equipment controlling nuclear weapons malfunctions frequently, and critical electronic devices and computers sometimes switch to combat mode for no apparent reason. According to the CIA, seven times during the fall of 1996 operations at some Russian nuclear weapons facilities were severely disrupted when robbers tried to "mine" critical communications cables for their copper!'" This vulnerable Russian system could easily be stressed by an internal or international political crisis, when the danger of accidental or indeed intentional nuclear war would become very real. And the U.S. itself is not invulnerable to error. In August 1999, for example, when the National Imagery and Mapping Agency was installing a new computer system to deal with potential Y2K problems, this operation triggered a computer malfunction which rendered the agency "blind" for days; it took more than eight months for the defect to be fully repaired. As the New York Times reported, part of America's nuclear early-warning system was rendered incompetent for almost a year." (At that time I was sitting at a meeting in the west wing of the White House discussing potentially dangerous Y2K nuclear weapons glitches. Several Pentagon officials blithely reassured me that everything would function normally during the roll-over. But in fact, their intelligence system had already been disabled.) Such a situation has the potential for catastrophe. If America cannot observe what the Russians are doing with their nuclear weapons-or vice versa-especially during a serious international crisis they are likely to err on the side of "caution," which could mean that something as benign as the launch of a weather satellite could actually trigger annihilation of the planet . This situation became even more significant after the September 11 attack.

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Impacts – Russian Economy

Russian economic collapse causes a civil war that escalates and goes nuclear

Steven David, political scientist, FOREIGN AFFAIRS, January/February 1999, p. http://www.foreignaffairs.org/19990101faessay955/steven-r-david/saving-america-from-the-coming-civil-wars.html. [T-Jacob]

If internal war does strike Russia, economic deterioration will be a prime cause. From 1989 to the present, the GDP has fallen by 50 percent. In a society where, ten years ago, unemployment scarcely existed, it reached 9.5 percent in 1997 with many economists declaring the true figure to be much higher. Twenty-two percent of Russians live below the official poverty line (earning less than $ 70 a month). Modern Russia can neither collect taxes (it gathers only half the revenue it is due) nor significantly cut spending. Reformers tout privatization as the country's cure-all, but in a land without well-defined property rights or contract law and where subsidies remain a way of life, the prospects for transition to an American-style capitalist economy look remote at best. As the massive devaluation of the ruble and the current political crisis show, Russia's condition is even worse than most analysts feared. If conditions get worse, even the stoic Russian people will soon run out of patience. A future conflict would quickly draw in Russia's military. In the Soviet days civilian rule kept the powerful armed forces in check. But with the Communist Party out of office, what little civilian control remains relies on an exceedingly fragile foundation -- personal friendships between government leaders and military commanders. Meanwhile, the morale of Russian soldiers has fallen to a dangerous low. Drastic cuts in spending mean inadequate pay, housing, and medical care. A new emphasis on domestic missions has created an ideological split between the old and new guard in the military leadership, increasing the risk that disgruntled generals may enter the political fray and feeding the resentment of soldiers who dislike being used as a national police force. Newly enhanced ties between military units and local authorities pose another danger. Soldiers grow ever more dependent on local governments for housing, food, and wages. Draftees serve closer to home, and new laws have increased local control over the armed forces. Were a conflict to emerge between a regional power and Moscow, it is not at all clear which side the military would support. Divining the military's allegiance is crucial, however, since the structure of the Russian Federation makes it virtually certain that regional conflicts will continue to erupt. Russia's 89 republics, krais, and oblasts grow ever more independent in a system that does little to keep them together. As the central government finds itself unable to force its will beyond Moscow (if even that far), power devolves to the periphery. With the economy collapsing, republics feel less and less incentive to pay taxes to Moscow when they receive so little in return. Three-quarters of them already have their own constitutions, nearly all of which make some claim to sovereignty. Strong ethnic bonds promoted by shortsighted Soviet policies may motivate non-Russians to secede from the Federation. Chechnya's successful revolt against Russian control inspired similar movements for autonomy and independence throughout the country. If these rebellions spread and Moscow responds with force, civil war is likely. Should Russia succumb to internal war, the consequences for the United States and Europe will be severe. A major power like Russia -- even though in decline -- does not suffer civil war quietly or alone. An embattled Russian Federation might provoke opportunistic attacks from enemies such as China. Massive flows of refugees would pour into central and western Europe. Armed struggles in Russia could easily spill into its neighbors. Damage from the fighting, particularly attacks on nuclear plants, would poison the environment of much of Europe and Asia. Within Russia, the consequences would be even worse. Just as the sheer brutality of the last Russian civil war laid the basis for the privations of Soviet communism, a second civil war might produce another horrific regime. Most alarming is the real possibility that the violent disintegration of Russia could lead to loss of control over its nuclear arsenal. No nuclear state has ever fallen victim to civil war, but even without a clear precedent the grim consequences can be foreseen. Russia retains some 20,000 nuclear weapons and the raw material for tens of thousands more, in scores of sites scattered throughout the country. So far, the government has managed to prevent the loss of any weapons or much material. If war erupts, however, Moscow's already weak grip on nuclear sites will slacken, making weapons and supplies available to a wide range of anti-American groups and states. Such dispersal of nuclear weapons represents the greatest physical threat America now faces. And it is hard to think of anything that would increase this threat more than the chaos that would follow a Russian civil war.

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AT: Non-Unique – Ukraine

Medvedev wants natural gas in the U.S. by 2010, regardless of the European marketLionel Beehner, Senior Writer Council on Foreign Relations, 2006 recipient of a German Marshall Fund journalism fellowship for a research project on post-Soviet youth movements in Ukraine and Belarus, January 10, 2006, “ergy’s Impact on EU-Russian Relations”, http://www.cfr.org/publication/9535/, Accessed July 15, 2008 CM

The issue of energy security is increasingly playing an impact on U.S.-Russian relations. U.S. Secretary of State Condoleezza Rice criticized Russia for its "politically motivated efforts to constrain energy supply to Ukraine," drawing a rebuke from Russia's Foreign Ministry. But Russia has U.S. energy consumers in mind as well. Russia's state-controlled energy giant, Gazprom, has sought a 10 percent U.S. market share by 2010, according to the company's deputy chairman, Alexander Medvedev. From Russia's standpoint, the United States is especially seen as a lucrative export destination for liquefied natural gas (LNG), shipped via Russia's Shtokman field in the Barents Sea, north of the Arctic Circle (LNG is gas frozen into liquid and shipped in refrigerated tankers and then warmed back into its gaseous state on delivery).

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1. Non-unique: Russia relations terrible in status quo.

M. K. Bhadrakumar, career diplomat for Indian foreign services, June 19, 2008, “Russia’s energy drive leaves reeling”, http://www.atimes.com/atimes/Central_Asia/JG19Ag01.html. [T-Jacob]

Washington hit back by ensuring that Russian companies are left out in the cold from the 30 contracts for lucrative oil deals that Baghdad is awarding. It is a big blow for Russia. In February, Moscow had written off US$12 billion or 93% of Iraq's debt to Russia in a move that was widely seen as aimed to help Russian oil company LUKoil regain the Saddam Hussein-era rights to develop Iraq's giant West Qurna-2 oil field. But under US pressure, the Iraqi government is now awarding West Qurna-2 to the US's Chevron. The Kremlin didn't show any anger, but coincidence or not, Gazprom chief executive Alexei Miller suddenly arrived in Tehran on Monday and discussed with Iranian President Mahmud Ahmadinejad the setting up of an organization of gas-producing countries. No doubt, with the Russian foothold in Libya (which has estimated natural gas reserves of 1.47 trillion cubic meters), in coordination with Algeria (which currently supplies over 10% of Europe's gas supplies), Qatar (with proven natural gas reserves of 25.8 trillion cubic meters) and Iran (which has the world's second-largest reserves after Russia), the time for a "Gas OPEC" is approaching. The Iranian leader also suggested to Miller a market-sharing arrangement so that Russia and Iran could "collectively meet the demands of Europe, India and China in the gas sector". During the visit, an agreement was signed on the development of Iran's oil and gas fields by Russian companies; on Russian participation in the transfer of Iran's Caspian Sea crude oil to the Oman Sea; cooperation in the development of Iran's fabulous North Azadegan oil field; and, possible participation of Gazprom in the planned Iran-Pakistan-India gas pipeline project. Evidently, Moscow took a deliberate decision to press ahead with Iran in energy cooperation in the full glare of world publicity in complete disregard of US displeasure. Tehran loved it. To quote a US expert, "Russia's strategic interest in Iran implicitly underscores the futility of hopes that Moscow would cooperate with Washington in imposing meaningful sanctions on Iran. While Western European companies are moving out of Iran or suspending agreements for fear of US sanctions (which penalize investments of more than $20 million a year in Iran's oil and gas sector), Gazprom is enlarging the already existing foothold." Conceivably, the danger of losing out on the last energy frontier to Russia (and China) could be a factor in Washington's policy shift on Iran talks. Washington calls the u-turn "a strong signal to the Iranian government that the United States is committed to diplomacy". But according to The New York Times, Rice has decided to "test Iran's willingness to consider an international package of incentives meant to coax Iran into making concessions on its nuclear program". What we do not know is how close the Bush administration may be for involvement in Iran's energy sector, which is an element in the so-called "international package of incentives". (Halliburton, which Vice President Dick Cheney headed, was a very active player in Iran.)

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2AC – RUSSIA

2. Non-unique: Russia collapse imminent.

Dave Kimble, civil libertarian writer and writer for the centre for research on development, May 21, 2006, “Collapse of Petrodollar Looming”, http://www.globalresearch.ca/index.php?context=viewArticle&code=KIM20060521&articleId=2486. [T-JacobRussia's oil exports represent 15.2% of the world's export trade in oil, making it a much more significant player than Iran, with 5.8% of export volumes. Russia also produces 25.8% of the world's gas exports, while Iran is still only entering this market as an exporter. GlobeAndMail.com is reporting that President Chavez of Venezuela is considering following Iran's move towards pricing oil in Euros. Venezuela has 5.4% of the export market, although since the bulk of his country's exports are of heavy oil to the US, where it needs special facilities to process it, it would be a very brave or foolhardy President that told the US to buy its oil in Euros, or else ... Nevertheless, you can see the attraction for any country wanting to apply some pressure on the world's superpower. And where Venezuela leads, Bolivia may not be far behind. You can see how this could quickly get out of control. While the Iranians have been suffering numerous delays in implementing their bourse, Russia could have their oil market up and running almost as soon as their currency market is ready to take on the work load, which might only be a few months away. Some commentators on the Iranian proposal have suggested that the impact on the US Dollar would not be so great because the greenback is used for all sorts of trade, not just oil, so 5.8% of the international oil trade is really only a small part of the bigger picture. This argument looks a bit weak if both Russia and Iran will be lowering the demand for Dollars to buy oil and gas. In order to counter the reduced demand for US Dollars, the standard control lever available to the Federal Reserve is to increase interest rates, over and above what it was going to be doing. This has the usual unwelcome consequences of dampening the US economy, and squeezing people with mortgages, which in turn leads to rising wages, falling house prices and a slump in the construction industry. At the same time, lower demand for Dollars will weaken its conversion rate, making imports more expensive. With rising wages, fuel bills and debt-servicing feeding through into prices for home-produced goods, the stage is set for either an inflationary spiral or a recession. In the short term, the inflationary route always looks to be the less painful, but it can only lead eventually to a crisis of confidence in US Dollars, when traders abandon the paper and rush for the exit. US-Russian relations slide It cannot have escaped the notice of the Russians that this announcement is a poke in the eye for the US. So its timing can hardly be an accident, coming less than a week after US Vice President Dick Cheney's address to a conference in Vilnius, Lithuania, where he attacked Russian energy policy, in front of an audience of European heads of state. "No legitimate interest is served when oil and gas become tools of intimidation or blackmail, either by supply manipulation, or attempts to monopolise transportation", Cheney said, referring to the Ukrainian gas cut-back (that Ukraine provocatively passed on to the downstream customers in western Europe). The next day Russian Foreign Minister Sergei Lavrov fired back "[the] U.S. vice president should be informed that for the last 40 years neither the U.S.S.R. nor the Russian Federation has ever broken a single contract for oil and gas supplies abroad." The antagonism continued to verberate when Lavrov met US Sectretary of State Condoleezza Rice at a foreign ministers' summit in New York on Iran's nuclear programme. As well as criticising Cheney's comments, Lavrov also attacked Rice's number three, Nicholas Burns, for his criticism of Russia's assistance with Iran's Bushehr nuclear facility. "This meeting isn't going anywhere", snarled Rice, perhaps angry that the rebuke of Burns reflected badly on her. Burns himself was probably a bit cranky after his trip to Moscow in April, when he publicly asked Russia not to go ahead with the sale of Tor-M1 mobile anti-missile missiles to Iran, only to be bluntly rebuffed by Russian Chief of Staff, General Yury Baluyevsky. Meanwhile the world looks on, hoping that the great powers really know what they are doing, and that World War 3 won't start because of a subtle miscalculation in brinkmanship.

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2AC – RUSSIA

3. Non-Unique: Russia hasn’t imported an ounce of LNG to the U.S.

4. No Internal link: Because of large supply, the U.S. will not become dependent on Russia for natural gas

Marshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 7Equally unusual, even though there are no natural gas pipelines connecting the United States with Russia, Gazprom is also beginning to export LNG (liquified natural gas) to the United States. For the time being, because Gazprom as yet lacks the technology to produce LNG on its own, it is a swap arrangement. These shipments under the Gazprom label actually originate in Algeria (in exchange, Gazprom pipes gas to some of Algeria's customers in Europe), but by 2010, Gazprom anticipates (unrealistically) that it will supply as much as 10 percent of the natural gas the United States needs as LNG directly from its own fields.' Given that the United States has fairly large natural gas reserves of its own and supplements domestic production with imports by pipeline from Canada, it is unlikely that the United States will ever become as beholden to Russia for its energy as Germany or Austria have become. Yet Russia's emergence as an energy superpower will have a long term impact on U.S. and world diplomacy if for no other reason than that our European allies will begin to think twice before saying "no" to Russia.

5. Internal link turn: If Russia uses its influence in the U.S. through energy, the U.S. market will rebel crushing relations

Marshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 206This implies that U.S. policy should encourage Russian companies to invest in the United States, especially when they provide goods and services that supplement those sold by others. In the same way, the more assets owned by Russian entities outside of Russia, the more Russian firms are likely to feel pressure to conform to international standards. Thus, if Gazprom should for some reason decide to withhold delivery of LNG to its U.S. customers, as a countermeasure those customers might well decide to seize Russian owned assets as a hostage. In the same way, companies like LUXoi1 should be encouraged to compete in U. S. markets by exporting Russian petroleum to the gasoline service stations that it owns here. (This is also a way to diversify oil imports.) 'When Russia is able to act as a monopolist, however, such investments are more problematic building a natural gas pipeline that gives them monopoly power over consumers in the territory served by that pipeline would be an example.

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2AC – RUSSIA

6. No link: disadvantage link isn’t predicated specifically off of the affirmative case

7. No Impact: Zero chance of war with Russia

Noah Shachtman, writer for national security online network database, June 9, 2008, “Moseley: Gates was Right; ‘Zero Chance’ of War with China or Russia”, http://blog.wired.com/defense/2008/06/moseley-gates-w.html. [T-Jacob]

Defense Secretary Robert Gates fired Air Force Chief of Staff General "Buzz" Moseley after repeatedly accusing the service of being unable to focus on the wars in Iraq and Afghanistan. In a fascinating interview with Air Force Times , conducted right after his removal, Moseley said the critiques were dead-on. It's an eye-opening admission. For years, Moseley's generals have been warning about the dangers of China and a resurgent Russia -- and downplaying today's counterinsurgency conflicts. Now, Moseley is saying there is " an almost zero chance we will fight a nation-state " like Russia or China. Which makes you wonder why the Air Force has been so preoccupied with these countries.

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AFF – Non-Unique

U.S. moving away from GazpromInternational Herald Tribune, February 22, 2008, “A U.S. official says Europe needs alternatives to Russian natural gas”, http://www.iht.com/bin/printfriendly.php?id=10314070, Accessed July 15, 2008 CMBRUSSELS: A U.S. State Department official said Friday that Europe needed alternatives to Russian natural gas that enriched "shady middlemen," putting forward the idea of Iraq and Azerbaijan as new suppliers.

Matthew Bryza, the U.S. deputy assistant secretary of state for southeastern Europe, was critical of Gazprom, the state-controlled Russian national gas behemoth, saying the United States did not like energy monopolies.

"We especially don't like them when they threaten at least the economic security of our most important allies," Bryza said. He criticized the company for charging too much and trying to undermine European efforts to seek new sources and routes for more natural gas.

He said the U.S. government strongly backed the Nabucco pipeline, sponsored by the European Union and aimed at bringing more natural gas to Europe from the Caspian Sea region. That pipeline could help Iraq earn energy dollars and benefit another U.S. ally, Azerbaijan.

Bryza said the United States was concerned that Europeans were paying "gigantic rents" for natural gas that Gazprom buys from supplier nations like Turkmenistan for as little as $100 for 1,000 cubic meters, or 35,000 cubic feet, and sells to Europe for nearly $300.

"When you have these gigantic rents generated because of the difference in price between Central Asia and Europe, some not so savory people get involved in the distribution of that money," he said.

Bryza was referring to Semyon Mogilevich, a Ukrainian-born Russian citizen accused by the United States of running an organized crime ring in the 1990s. Mogilevich was involved with the Ukrainian gas export company RosUkrEnergo.

The United States wants Gazprom to behave more like a Western energy company, by investing most of its profits into producing and transporting more natural gas instead of buying up strategic energy infrastructure in Europe "that's the pattern today," he said.

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AFF – Energy key to Russian Influence

Russia is using its energy dominance as a political weapon Marshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 3

Russia has not hesitated in the past to cut off the flow of both petroleum and gas to strengthen its side of a political dispute, a practice it inherited from its forebears in the Soviet Union's Ministry of the Gas Industry and Ministry of the Petroleum Industry. Europeans are realizing how dependent on Russia they have become as each year they rely more and more on Russian natural gas imports. Gazprom and, by extension, the Russian government are already beginning to enjoy a power over their European neighbors far beyond the dreams of the former Romanov czars or the Communist Party general secretaries. President Vladimir Putin, with his control of Gazprom as well as another state owned petroleum company, Rosneft, had become a real life Dr. No an archetypal James Bond villain, complete with a yacht and retinue. As President Putin at the time noted in a three hour meeting following our Gazprom visit, Gazprom and Rosneft are very real and each year are accumulating more and more wealth and international influence, which they are using to advance the interests of the Russian state.

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AFF – Russian Influence Increasing Now

The world’s dependence on Russia is increasing – especially the U.S.Marshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 3-7

But it is not only Europe that finds itself each day becoming more and more dependent on energy exports from Russia. Although the United States is separated from Russia by oceans, it also is beginning to import and consume more and more Russian energy. As in Europe, the United States is trying to reduce its overreliance on energy imports from the Middle East. As part of this diversification, in 2005 the United States imported dose to $8 billion worth of Russian petroleum. In woO, that jumped by 25 percent to $1o billion. True, that represented only 3 percent of our petroleum imports small, but an increase from the 2.2 percent of 2004 and a hint that we are likely to increase imports in the future.' More than that, in woo, LUKoi1, one of Russia largest private oil companies, purchased nearly 3,000 filling stations in the United States from Getty Oil and Mobil and is now busily converting them into LUKoil outlets. It also should be noted that in woO, Russia became the world's largest producer of petroleum, producing more than Saudi Arabia. This is not the first time Russia has produced more petroleum than anyone else. It also reigned as the world's largest producer in the late 1970s and 198os. Even this was not unprecedented. As Table Intro. r indicates, Czarist Russia from 1898 to 1901 also produced more oil than the United States, until then the leader.

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AFF – No I/L – Too Much U.S. Supply

Because of large supply, the U.S. will not become dependent on Russia for natural gasMarshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 7

Equally unusual, even though there are no natural gas pipelines connecting the United States with Russia, Gazprom is also beginning to export LNG (liquified natural gas) to the United States. For the time being, because Gazprom as yet lacks the technology to produce LNG on its own, it is a swap arrangement. These shipments under the Gazprom label actually originate in Algeria (in exchange, Gazprom pipes gas to some of Algeria's customers in Europe), but by 2010, Gazprom anticipates (unrealistically) that it will supply as much as 10 percent of the natural gas the United States needs as LNG directly from its own fields.' Given that the United States has fairly large natural gas reserves of its own and supplements domestic production with imports by pipeline from Canada, it is unlikely that the United States will ever become as beholden to Russia for its energy as Germany or Austria have become. Yet Russia's emergence as an energy superpower will have a long term impact on U.S. and world diplomacy if for no other reason than that our European allies will begin to think twice before saying "no" to Russia.

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AFF – Empirically Denied – Energy Relations

The U.S. and its allies tried to break the Russian pipeline monopolyMarshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 7-9

As Russia customers have awakened to how vulnerable they have become to future cuts in their energy supplies, there are signs that this overdependence on Russian gas is already forcing at least some in Europe to have second thoughts about standing up to Russia. Nor are the European consumers the only ones who find themselves very much at the mercy of Gazprom. So far Gazprom also determines the fate of three other large exporters of natural gas. To their dismay, if they want to sell natural gas to Europe, Central Asian gas producers such as Turkmenistan, Kazakhstan, and Uzbekistan have no alternative but to ship it through the Gazprom pipeline. This is a legacy of the Soviet era when it was only logical to consolidate shipments of gas produced within the republics of the Soviet Union through one unified system. After all, what did it matter if the gas to be exported came from Uzbekistan and transited through Russia? They were both parts of the Soviet Union. But when the Soviet Union disintegrated in 1991, Gazprom assumed ownership of the bulk of that pipeline, and the newly independent countries in Central Asia, which were previously republics of the USSR, had no other outlet of their own to the West. As a result, this post 1991 monopoly control of the natural gas pipeline allows Gazprom to hold down the price it pays to the Central Asian producers for their gas. In 2006, for example, Gazprom paid less than $50 per 1,000 cubic meters while selling this same gas to the Europeans at prices averaging $230 per 1,000 cubic meters.

Working with energy and government officials in Central Asia, some European countries and the United States have sought to break that monopoly by lining up support for a bypass natural gas pipeline that would be built under the Caspian Sea and link Central Asia to Azerbaijan. There it would parallel an oil pipeline that goes then to Georgia and Turkey. To be called NABUCCO, this pipeline would then run through Bulgaria, Romania, Hungary; and on eventually to Western Europe.

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AFF – I/L Turn – Retaliation

If Russia uses its influence in the U.S. through energy, the U.S. market will rebel crushing relationsMarshall I. Goldman, Kathryn Wasserman Davis Professor of Russian Economics (Emeritus) at Wellesley College, former associate Director of the Davis Center for Russian Studies at Harvard University from 1975 to 2006, M.A. and Ph.D. degrees in Russian studies and economics from Harvard University, honorary Doctor of Laws degree from the University of Massachusetts, Amherst, Fulbright-Hayes Lecturer at Moscow State University, State Department consultant, May 27, 2008, Petrostate: Putin, Power, and the New Russia, Oxford University Press, Pg. 206

This implies that U.S. policy should encourage Russian companies to invest in the United States, especially when they provide goods and services that supplement those sold by others. In the same way, the more assets owned by Russian entities outside of Russia, the more Russian firms are likely to feel pressure to conform to international standards. Thus, if Gazprom should for some reason decide to withhold delivery of LNG to its U.S. customers, as a countermeasure those customers might well decide to seize Russian owned assets as a hostage. In the same way, companies like LUXoi1 should be encouraged to compete in U. S. markets by exporting Russian petroleum to the gasoline service stations that it owns here. (This is also a way to diversify oil imports.) 'When Russia is able to act as a monopolist, however, such investments are more problematic building a natural gas pipeline that gives them monopoly power over consumers in the territory served by that pipeline would be an example.

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AFF – Relations Non-Unique

US-Russia relations are low and declining.Council on Foreign Relations , an independent national membership organization with a nonpartisan center for producing future policymakers, May 5, 2005 , “Russia’s wrong direction: What the United States Can and Should Do”, http://www.cfr.org/publication/10020/ [T-Jacob]

March 5, 2006--Fifteen years after the collapse of the Soviet Union, “U.S.-Russia relations are clearly headed in the wrong direction,” finds an Independent Task Force on U.S. policy toward Russia sponsored by the Council on Foreign Relations. “Contention is crowding out consensus. The very idea of a ‘strategic partnership’ no longer seems realistic,” it concludes. The bipartisan Task Force was chaired by former Senator John Edwards and former Congressman and Housing and Urban Development Secretary Jack Kemp and directed by Council Senior Fellow Stephen Sestanovich. The Task Force notes significant recent economic progress in Russia. “Between 2000 and 2004 the number of Russians living below the government’s poverty line dropped from forty-two million to twenty-six million. The national unemployment rate--over 10 percent in 2000--is now about 7 percent...[and] a middle class appears to be emerging.”

US-Russia relations are faltering.Gregor Peter Schmitz, director of the Bertelsmann Foundation’s Transatlantic in Brussels, October 29, 2007, “Cold War Tensions, Reloaded”, http://www.spiegel.de/international/world/0,1518,512464-2,00.html [T-Jacob]

Bush had just used unusually hawkish words at this press conference to describe the nuclear tension with Iran. Clearly referring to Putin, Bush had told reporters, "If you're interested in avoiding World War III, it seems like you ought to be interested in preventing Iran from having the knowledge necessary to make a nuclear weapon." That reference to "World War III" was reminiscent of earlier presidential rhetoric like "The Axis of Evil" (Bush, 2002) and "The Evil Empire" (Reagan, 1983). The choice of words reflected a deep chill in US-Russian relations -- and differences over Iran are not the only reason for the falling out. "The relationship is really shaken. Both sides appear determined to verbally assault each other as often as possible over the coming months," says Rose Gottemoeller, Director of the Moscow office of the Carnegie Endowment for International Peace in an interview with SPIEGEL ONLINE.

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FLARING

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SHELL – FLARING

A. Natural gas prices will continue to rise this winter, multiple warrants

CNN, 7/3/08, “Avista warns of continued natural gas price hikes”, CNN money http://money.cnn.com/news/newsfeeds/articles/apwire/919e35e0554e2f663d1af503d11a7862.htm#TOP //EM

NEW YORK (Associated Press) - Normally, natural gas prices are low in the summer months and utilities stock up for sale in the winter. This year, though, a spike in energy prices is also hitting natural gas, which likely means higher prices for consumers this winter, Avista Corp. warned Wednesday. Kevin Christie, Avista's director of gas supply, said prices rose from an average of $7.39 per dekatherm in June 2007 to $12.81 per dekatherm last month, a 73 percent increase. A typical home in the utility's service areas in Eastern Washington, northern Idaho and Oregon uses about seven dekatherms a month. "The combination of an unusually long winter and cold spring created higher demand for natural gas, which depleted storage reserves across the country," Christie said in a release. High prices for crude oil, plus lower natural gas imports into the United States, are also pushing prices up, Christie said. The lack of lower spring and summer prices means natural gas rates for customers will likely increase when Avista files its annual "purchase gas cost adjustments" in September, although the amount of the increase remains undetermined, Christie said.

B. Link:

1. Alternative energy would decrease natural gas prices

Russell Hasan, President of the Altenews Company, 7-25-06, <<http://www.altenews.com/Alternative%20Energy%20Overview.pdf>>

Simultaneously with household use, alternative energy is going to become popular with corporations and businesses. The price of oil is continually rising and global supplies of light sweet crude oil are running out. Also, oil production is controlled by a cartel of countries who drive the price up and make oil overpriced in American markets. This is going to make oil an unattractive option for industrial purposes in the future. The prospects for coal, natural gas and nuclear are also bad, due to both financial and environmental reasons. Global supplies of coal, natural gas and uranium are becoming depleted, and these energy sources produce pollution on a scale that is undesirable. These factors are going to lead businesses and corporations to turn to alternative energy sources for their electricity. There are many cases of businesses using green building to reduce energy costs and relying on renewable energy to have a reliable and cost-effective source of power. As alternative energy supplies become economically feasible they will be adopted by conventional businesses, to the point of becoming mainstream in the future, and the companies that supply alternative energy stand to make substantial profits by supplying energy to these companies.

Several factors will also make the American government support the development of alternative energy. The first is the need for energy independence. The disaster of hurricanes Katrina and Rita showed that the American supply of petroleum, based on pipelines coming from the gulf coast, is unstable due to potential bad weather conditions, and alternative energy sources will help America become less dependent upon oil pipelines. More importantly, alternative energy will also help America become less dependent upon foreign oil, particularly from the Middle East, which is in the national interest. American dependence upon foreign oil is a major issue due to the political instability of the Middle East, it involves a huge political and military commitment by the United States to peace in the Middle East, and alternative energy will help to alleviate the situation and enable America to break free from dependence upon the Middle East and foreign oil. This could help America disentangle itself from its problematic relations with Iraq, Iran, and the other major oil-producing countries of that region. In fact, the American government has already enacted several measures to promote the alternative energy industry, both giving grants for research and taking steps to make alternatives more competitive through government incentives, and more are sure to come.

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SHELL – FLARING

2. High natural gas prices deter flaring as more gas will be transferred to the market place.

United States Government Accountability Office, Report to the Honorable Jeff Bingaman, Ranking Minority Member, Committee on Energy and Natural Resources, U.S. Senate, July 2004, http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=gao&docid=f:d04809.pdf

Although most natural gas production involves extracting gas from wellsdrilled into underground gas reservoirs, some natural gas is generated as aby-product of oil production. Gas produced during oil production is calledassociated gas. During oil and gas production, it may be necessary to burnor release natural gas for a number of operational reasons, includinglowering the pressure to ensure safety. Burning natural gas is known asflaring, while releasing natural gas directly into the atmosphere is calledventing. In addition to the operational reasons for flaring and venting, inareas where the primary purpose of drilling is to produce oil, producersflare or vent associated natural gas because no local market exists for thegas and transporting it to a market may not be economically feasible.2Natural gas prices are a major determinant of whether associated gas isflared and vented or sold. Associated natural gas would be sold if priceswere high enough over a long enough period to justify building theinfrastructure—pipelines and ports—to transport the gas to a market. Inthe United States, there are well-developed natural gas markets andinfrastructure to reduce the flaring and venting of associated natural gas.However, in parts of the world like Africa and the Middle East, where thenatural gas market and infrastructure for transporting gas are not as welldeveloped,flaring and venting are generally more prevalent. With increasesin natural gas prices, some countries have recognized the potential ofincreasing exports to high-demand countries like the United States usingliquefied natural gas (LNG) technology. These countries liquefy the naturalgas and transport it in specially designed tanker ships to the United Statesand other countries. When the liquefied gas arrives at an import facility, theliquid is returned to a gaseous state and transported to a market.

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SHELL – FLARING

C. Impacts

1) Flaring and venting emit methane which is “23 more times potent than CO2 in its ability to warm the planet.” Stopping flaring is key to preventing global warming.


Although gas is sometimes flared or vented because it has too littleeconomic value to justify its capture, flaring or venting this gas into theatmosphere has an environmental cost. In general, flaring emits carbondioxide, while venting releases methane.3 These and other chemicalcompounds found in the earth’s atmosphere create a greenhouse effect.Under normal conditions, when sunlight strikes the earth’s surface, some ofit is reflected back towards space as infrared radiation or heat. Greenhousegases such as carbon dioxide and methane impede this reflection bytrapping heat in the atmosphere. Methane is 23 times more potent thancarbon dioxide in its ability to warm the atmosphere. While these gasesoccur naturally on earth and are emitted into the atmosphere, theexpanded industrialization of the world over the last 150 years hasincreased the amount of emissions from human activity (known asanthropogenic emissions) beyond the level that the earth’s naturalprocesses can handle. Scientists generally agree that these increasedgreenhouse gases are contributing to global warming, which can havedetrimental effects on the climate. In general, the environmental costs offlaring and venting are not borne by the responsible parties because thereare no restrictions on greenhouse gas emissions. However, nations haveproposed international agreements to limit greenhouse gas emissions,including those released during flaring and venting.

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SHELL – FLARING

2. Global Climate change will lead to security threats for the US as the military is inhibited in its ability to respond to rapid climate changes.

Richard F. Pittenger & Robert B. Gagosian, Center for Technology and National Security PolicyNational Defense University, October 2003, Defense Horizons. http://permanent.access.gpo.gov/websites/nduedu/www.ndu.edu/inss/DefHor/dh33/dh33.pdf

It does not take a lot of imagination, for example, to envisionhow deleterious changes in the monsoons in South Asia (whichencompasses half the world’s population and several nuclear-armednations) could quickly escalate into security threats for the UnitedStates; or how an abrupt cooling in the North Atlantic region couldlead to consecutive severe winters that tax the energy resources andeconomies of the US and Europe—quickly degrading inhabitants’quality of life and narrowing the choices available to them.Beyond environmental threats that could lead to war, however,abrupt climate changes could pose more specific consequences tothe US military. If they occur in a 3-to-10-year timeframe, the military,without prior planning, could be in a poor position to respond intimely fashion.Given our current state of knowledge, we cannot predict theprobability of any abrupt climate change. But since the possibility isreal, it seems a useful exercise to contemplate the military ramificationsof potential, abrupt climate changes. Many of these stem frompotential changes in the North Atlantic and Arctic Oceans. As previouslynoted, changes within each of these ocean basins may be interrelatedand simultaneous, but let us consider each separately.

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Link – Oil

Increased oil production lowers the cost of natural gas resulting in flaring.


While flaring and venting represent only 3 percent of the total natural gasproduction, the natural gas flared and vented—about 100 billion cubicmeters a year—is enough to meet the annual natural gas consumption ofboth France and Germany. In general, the amount of flaring and ventingemissions is related to the amount of oil produced: the higher theproduction, the more gas flared and vented. Since 1990, the quantity of oilproduced has increased, but because of various global reduction initiatives,the quantity of natural gas flared and vented has remained constant.Consequently, natural gas emissions as a percentage of oil production havedecreased.

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Internals – Low Prices = Flaring

Subsidies for alternative energy sources undermine gas prices making extraction too costly.

Franz Gerner et al. , Bent Svensson, Sascha Djumena (a senior energy specialist,with the World Bank Group’s Oil and Gas Policy Division.), October 2004, Public Policy for the private sector. “Gas Flaring and Venting,” << http://www.eapirf.org/MenuItems/Resources/Papers/Energy/rsrc304.pdf>>

Where operators have the right to sell associatedgas, they will decide in favor of that option ratherthan flaring or venting only if they have access todomestic or international energy markets and ifenergy prices are favorable. Many developingcountries lack both a domestic gas market and theinfrastructure (liquefied natural gas facilities,export-oriented pipelines) for selling associatedgas in international markets. Moreover, domesticsales are often hindered by distorted energy pricing,monopolistic behavior by vertically integratedstate-owned utilities, and lack of atransparent legal and regulatory framework allowingthird parties to build and own a network forselling gas to industries and power generators.In many developing countries the relativelylow financial returns developers can expectfrom investing in the construction of a gas networkhave undermined the prospects for developinga gas market. Part of the problem is oftensubsidies for competing energy sources (oil,coal, nuclear, hydropower), which lead to lowprices for competing fuels.But in many oil-producing countries the perceivedvalue of associated gas has changed withthe rise in international natural gas prices sincethe early 1970s and as economic and budgetarypressures have led governments to abolish energysubsidies. Higher gas prices have encouragedmany governments and companies to develop gasinfrastructure, eventually providing opportunitiesto market associated gas domestically or internationally.Some oil-producing countries, such asAlgeria and the Arab Republic of Egypt, havedeveloped domestic gas markets and earmarkeda substantial share of domestic production forexport. Even so, many operators in developingcountries continue to view associated gas, and therequirement to develop gas infrastructure, as ahindrance to increasing oil production.

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Internals – Low Prices = Flaring

Low commercial value of natural gas makes flaring more cost effective, Nigeria proves.

Michiko Ishisone, UCLA Berkeley, December 2004, Gas Flaring in the Niger Delta: the Potential Benefits of its Reduction on the Local Economy and Environment. <<http://ist-socrates.berkeley.edu/~es196/projects/2004final/Ishone.pdf>>

From an economic perspective, the Nigerian government’s main interest in the oil industry is to maximize its monetary profits from oil production (ESMAP 2001). Oil companies find it more economically expedient to flare the natural gas and pay the insignificant fine than to reinject the gas back into the oil wells. Additionally, because there is an insufficient energy market especially in rural areas (GGFR 2002), oil companies do not see an economic incentive to collect the gas.

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Internals – High Prices Solve Flaring

Higher prices make natural gas worth collecting.

New Scientist, 7-12-2007, Rising gas prices could end wasteful flaring. <<http://environment.newscientist.com/article/dn12250>>

Dwindling energy supplies and rising gas prices could soon make gas flaring unprofitable, say researchers, saving billions of dollars' worth of natural gas from going up in smoke.

Historically, producers have simply burned gas found alongside oil if it was too difficult and costly to recover and sell it. In recent years, concerns about global warming have added to pressure to end the practice. But analysts say harsh economic reality is the factor that really concentrates minds.

The US National Oceanic and Atmospheric Administration (NOAA) estimates that 168 billion cubic metres (bcm) of gas were flared in 2006 – equivalent to 27% of the US natural gas consumption (read NOAA's gas flaring report). NOAA says the flared gas could have fetched $69 billion if sold.

"Until you start to put real value into gas prices, you might as well flare. But now gas prices are getting to the point where it's worth collecting," says Jonathan Stern of the Oxford Institute for Energy Studies in the UK.

The effect of higher prices, however, has yet to be felt. According to NOAA, gas flaring remained constant – between 150 bcm and 170 bcm – from 1995 to 2006.

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Internals – High Prices Solve Flaring

High prices in the status quo make it profitable to discover and extract natural gas.

Alberta department of Immigration and Industry, Oil and Gas Extraction Industry, 6-2006, http://www.alis.gov.ab.ca/occinfo/IndustryDescriptions/oilgasextract.htm

The outlook for the Natural Gas industry in the North American economy looks bright. Alberta accounts for over 80 per cent of Canadian natural gas production. Half of Alberta’s natural gas production is exported to the United States. A quarter of the production is exported to other provinces. Demand for exported Alberta gas will rise significantly as natural gas producers in the United States struggle to keep pace with demand. Such demand will reduce Alberta’s natural gas reserves but will generate exploration and development along with more processing plants, pipelines and storage facilities.

Natural Gas in Coal (NGC), also known as coal bed methane, is a relatively new venture in Alberta. The feasibility of NGC production is not completely known but there is potentially 500 trillion cubic feet (over double the reserves of traditional natural gas) of NGC in Alberta.

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Impact Booster – Methane

Flaring and venting emit methane which is “23 more times potent than CO2 in its ability to warm the planet.”


Although gas is sometimes flared or vented because it has too littleeconomic value to justify its capture, flaring or venting this gas into theatmosphere has an environmental cost. In general, flaring emits carbondioxide, while venting releases methane.3 These and other chemicalcompounds found in the earth’s atmosphere create a greenhouse effect.Under normal conditions, when sunlight strikes the earth’s surface, some ofit is reflected back towards space as infrared radiation or heat. Greenhousegases such as carbon dioxide and methane impede this reflection bytrapping heat in the atmosphere. Methane is 23 times more potent thancarbon dioxide in its ability to warm the atmosphere. While these gasesoccur naturally on earth and are emitted into the atmosphere, theexpanded industrialization of the world over the last 150 years hasincreased the amount of emissions from human activity (known asanthropogenic emissions) beyond the level that the earth’s naturalprocesses can handle. Scientists generally agree that these increasedgreenhouse gases are contributing to global warming, which can havedetrimental effects on the climate. In general, the environmental costs offlaring and venting are not borne by the responsible parties because thereare no restrictions on greenhouse gas emissions. However, nations haveproposed international agreements to limit greenhouse gas emissions,including those released during flaring and venting.

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Impact Booster – Methane

Methane is 21 times worse then CO2The United Kingdom Offshore Oil and Gas Industry Association, 2002, “UKOOA Sustainability Strategy 2002 - First Report”, http://www.oilandgasuk.co.uk/templates/sustainability/commitment-detail.cfm/82, Accessed July 19, 2008 CM

Methane emissions are of particular concern to the industry because methane is a significant GHG with 21 times the effect per weight of CO2. However, offshore methane emissions are a minor contributor to anthropogenic emissions accounting for only 6% of UKCS GHG (CO2 equivalent) emissions.

Industry methane emissions are primarily from venting but can also occur from leaks. At the time of this commitment the EU had been looking into European methane emissions (see the OGP web site). The EU concluded that the offshore industry was not a large contributor - the greatest quantities come from agriculture, refuse tips and marsh land - and that most practical measures offshore had already been taken.

Methane is 23 times worse then CO2American Electric Power, June 14, 2007, “AEP to support largest agricultural carbon offset program in U.S.; program will capture and destroy methane from 200 farms”, http://www.aep.com/newsroom/newsreleases/default.asp?dbcommand=displayrelease&ID=1375, Accessed July 19, 2008 CM

Methane from livestock manure accounts for 0.6 percent of total greenhouse gas emissions in the United States. Methane is 23 times more potent than carbon dioxide (CO2) in trapping heat in the atmosphere and is released into the air through common manure-handling practices. Through the methane-capture program, ECC will install covers on manure storage lagoons to capture and flare (burn off) methane, converting it to CO2, a much less-potent greenhouse gas. Capturing and flaring the methane from manure lagoons significantly reduces the greenhouse gases, as well as odors, emitted from livestock farms. It also helps prevent issues with pests, rainfall and dust.

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Impacts – Warming

Gas flaring releases methane, CO2 and other harmful gasses into the CO2Safiya Yakubu, Daily Trust (Abuja) Nigeria, March 10, 2008, “Nigeria: Gas Flaring in the Niger Delta and Its Health Hazards”, http://allafrica.com/stories/200803100319.html, Accessed July 19, 2008

Gas flaring also contributes to ozone depletion and this leads to the exacerbation of the problem of global warming. CFCs or chlorofluorocarbons are the primary cause of ozone depletion. When industrial processes release these chemicals, they rise into the atmosphere and degrade the ozone layer. Gas flaring, not only in the Niger Delta, but also in Nigeria is highly inefficient and releases large amount of methane which has very high global warming potential. Other green house gasses include carbon dioxide etc.

Global warming results in widespread starvation, famine, and regional instability.

Dr. Rajendra K Pachauri, Tata Energy Research Institute, 7-14-2008, The Times of India [Editorial], http://timesofindia.indiatimes.com/Editorial/Stand_Up_And_Deliver/articleshow/3229474.cms

Clearly, limiting emissions will not be possible unless very clear targets are established for the year 2020 that would allow a beginning of reductions by 2015. Not taking early action in reducing GHG emissions would lead to severe impacts of climate change being experienced in different parts of the world.

Unfortunately, the worst consequences of these impacts will be felt by some of the poorest communities and countries, who have had hardly any role in contributing to the evolution of this problem. GHG emissions have come overwhelmingly from the developed countries, but the heaviest price in terms of impacts of climate change is being paid by some of the poorest countries.

To this extent at least the G8 leaders have either proved unaware of or insensitive to the vulnerability of the worst affected societies. There are several examples of the impacts on vulnerable regions and communities. In Africa alone by 2020 about 75 to 250 million people will be affected by water stress resulting from climate change and there is likely to be a 50 per cent decline in agricultural yields in certain countries. This would expose some of these societies to the danger of famine and massive malnutrition. Even today, over 50 countries regularly import food to meet their basic needs. With a decline in agricultural yields, an unprecedented increase in global food prices and oil, there would be very little capacity or economic means available with these nations to be able to stave off large-scale starvation, with the prospect of disruption of peace and security.

***SEE ALSO WARMING GENERIC

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Impacts – Military

Global Climate change will lead to security threats for the US as the military is inhibited in its ability to respond to rapid climate changes.

Richard F. Pittenger & Robert B. Gagosian, Center for Technology and National Security PolicyNational Defense University, October 2003, Defense Horizons. http://permanent.access.gpo.gov/websites/nduedu/www.ndu.edu/inss/DefHor/dh33/dh33.pdf

It does not take a lot of imagination, for example, to envisionhow deleterious changes in the monsoons in South Asia (whichencompasses half the world’s population and several nuclear-armednations) could quickly escalate into security threats for the UnitedStates; or how an abrupt cooling in the North Atlantic region couldlead to consecutive severe winters that tax the energy resources andeconomies of the US and Europe—quickly degrading inhabitants’quality of life and narrowing the choices available to them.Beyond environmental threats that could lead to war, however,abrupt climate changes could pose more specific consequences tothe US military. If they occur in a 3-to-10-year timeframe, the military,without prior planning, could be in a poor position to respond intimely fashion.Given our current state of knowledge, we cannot predict theprobability of any abrupt climate change. But since the possibility isreal, it seems a useful exercise to contemplate the military ramificationsof potential, abrupt climate changes. Many of these stem frompotential changes in the North Atlantic and Arctic Oceans. As previouslynoted, changes within each of these ocean basins may be interrelatedand simultaneous, but let us consider each separately.

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Impacts – Human Rights

Impact: Natural gas flaring violates the right to life and dignity.

Sara C. Aminzadeh, J.D. candidate, University of California, Hastings College of the Law, Winter 2007, A Moral Imperative: The Human Rights Implications of Climate Change, [Lexis/Nexis Academic] - Hastings College of the Law Hastings International and Comparative Law Review .

A recent Nigerian case successfully adopted a human rights approach to address an environmental injustice, though climate change was only a tangential issue. n38 In June 2005, communities from the Niger Delta filed a case in the Federal High Court of Nigeria against Shell, ExxonMobil, ChevronTexaco, the Nigerian National Petroleum Corporation, and the Nigerian government to stop gas flaring. n39 Gas flaring is an environmentally destructive process used [*238] by oil refineries, oil wells, chemical plants, and landfills to burn off and vent unusable waste gas. This case focused on resultant air and water pollution, though Nigeria's practice of gas flaring also causes more GHG emissions than all other sources in sub-Saharan Africa combined. n40

The Niger Delta communities argued that the practice of gas flaring and failure to undergo environmental impact assessments violated Nigerian gas flaring regulations and, significantly, the Delta communities' human rights. n41 The communities specifically cited climate change as a harm caused by the flaring, which was incorporated into the Court's judgment: "The burning of gas by flaring in their n42 community ... contributes to adverse climate change as it emits carbon dioxide and methane which causes warming of the environment. " n43 The Court ordered that gas flaring must stop in the Niger Delta community as it violates guaranteed constitutional rights to life and dignity. n44 The Nigerian case is one of the first where a national court held that climate change, like other environmental issues, may implicate human rights.

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Impacts – Value of Life

Impact: Gas flaring renders those in undeveloped countries as disposable peoples by subjecting them to lower safety standards than those of developed countries.

Koriambanya S.A. Carew, Drake University Drake Journal of Agricultural Law, Summer 2002, [Lexis/Nexis Academic], DAVID AND GOLIATH: GIVING THE INDIGENOUS PEOPLE OF THE NIGER DELTA A SMOOTH PEBBLE--ENVIRONMENTAL LAW, HUMAN RIGHTS AND RE-DEFINING THE VALUE OF LIFE. http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4182951255&format=GNBFI&sort=BOOLEAN&startDocNo=1&resultsUrlKey=29_T4182951259&cisb=22_T4182951258&treeMax=true&treeWidth=0&csi=166248&docNo=3

Another pollution source found in the Niger Delta is gas flaring. Human rights activists and environmental publicists have documented that the constant gas flaring has led to the creation of acid rain and release of greenhouse gases into the atmosphere. n53

According to many activists and residents of the Niger Delta, acid rain has substantially destroyed the plant life and wildlife in the region. n54 The people of the Niger Delta have noticed a change in their habitat, but also report that they suffer from respiratory diseases and are partially deaf from the constant noise from the gas flares . n55 This is in addition to the disproportionate increase in incidents of cancer and other organic diseases linked to the water pollution. n56

In addition to the fact that Shell does not use the same operating standards that it uses in developed nations, Shell has also been resistant to other suggestions that would safeguard the habitat of the Nigeria people. For instance, in 1997, Pensions Investments Research Consultants ("PIRC") announced that the environmental report issued by Shell was inadequate. n57 PIRC then issued a resolution asking that Shell accept independent environmental audits. n58 According to PIRC, independent environmental audits are accepted in the oil industry as best practice. n59 For example, British Petroleum, another oil giant, has an environmental audit conducted by Ernst and Young annually. n60 Shell declined to adopt this recommendation and announced that each of its businesses would decide whether or not to audit. n61 Following this announcement, eleven percent of Shell's shareholders "voted for an overhaul of the oil company's position on environmental issues" and voted to support the PIRC resolution. n62 Shell Nigeria reportedly will be adopting the suggested PIRC policy. n63

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Impacts – Communities

Gas flaring is really bad for communities – laundry listOfeibea Quist-Arcton, a journalist and broadcaster from Ghana who reports for NPR News on issues and developments related to West Africa., July 24, 2007, “Gas Flaring Disrupts Life in Oil-Producing Niger Delta”, http://www.npr.org/templates/story/story.php?storyId=12175714, Accessed July 19, 2008 CM

Every year, millions of dollars are literally going up in smoke in Nigeria, Africa's top crude oil-exporting nation, as companies burn off unwanted natural gas released during oil production.

This flaring and venting produces more greenhouse-gas emissions than any other single source in Africa south of the Sahara, and many who live in Nigeria's oil-producing communities complain of chronic health and environmental problems associated with the gas flares.

Black Clouds over Ebocha

Much of the region where oil is pumped is a maze of winding mangrove creeks and waterways. Leafy, green and humid, Ebocha-Egbema is an unremarkable collection of small villages with tin-roof houses and shops, located in the heart of the Rivers State in Nigeria's turbulent oil-producing Niger Delta.

Huge flames billow in the air over Ebocha, and above them, black clouds leap into the sky. The giant gas flares operated by Agip-Nigeria belch out noxious fumes that loom over homes, farms and shops. There's a strange smell and an audible hiss in the air.

Residents of the Niger Delta region, where Ebocha is located, say gas flaring is ruining lives and livelihoods. Chief Eze Kingsley Okene, a local traditional leader and retired chemist, says Nigeria isn't doing enough to curb the practice.

"Yes, we are living with death, because of [the] oil company," Chief Okene says.While many villagers may not be familiar with the concept of climate change, they complain that the air around them is hotter and foul-smelling because of the gas flares. Chief Okene's wife, Roseline organizes protests against gas flaring, which she says produce poisons that kill crops and make villagers sick.

"If you put water in a basin, you see that the water will change to charcoal — black and slippery," Roseline says. "You cannot wash it out without soap. ... So if [a] human being drinks such water, it will affect a human being."

In the areas close to the gas flares, medical staff report treating patients with all sorts of illnesses that they believe are related to the flames: bronchial, chest, rheumatic and eye problems, among others. Some are referred to Ebocha-Egbema's General Hospital, which is being completely refurbished.

The hospital's senior nursing officer, Anthonia Chioma Ike, is from another part of Nigeria, but after eight years of living and working in the vicinity of the gas flares, she's furious about what's going on.

"I don't feel fine. I feel afraid. I feel that something might happen one day that will cause a disaster in the community … Like fire. Like people around that area always come here complaining that they are having internal heat. ... And they say they don't sleep because of the noise of that place," Chioma says. "From here, you'll be hearing the noise ... As if something is falling from up, from height. They say every time it seems the house and everything will explode."

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2AC – FLARING

1. Lack of infrastructure is the reason for flaring, not low prices.

John Donnelly, Globe Staff, 6-21-2007, The Boston Globe, “Russia top offender in gas flaring emissions,” [Google Scholar]. <<http://www.boston.com/news/world/europe/articles/2007/06/21/russia_top_offender_in_gas_flare_emissions/>>

[MM]

WASHINGTON -- A little-known but major contributor to global warming -- gas flaring at oil wells -- has been measured for the first time using satellite imagery and shows that Russia is burning three times more gas than previous estimates, making it the world's worst offender, according to a new US study.

At many oil drilling sites around the world, producers ignite excess gas, sending huge balls of fire into the sky. Environmentalists and World Bank analysts say the practice -- called gas flaring -- needlessly harms the environment and wastes a lucrative energy source.

When companies drill for oil in underground caverns, their equipment brings to the surface both petroleum and natural gas. Producers burn the gas because they have no infrastructure to use it, or no immediate consumer. In some cases, such as at some of Russia's isolated oil wells, the nearest possible user of natural gas could be more than 1,000 miles away.

The report was completed by scientists at the US National Oceanic & Atmospheric Administration in Colorado using Air Force meteorological satellite images dating to 1995. It reveals that the amount of carbon dioxide emitted from Russia's gas flaring alone equals the combined emissions from all cars and trucks in New York state and New England.

2. Regulation is key to stopping flaring, Kazakhstan proves.

United States Government Accountability Office, Report to the Honorable Jeff Bingaman, Ranking Minority Member, Committee on Energy and Natural Resources, U.S. Senate, July 2004, http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=gao&docid=f:d04809.pdf [MM]

In addition, the government could investigate the public’sperceptions of the risk associated with new infrastructure. For example,some communities have resisted LNG facilities because they are worriedabout the safety and security procedures in place to protect them from anaccidental explosion or a terrorist attack. Finally, the federal governmentcould continue to work with other countries and corporations to reduceflaring and venting. For example, USAID provided much of the funding fortraining regulators in Kazakhstan, where improved regulation has virtuallyeliminated the routine flaring of natural gas. In addition, the United Statescould continue to support the work of the World Bank’s Global Gas FlaringReduction Partnership (GGFR), which recently issued standards on how toachieve reductions in the flaring and venting of gas worldwide.

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INDUSTRIES DA

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A. Natural Gas prices are plunging, they have fallen 20% from their peak price



B. Demand in the transportation sector won’t drop, Natural gas demand from hydrogen cars would directly trade off with lowering oil demand

Philip Hopkins, Logistics Reporter, 5/19/08, The Age First Edition, “Transport Hazy on Cutting Emissions” pg lexis //EM

Mr Wheaton said diesel had fewer emissions than petrol, although there were issues with heavy particulates. Other fuels such as liquefied natural gas or compressed natural gas had lower emissions. BMW had built a prototype hydrogen car. "But the infrastructure is not there. We have to build it," he said. Mr Wheaton said gas-based fuel and new technology could reduce emissions. "The question is what path do we take to that," he said. "Our thinking is not too clear about that . . . 25 years are needed for breakthrough technologies such as telephones and computers." Mr Wheaton said in theory, change in the transport sector could occur quickly, "but not in practice," Cars were produced relatively fast, but trucks, aircraft and ships had much longer lives. Mr Wheaton said reducing emissions by reducing demand was not an option in transport. "Those in logistics do not want to cut (customer) demand," he said.

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C. High natural gas prices destroy the chemical industry, sending the entire manufacturing industry in a downward spiral which destroys the economy

Paul Bjacek, staff writer, 11/6/06, ICIS chemical business America, “Lost Manufacturing” pg lexis //EM

LOST MANUFACTURING or "de-industrialization" is occurring in the US and other developed countries as semifinished and finished goods manufacturing investment shifts to countries with a cost advantage, such as China.US chemical producers, with a total of over $180 billion in assets on US soil, are painfully aware that the country is seeing downstream industrial development impeded by high costs. They must respond strategically, using innovation and customer collaboration.ANALYSIS RESULTSDomestic demand for manufactured goods will outstrip domestic industrial production over the next 10 years and imports will fill the gap, according to an Accenture Research study for the ACC (American Chemistry Council).According to the study, which quantifies the impact of lost downstream manufacturing (of 17 selected industries) on the future chemical industry, domestic production of finished goods (in aggregate) will still increase over the period, but imports will rise faster.This implies that US manufacturers will lose market share and, therefore, chemical manufacturers will lose the demand for chemicals associated with manufacturing these products. The total chemical sales opportunity losses represent just 2.4% of the expected $8 trillion total manufacturing industry sales opportunity losses (or cumulative net trade losses by 2015) caused by lost manufacturing. The estimated cumulative opportunity losses (based on trade losses) for the chemical sector over 10 years consist of $188bn in chemical sales, including $50bn in sales from the top seven thermoplastic resins $40bn in capital expenditures in chemicals, including $5bn for new thermoplastics capacity $30bn in chemical research and development expenditures $43bn in US government tax revenue from chemical companies $3bn in charitable contributions from chemical companies and 157,000 chemical industry-related jobs. The loss of these chemical industry-related jobs by 2015 is a particularly painful blow to the US economy because nearly 50% of chemical industry employees are "knowledge workers" with university degrees and training, whose principal tasks involve the development or application of specialized knowledge in the workplace. The US industrial economy is interdependent, with chemicals accounting for 5% or more of production costs in at least six other major US industries - textiles, the business of chemistry, plastics and rubber products, semiconductor & electronic components, paper products and nonmetallic mineral products. These industries generate nearly $1.2 trillion in total revenue. Declines in output in any one of these corresponds to declines in chemicals potential demand. However, the volume of chemicals decline depends on the amount of chemicals used in a downstream industry, as well as the projected change in production of that same industry. Taking into account both of these factors, chemicals used in the production of plastics and rubber products, petroleum and coal, food, and textile products will be subject to the largest loss of potential demand. Besides relatively higher labor and regulatory costs in the US, high energy prices are contributing to the decline of US industrial production. High, volatile natural gas costs and unreliable supplies affect electricity costs and, in the case of chemicals, raw material costs as well. Volatility also causes uncertainty in production planning and volume expansion. Energy is the largest input factor for most base chemicals, so reliable, low cost energy supplies are critical to ensuring chemical industry competitiveness.

D. <Insert Economy Impact>

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SHELL – INDUSTRIES CAP AND TRADE

A. Natural Gas prices are plunging, they have fallen 20% from their peak price



B. Cap and trade causes major shift from coal to natural gas, spiking prices which crushes chemical agricultural and metal industries.

Gas Market Report, 11/16/07, Inside F.E.R.C.’s Gas Market Report, “Lawmakers Fear Heavy Reliance on Gas Via GHG Bill Could Cripple US Economy”, pg lexis //EM

A top House negotiator on climate change legislation warned Tuesday that any program to cap greenhouse gas emissions must ensure that the US economy doesn't become overly reliant on natural gas. Representative Rick Boucher, chairman of the Energy and Commerce subcommittee charged with drafting a bill to cut emissions tied to global warming through a cap-and-trade program, reiterated a big fear on Capitol Hill: that a precipitous rise in natural gas prices would cripple the economy. "If electric utilities default in large numbers from using coal to using natural gas, gas prices will spike. They will be multiples of what they are today," Boucher said. "That would be very difficult for the 58% of homeowners who heat with natural gas." The chemicals, metals and agriculture sectors, among others, would be broadly dislocated if coal-fired utilities default to cleaner-burning gas, he maintained.

C. Ag Key To Econ

Peter Chalk, analyst for RAND corporation, October 2001, “Terrorism Infrastructure Protection and the U.S. Food and Agriculture Sector, RAND CONGRESSIONAL TESTIMONY, npg.Agriculture and the general food industry remain absolutely critical to the social, economic and, arguably, political stability of the US, indirectly constituting roughly two percent of the country’s overall domestic gross domestic product (GDP). One in eight people work in some component of agriculture – more if food production is included – making the industry one of the US’ largest employers. 1 http://66.102.7.104/search?q=cache:ZrCVxe3WCZ4J:www.rand.org/publications/CT/CT184/CT184.pdf+ %22terrorism,+infrastructure+protection%22+AND+RAND+AND+Chalk&hl=en - 5Cattle and dairy farmers alone earn between US$50 and US$54 billion a year through meat and milk sales, while roughly US$50 billion is raised every year through agricultural exports. The share of produce sold overseas is more Comments made by Noreen Hynes during the International Conference on Emerging Infectious Diseases (ICIED), Atlanta, Georgia, July 16-19 2000. than double that of other US industries, which gives agriculture major importance in terms of the American balance of trade.2 These figures represent only a fraction of the total value of agriculture to the country, as they do not take into account allied services and industries such as suppliers, transporters, distributors and restaurant chains. 3http://66.102.7.104/search?q=cache:ZrCVxe3WCZ4J:www.rand.org/publications/CT/CT184/CT184.pdf+%22terrorism,+infrastructure+protection%22+AND+RAND+AND+Chalk&hl=en - 6The down stream effect of any deliberate act of sabotage/destruction to this highly valuable industry would be enormous, creating a tidal wave effect that would be felt by all these sectors, impacting, ultimately, on the ordinary citizen him/herself.

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SHELL – INDUSTRIES CAP AND TRADE

D. Economic Collapse Would Escalate To Full-Scale Conflict and Rapid Extinction

Thomas Bearden, Lt. Col in US Army,6/24/00, “The Unnecessary Energy Crisis”, Free Republic, p. online //wyo-tjc

History bears out that desperate nations take desperate actions. Prior to the final economic collapse, the stress on nations will have increased the intensity and number of their conflicts, to the point where the arsenals of weapons of mass destruction (WMD) now possessed by some 25 nations, are almost certain to be released. As an example, suppose a starving North Korea launches nuclear weapons upon Japan and South Korea, including U.S. forces there, in a spasmodic suicidal response. Or suppose a desperate China-whose long-range nuclear missiles (some) can reach the United States-attacks Taiwan. In addition to immediate responses, the mutual treaties involved in such scenarios will quickly draw other nations into the conflict, escalating it significantly. Strategic nuclear studies have shown for decades that, under such extreme stress conditions, once a few nukes are launched, adversaries and potential adversaries are then compelled to launch on perception of preparations by one's adversary. The real legacy of the MAD concept is this side of the MAD coin that is almost never discussed. Without effective defense, the only chance a nation has to survive at all is to launch immediate full-bore pre-emptive strikes and try to take out its perceived foes as rapidly and massively as possible. As the studies showed, rapid escalation to full WMD exchange occurs. Today, a great percent of the WMD arsenals that will be unleashed, are already on site within the United States itself. The resulting great Armageddon will destroy civilization as we know it, and perhaps most of the biosphere, at least for many decades.

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Links – Hydrogen Cars

Demand in the transportation sector won’t drop, Natural gas demand from hydrogen cars would directly trade off with lowering oil demand

Philip Hopkins, Logistics Reporter, 5/19/08, The Age First Edition, “Transport Hazy on Cutting Emissions” pg lexis //EM

Mr Wheaton said diesel had fewer emissions than petrol, although there were issues with heavy particulates. Other fuels such as liquefied natural gas or compressed natural gas had lower emissions. BMW had built a prototype hydrogen car. "But the infrastructure is not there. We have to build it," he said. Mr Wheaton said gas-based fuel and new technology could reduce emissions. "The question is what path do we take to that," he said. "Our thinking is not too clear about that . . . 25 years are needed for breakthrough technologies such as telephones and computers." Mr Wheaton said in theory, change in the transport sector could occur quickly, "but not in practice," Cars were produced relatively fast, but trucks, aircraft and ships had much longer lives. Mr Wheaton said reducing emissions by reducing demand was not an option in transport. "Those in logistics do not want to cut (customer) demand," he said.

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Links – Hydrogen Links

Hydrogen cars increase natural gas demand, they use natural gas to replace oil

Jenny Mandel, reporter, 11/15/07, Greenwire, “AUTOS: Honda Shows Fuel Cell Concept Car, Home Filling Station” pg lexis // EM

The refueling stations are more of a hand-wave. Honda says the systems will connect to a home's natural gas supply to generate hydrogen for a car and heat and electricity for a home, but Ra was fuzzy on how it would feed in heat and stressed that the system is still experimental. She said the concept is that the systems could ultimately be purchased like any other appliance to generate a portion of a household's electricity -- about 4 kilowatts -- as well as hydrogen fuel to help bridge the gap before public hydrogen filling stations become ubiquitous.

They say that hydrogen cars increase efficiency, but they do this by trading oil demand for natural gas demand, while overall demand is decreased, natural gas demand is increased, causing a raise in prices

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Links – Cap and Trade

Implementing a cap and trade program would increase natural gas prices

Joseph Chang, staff writer, 3/19/07, ICIS Chemical Business, “Living in a Green World” pg lexis //EM

California, led by governor Arnold Schwarzenegger, has already passed legislation mandating emissions caps on industry for the first time in history. House Speaker Nancy Pelosi (D-Calif.) is asking for a federal bill on emissions caps by July. "This is a big concern, whether it's summary execution at the federal level or death by duck bites at the state level," says Drevna. "I can't say the states are serious when they're considering this - they may just be trying to prod the federal government into taking some action with their particular proposal. It's one thing for California to set up goals, but putting those goals into actual legislative language and regulatory approaches will prove to be much more daunting." Congress must be very careful not to create winners and losers in this debate, something easily achieved with emissions cap and trading proposals, warns NPRA. "Congress has a hard time passing legislation that doesn't create winners and losers, but this one is so critical that every nuance has to be carefully dissected to make sure there's a full understanding as to what the ultimate impacts are - not only on industry-specific sectors such as refining and petrochemicals, but also on the overall economy," says Drevna. Emissions caps would cause natural gas prices to rise, hurting the petrochemical industry, according to NPRA. Utilities, the leading consumer of natural gas, would be further incentivised to use clean burning natural gas rather than coal. "Any time you force fuel switching by any regulation, the impact has been less supply and higher price," Drevna points out. "If you start forcing the obvious choice for those in the system to use more natural gas, prices will rise and there will be demand destruction within certain sectors. Unfortunately, one of those sectors will be the domestic petrochemical industry. That's why we're saying: Don't create winners and losers! Be careful how you do this cap and trade." While utilities will be able to easily pass along higher natural gas prices to consumers through rate increases, the petrochemical industry has no such luxury, NPRA adds. The threat to the US petrochemical industry and further downstream to the overall manufacturing sector, is palpable. However, this has received little attention among policy makers. "One of the things we are trying to get policymakers and opinion leaders to focus on is the fact that if you don't produce the petrochemicals domestically, and if you're not producing the plastic pellets here in the US, there is absolutely no reason to make the products that are derived from those pellets here," Drevna points out. "I don't think anyone has really focused on that. It's the quintessential ripple effect. We're looking at the destruction of the US manufacturing sector." Regardless, it appears there will be significant movement on emissions caps in the 110th Congress. "Anyone intellectually honest about the situation would have to admit that we are fast approaching the day that some sort of legislation will be enacted," says Drevna.

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Links – Cap and Trade

EIA study shows cap and trade program would massively increase natural gas prices, destroying the economy

States News Service, 11/15/07, “News Analysis: Carbon Mandate Would Harm Consumers, Jobs and Economy” pg lexis //EM

In response to a request from Senators George V. Voinovich (R-OH), John Barrasso (R-WY) and James Inhofe (R-OK) sent in mid-September, EIA found that cap-and-trade legislation, without new nuclear power plants and rapid deployment of biomass and clean coal technology, will cause huge increases in electricity and natural gas prices. "The energy supply crisis in the United States is sending jobs to China, destroying our manufacturing communities and forcing consumers to pay even higher energy bills," Sen. Voinovich said. "If we pass cap-and-trade legislation without increasing energy supplies, our country could face an economic catastrophe, and what' left of our good-paying jobs could vanish."

Cap and trade causes major shift from coal to natural gas, spiking prices which crushes chemical agricultural and metal industries.

Gas Market Report, 11/16/07, Inside F.E.R.C.’s Gas Market Report, “Lawmakers Fear Heavy Reliance on Gas Via GHG Bill Could Cripple US Economy”, pg lexis //EM

A top House negotiator on climate change legislation warned Tuesday that any program to cap greenhouse gas emissions must ensure that the US economy doesn't become overly reliant on natural gas. Representative Rick Boucher, chairman of the Energy and Commerce subcommittee charged with drafting a bill to cut emissions tied to global warming through a cap-and-trade program, reiterated a big fear on Capitol Hill: that a precipitous rise in natural gas prices would cripple the economy. "If electric utilities default in large numbers from using coal to using natural gas, gas prices will spike. They will be multiples of what they are today," Boucher said. "That would be very difficult for the 58% of homeowners who heat with natural gas." The chemicals, metals and agriculture sectors, among others, would be broadly dislocated if coal-fired utilities default to cleaner-burning gas, he maintained.

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Link Amplifier – Chemical Industry

Regulations force the chemical industry to cut back, catalyzing an increase in natural gas prices and starting a snowball effect

Alan Lammay, staff writer, 5/5/08, Natural Gas Week, “Chemical Business-Cycle Downturn Could be Bearish for Gas Market” pg lexis //EM

After a decade of economic growth, the US chemical industry is bracing itself for a possible downturn in its business cycle. Worries about a slowdown in the US , skyrocketing natural gas prices, the security of future energy supplies, and the growing burden of regulations in many regions, are all signs that tough times may be ahead. It could also be a bearish catalyst for natural gas prices as the industry begins to decelerate.

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Brink – Chemical Industry

Natural gas price increases have cost 50 billion to chemical industry(Natural Gas Facts (no date given) accessed 7-19-08 “Epanded OCS access is important to the economy” http://www.naturalgasfacts.org/factsheets/ocs.html )

Failure to provide needed access comes at a high cost. Since 2000, natural gas prices have increased 150%. In the past two years, higher energy prices have cut the annual rate of US economic growth by an estimated 0.5% - 1.0%, seriously impacting US industry. Since 2002, chemical manufacturers have lost $50 billion worth of business and 90,000 direct jobs; 36% of the natural gas dependent nitrogen fertilizer industry in the US has been shut down or mothballed since 2000. Worldwide, virtually every other country with offshore resource potential is actively promoting investment in new development. If we continue to reject opportunities to develop the country's rich OCS resources, the US economy will continue to bear an unnecessary cost burden and jobs will be lost.

Chemical industry on the brink, slight recovery from recent slowdown now but volatile natural gas prices are a major threat

Kate Phillips, staff writer, 6/30/08, Chemical Week, “ACC Expects Industry Production to stall and Slow U.S. Economy” pg lexis //EM

Growth in U.S. chemicals has stalled since third-quarter 2007, due to a manufacturing slowdown. "A build-up of downstream customer inventories and subsequent drawdown occurred with adverse effects on chemical industry production, despite rising exports," Swift says. "Downstream inventory destocking, however, appears to be running its course, and recent months have seen some improving activity." Continued recovery in volumes coupled with slow capacity gains pushed overall operating rates to 79.2% last year, Swift says. Capacity utilization will be near 80% by 2010, he says. "A major risk at this point" in the U.S. chemical cycle is volatile natural gas costs as long-term supply-demand imbalances remain, Swift says. "A comprehensive U.S. energy policy ensuring adequate and diverse supply -- including that from Outer Continental Shelf -- would go far in moderating volatility and supporting the competitive position of U.S. industry," he says.

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Internals – Manufacturing

Natural gas price increases are devastating to industry, causes rising product prices

Rick Barret, staff writer, 4/6/06, Knight Ridder/ Tribune Business News, “Industrial Spark” http://www.redorbit.com/news/science/460790/industrial_spark/ //EM

Factories and other industrial operations use about one-third of the natural gas consumed in the United States. Besides being used to heat buildings and run production lines, the fuel is used as a raw ingredient in products such as plastics, fabrics, fertilizers and chemicals. Every $1 increase in natural gas prices adds $3.7 billion in costs for the chemical industry alone, according to the American Chemistry Council. Those costs are eventually reflected in thousands of products. Metal-fabrication industries have felt the sting of high gas prices when using the fuel to run large furnaces that provide heat treatments of steel and stainless steel products such as fasteners, shafts and gears.

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Internals – Chemical Industry

High natural gas prices destroy the chemical industry, sending the entire manufacturing industry in a downward spiral that destroys the economy

Paul Bjacek, staff writer, 11/6/06, ICIS chemical business America, “Lost Manufacturing” pg lexis //EM

LOST MANUFACTURING or "de-industrialization" is occurring in the US and other developed countries as semifinished and finished goods manufacturing investment shifts to countries with a cost advantage, such as China.US chemical producers, with a total of over $180 billion in assets on US soil, are painfully aware that the country is seeing downstream industrial development impeded by high costs. They must respond strategically, using innovation and customer collaboration.ANALYSIS RESULTSDomestic demand for manufactured goods will outstrip domestic industrial production over the next 10 years and imports will fill the gap, according to an Accenture Research study for the ACC (American Chemistry Council).According to the study, which quantifies the impact of lost downstream manufacturing (of 17 selected industries) on the future chemical industry, domestic production of finished goods (in aggregate) will still increase over the period, but imports will rise faster.This implies that US manufacturers will lose market share and, therefore, chemical manufacturers will lose the demand for chemicals associated with manufacturing these products. The total chemical sales opportunity losses represent just 2.4% of the expected $8 trillion total manufacturing industry sales opportunity losses (or cumulative net trade losses by 2015) caused by lost manufacturing. The estimated cumulative opportunity losses (based on trade losses) for the chemical sector over 10 years consist of $188bn in chemical sales, including $50bn in sales from the top seven thermoplastic resins $40bn in capital expenditures in chemicals, including $5bn for new thermoplastics capacity $30bn in chemical research and development expenditures $43bn in US government tax revenue from chemical companies $3bn in charitable contributions from chemical companies and 157,000 chemical industry-related jobs.The loss of these chemical industry-related jobs by 2015 is a particularly painful blow to the US economy because nearly 50% of chemical industry employees are "knowledge workers" with university degrees and training, whose principal tasks involve the development or application of specialized knowledge in the workplace.The US industrial economy is interdependent, with chemicals accounting for 5% or more of production costs in at least six other major US industries - textiles, the business of chemistry, plastics and rubber products, semiconductor & electronic components, paper products and nonmetallic mineral products. These industries generate nearly $1.2 trillion in total revenue. Declines in output in any one of these corresponds to declines in chemicals potential demand. However, the volume of chemicals decline depends on the amount of chemicals used in a downstream industry, as well as the projected change in production of that same industry. Taking into account both of these factors, chemicals used in the production of plastics and rubber products, petroleum and coal, food, and textile products will be subject to the largest loss of potential demand. Besides relatively higher labor and regulatory costs in the US, high energy prices are contributing to the decline of US industrial production. High, volatile natural gas costs and unreliable supplies affect electricity costs and, in the case of chemicals, raw material costs as well. Volatility also causes uncertainty in production planning and volume expansion. Energy is the largest input factor for most base chemicals, so reliable, low cost energy supplies are critical to ensuring chemical industry competitiveness.

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Internals – Chemical Industry

Natural gas is the principal feedstock for the US chemical industry, which is a key job provider and essential to the US economy

ICIS, 11/13/06, Chemical Business America, “Washington News” pg lexis //EM

Chemical Workforce grows by 2%Shipments of US chemical products remain strong and sector employment is at a three-year high, but the onset of winter weather may accelerate prices for gas feedstock, said industry economists.Latest data on rail car loadings of chemical products show increasing cargo volumes in nine of the past 13 months, said the American Chemistry Council (ACC).The US chemicals industry continues to take on new workers, with 2,000 added in October alone, bringing employment in the sector to a three-year high, it said. The chemicals industry workforce, which numbered 897,800 last month, has grown by more than 18,000 jobs, or 2%, since October last year, according to Department of Labor data. Industry economists expressed concern, however, that the early onset of North American winter weather has triggered the first draw-downs against underground stores of natural gas and may soon begin upward pressure on gas pricing. Natural gas is the principal feedstock for the US chemicals manufacturing sector.On the broader economy, the ACC pointed to a continued cooling in many parts, particularly in construction and manufacturing - two crucial downstream consuming sectors for chemicals.In addition, sales of vehicles were reported down 2.3% in September and the Institute for Supply Management manufacturing index declined in October for the fourth consecutive month. On the plus side, personal incomes rose by a better-than-expected 0.5% in September, extending a lengthy run of strong increases and suggesting continuing potential for consumer spending, the principal engine of the US economy.

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Impacts – Chemical Industry key to All Things

Chemical industry key to US economy, preventing disease spread, ensuring food supply and drinking water, stopping fires, manufacturing fighter jets, satellites, space shuttles, and nanotech

Senator James Inhofe, expert on national security issues and chairman of Environmental public works committee, 8/2/06, US Fed News, “Sen. Inhofe Issues Statement On Toxic Substances Control Act, Chemicals Management Program At Epa” pg lexis //EM

The chemical industry is a crucial part of the US economy. The United States is the number one chemical producer in the world, generating $550 billion a year and putting more than 5 million people to work. More than 96% of all manufactured goods are directly touched by chemistry.

Chemicals are the essential building blocks of products that safely and effectively prevent, treat and cure disease; ensure the safest and most abundant food supply in the world; purify our drinking water and put out fires. They are the foundation for life-saving vaccines, child safety seats, bicycle helmets, home insulation, and Kevlar vests. Innovations in chemistry have helped to increase energy efficiency and to make planes, fighter jets, satellites and space shuttles safer and more secure. We are also on the cusp of new and exciting chemical advances in the form of nanotechnology. These tiny chemicals have the potential to cure cancers, clean up pollution, and make cars stronger and lighter than ever before. To say that chemicals are vital is an understatement.

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Impacts – Chemical Industry key to National Defense

Chemical industry key to economy and national defense

Joe Kamalick, staff writer, 9/11/06 ICIS chemical business America, “Chemicals remain a tempting target” pg lexis //EM

FIVE YEARS after the September 11 terrorist attacks - a 21st Century Pearl Harbor - the chemical industry has by all accounts made significant strides in antiterrorism security but remains vulnerable to what some authorities fear will be an inevitable and perhaps devastating attack. Ever since 9/11, chemical production, storage and transit facilities have been seen as potential targets for terrorists, targets where highly toxic compounds are stored or used in large volumes and could cause horrific casualties if ignited or otherwise released into surrounding communities. While the potential for terrorist use of chemical facilities as weapons of mass destruction is widely acknowledged, the question of how to deal with that risk has divided policy-makers, Congress and the industry itself. Underlying the debate in government and within industry is this core question: How can we protect the chemical industry without smothering it? The crucial role that chemical production plays in the US economy and defense profile was brought into sharp relief by last year's double hurricane strikes along the Gulf Coast. ASSESSING THE DAMAGE In assessing the damage done by hurricanes Katrina and Rita, Department of Homeland Security (DHS) assistant secretary Robert Stephan says, "The impact of those storms on the US refining and petrochemical industries made it clear that those industries represent a key element in our national defense production machine."There is no evidence that any chemical facility has been the target of a terrorist plot - at least none that US intelligence officials will admit. Still, the risk seems palpable in the wake of continuing efforts by directed or rogue terrorist groups to strike at vulnerable targets of opportunity overseas, such as the attacks on the Madrid and London subway systems and the more recent UK-based plot to blow up US-bound airliners. "My instinct is that chemical facilities are probably on the short list of vulnerable targets for Al Qaeda," says Lt. Gen.

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Impacts – Chemical Industry key to Economy

Chemical industry is the world’s largest producer with over $15 billion in trade surplus and contributes 21% of GDP to the US economy

Business Wire, 5/31/07, “The US Chemical industry is the world’s largest Producer with a balance of trade surplus in excess of $15 billion” pg lexis //EM

The US Chemical Industry is the world's largest producer by a substantial margin with a balance of trade surplus in excess of $15 billion. It is a major player contributing 21% in GDP to the US economy. This growth has led many theorists to conclude that the industry is a "harvester" rather than an "investor" for future growth.

Chemical Industry key to US econ, multiwarrant

Senator James Inhofe, expert on national security issues and chairman of Environmental public works committee, 4/29/08, Congressional Documents and Publications, “Inhofe Hearing Statement on EPA Toxic Chemicals Policies” pg lexis //EM

Good morning. Today's hearing is to examine the adequacy of the mechanisms for the evaluation and regulation of chemicals by the EPA. The subject is important because the chemical industry is a crucial part of the U.S. economy, and we have to be mindful of what we put at risk if we over-regulate this industry and stifle its 30 year history of innovation. Here are some statistics. The United States is the number one chemical producer in the world, generating $635 billion a year and putting more than 5 million people to work. The U.S. chemical industry paid more than $27.8 billion in federal, state, and local income taxes in 2006. More than 96% of all manufactured goods are directly touched by chemistry.

The chemical industry is central to the economy and is only strengthening

Prime Newswire, 2/7/08, “M&A Volume in the Transportation & Logistics Industry reaches 20-year high, According to PricewaterhouseCoopers” pg lexis //EM

Chemical Compounds, PricewaterhouseCoopers quarterly report on the state of transactions in the global chemicals industry, highlighted a rise in deal value, which more than doubled from $53 billion in 2006 to $109 billion in 2007. This increase was driven by a greater number of deals with transaction values over $1 billion, as well as a slight rise in deal volume which reached 819 deals in 2007. The size of these large deals also increased significantly in 2007 with three deals that were greater than $10 billion and three that were greater than $5 billion (but less than $10 billion), compared to 2006 when only one deal was greater than $10 billion.

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Impacts – Chemical Industry key to Economy

Produced chemicals are an integral part of the US economy

Ed Zwim, staff writer, 6/11/07, ICIS chemical business America, “Survival of the Fittest” pg lexis //EM

MERGER AND acquisition (M&A) activity is making its impact on the North American chemical industry's distribution network. The previously fragmented market by which companies distribute the chemicals needed to run the US economy may soon give way to a more streamlined set of entities, as smaller distributors are swallowed up by larger ones. In the past 10 years, the number of national distributors has decreased from six or seven to three - Univar/CHEMCENTRAL, Ashland and Brenntag, says Chris Jahn, president and CEO of the National Association of Chemical Distributors (NACD), an industry group that he says accounts for 80-90% of industry revenues and has lost 48 members over the past 14 years, due to M&A activity alone. Not surprisingly, large and small companies involved in distribution are putting their best feet forward to operate in this changed environment. The larger ones tout the synergistic opportunities involved in M&A, while small and medium-sized enterprises say they welcome the competition.

Chemical industry is an essential contributor to the US economy

EPA, 4/17/07, Environmental Protection Agency Documents and Publications, “Chemical Industry Expands Work with EPA in Solving Environmental Problems” pg lexis //EM

The chemical industry is an essential contributor to the U.S. economy, with about $555 billion in annual revenues. There are approximately 13,500 chemical manufacturing facilities in the United States, owned by more than 9,000 companies. The sector is one of the nation's largest exporters, accounting for 10 cents of every U.S. export dollar.

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Impacts – Air Power

Air power is key to solve war, asteroid collisions, and natural disasters – the impact is extinction.

Col. John A Warden III USAF (ret.) President of Venturist Inc., 1997, Airpower Confronts an Unstable World, Ed. Hallion, pp 239-240

Earlier in this chapter, we discussed reaction to natural disasters by air operations. Left unaddressed, however, was the possibility of using air power to prevent them. We normally think of natural disasters as being terrestrial in origin and including earthquakes, volcanoes and wind storms. Our current knowledge of the earthquake suggests we are powerless to prevent them. The same may be true of volcanoes although it may be worth a little thought as to whether it might be possible to relieve volcanic pressures pre-emptively with some kind of high - energy -. penetrating weapon. Likewise, there may be something which can be done about tornadoes and hurricanes. Without question, however, air forces have the potential ability, and arguably the responsibility. to prevent extra-terrestrial disasters. The probability that the Earth will be hit by an errant asteroid or comet is close to one; indeed, we recently saw several such bodies hit Jupiter and impose on the Jovian planet damage which on Earth might have destroyed most life. Air forces unequivocally accept responsibility for intercepting airborne attackers; why should they not also be charged with protecting us from extraterrestrial projectiles? The cost, if spread among the world's air forces, would be relatively low and would take advantage of multiple talents and observation positions. Although the world in front of us looks quite peaceful in comparison to the millennia of strife we have suffered, the opportunities for air power are boundless. From ensuring a long period of stability to dealing with the inevitable localised disturbances, air power has the potential to be the most important, and importantly the least expensive, tool available. For it to be, however, airmen must become imaginative and innovative. They must rethink their business and realise that it is not flying aircraft but rather injecting energy into the heart of target systems from a conceptual high ground. Airmen must realise that their only purpose is not to fly and fight-for that is nothing more than a poor excuse for an industrial age input measure-but rather is to affect major change rapidly in a target system. They must realise that the manned aircraft is only a tool that must be discarded when it is no longer the best tool available. And airmen must be willing to engage in open, honest, brutal debate with the advocates of still older military tools who are fighting desperate battles to keep institutions alive . The opportunities for air power are immense-as-are the challenges. If we accept the challenges and overcome them, we will make a maior contribution to world peace and stability. If we refuse to accept the challenges and continue to live in a long-gone world of flying scarves, our relevance will fade rapidly, and with it our best hope for the future

Asteroid Collisions extinguish all life on Earth

Evan R. Seamone, Iowa Law Review, 2002, “When Wishing on a Star Just Won’t Do It: The Legal Basis for International cooperation in the Mitigation of Asteroid Impacts and Similar Transboundary Disasters,” March, pg lexis //dch

Even though collisions with space bodies could potentially extinguish all life on Earth, scientists were slow to appreciate the significance of the threat. Thousands of objects from space descend to our planet's terra firma each year . n44 Space bodies typically disintegrate before entering the Earth's atmosphere, which is protected by a "gaseous shroud" that annually withstands several interplanetary strikes. n45 But some projectiles can be so big and move so fast that the atmosphere cannot absorb their force, at which point damage occurs based on the size and velocity of the impacting object. n46 The destruction of the dinosaurs demonstrates the seriousness of asteroid or comet collision , as opposed to commonplace disasters. n47 Even if [*1102] an impact would not cause the end of life, the resulting damage would be unlike any disaster the modern international community has seen. A serious collision could lead to the eventual "poisoning of the atmosphere through the production of various oxides of nitrogen ... [and to] global fires, pyrotoxin production, giant tsunamis, earthquakes, severe greenhouse warming and acidic rain." n48 Even smaller objects (less than 2/3-mile or one kilometer in diameter) could cause damage equivalent to a nuclear detonation . n49

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Impacts – Air Power

Air power is the single most important aspect of military power, nothing else even comes close.

Col. John A Warden III USAF (ret.) President of Venturist Inc., 1997, Airpower Confronts an Unstable World, Ed. Hallion, pp 239-240

As the 20th Century draws to a close, air power dominates warfare. Those who have air power overwhelm those who don't; those who don't have it spend their energies trying to get it, thwart it or escape it. It is control of the high ground writ large-but unlike the old days when high ground was largely an accident of the situation, in the new world, air power allows the user to move the high ground to wherever it is needed. Air power, when measured in terms of output per dollar or life invested, is the cheapest, most effective method of fighting in human history and the advent of precision makes it even cheaper .

Nuclear War

Zalmay Khalilzad, RAND analyst, Spring 1995, “Losing the Moment,” WASHINGTON QUARTERLY, pg lexis

Under the third option, the United States would seek to retain global leadership and to preclude the rise of a global rival or a return to multipolarity for the indefinite future. On balance, this is the best long-term guiding principle and vision. Such a vision is desirable not as an end in itself, but because a world in which the U nited S tates exercises leadership would have tremendous advantages. First, the global environment would be more open and more receptive to American values -- democracy, free markets, and the rule of law. Second, such a world would have a better chance of dealing cooperatively with the world's major problems, such as nuclear proliferation, threats of regional hegemony by renegade states, and low-level conflicts. Finally, U.S. leadership would help preclude the rise of another hostile global rival, enabling the United States and the world to avoid another global cold or hot war and all the attendant dangers, including a global nuclear exchange. U.S. leadership would therefore be more conducive to global stability than a bipolar or a multipolar balance of power system.

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Impacts – Disease

Disease Spread Risks Extinction

John D. Steinbruner, Senior Fellow Brookings Institute, Winter 98, “Biological Weapons: A Plague Upon All Houses,” FOREIGN POLICY n. 109, pp. 85-96, ASP.

It is a considerable comfort and undoubtedly a key to our survival that, so far, the main lines of defense against this threat have not depended on explicit policies or organized efforts. In the long course of evolution, the human body has developed physical barriers and a biochemical immune system whose sophistication and effectiveness exceed anything we could design or as yet even fully understand. But evolution is a sword that cuts both ways: New diseases emerge, while old diseases mutate and adapt. Throughout history, there have been epidemics during which human immunity has broken down on an epic scale. An infectious agent believed to have been the plague bacterium killed an estimated 20 million people over a four-year period in the fourteenth century, including nearly one-quarter of Western Europe's population at the time. Since its recognized appearance in 1981, some 20 variations of the HIV virus have infected an estimated 29.4 million worldwide, with 1.5 million people currently dying of AIDS each year. Malaria, tuberculosis, and cholera - once thought to be under control - are now making a comeback. As we enter the twenty-first century, changing conditions have enhanced the potential for widespread contagion . The rapid growth rate of the total world population, the unprecedented freedom of movement across international borders, and scientific advances that expand the capability for the deliberate manipulation of pathogens are all cause for worry that the problem might be greater in the future than it has ever been in the past. The threat of infectious pathogens is not just an issue of public health, but a fundamental security problem for the species as a whole.

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Impacts – Food Supply

Food Shortages Lead To World War III

William Calvin, University of Washington, Jan 1998, “The Great Climate Flip-Flop,” ATLANTIC MONTHLY v. 281 n. 1, pp. 47-64.)

The population-crash scenario is surely the most appalling. Plummeting crop yields would cause some powerful countries to try to take over their neighbors or distant lands -- if only because their armies, unpaid and lacking food, would go marauding, both at home and across the borders. The better-organized countries would attempt to use their armies, before they fell apart entirely, to take over countries with significant remaining resources, driving out or starving their inhabitants if not using modern weapons to accomplish the same end: eliminating competitors for the remaining food. This would be a worldwide problem -- and could lead to a Third World War -- but Europe's vulnerability is particularly easy to analyze. The last abrupt cooling, the Younger Dryas, drastically altered Europe's climate as far east as Ukraine. Present-day Europe has more than 650 million people. It has excellent soils, and largely grows its own food. It could no longer do so if it lost the extra warming from the North Atlantic.

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Impacts – Satellites

Satellites key to military readiness and hegemony

Center for Security Policy, 1-23-98, “Summary of 'The Need For American Space Dominance',” Press Release Number 98-P 16at, http://www.centerforsecuritypolicy.org/index.jsp?section=papers&code=98-P_16at

General Edward Meyer: "I [would like to] take you through basically what the warp and woof of the Army is and what their needs are as far as it relates to space....The ability to be able to have position locating systems and so on that rely upon space to provide [the common soldier] with data and information is essential if we are going to have smaller armed forces who are able...to operate over larger areas more effectively. "When we know exactly where we are and exactly where the targets are, then the requirement for ammunition goes down dramatically because you are able to fire one or two rounds, where before you had to fire six or eight rounds in order to fire and be able to attack targets, and this is even with non-'smart' weaponry. "In the special operations area...they have to have the ability...to, one, not only [know] what is going on where they are, but they also have to be able to communicate with a whole lot of joint entities that are flying around in the skies, and that does not permit you to run fiber optics out to them or long-range cable entities. That means that we have to be able to deal like many of the developing countries are today with cellular phone-type data, where the data and information is fed to them from the skies. "For the medical sergeant and the medical NCO, why is he important? Because a soldier is laying out there and because a doctor can talk to him and tell him how to help that young soldier and keep him alive. So that is an important adjunct that we have, and require space assets. "So I argue that of all the services...space will have the biggest impact upon the Army....Space is going to impact on the organizations of the future, and it is going to impact upon the research and development of the future. We will have very different types of armed forces, ones -- or armies -- which are less capable in my judgment, in the long run, which are heavier, more difficult to project than if we have access to space." Admiral Wesley McDonald: "For those people who are still serving in the military and particularly in the Navy, space has grown to be a very, very important aspect of what they do. I can't impress you enough as to how dependent on use of space the Navy is. As Shy used in some of his examples, it is very important for the Army individual, unit, or group, or whatever we are looking at, to know where they are. That is absolutely true for the Navy. "Even though the ocean is very broad, all around the world, you really can't hide unless you have control of what is up there [in space] at times when you really want to assure yourself you can hide. "If we lose the ability to control what is in space -- whether it be satellites, whether it be spacecraft, whether it be other types of intelligence-seeking things [we are in trouble]. And I want to tell you, without intelligence, nobody knows where they are going or what they are going to do and what they are going to see." General "Mike" Loh: "When I look back and look at all of those forces and people that are required to conduct our combat military missions, Air Force as well as Army, Navy, Marine Corps, how very dependent they have become, just in the past few years, how very dependent they have all become on space assets. It is almost frightening when you then turn that around and look at how little we have allowed for the protection and the space superiority of those assets. "Let me cover five functions for which today we are almost totally dependent on space assets. The first is communications....If the DSCS satellites or the MILSTAR satellites went out of commission, even some of them, we'd be devastated. We depend on space communications to knit together a theater battle management system, a command-and-control system that all of the services will use. It is dependent on space. We have cut the Gordian Knot. There is no more belt-and- suspenders. "The warning function is taking on more and more missions. It used to be the mission of detecting ballistic missile attack against the United States....The warning function that we have relied on for theater applications, on other means, is now being done to a very large extent through space assets. "The next two, we have just absolutely become totally dependent on, and that is navigation and weapons delivery....We are dependent on navigation, on knowing where we are and where everything is on the Global Positioning Satellite (GPS) system. [And] we have now become dependent on that system for weapons delivery. Every system that I am aware of that is in development by the services today for precision weapons delivery is based on GPS.

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Impacts – Hegemony

Nuclear War

Zalmay Khalilzad, RAND analyst, Spring 1995, “Losing the Moment,” WASHINGTON QUARTERLY, pg lexis

Under the third option, the United States would seek to retain global leadership and to preclude the rise of a global rival or a return to multipolarity for the indefinite future. On balance, this is the best long-term guiding principle and vision. Such a vision is desirable not as an end in itself, but because a world in which the U nited S tates exercises leadership would have tremendous advantages. First, the global environment would be more open and more receptive to American values -- democracy, free markets, and the rule of law. Second, such a world would have a better chance of dealing cooperatively with the world's major problems, such as nuclear proliferation, threats of regional hegemony by renegade states, and low-level conflicts. Finally, U.S. leadership would help preclude the rise of another hostile global rival, enabling the United States and the world to avoid another global cold or hot war and all the attendant dangers, including a global nuclear exchange. U.S. leadership would therefore be more conducive to global stability than a bipolar or a multipolar balance of power system.

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Impacts – Terrorism

Terrorism ensures extinction

Yonah Alexander, professor and Director, inter-University Center for Terrorism, Spring 2000, “Terrorism in the Twenty-First Century: Threats and Responses,” DEPAUL BUSINESS LAW JOURNAL v. 12, p. 66-67.)

More specifically, present-day terrorists have introduced into contemporary life a new scale of terror violence in terms of both threats and responses that has made clear that we have entered into an Age of Terrorism with all of its serious implications to national, regional, and global security concerns. n25 Perhaps the most significant dangers that evolve from modern day terrorism are those relating to the safety, welfare, and rights of ordinary people; the stability of the state system; the health of economic [*67] development; the expansion of democracy; and possibly the survival of civilization itself.

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Impacts – Nanotech

Halting nanotech innovation causes disease spread, famine, economic crises, and nuke wars

Treder, Executive Director of the non-profit Center for Responsible Nanotechnology. Future Brief, 06, “From Heaven to Doomsday: Seven Future Scenarios,” http://ieet.org/index.php/IEET/articles/treder20060218/

In this scenario, reactionary critics of scientific progress, from supporters of "creationism" to radical environmental protection groups, and from neo-Luddites to educated technophobes (such as Francis Fukuyama and Leon Kass), are successful in essentially halting development. The result is a monumental increase in world misery. Research scientists, technology entrepreneurs, open-minded academics and political progressives are persecuted and stymied in most countries, including the U.S.; they are systematically silenced, jailed, or exterminated in other places. Advancements in artificial intelligence, genetic engineering, space exploration, robotics, and nanotechnology come to a halt. Moore’s Law is finally overturned. Famine, pestilence, disease, and starvation at levels never seen before devastate much of the world. As millions suffer horrible wasting deaths, billions more are born into inescapable poverty and squalor. Chronic worldwide economic crises result in massive political instability that leads to civil wars, regional wars, and ultimately nuclear wars. At the close of the 21st century, world conditions have returned to a state more like the 19th century. It is the second Dark Ages.

[you can read an econ, disease, heg or food supply impact]

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NANOTECH LEADS TO UTOPIA AND TURNS ALL YOUR IMPACTS

Bill Joy, April 2k. Cofounder, chief scientist of SunMicrosystems. “Why the future doesn’t need us” WiredMagazine. http://www.wired.com/wired/archive/8.04/joy.html

The many wonders of nanotechnology were first imagined bythe Nobel-laureate physicist Richard Feynman in a speechhe gave in 1959, subsequently published under thetitle "There's Plenty of Room at the Bottom." The bookthat made a big impression on me, in the mid-'80s, wasEric Drexler's Engines of Creation, in which he describedbeautifully how manipulation of matter at the atomic levelcould create a utopian future of abundance, where justabout everything could be made cheaply, and almost anyimaginable disease or physical problem could be solvedusing nanotechnology and artificial intelligences.A subsequent book, Unbounding the Future: TheNanotechnology Revolution, which Drexler cowrote, imaginessome of the changes that might take place in a world wherewe had molecular-level "assemblers." Assemblers could makepossible incredibly low-cost solar power, cures for cancerand the common cold by augmentation of the human immunesystem, essentially complete cleanup of the environment,incredibly inexpensive pocket supercomputers - in fact,any product would be manufacturable by assemblers at acost no greater than that of wood - spaceflight moreaccessible than transoceanic travel today, and restorationof extinct species.

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Turns case: nanotech innovation corporations to decouple from the environment, enabling non-ecologically destructive production

Martin W. Lewis, Assistant professor in the Department of Geography and Regional Science George Washington University, 1992, Green Delusions: An Environmentalist Critique of Radical Environmentalism, Durham: Duke University Press, 16-7//uwyo-ajl

The Promethean perspective adopted here advocates a form of environmental protection that green extremists would consider utterly heretical. Where they seek to reconnect humanity with nature, I counter that human society should strive to separate itself as much as possible from the natural world , a notion that has aptly been labeled "decoupling" by the geographer Simmons (1989:3841. To advocate decoupling is to reject both the instrumentalist claim-that nature should be used merely for human ends-and the green counterargument-that humanity is, or should be, just another species in nature.Decoupling processes have already averted ecological devastation many times. European forests, for example, avoided destruction when early modern smelters substituted coal for charcoal (see Perlin 1989).This process should continue as composites replace steel and as coal begins to yield to solar power-with nature breathing easier everywhere as a result. But one must wonder whether self-proclaimed deep ecologists affirming their communion with nature through shamanistic rituals will supply the world with solar technologies. I suspect rather that such delivery will come, if at all, from high-tech corporations-from firms operating in a social, economic, and technical milieu almost wholly removed from the intricate webs of the natural world.If we are lucky, the commercialization of photovoltaic solar energy will come in good part from struggling American start-ups like Chronar.It now seems far more likely, however, that this technology will be dominated by such vast industrial concerns as Hitachi, Sanyo, and Fujitsu (The Economist, 19-25 May 1990). The engineers, investors, and managers of a company like Chronar should be hailed and supported as Enivronmentla heroes, not denounced as technocratic and capitalist eco-villains. We will be better able to appreciate the vital roles that such companies plaY if we accept that ecological salvation will come through distancing ourselves from, rather than reimmersing ourselves in, the natural world.To move from heresy to blasphemy, I would also suggest that as toxic waste decomposition technologies and recycling techniques are perfected, the use of synthetic materials will entail far less environmental destruction than will the continued production of natural products like paper, wood, and cotton. The future may yet be in plastics. Let us hope that companies like Du Pont can create artificial fibers sophisticated enough that we no longer need to deplete the earth's aquifers, clear its tropical forests, drain its wetlands, and pour massive quantities of biocides on all of these environments in order to grow the cotton that affluent American consumers consider so wonderfully "natural." The greatest hope for virtually complete decoupling may lie in the socalled nanotechnology revolution (Drexler 1986; Drexler and Peterson 1991). If its proponents are correct, the nano techniques of molecular assembly will allow us to build superior goods using only a small fraction of the energy and materials now required. Indeed, Drexler goes so far as to argue that by mining surplus atmospheric carbon dioxide we will be able to provide most of the raw materials needed for the next economy.Moreover, not only would a nanotech economy spare the natural world of any noxious pollutants, but it would also allow a truly massive return of land to natural communities. Although the layperson may regard nanotechnology as utter fantasy, it is based on firm scientific reasoning, and it has been taken seriously by at least one prominent environmental phi'losopher (Milbrath 1989).

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Impacts – Agriculture

Ag Key To Econ

Peter Chalk, analyst for RAND corporation, October 2001, “Terrorism Infrastructure Protection and the U.S. Food and Agriculture Sector, RAND CONGRESSIONAL TESTIMONY, npg.

Agriculture and the general food industry remain absolutely critical to the social, economic and, arguably, political stability of the US, indirectly constituting roughly two percent of the country’s overall domestic gross domestic product (GDP). One in eight people work in some component of agriculture – more if food production is included – making the industry one of the US’ largest employers. 1 http://66.102.7.104/search? q=cache:ZrCVxe3WCZ4J:www.rand.org/publications/CT/CT184/CT184.pdf+%22terrorism,+infrastructure+protection%22+AND+RAND+AND+Chalk&hl=en - 5Cattle and dairy farmers alone earn between US$50 and US$54 billion a year through meat and milk sales, while roughly US$50 billion is raised every year through agricultural exports. The share of produce sold overseas is more Comments made by Noreen Hynes during the International Conference on Emerging Infectious Diseases (ICIED), Atlanta, Georgia, July 16-19 2000. than double that of other US industries, which gives agriculture major importance in terms of the American balance of trade.2 These figures represent only a fraction of the total value of agriculture to the country, as they do not take into account allied services and industries such as suppliers, transporters, distributors and restaurant chains. 3http://66.102.7.104/search?q=cache:ZrCVxe3WCZ4J:www.rand.org/publications/CT/CT184/CT184.pdf+%22terrorism,+infrastructure+protection%22+AND+RAND+AND+Chalk&hl=en - 6The down stream effect of any deliberate act of sabotage/destruction to this highly valuable industry would be enormous, creating a tidal wave effect that would be felt by all these sectors, impacting, ultimately, on the ordinary citizen him/herself.

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Impacts – Manufacturing

Increasing natural gas prices will collapse the entire US manufacturing industry

Joseph Chang, staff writer, 3/19/07, ICIS Chemical Business, “Living in a Green World” pg lexis //EM

California, led by governor Arnold Schwarzenegger, has already passed legislation mandating emissions caps on industry for the first time in history. House Speaker Nancy Pelosi (D-Calif.) is asking for a federal bill on emissions caps by July. "This is a big concern, whether it's summary execution at the federal level or death by duck bites at the state level," says Drevna. "I can't say the states are serious when they're considering this - they may just be trying to prod the federal government into taking some action with their particular proposal. It's one thing for California to set up goals, but putting those goals into actual legislative language and regulatory approaches will prove to be much more daunting." Congress must be very careful not to create winners and losers in this debate, something easily achieved with emissions cap and trading proposals, warns NPRA. "Congress has a hard time passing legislation that doesn't create winners and losers, but this one is so critical that every nuance has to be carefully dissected to make sure there's a full understanding as to what the ultimate impacts are - not only on industry-specific sectors such as refining and petrochemicals, but also on the overall economy," says Drevna. Emissions caps would cause natural gas prices to rise, hurting the petrochemical industry, according to NPRA. Utilities, the leading consumer of natural gas, would be further incentivised to use clean burning natural gas rather than coal. "Any time you force fuel switching by any regulation, the impact has been less supply and higher price," Drevna points out. "If you start forcing the obvious choice for those in the system to use more natural gas, prices will rise and there will be demand destruction within certain sectors. Unfortunately, one of those sectors will be the domestic petrochemical industry. That's why we're saying: Don't create winners and losers! Be careful how you do this cap and trade." While utilities will be able to easily pass along higher natural gas prices to consumers through rate increases, the petrochemical industry has no such luxury, NPRA adds. The threat to the US petrochemical industry and further downstream to the overall manufacturing sector, is palpable. However, this has received little attention among policy makers. "One of the things we are trying to get policymakers and opinion leaders to focus on is the fact that if you don't produce the petrochemicals domestically, and if you're not producing the plastic pellets here in the US, there is absolutely no reason to make the products that are derived from those pellets here," Drevna points out. "I don't think anyone has really focused on that. It's the quintessential ripple effect. We're looking at the destruction of the US manufacturing sector." Regardless, it appears there will be significant movement on emissions caps in the 110th Congress. "Anyone intellectually honest about the situation would have to admit that we are fast approaching the day that some sort of legislation will be enacted," says Drevna.

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Impacts – Steel

Steel industry collapse inhibits building new nuclear power plants

Rep. Fred Upton, R-Mich, 5/22/08, CQ transcripts “Republican Members of the House of Representatives Hold a News Conference on Legislative Energy Proposals” pg lexis //EM

Today, as we look at new nuclear plant construction, when it occurs -- and there are a couple of applications that are pending before the NRC -- 85 percent of the components are going to come from overseas, not here.

So we want to send the word to our steelworkers, our pipefitters, our steamfitters, whether they be in Pittsburgh or Gary, Indiana, and other places that were always mighty in terms of the steel industry that in fact that green light's going to be back on and we're going to get back to business with American made engineers and producers that can in fact expand our nuclear capability.

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Turns Case

Turn: Chemical industry key to efficient cars and all forms of renewable energy that an RPS would rely on

Senator James Inhofe, expert on national security issues and chairman of Environmental public works committee, 4/29/08, Congressional Documents and Publications, “Inhofe Hearing Statement on EPA Toxic Chemicals Policies” pg lexis //EM

But it is about more than money. Chemicals are the essential building blocks of products that safely and effectively prevent, treat, and cure disease; ensure the safest and most abundant food supply in the world; purify our drinking water and put out fires. They are the foundation for life-saving medical devices, such as sutures, internal tubing, and scalpels. Innovations in chemistry have made planes, fighter jets, and space shuttles safer and more secure. Plastics are used to make lighter, yet stronger, cars, and silica is an ingredient in low-rolling resistance tires, all of which increases automobile fuel efficiency. Alternative sources of energy, on which cap-and-trade proponents are relying, are dependent on chemicals. Wind power blades contain polyester and resin additives, and solar power relies on silicon-based materials. Finally, chemicals keep our children and our men and women in uniform safe by increasing the effectiveness of child safety seats, bicycle helmets, and Kevlar vests. I could go on and on.

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INDUSTRIES AFF

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2AC – Industries

1. Forecasts for future increases in natural gas prices should be doubled or tripled

Global Power Report, 5/17/07, “Congress is under estimating carbon costs by low balling gas forecast, say consultants, pg lexis //EM

Energy-intensive industries said this week that Congress is under estimating the cost of a nationwide carbon cap-and-trade program because government forecasts have unrealistic assumptions for future natural gas prices. Current forecasts by the Energy Information Administration and others that long-term gas prices will stabilize at roughly $4.50/MMBtu should assume prices two or three times that figure for two reasons, officials with Industrial Energy Consumers of America told reporters at a briefing. IECA Executive Director Paul Cicio and Andy Weismann, a consultant to the trade group, said most forecasts today under estimate how quickly additional natural gas supplies can be expected from the proposed Alaska natural gas pipeline and new liquefied natural gas terminals. Cicio made his comments as IECA and other trade groups are ramping up a lobbying campaign aimed at getting Congress to lift government barriers to more LNG terminals and expanded domestic gas drilling, he said. Weismann said he does not see the natural gas pipeline project, which would deliver 5 Bcf of natural gas into the Lower-48 states each day, coming online before 2015. That is five years or more beyond what the EIA projects. If there are delays in permitting or funding the project, "that's a 5 Bcf/day hole in US supply, and I don't know how you fill that easily," Weismann said. He also said the projected $25 billion capital cost of the projects could actually be as high as $40 billion because the cost of raw materials such as concrete and steel have risen substantially in light of the construction boom in China and India. "One could easily argue that natural gas price forecasts should be two to three times as high as they are now," Weismann said. Natural gas prices will continue to rise this winter, multiple warrants CNN, 7/3/08, “Avista warns of continued natural gas price hikes”, CNN money http://money.cnn.com/news/newsfeeds/articles/apwire/919e35e0554e2f663d1af503d11a7862.htm#TOP //EM NEW YORK (Associated Press) - Normally, natural gas prices are low in the summer months and utilities stock up for sale in the winter. This year, though, a spike in energy prices is also hitting natural gas, which likely means higher prices for consumers this winter, Avista Corp. warned Wednesday. Kevin Christie, Avista's director of gas supply, said prices rose from an average of $7.39 per dekatherm in June 2007 to $12.81 per dekatherm last month, a 73 percent increase. A typical home in the utility's service areas in Eastern Washington, northern Idaho and Oregon uses about seven dekatherms a month. "The combination of an unusually long winter and cold spring created higher demand for natural gas, which depleted storage reserves across the country," Christie said in a release. High prices for crude oil, plus lower natural gas imports into the United States, are also pushing prices up, Christie said. The lack of lower spring and summer prices means natural gas rates for customers will likely increase when Avista files its annual "purchase gas cost adjustments" in September, although the amount of the increase remains undetermined, Christie said.

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2AC – Industries

2. Despite natural gas price drop, the commodity’s boom isn’t over yet. This is only a short term correction

Stevenson Jacobs, AP Business Writer, 7/17/08, Associated Press Financial Wire, “Commodities Drop for 3rd day as Oil Keeps Falling” pg lexis //EM

Commodities turned lower for a third day Thursday, as steep drops in crude oil and natural gas prices fed beliefs that high energy costs are curbing Americans' fuel consumption and at least temporarily cooling the commodities boom. Crude oil had another day of sharp losses, falling more than $5 a barrel after a big sell-off of natural gas. Oil also fell more than $10 in the previous two sessions. The drop in energy helped send soybeans, silver, corn and other commodities sharply lower. "We're seeing some worries about demand destruction in oil, so I think that's creating some fear among investors and leading them to sell," said Tom Pawlicki, commodities analyst with MF Global Research in Chicago. Worries about the health of the American economy has weighed heavily on commodities this week. Investors are concerned that rising inflation and weak economic growth will slow consumer spending and curb demand for raw materials in the U.S. and overseas. Despite the sharp drop in futures prices in recent days, few analysts predict an end to the white-hot commodities boom of the last year. Pawlicki called this week's sell-off a "short-term correction" and predicted prices would turn higher in coming days and months as investors who have been bearish on stocks shift funds back into commodities. "I think it's too early to call a top to this market," Pawlicki said. The drop in crude prices weighed on agriculture futures Thursday, with corn, wheat and soybeans all dropping sharply. Also pressuring prices was more favorable growing weather in the Midwest and a vote by Argentina's Senate to block a hotly disputed grains-export tax that had prompted weeks of farming strikes and food shortages. Soybeans for November delivery fell 50.5 cents to $14.975 a bushel on the Chicago Board of Trade, after earlier falling to $14.90 a bushel. Corn for December delivery lost 28.75 cents to $6.485 a bushel, while September wheat dropped 24.5 cents to $8.095 a bushel. In energy markets, crude oil fell sharply Thursday, sent lower following the biggest one-day drop in natural gas prices in nearly a year. Light, sweet crude for August delivery fell $5.31 to settle at $129.29 a barrel on the New York Mercantile Exchange. Prices have fallen about $15 in the past three days. Natural gas futures for August delivery fell as much as 8.2 percent in the day, the biggest one-day drop in nearly a year. Natural gas fell 13.8 percent on Aug. 20, 2007, according to Nathan Golz, researcher at Wachovia Securities in St. Louis.

3. Chemical industry moving to renewables in status quo

M2 Equity Bytes, 6/20/08, “Rentech and UOP enter into an alliance to deploy clean fuels and chemical technologies” pg lexis //EM

Rentech Inc(AMEX:RTK), a provider of clean energy solutions, announced on Thursday (19 June) that the company has entered into a non-exclusive agreement with UOP LLC, a Honeywell (NYSE:HON) company, for the deployment of clean fuels and chemical technologies. Under the alliance, both the companies will use their respective technologies for the commercial production of synthetic fuels, specialty waxes and chemicals. The companies said that the agreement aligns Rentech's proprietary process to convert synthesis gas from biomass and fossil resources into hydrocarbons with UOP's hydrocracking and hydrotreating technologies that process and upgrade hydrocarbons into ultra-clean synthetic fuels, specialty waxes and chemicals. Rentech and UOP expect to increase their market reach and jointly offer proven technologies that can produce ultra-clean synthetic fuels, specialty waxes and chemicals that are cleaner than traditional petroleum-derived fuels and chemicals.

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2AC – Industries

4. Breakthrough in solar power ensures renewable supply for Chemical industry

Business Wire, 7/7/08, “Record-High Petroleum Prices a Boon to BioSolar; Company’s Cost-Saving Bio-Based Materials for Photovoltaic Solar Modules Poised to Decrease Industry’s oil dependence”

A recent article in PlasticsNews underscores how manufacturers are impacted by price increases of commodity chemicals, as well as "almost unprecedented" run-ups in energy and raw materials costs. The June 22, 2008 article notes that companies are impacted not only by rising raw materials costs, but the associated electricity and transportation costs as well. Kevin Swift, chief economist at the American Chemistry Council, says, "Each $1 increase in the price of a barrel of crude oil costs the chemical industry $660 million annually ...For a $1 increase in 1 million BTUs of natural gas, it's $3.3 billion in new costs.""The market for solar power is already in explosive growth mode, and photovoltaic technology has progressed markedly in recent years with advances making the cells more efficient, lighter and less expensive. But BioSolar is singularly positioned to lead the development of truly sustainable and cost-effective solar technology as the first company to introduce a new dimension of cost reduction by replacing petroleum-based plastic solar cell module components with durable non-food, bio-based materials," said Lee. BioSolar is in the process of transitioning into full-scale production of its BioBacksheet(TM) in a 60,000-square-foot state-of-the-art facility operated by its contract manufacturing partner, Rowland Technologies, Inc. By incorporating Rowland Technologies' world-class manufacturing capabilities with BioSolar's unique material engineering, BioSolar is producing an environmentally-friendly product with characteristics that exceed the thermal index requirements of solar module manufacturers. "We expect this breakthrough product to be rapidly accepted as the standard for the backsheet component of both traditional and certain thin-film photovoltaic modules," said Lee.

5. Economic decline inevitable, no unique impact

Xinhua News Service, 7/15/08, World News Economic, “Bernanke says U.S. Economy continues to Face Numerous Difficulties” pg lexis //EM

The U.S. economy continues to face "numerous difficulties," include persistent strains in financial markets, declining house prices and rising prices of oil and food, Federal Reserve Chairman Ben Bernanke said on Tuesday. "The U.S. economy and financial system have confronted some significant challenges thus far in 2008," said Bernanke in a written testimony to the Senate Banking Committee. "The effects of the housing contraction and of the financial headwinds on spending and economic activity have been compounded by rapid increases in the prices of energy and other commodities, which have sapped household purchasing power even as they have boosted inflation," he said.

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RANDOMNESS

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Natural Gas Peak

A. The natural gas supply is not increasing

(Simons, Matthew. 5-23-05, “Depletion and US energy policy” http://64.233.167.104/search?q=cache:XNyPdp7UgBYJ:www.hubbertpeak.com/aspo/iwood/simmons_depletion.pdf+Matthew+Simons+%22Depletion+and+US+Energy+policy%22+uppsala&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a)

Why was their concern for natural gas so high? It stemmed from the simple fact thatPresident Bush and Vice President Cheney were both staggered to watch a drillingboom for natural gas occur as gas prices spiraled from $3 to over $10 per mcf and tothen see that this unprecedented drilling boom merely kept the daily supply of naturalgas flat. Despite the fact that gas well completions grew from 10,000 wells completed in1999 to over 22,000 wells completed in 2001, daily supply did not grow. It stayed as flatas it had been for the previous seven years.

B. Without alternatives, natural gas peak collapses the economy

(Simons, Matthew. 5-23-05, “Depletion and US energy policy” http://64.233.167.104/search?q=cache:XNyPdp7UgBYJ:www.hubbertpeak.com/aspo/iwood/simmons_depletion.pdf+Matthew+Simons+%22Depletion+and+US+Energy+policy%22+uppsala&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a)How this shapes America’s future and the unforeseen consequences of natural gas supply collapsing will be a watershed event in U.S. history. If the U.S. cannot grow its electricity demand through a lack of ample natural gas, it is hard to see how our economy can grow. If the U.S. economy is curtailed because of a scarcity of energy growth, this puts some severe pressure on many other economies of the world too.

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Natural Gas Peak

Natural gas will deplete by 2025 anyways.

Saud Mohammad Al-Fattah, PhD degree from Texas A&M University, Texas & Reservoir Management & Well Testing Systems Group at Saudi Aramco, 4-27-2006, Petroleum Management and Economics. “Time Series Modeling for U.S. Natural Gas Forecasting,” [Google Scholar]. <<http://petroleumjournalsonline.com/journals/index.php/economics/article/view/20>>

Faced with diminishing supplies of domestic crude oil and increased demand for energy, the US has come to rely on imported crude and domestic supplies of natural gas. During the last decade US natural gas production has risen about 10%, but it still does not succeed to meet demand. This supply shortage has resulted in significant increases in natural gas prices. We believe that developing a reliable method to forecast US natural gas production rates and reserves will benefit gas producers, consumers and policy makers.This paper presents one methodology for developing forecasting models for predicting U.S. natural gas production, proved reserves, and annual depletion to year 2025 using a stochastic (time series) modeling approach. The methodology is not mechanistic. A mechanistic model would examine individual geologic settings, exploration success, the physics of gas production, and the rate of exploitation for provinces, basins, and reservoirs. However, to do so would result in an extraordinarily massive model that would be difficult, if not impossible, to develop and use. Instead we used a simpler approach which takes advantage of established trends in easily obtained published data.

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Natural Gas Price Spikes

Global demand for natural gas is growing past capacity as economies develop and the world starts to protect the environment – supply crunch is coming


World energy demand is rising. Without major energy policy changes, the IEA World Energy Outlook 2007 predicts well over a 50% higher global energy demand by 2030. This demand growth will be accelerated by the fast growing economies of China and India and other emerging economies. Based on existing energy policies, China and India will account for 45 % of this energy demand increase. Such global growth in energy demand can come from two sources: • The world population will increase on average by 1% per year over the next 22 years. This adds a city larger than Amsterdam every week to the world’s population. As OECD countries now use over three times more energy per capita than the rest of the world, and because population will mainly grow outside the OECD countries, it can be roughly estimated that a third of the projected increase in world energy demand by 2030 will be caused by global population growth. • Despite the trend towards a decoupling of energy demand from GDP growth, GDP remains the main driver for this increase in global energy demand. The legitimate aspiration of the population in the emerging markets –as it is in the OECD countries– is aimed at maximising living standards. By 2030, increased living standards are expected to contribute two-thirds of the increase in total energy demand. Without substantial changes in energy policies, the forecasted world energy demand by 2030 can only be covered with increased hydrocarbon use to avoid major future imbalances. Under these conditions, the switch to low carbon energy systems to combat climate change represents a potentially conflicting objective with that of fulfilling the energy needs of a more prosperous and growing world population. IEA warns that, without changes in the energy policies of the consuming regions, by 2015 a supply crunch might be expected.

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Natural Gas Price Spikes

A decrease in natural gas demand is good – supply crunch now


But the key question is: will there be enough new liquefaction capacity coming down the pipeline to justify all these new plants? The answer is, for the time being at least, no. The major exporting region is the Middle East. Some additional developments can be observed with the booming building efforts taking place in Qatar. However, Qatar is no longer taking on new commitments and, being currently congested with present LNG projects and other activities, has even announced a cooling off period,. Simply put, no spare LNG production capacity is currently available.There is also a global shortage of experienced workforce and engineering capacity. The prices of nickel and other input materials have been rising steeply, increasing the break-even cost of LNG shipped gas, making pipelined gas more competitive at distances even beyond 3,000 km. Nigeria, Yemen, Oman, Iran, Trinidad and Tobago, Indonesia, Malaysia, Algeria, Russia, Norway and Australia are the principal future producers of LNG, but all have some sort of reservations, or even real constraints, standing in the way of their developing, in the short term, the considerably larger quantities of LNG necessary to meet all of the potential demand of wholesalers seeking alternative supplies.

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Gas Markets Risky

The natural gas market is incredibly risky and unpredictable for both consumers and producers


On the other hand, some producing countries are questioning what they call the ‘security of demand’. How certain will the demand be in consumer markets? Will it be strong enough to be able to make reasonable decisions on the levels of long-term natural gas investments? This perspective is heard, in particular, from the Russians and the Algerians, who also claim that regulatory interventions in the market dampen their enthusiasm for new large-scale investments. Some potential interventions, possibly stemming from the growing EU opposition to foreign investors with trading interests in the EU infrastructure, are seen as downright hostile by such producers. Under these conditions, can consumers be confident in their reliance on such suppliers to make the necessary investments in long-term gas exploitation, particularly in the gas-to-power sector? As a result, is natural gas supply really so reliable that it can contribute to an easing of supply security anxieties and to combatting climate change?

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Energy Regulation Bad

USFG needs to step away from energy regulation – hurts the LNG market.

Daniel Yergin, Chair of Cambridge Energy Research Associates, 3-06, “Ensuring Energy Security”, Foreign Affairs, EBSCO, [Crystal Xia]

Markets need to be recognized as a source of security in themselves. The energy security system was created when energy prices were regulated in the United States, energy trading was only just beginning, and futures markets were several years away. Today, large, flexible, and well-functioning energy markets provide security by absorbing shocks and allowing supply and demand to respond more quickly and with greater ingenuity than a controlled system could. Such markets will guarantee security for the growing LNG market and thereby boost the confidence of the countries that import it. Thus, governments must resist the temptation to bow to political pressure and micromanage markets. Intervention and controls, however well meaning, can backfire, slowing and even preventing the movement of supplies to respond to disruptions. At least in the United States, any price spike or disruption evokes the memory of the infamous gas lines of the 1970s--even for those who were only toddlers then (and perhaps even for those not yet born at the time). Yet those lines were to a considerable degree self-inflicted--the consequence of price controls and a heavy-handed allocation system that sent gasoline where it was not needed and denied its being sent where it was.

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AT: Wind Can Act as Hedge

Wind cannot act as a hedge against natural gas – not stable enough.David Berry, member of the Energy Project, 11-21-03, “Renewable energy as a natural gas price hedge: the case of wind”, Energy Policy 33, ScienceDirect [Crystal Xia]

A hedge is a mechanism to reduce the risk of paying high prices for natural gas in the future. However, wind is not a perfect substitute for gas-fired energy. Wind does not blow on demand and is available only intermittently. Thus, wind energy can only be used when it is available and cannot reliably displace all gas generation. The hedge provided by wind is similar to a financial swap (Bolinger et al., 2002) in that a resource with a stable price is substituted for a resource with a highly volatile price. If a utility uses wind as a hedge against volatile natural gas prices, it foregoes savings when gas prices are low but avoids paying high prices when gas prices are high. A wind hedge, as it has developed so far, does not provide the utility with the option of taking wind energy only when gas prices are high. As discussed further below, utilities typically take all the energy output from a wind facility regardless of gas prices.

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AT: Resource War with China/India

Chinese and Indian participation in the energy market just means there will be more energy available to everyone as their demand grows

Daniel Yergin, highly respected authority on energy, international politics and economics. Dr. Yergin is a Pulitzer Prize winner and recipient of the United States Energy Award for “lifelong achievements in energy and the promotion of international understanding,” both a world-recognized author and a business leader, as chairman of Cambridge Energy Research Associates (CERA), one of the world’s leading consulting and research firms in its field, and executive vice president of IHS, the parent company of CERA, March 2006 - April 2006, “Ensuring Energy Security,” Foreign Affairs, p. Lexis

China's thirst for energy has become a decisive plot element in suspense novels and films. Even in the real world there is no shortage of suspicion: some in the United States see a Chinese grand strategy to preempt the United States and the West when it comes to new oil and gas supplies, and some strategists in Beijing fear that the United States may someday try to interdict China's foreign energy supplies. But the actual situation is less dramatic. Despite all the attention being paid to China's efforts to secure international petroleum reserves, for example, the entire amount that China currently produces per day outside of its own borders is equivalent to just 10 percent of the daily production of one of the supermajor oil companies. If there were a serious controversy between the United States and China involving oil or gas, it would likely arise not because of a competition for the resources themselves, but rather because they had become part of larger foreign policy issues (such as a clash over a specific regime or over how to respond to Iran's nuclear program). Indeed, from the viewpoint of consumers in North America, Europe, and Japan, Chinese and Indian investment in the development of new energy supplies around the world is not a threat but something to be desired, because it means there will be more energy available for everyone in the years ahead as India's and China's demand grows.

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