Why Is Uncle Sam Punishing Natural Gas Producers?

Natural gas exploration and production companies continue to face considerable headwinds because of low natural gas prices. To stay solvent, natural gas producers such as Chesapeake Energy (NYSE: CHK  ) and Devon Energy (NYSE: DVN  ) were forced to move into liquids production in addition to creating joint ventures or selling assets to foreign national oil companies.

Oil and gas producers are now looking to the federal government to allow more LNG exportation permits so companies can sell natural gas to the highest bidder. Uncle Sam continues to drag its feet on making a decision for or against LNG exportation, forcing some natural gas producers to sell valuable assets and technology to foreign government-owned oil and gas companies. With record worldwide price disparities, the United States could profit handsomely from selling low-cost natural gas into high-end markets, but time is of the essence.

Energy investors would be hard-pressed to find another company trading at a deeper discount than Chesapeake Energy. Its share price depreciated after negative news surfaced concerning the company's management and spiraling debt picture. While these issues still persist, giant steps have been taken to help mitigate the problems. To learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy.


Read/Post Comments (20) | Recommend This Article (14)

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  • Report this Comment On March 09, 2013, at 9:17 PM, motorchef wrote:

    The reason is so obvious that the author of this article is obviously paid by an industry person to spread dumbness in their favor. Natural gas is a competitive advantage for the US. By keeping the abundance here, energy price will stay low; Industry will have access to cheap energy which is one of the highest cost components in any manufactured product. This means manufacturing is better off done here in this country. This country then becomes competitive with other industrial nations again.

    Add to this the cost savings for the consumer. When the consumer spends less on energy they have more capital to invest themselves and more discretionary income. Since consumers drive 2/3 of the US economy, this becomes a no-brainer. Consumers and the country becomes wealthier overall even by trickle-down economics.

    Additionally, if the gas market here is kept low and isolated from the fluctuations of the world market, the US economy will be less susceptible to the fluctuation of the world economy. This would mean the events of the world political stage would have less impact on our economy. Add to this the tax revenue that would be generated by the additional spending by the consumer and we have a much more stable political environment.

    In summary, it is anti-American to export such a valuable natural resource. The real question here is the allegiance of the author of this article to his country or to his wallet. The article goes to great lengths to present an argument so flawed that it almost blinds the reader to the obvious. This website needs to seriously rethink why they published this to begin with or the readers need to question if this website is so anti-American.

  • Report this Comment On March 09, 2013, at 9:41 PM, Boskley wrote:

    It is anti-American to export a natural resource, but it is not anti-American to JV with China or sell our technology? Decisions are being made for shareholders because prices remain depressed and an increase in NG prices would help avoid some of these partnerships.

  • Report this Comment On March 09, 2013, at 9:54 PM, BilFoxsoapbox wrote:

    Because that what flat earth no growth Marxists do...

  • Report this Comment On March 09, 2013, at 10:17 PM, hambone1969 wrote:

    This article and it's author are seriously flawed. Why on earth would we want to export Nat gas, and then raise the price of the commodity- thus increasing manufacturing costs and the monthly costs for US energy consumers. Is this author so insulated (or anti-american) that he has no clue that we all hate US oil dependence on Arabs, and yet he wants to export and hamstring the US manufacturer and consumer? I can only surmise this guy is either paid by the nat gas association or he is speaking his book and owns tons of nat gas stocks and needs to pump them up. Horrible article.

  • Report this Comment On March 09, 2013, at 10:29 PM, Maux wrote:

    Why, many countries who export resources keep local prices separated and unaffected by spot market fluctuations.

    Gasoline in countries like Saudi Arabia is much cheaper then in the US or EU.

    If there is excess NG here (like coal, lumber, automobiles, computers, garments, etc.) why not consider improving our economy with NG exports? It will create more jobs, and make us the economic power we once were.

    It only has to be done wisely...

  • Report this Comment On March 09, 2013, at 10:29 PM, davknsit wrote:

    Motorchef is correct! And here in our states we have the Electric companies that screw us when they in fact have access to the cheap gas for electrical generation. Much cleaner than coal or oil. I believe the under the table dealings with our very own native OIL barrons is the key to this. Look at the subsidies the Gov gives the corn farmers to plow under a good crop! While they refused to buy corn and corn oil from that crazy guy in South America! RIP.

  • Report this Comment On March 09, 2013, at 10:37 PM, davknsit wrote:

    My fifteen minutes are up! Where can I unsubcribe from this site?

  • Report this Comment On March 09, 2013, at 10:40 PM, deecee53 wrote:

    Yes indeed. Lets start exporting another natural resource to the rest of the world. Why not be at the mercy of speculators and traders who control the world price,[like we are with oil].??

  • Report this Comment On March 09, 2013, at 10:44 PM, mitstrebor wrote:

    Your asking WHY? How stupid can you get? Natural gas is the cheapest energy on the whole planet, If we were able to produce enough natural gas to supply the whole world forever, the U.S. govt. would object cause they can't make money off of it! Plain and simple, There is no way of regulating it!

  • Report this Comment On March 09, 2013, at 10:55 PM, mr091468 wrote:

    "Uncle Sam"? "Uncle Sam"?? Please don't personalize the 535 prostitutes plus that thing in the white house who hates coal, energy and the working class, by referring to our dear old Uncle Sam. The DC prostitutes have been paid off by special interests.

  • Report this Comment On March 09, 2013, at 10:56 PM, jumpytrader wrote:

    I agree with the reasons above for not exporting LNG and won`t repeat them.

    Exporting LNG will reduce the supply in the US and that will raise prices to manufactures and consumers no matter what you do.

    The only ones that would benefit from Exporting LNG would be the Gas companies, exporters and the over seas buyers.

    Our domestic demand is already increasing and will keep increasing. That will drive price increases for the producers soon enough.

    Our technology has given us back a chance to be competitive again and we should not sell that off.

    Secondly our fracking technology is already being exported overseas and soon they will be fracking their own gas and be able to under cut the price of LNG.

    So by the time LNG can go on line it will have major price and supply competition over seas and Austrailia is closer to Japan.

    LNG looks like a bad investment to me and for the USA.

  • Report this Comment On March 09, 2013, at 11:17 PM, toomuchgas wrote:

    The natural gas belongs to the the companies that found it and the individuals who sold them their leases. It is private property neither the government nor the citizens of the U.S. have any special right to it. Everyone should pay the free market fair (international) price. We don't block the export of other valuable resources like corn, soybeans and cattle. So why are the energy commodities different other than the politics of it. By the way I would prefer we don't export corn to keep the price of meat and ethanol low. Same difference.

  • Report this Comment On March 10, 2013, at 12:11 AM, mitchslagghorn wrote:

    freakin simple, Because BigGas and BigOil are destroying the planet! The CO2 being pumped into the atmosphere is forcing the government to finally begin creating legislation that will not only impair but eventually replace. It is clearly time to dump the addiction of fossil fuels and make the move to renewable energy. And it has to be done before the world economy shifts away from the U.S. dollar. The addiction, and the control, needs to be brought down, For the sake of the planet.

    S.O.S. Save Our Species

  • Report this Comment On March 10, 2013, at 12:30 AM, rednecktrash wrote:

    This is easy. Energy independence is freedom. We cannot have too much freedom now can we?

  • Report this Comment On March 10, 2013, at 12:40 AM, TRandyB wrote:

    Do not sell any at all until the price rises. By then the US may have started using this natural resource to the highest potential for transportation, energy creation, etc, etc. so that we don't have to buy expensive oil from countries that want to do us harm or steal our intellectual property.

  • Report this Comment On March 10, 2013, at 9:06 AM, beyondo1 wrote:

    Joel you must be long and heavy with 'Schlumberger'

  • Report this Comment On March 10, 2013, at 10:11 AM, rogerappleseed wrote:

    It's true that nat gas burns a little cleaner than gaso line and a lot cleaner than coal. Here is the rub: Natural gas is dirtier than gasoline if you look at the whole equation. There is a whole lot more air pollution involved in the extraction process but the companies aren't saying anything about that. There are large amounts of uncofined nat gas going straight to the atmosphere and nat gas is 20 to 50 times worse a greenhouse gas than CO2. The worst part is every time a well is fracked it takes 4-6 million gallons of drinking water in which they add 496 toxic chemicals. Each well can be fracked up to 22 times and there are hundreds of thousands of these wells or more around our country. Do the math...it is violating our fresh water supply! If they allow export they will do it even more and destroy our aqufers. Why is it when an oil company has a little hard time they try to make it sound like it's the people that are suffering. It's NOT! It's the 1% again!

  • Report this Comment On March 10, 2013, at 12:07 PM, cityperson wrote:

    Son as our politicians and others in government get their investments in and their hands greased, the foot dragging will end. Just watch and see.

  • Report this Comment On March 10, 2013, at 12:18 PM, rogerappleseed wrote:

    To toomuchgas, Countries around the world are running out of water. To combat this, these countries are buying food stuffs that require huge amounts of water from other countries, draining their aquifers. There are other countries that are buying land in some poor countries to grow food for their country back home. Meanwhile the people that work in their fields are starving. Did you know it takes between 4000 and 12000 gallons of water, according to two different universities, to raise 2.2 pounds of beef? Our aquifers are dropping. China is draining their fossil aquifer and they don't replenish PERIOD!

    Corn is food, not fuel. People are starving because we are burning our food so that Bubba can run his 5 mile per gallon big-ass truck he has a right to drive. It takes more gasoline energy to produce the ethanol, than the energy you will finally get from the ethanol when you burn it. It is a net loser. Corruption keeps this insanity going. Please people, do some research on peak oil. Watch the DVD "Gasland" and learn. Watch the DVD "Crude Impact" and see what fossil fuels are really doing to this planet. Watching "Crude Awakenings" is a good place to start. Whenever you burn anything you are producing CO2 (14%) we need renewables as of 20 years ago. We already have refugees from the effects of sea level rise. What are we waiting for? The oil company's bank account to burst at the seams?

  • Report this Comment On March 11, 2013, at 10:54 AM, leasehound wrote:

    Unfortunately, many of the shale gas wells that have been drilled, and which could be drilled, are not economic at today's natural gas prices ($3.62/mcf this morning). The producers have absorbed the cost differential to this point and continued to drill in order to establish production that will hold their leases, but this cannot continue indefinitely. Most will tell you that they need prices in the range of $4.00/mcf to $6.00/mcf to be econonic in the majority of the current plays in the U.S. Increased demand, through additional gas-fired power plants, conversion of fleets to CNG, and the export of LNG could raises prices enough for the producers, but not to the point of where natural gfas loses its price advantage. Gas still in the ground is of no use to anyone if it cannot be produced economically.

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