Carpe Diem

‘Big Chemical’ continues to make the case that it’s entitled to the natural resources of US energy companies

Here’s a re-write of an op-ed in today’s WSJ by Dow Chemical CEO Andrew N. Liveris:

New Title: “Wanted: An UnBalanced Approach to Shale Gas Exports favoring “Big Chemical” and “Big Steel”: Rushing to sell natural gas to Europe and Asia risks damage to the U.S. economy profits of Dow Chemical and other large chemical and steel companies.”

Revised text:

There is virtually unanimous agreement that America needs a sound and balanced energy policy, and that recent discoveries of shale gas present a historic opportunity to strengthen the economy, increase national competitiveness and create jobs. But that is where the agreement ends.

A vigorous debate is under way. On one side are consumers and manufacturers—including The Dow Chemical Company, which I lead—who want to maximize America’s new competitive energy advantage for large chemical and steel companies (Big Chemical and Big Steel) by adopting an measured approach to natural-gas policy that would continue to prevent or limit exports of the natural gas belonging to US energy companies. On the other side are energy producers who want to quickly export massive some quantities of natural gas that they have invested billions of dollars to develop, even bypassing and they have been participating in a public-interest review process as required by law.

This latter approach would allow U.S. firms to profit from exports in the short term and earn a return on the billions of dollars they’ve invested in energy exploration, drilling and production, but at the long-term expense of (and lower profits)  of the rest of the economy. for Big Chemical and Big Steel. It would invite a return to the kind of boom-and-bust energy cycle that has hurt the U.S. economy in the past, but is a normal cycle for energy development. When world-wide demand surges and domestic supply shrinks thanks to exports, consumers and businesses like Dow Chemical in the U.S. suffer, and some Americans lose their jobs, although millions of shovel-ready jobs could be created in the US thanks to increased development of natural gas for export markets.

It is crucial to maintain a stable and affordable domestic supply of natural gas for Big Chemical and Big Steel.  American manufacturers that rely on natural gas (whether as a fuel source or raw material) have announced $95 billion of domestic investments that are predicated on affordable, plentiful domestic supply of natural resources that belong to private energy companies, and that supply will continue thanks to the billions of dollars of investment from energy companies that can now access a 100-year supply of natural gas in America. 

Let America—the world’s foremost advocate of free trade—consider what is in the nation’s best interest (and the self-interest of Big Chemical and Big Steel) and agree to clear federal rules before it exports all some of its gas away according to other countries’ desires and to the benefit of the shareholders and employees of US energy companies that have invested billions of private capital to produce natural gas and employ thousands of Americans. Recent discoveries of shale gas represent the most significant energy event in the U.S. since oil was found in Pennsylvania in 1859. But Americans will see real economic progress and energy security only if policy makers have the wisdom to seize the opportunity to limit natural gas exports for the benefit of Big Chemical and Big Steel, and to the detriment of the shareholders and employees of US energy companies.   

MP: As I’ve mentioned before, it’s disappointing that major US exporting companies like Dow are spending resources to make the case that they are somehow entitled to the abundant natural resources that other US companies extracted from miles below the ground, that they didn’t invest a penny of their own capital to produce, and that they didn’t employ a single worker to develop.

40 thoughts on “‘Big Chemical’ continues to make the case that it’s entitled to the natural resources of US energy companies

  1. MP: As I’ve mentioned before, it’s truly disappointing that major exporting companies like Dow are spending resources to make the case that they are somehow entitled to the abundant natural resources that other US companies extracted from miles below the ground, that they didn’t invest a penny of their own capital to produce, and that they didn’t employ a single worker to develop.

    People will always use whatever means possible to get as much as they can. And that is why they should not be able to use the power of government to violate the property rights of other individuals. And the only way to do that is to have a government with as little power as possible. As Jefferson understood, “that government is best which governs least.”

    Sadly, there is little support for that position as both the left and right fight over the levers of power so that they can control whether the taxpayer is screwed by the welfare state or by the warfare state.

    • Vangel: “Why is it disappointing when humans act as predicted by human nature? People will always use whatever means possible to get as much as they can.”

      I agree, Vangel. The evil party with respect to corporate welfare is not the corporate leader or his lobbyist. The corporate leader is required by contract and by law to act in the best interest of the firm owners, the shareholders. No, the evil party is the elected members of Congress who should be representing the interests of the voters who put them in office.

      Likewise, the evil party with respect to welfare state is not the persons who benefit from the welfare state. Again, the evil party is the members of Congress who were elected to represent the interests of all voters.

      • John,

        You skip right past the corrupt, ignorant voters who are the source of the problem. Jesse Jackson Jr was only able to loot his campaign coffers because the swine in his district kept returning him to office.

        • Paul,

          I agree. You’ve hit a nerve. Our political system requires a level of engagement and attentiveness that I’m not sure we have any more. We’re losing it – big time.

          • Unfortunately, that moving target has already moved out of any individual’s range. Democratic institutions are, naturally enough, undermined by this — necessitating rule by experts.

            Now, only the wise (those who know the form of the good) can be expected to properly order our Republic.

        • Paul,

          I’m not sure that’s anything new, though. Voter ignorance has been a problem since the founding of the nation. I’m actually a little optimistic about the future. No longer do a handful of newspaper chains and three networks control the access to information.

        • You skip right past the corrupt, ignorant voters who are the source of the problem. Jesse Jackson Jr was only able to loot his campaign coffers because the swine in his district kept returning him to office.

          Voters and politicians are human beings with human weaknesses. That is why they should not have the power to rule over others, which is what the Founding Fathers knew well. The only way to save the country is to cut down the size of the federal government by limiting it to the functions it was actually authorized explicitly by the Constitution.

          • “The only way to save the country is to cut down the size of the federal government by limiting it to the functions it was actually authorized explicitly by the Constitution.”

            Agreed, but we need to have an informed public that will vote for the individuals who will roll it back. Ain’t happening. We are doomed.

      • I agree, Vangel. The evil party with respect to corporate welfare is not the corporate leader or his lobbyist. The corporate leader is required by contract and by law to act in the best interest of the firm owners, the shareholders. No, the evil party is the elected members of Congress who should be representing the interests of the voters who put them in office.

        Sorry but I have to disagree. The thieves in Congress are not there to help the voters. They are there to help their friends and themselves. I have no expectations that rational human beings driven by the lust for power will govern as selfless, all-knowing angels. I expect them to be the whores that they have usually been, which is why I don’t want government to have much power and to have a system that will permit all voluntary activities without third party involvement. The only legitimate role for government that one could argue for (and I do not even accept this argument but will let it pass for now) is the protection of individual rights. In this case rights are strictly negative, not the fiction that the progressives say that they are.

    • These are public companies that are supposed to use every legal means at their disposal to increase shareholder profits. They are designed to be amoral, un-patriotic, and not enamored of Adam Smith or anyone else.

      What is the surprise?

      I would be angry if a publicly held corporation violated its charter and chose smaller profits to honor some ideal.

      If you want public corporations to honor “ideals,” where does that head? And who chooses the ideals?

      • These are public companies that are supposed to use every legal means at their disposal to increase shareholder profits. They are designed to be amoral, un-patriotic, and not enamored of Adam Smith or anyone else.

        I agree. The chemical companies will try to use the power of government to rob others of their property rights. Which is why I argue that government should not have such power.

        What is the surprise?

        To anyone who understands human nature there is no surprise.

        I would be angry if a publicly held corporation violated its charter and chose smaller profits to honor some ideal.

        So would many investors. The problem is that sometimes not doing the right thing leads to losses. I suspect that any chemical company that tried to build facilities to take advantage of the production by money losing shale companies will wind up destroying capital just as the shale producers have.

        If you want public corporations to honor “ideals,” where does that head? And who chooses the ideals?

        The problem is that once they companies agree that the government has the right to rob others of their property they have little defense when it is their turn to be led to the abattoir of the ‘public good.’ Doing the wrong thing has a way of coming back to bite you on the arse.

  2. Drilling in people’s backyards to fuel big oil and gas and chemical companies pocketbooks at the expense of our environment/global warming is so short sighted

    • Kim: “Drilling in people’s backyards to fuel big oil and gas and chemical companies pocketbooks at the expense of our environment/global warming is so short sighted

      Of course those whose backyards are being drilled are having their pocketbooks bloated also, and the rest of us are better off due to an abundance of cheap fuel, energy, and chemical stocks. It seems like a win-win situation.

      You are aware, of course, that big oil and gas are only able to fill their huge pocketbooks because people voluntarily force them to take money in exchange for their valuable products, right?

      What specific environmental problems are you concerned with, considering that global warming is a non-issue?

      Of course you’re right about the desirability of farms over fracking . We all yearn to return to the idyllic lives and standard of living our ancestors enjoyed before the industrial revolution, when people worked every waking hour at back-breaking and mind-numbing tasks just to survive, and died by age 40.

      I’m only guessing that you meant that sort of individual family farming, and not the conversion of every acre of viable farmland into some crop from which to make ethanol, which even at that couldn’t ever produce more that 25% of US fuel needs.

    • Drilling in people’s backyards to fuel big oil and gas and chemical companies pocketbooks at the expense of our environment/global warming is so short sighted

      There is no environmental problem. The problem is the low return on energy and the capital destruction.

      • But from the point of the land owner its fairly free money, for perhaps some small amount of land being tied up. The drillers make money also. So only the investor looses out, but then if the investor is stupid enough to put his money in that area he gets what he deserved, just as if the investor invested in CDOs and the like.

        • But from the point of the land owner its fairly free money, for perhaps some small amount of land being tied up. The drillers make money also. So only the investor looses out, but then if the investor is stupid enough to put his money in that area he gets what he deserved, just as if the investor invested in CDOs and the like.

          I could not agree more. The investors get killed. The lenders get bailed out by the taxpayers. The farmers, drillers, hookers, bartenders, truck drivers, railways, etc., get paid. The problem is that one of these days the cost to the taxpayer will be too great and there will be an incident that destroys the currency by so much that the lenders will not be saved. When that happens the US will find itself in the same place as the UK; a former power dreaming of the good old days when it had a much bigger role to play in the world.

    • LOL, Yes big oil is drilling in my families backyard and we are extremely please with this corrupt arrangement. My daughter is currently taking advantage of big oil money while attending college and has the need for ZERO tax payer assistance or aquiring the massive debt of other people her age. I hope the big oil company stays a long time and contnues to bloat our family back accounts.

  3. The more I think about it, the less I am sure natural gas could be exported even if we wanted to. I mean, it would have to be converted to LNG to be shipped across the ocean, right? There are only a handful of terminals in the US where we could ship from and fewer in Europe. Besides, no one wants a ship full of LNG in their harbor. It’s essentially a giant floating bomb.

    Am I wrong?

    • You are wrong. LNG has been shipped safely around the world for 50 years. Japan and Korea get virtually all of their natural gas via LNG. LNG ships are NOT floating bombs. Many ports around the world see regular LNG shipments without incident.

      • You are wrong. LNG has been shipped safely around the world for 50 years. Japan and Korea get virtually all of their natural gas via LNG. LNG ships are NOT floating bombs. Many ports around the world see regular LNG shipments without incident.

        That is true. But so far the people who hate the United States have not been targeting LNG ships or terminals. But they are still floating bombs in search of a fuse.

        • We deal with the floating bomb myth all the time. Not true.
          Yes, an LNG tanker contains a lot of energy, but it can’t release that energy all at once. LNG facilities on land are designed to contain spills and minimize damage. Regulations require land terminals to obtain control of the “exclusion zones” around LNG storage to prevent harm to people and property.

          LNG tanker accidents or malicous acts would result in an LNG spill on water resulting likely in an LNG pool fire. Yes, it would be a big fire but would last just minutes and only be dangerous out to about 1,300 meters or so. See Sandia Labs study on tanker events here: tinyurl.com/ag4yq9p

          Yes, there are risks, but they are well understood and can be managed. An LNG vessel was attacked by Somali pirates. Nothing major happened.

          • LNG vessels are very large and robust ships with multiple layers of containment and insulation. Not particularly vulnerable to attack.

            I see my 13-year old son’s friends look at video on how to make thermite. All it takes is a few idiots to take over a ship and set enough explosives to get through the containment or some missile to hit the vessel and you have the uncontrolled release of a great deal of energy. You are thinking accident or minor hits. I am thinking deliberate planning by some bad characters who are a bit better than a bunch of fishermen with automatic rifles.

          • We deal with the floating bomb myth all the time. Not true.
            Yes, an LNG tanker contains a lot of energy, but it can’t release that energy all at once. LNG facilities on land are designed to contain spills and minimize damage. Regulations require land terminals to obtain control of the “exclusion zones” around LNG storage to prevent harm to people and property.

            It can release that energy if someone flies a plane into it or shoots a missile at the ship that hits the wrong place. I am not talking about an accident. I am talking about the bad guys planning an attack.

    • Or you can covert natural gas to diesel fuel and other light oil, exporting that instead. Shell’s GTL (gas to liquids) plant in Qatar went online last year. Shell and Sasol both have plans to build similar plants in the USA.

      • Shell and Sasol both have plans to build similar plants in the USA“…

        Oh those horrible companies!

        Where do they get the nerve to pay people to build and operate those facilities?!?!

        Good on them!

        Shell and Sasol will be shovel ready before Obama will…

    • The more I think about it, the less I am sure natural gas could be exported even if we wanted to. I mean, it would have to be converted to LNG to be shipped across the ocean, right? There are only a handful of terminals in the US where we could ship from and fewer in Europe. Besides, no one wants a ship full of LNG in their harbor. It’s essentially a giant floating bomb.

      Am I wrong?

      No, you are not. The thing that worried me on 9/11 was the safety of the LNG ships and terminals. If those idiots had any brains and attacked them they could have done far more damage than they did on that terrible day.

  4. I don’ know why Mark Perry is “disappointed” that publicly held companies are doing their best to maximize returns for shareholders, as it is their fiduciary obligation.

    They do not have an obligation to support free trade. Or “fair” regulations or trade laws. They have an obligation to boost shareholder profits.

    At the annual meeting of a Dow or US Steel, they do not Pledge Allegiance to the Flag or sing the National Anthem, or bow to Adam Smith.

    Their job of Dow or US Steel management is to make as much money as they can for shareholders, within the law. If they can change the law, all the better.

    Publicly held corporations are–indeed by charter and be design–amoral organizations. They are supposed to be amoral. They are supposed to generate max profits and that is it (within only the law).

    Why can’t Mark Perry get this? Their charters are amoral.

    How about this from Dow: “Even though if the United States exports a lot of natural gas, thus raising our costs and cutting our profits, we support that.”

    Is that how a public corporation should be run?

    • Benjamin,

      I don’t presume to speak for Dr. Perry but I am guessing that his disappointment lies in the hypocrisy of companies like these, (DOW, US Steel) that rely on exporting their own goods, trying to limit other companies, namely energy companies, from being able to export their goods.

      Dr. Perry has a strong sense of right/wrong and this he sees as blatantly wrong.

      But of course you are right. Dow and US Steel have the right to spend as much money and effort as they like in trying to convince the government and the public that exporting energy is bad for the US. They are not breaking any laws and if successful in their efforts they will benefit their companies and their shareholders.

      As you said, that is how companies are run, to maximize shareholder value within the limits of the law. No problem there, free markets work best when we have lots of companies following this mandate.

      The issue is not with the companies but with the actions of the government. The companies lobby the government to take actions like limiting energy exports. The actions of the government harm free markets, not the actions of companies. If governments did not meddle in free markets then companies would stop lobbying them because there would be no opportunity for them to gain advantage over other companies.

      Competition amongst companies for market share is what makes free markets work best. This is what gives the best outcome for the consumer. Of course companies hate competition since it makes gaining market share more difficult and makes earning a profit more difficult. That is why they try to get governments to limit competition. Government should not be in the business of determining who makes what profit and who gains what market share. Leave that to the free markets.

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