With hundreds of miles of shoreline and the world’s leading Navy and Coast Guard, the United States is the globe’s most logical stable exporter of energy. Too bad Congress effectively banned exports a generation ago. Lifting the ban won’t be enough to displace the Venezuelas and Irans of the market, though. Stifling regulation—and the threat of more to come—on the means of moving the products of innovative technology like fracking is a critical check on an otherwise burgeoning industry.
Missing from many stories about America’s energy revolution is the industry’s midstream sector. This is the chain of transportation and rough processing of raw oil and natural gas, and the link between the upstream and downstream sectors. Whereas the term upstream concerns the actual extraction process and downstream refers to final refining and the creation of certain consumer products, midstream is infrastructure and logistics.
Midstream is not just pipelines: Rail and trucking systems and processing and pumping centers are getting a makeover in the wake of the American gas renaissance. Prior to 2012, U.S. gas and oil companies focused primarily on domestic or foreign sources of oil (upstream) and final processing and delivery to the customer (downstream). With more natural gas reserves being discovered and harnessed in the continental United States, a robust midstream infrastructure is now essential. Everything from gas prices to the domestic job base is at stake.
The most high-profile midstream issue is the Keystone XL pipeline, which remains a lightning rod despite strong House and Senate approval. Keystone’s final phase has been stalled for seven years during the height of the recession. President Obama’s Keystone veto this session is just the latest proof the project and its economic benefits are not among the president’s priorities.
But with oil and natural gas flowing out of the shales of Canada and the barrens of the Dakotas, voters and policymakers alike should realize that without a modern midstream infrastructure, our energy influence is effectively neutered. The United States is the world’s leading gas producer, but this materiel is useless if the industry cannot transport it to where Americans need it.
Russ Girling, CEO of TransCanada, the midstream firm constructing Keystone, is flexible about logistics, saying, “We are approaching 1.2 million barrels per day of rail-loading capacity—nobody has waited for Keystone XL pipeline to get built.” Although pipelines have been acknowledged by both industry and the EPA as significantly more efficient and less risky forms of oil transport, U.S. federal trepidation is forcing the company’s hand. The Keystone pipeline would take 800,000 barrels a day off train tracks, putting midstream facility jobs in the United States rather than in Canadian rail systems.
If pipelines and energy infrastructure facilities are not built and instead tarred and feathered in the public eye, progress will be impossible. A nascent sector is more easily targeted than an established one. Publicly torpedoing a major transnational energy deal discourages not only investors and policymakers, but also job creators. The last two years’ increased gas production is not just a boon at the pump: Aside from tens of thousands of construction jobs, upgrading energy infrastructure is constructing careers.
Far from the Canadian border and almost directly between Houston and New Orleans, South African energy company Sasol is turning gas into jobs. “Plants use natural gas like a bakery shop uses flour,” according to Dan Borne, president of the Louisiana Chemical Association. Local environmental activists and national nonprofits are demanding more regulation of midstream plants like the $8 billion ethane cracker Sasol is currently constructing.
Ethane crackers—processing facilities for raw natural gas—are essential for breaking apart gas on the molecular level to produce ethylene, the building block for hundreds of modern plastics and chemicals. This midstream plant in southwest Louisiana provides ethylene to facilities downstream in the chain and is ideally situated near the refinery hub of Houston. Surrounded by states that have had little or no growth since the recession, Louisiana has seen a 3 percent job growth rate since U.S. hydraulic fracturing started, more than double the national average. While the average factory/production job in the state pays $40,100 per year, the Sasol plant will permanently employ at least 500 workers earning $80,000 annually, in addition to 5,000 construction workers during peak times.