Want A Long-Term Play? Forget Oil - Bet On Wyoming

by: John Lohr

Summary

Renewable energy, a controversial topic, but here are some comments from a coal and oil state resident (me).

It's an economic discussion, not an environmental one.

It probably won't work, but it's better than a discussion about electric cars.

“A little dab’ll do ya” -- 1950s commercial

In any discussion about energy policy, the argument revolves around environmental issues and energy-efficient cars versus coal and oil. Now, here in Wyoming, we are sensitive about coal and oil related jobs being lost. But what has remained off the radar is how a dramatic change in federal energy policy may actually impact domestic industry in a positive way: more jobs, less dependence on oil from nations such as Venezuela, and Saudi Arabia.

Unfortunately, oil has to be central to America’s energy future, at least in the immediate term. Our modern technological culture is entirely dependent on gasoline. Despite the “drill baby drill” rhetoric intended to build support for selling off federal lands (like Bureau of Land Management areas where people graze their cattle, and national parks where people go to hunt and fish and camp, bringing in valuable tourist dollars), more than fifty million acres of oil-rich land is already allocated to various oil companies--who refuse to drill there because the price of oil isn’t high enough. No new oil refineries have been built in the United States for decades--not because of restrictive environmental regulations forced through by hippies, but because the profit margin for the oil companies isn’t high enough. There are 141 oil refineries in the US, the last one built in 1975 in Corpus Christi Texas by Magellan Midstream Partners LP. (NYSE:MMP): 42,500 barrels per calendar day. However, while developing domestic oil production may be a short-term measure, it is certainly not a solution. So, how will we power our future?

The most common response is “solar”, but the technology just isn’t there. Solar power, on a large scale, is not yet currently feasible. While Wyoming has over 300 days of Big Sky sunshine, we lead the league in two other powerful alternative sources: wind power (fields of electricity-generating windmills are very visible here, but there are not enough of them). North Dakota has the most wind turbines. The other alternative energy source is liquid natural gas, or LNG. Wyoming ranks 5th in the country in LNG production (2016), yet it doesn’t make the top 40 states in consumption. No surprise, Texas consumes almost twice as much LNG as any other state. Just in case you were wondering, as a country we consume about .0003% more than we produce. Advocates say we haven’t scratched the surface of available reserves down there.

The great industrial boom of the twentieth century that helped transform us from an agrarian society to a mechanized one was fueled by oil--and the oil states like Texas and Alaska experienced economic prosperity. Here in Wyoming we could be the vanguard of the next industrial revolution. What’s the stumbling block? OK, besides Big Oil, Big Banks, Big Government, Big Pharma (Just threw that in. If they aren’t part of the solution….)

Natural gas is said to produce very little air pollution. It is substantially more efficient than oil or coal--by up to 60%. The problems with natural gas are many--it is highly toxic, has storage issues, and requires costly and complicated equipment to transport. When liquified, Natural Gas is non-toxic and as easy to store and transport as gasoline. While the technology for reducing natural gas to a liquid state has been around since the late sixties, LNG has not been used widely because it was not economically viable, due to high costs, and the easy availability of oil. Now obtaining oil is increasingly difficult, and the technology for liquefying natural gas has become much more cost-effective. Plus, major automobile companies are actively working on developing LNG and oil and coal burning power plants are beginning to convert to LNG.

We have one of the largest natural gas reserves (in methane form) in the world right here underneath Wyoming (also Montana and South Dakota, but who cares). There are massive underground deposits between Rock Springs and Sweetwater, to the northwest of Laramie, in the Bighorn Mountains north of Hot Springs, and throughout the Powder River basin (over an area larger than any of the New England states). Methane extraction is already going on in parts of the state; it would require little effort beyond Big Money to expand operations.

What does this have to do with finance, you ask? Plenty. Development of local sources of energy will undoubtedly bring investment, jobs and money into the area--and not in small scale either--thousands of well-paying jobs, and billions of dollars coming into the state. While there are some issues that have been raised (and rightly so) about the long-term economic prospects, and the impact on the natural beauty and splendor which draws tourists and hunters and campers (and their money), all indications are that the payback can balance a manageable geographical containment. Besides, we have to replace those lost coal and oil jobs.

The largest LNG facility in the world is located in the oil-producing nation Qatar, but they don’t want to use their own oil; they want to sell it to us. Can you envision a future where we sell our LNG to them, OPEC (the Organization of Petroleum Exporting Countries) is irrelevant, and America is the leader of the Organization of Liquid Natural Gas Exporting Countries. Forget about war. If we don’t like what some small-minded nation is doing, we can simply cut them off, just like OPEC did to us back in the seventies. Think about it. Economically feasible? Sure, until Washington and their special interests get ahold of it. I realize I’m probably dreaming, but if I were charged with building momentum around OLNGEC, I’d get Jamie Dimon behind it. The herd of banks will follow his lead.

John Lohr can be contacted at: john@somebodyelsesmoney.com

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: John Lohr has exclusive research on the Marketplace. See: THE FIDUCIARY SALE: IN SEARCH OFTHE ETHICAL ADVISOR.