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DDI 08 – SS Natural Gas Redux

Uniqueness – NG Demand Increasing.........................................................................................................................................................7


Uniqueness – NG Demand Increasing.........................................................................................................................................................8
Uniqueness – NG Demand Increasing.........................................................................................................................................................9
Uniqueness – NG Demand Increasing.......................................................................................................................................................10
Uniqueness – NG Demand Increasing.......................................................................................................................................................11
Uniqueness – Demand will stay high.........................................................................................................................................................12
Uniqueness – NG demand Decreasing......................................................................................................................................................13
Uniqueness – NG Demand Decreasing......................................................................................................................................................14
Uniqueness - Canada NG demand low......................................................................................................................................................15
Uniqueness – NG prices high....................................................................................................................................................................16
Uniqueness – NG Prices High...................................................................................................................................................................17
Uniqueness – NG Prices High...................................................................................................................................................................18
Uniqueness – NG Prices High...................................................................................................................................................................19
Uniqueness – NG Prices High...................................................................................................................................................................20
Uniqueness – NG Prices High...................................................................................................................................................................21
Uniqueness – NG Prices Increasing...........................................................................................................................................................22
Uniqueness – NG Prices Increasing...........................................................................................................................................................23
Uniqueness – NG prices low......................................................................................................................................................................24
Uniqueness – NG prices low......................................................................................................................................................................25
Uniqueness – NG Prices Decreasing.........................................................................................................................................................26
...................................................................................................................................................................................................................27
Uniqueness – LNG Increasing...................................................................................................................................................................27
Uniqueness – LNG Increasing...................................................................................................................................................................28
Uniqueness – LNG Increasing...................................................................................................................................................................29
Uniqueness – LNG Increasing...................................................................................................................................................................30
Uniqueness – LNG Increasing...................................................................................................................................................................31
Uniqueness – LNG Increasing...................................................................................................................................................................32
Uniqueness – LNG Increasing...................................................................................................................................................................33
Uniqueness – LNG Increasing...................................................................................................................................................................34
Uniqueness – LNG Demand Increasing....................................................................................................................................................35
Uniqueness – LNG Demand Decreasing...................................................................................................................................................36
Incentives drop NG demand and NG prices..............................................................................................................................................37
Alternate Energy decreases NG Prices......................................................................................................................................................38
Alternate Energy decreases NG Prices......................................................................................................................................................39
Renewables decreases NG Demand..........................................................................................................................................................40
Renewables decreases NG Demand...........................................................................................................................................................41
Renewables decreases NG Demand...........................................................................................................................................................42
Renewables decreases NG Demand...........................................................................................................................................................43
NG competes with renewables...................................................................................................................................................................44
Renewables decreases NG demand/prices.................................................................................................................................................45
Renewables (and Efficiency CP) drop NG prices......................................................................................................................................46
Renewables reduces NG Prices.................................................................................................................................................................47
Renewables reduce NG demand – RPS mechanism..................................................................................................................................48
RPS Reduces NG prices.............................................................................................................................................................................49
Nm According to the report, the adoption of a 15% Federal RPS will require a flood of new wind and other renewable projects well
beyond current proposed projects, leading to a 500-percent increase in renewable capacity from current levels by 2026. This increase
translates into an incremental construction cost of $134 billion (2006 dollars) between 2006 and 2026. The report also shows the
switch to renewable energy will drive down demand and price of natural gas. "The lower fuel costs and fossil fuel consumption will
lead to lower electricity costs," continued Sannicandro............................................................................................................................49
Cap and Trade reduce NG demand............................................................................................................................................................50
Nuke Power reduces NG prices.................................................................................................................................................................51
Nuke Power reduces NG prices ................................................................................................................................................................52
Nuclear energy will tradeoff with natural gas as taxes and penalties on burning fossil-fuels increase. ...................................................52
Wind Decreases NG Demand....................................................................................................................................................................53
Solar Decreases NG Demand.....................................................................................................................................................................54
NG Demand key to LNG..........................................................................................................................................................................55
NG Demand key to LNG ..........................................................................................................................................................................56
High NG Prices key to LNG......................................................................................................................................................................57
LNG Market developing............................................................................................................................................................................59
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DDI 08 – SS Natural Gas Redux
US key to global prices..............................................................................................................................................................................60
Perception - Berman..................................................................................................................................................................................61
SHELL – RUSSIA.....................................................................................................................................................................................62
SHELL – RUSSIA.....................................................................................................................................................................................63
Uniqueness – Natural Gas Dependence Growing......................................................................................................................................64
Uniqueness – Russia NG Use Increasing...................................................................................................................................................65
Uniqueness – Gazprom..............................................................................................................................................................................66
Uniqueness – Gazprom..............................................................................................................................................................................67
Internals – Energy key to Relations...........................................................................................................................................................68
Internals – Russian Energy Dominance.....................................................................................................................................................69
Internals – Natural Gas Key to Relations..................................................................................................................................................70
Internals – Natural Gas Key to Relations..................................................................................................................................................71
Internals – Natural Gas Key to Relations..................................................................................................................................................72
Internals – Natural Gas Key to Relations..................................................................................................................................................72
Internals – US key to Natural Gas.............................................................................................................................................................74
Internals – Gazprom Investing in US.........................................................................................................................................................75
Impacts – NATO Backlash.........................................................................................................................................................................76
Impacts – NATO key to Relations.............................................................................................................................................................77
Impacts – Neo-Imperialism........................................................................................................................................................................78
Impacts – National Security Risk..............................................................................................................................................................79
Impacts – Terror Coop...............................................................................................................................................................................80
Impacts – Terrorism...................................................................................................................................................................................81
Impacts – US-Russian War........................................................................................................................................................................82
Impacts – US-Russian War........................................................................................................................................................................83
Impacts – Russian Economy......................................................................................................................................................................84
AT: Non-Unique – Ukraine........................................................................................................................................................................85
US-Russia Cooperation on Nuke Energy..................................................................................................................................................86
SHELL – CANADA..................................................................................................................................................................................88
SHELL – CANADA..................................................................................................................................................................................89
SHELL – CANADA..................................................................................................................................................................................90
Links – Supplier.........................................................................................................................................................................................91
Links – Supplier ........................................................................................................................................................................................92
Links – Energy Cooperation......................................................................................................................................................................93
Impacts – Relations....................................................................................................................................................................................94
Impacts – Relations....................................................................................................................................................................................95
Impacts – Afghanistan Module..................................................................................................................................................................96
Impacts – Afghanistan Extensions.............................................................................................................................................................97
Impacts – Military......................................................................................................................................................................................98
Impacts – Trade..........................................................................................................................................................................................99
Impacts – WOT........................................................................................................................................................................................100
1NC LNG Econ (1/2)...............................................................................................................................................................................101
1NC LNG Econ (2/2)...............................................................................................................................................................................102
Renewables LNG Tradeoff link...............................................................................................................................................................103
High NG prices key to LNG....................................................................................................................................................................104
NG demand key to LNG..........................................................................................................................................................................105
LNG key to econ......................................................................................................................................................................................106
LNG key to econ......................................................................................................................................................................................107
LNG key to econ......................................................................................................................................................................................108
AT: LNG Accidents..................................................................................................................................................................................109
AT: LNG Accidents..................................................................................................................................................................................110
AT: LNG Accidents..................................................................................................................................................................................111
AT: LNG Accidents..................................................................................................................................................................................112
AT: LNG Terrorism..................................................................................................................................................................................113
SHELL – LNG SAFETY.........................................................................................................................................................................114
SHELL – LNG SAFETY.........................................................................................................................................................................115
Uniqueness – LNG Inevitable..................................................................................................................................................................116
Uniqueness – LNG Inevitable..................................................................................................................................................................117
Uniqueness – LNG Inevitable..................................................................................................................................................................118
Internals – LNG Demand key to Safety...................................................................................................................................................119
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DDI 08 – SS Natural Gas Redux
Internals – LNG Demand key to Safety...................................................................................................................................................120
Internals – LNG Demand key to Safety...................................................................................................................................................121
Impact – LNG Terror...............................................................................................................................................................................122
Impact – LNG Terror ..............................................................................................................................................................................123
Impact – LNG Terror...............................................................................................................................................................................124
Impact – LNG Terror...............................................................................................................................................................................125
Impact – LNG Terror...............................................................................................................................................................................126
AT: LNG Safe..........................................................................................................................................................................................127
SHELL – INDONESIA ...........................................................................................................................................................................128
SHELL – INDONESIA...........................................................................................................................................................................129
SHELL – INDONESIA...........................................................................................................................................................................130
SHELL – INDONESIA ...........................................................................................................................................................................131
Uniqueness – Indonesian Prices High......................................................................................................................................................132
Uniqueness – Indonesian NG Strong.......................................................................................................................................................133
Internals – Indonesia Supplier.................................................................................................................................................................134
Internals – Indonesia Wants US Markets.................................................................................................................................................135
Internals – NG key to Relations...............................................................................................................................................................136
Brink – Investment...................................................................................................................................................................................137
Impacts – Economy .................................................................................................................................................................................138
Impacts – Stability...................................................................................................................................................................................139
Impacts – Stability ..................................................................................................................................................................................140
Impacts – Stability ..................................................................................................................................................................................141
Impacts – Stability ..................................................................................................................................................................................142
Impacts – Turns the Case.........................................................................................................................................................................143
Impact Booster – Stability.......................................................................................................................................................................144
SHELL – IPI PIPELINE..........................................................................................................................................................................145
SHELL – IPI PIPELINE..........................................................................................................................................................................146
Uniqueness – IPI Pipeline Coming..........................................................................................................................................................147
Uniqueness – Indian Demand High.........................................................................................................................................................148
Brink – India-Iran Relations....................................................................................................................................................................149
Link – Demand key to IPI........................................................................................................................................................................150
Link – Prices key to Pipeline...................................................................................................................................................................151
Link – Prices key to Pipeline...................................................................................................................................................................152
Internals – Iran Wants Pipeline................................................................................................................................................................153
Internals – Iran Natural Gas Untapped....................................................................................................................................................154
Internals – India Natural Gas Demand ....................................................................................................................................................155
Internals – India Natural Gas Demand.....................................................................................................................................................156
Internals – India Natural Gas Demand.....................................................................................................................................................157
Internals – India Natural Gas Demand.....................................................................................................................................................158
Internals – Iran Supplies Natural Gas......................................................................................................................................................159
Impacts – Stability ..................................................................................................................................................................................160
Impacts – Iranian-Pakistani Relations.....................................................................................................................................................161
Impacts – CBMs......................................................................................................................................................................................162
Impacts – Iranian Economy.....................................................................................................................................................................163
Impacts – Diplomacy...............................................................................................................................................................................164
Impacts – IPI Key to Pakistan Industry...................................................................................................................................................165
Impacts – Pakistan Strategy/Security.......................................................................................................................................................166
Impacts – Pakistan Economy...................................................................................................................................................................167
Impacts – Indian Economy......................................................................................................................................................................168
Impacts – Indian Energy..........................................................................................................................................................................169
Impacts – Indo-Pak Relations..................................................................................................................................................................170
Impacts – Indo-Pak relations...................................................................................................................................................................171
Impacts – Indo-Pak Relations..................................................................................................................................................................172
Impacts – Conflict Res.............................................................................................................................................................................173
Impacts – CBMs......................................................................................................................................................................................174
Impacts – Regional Stability....................................................................................................................................................................175
AT: TAPI Better.......................................................................................................................................................................................176
AT: US Pressure Prevents Pipeline..........................................................................................................................................................177
AT: US Pressure Prevents Pipeline..........................................................................................................................................................178
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DDI 08 – SS Natural Gas Redux
AT: Pipeline Unsafe.................................................................................................................................................................................179
SHELL – FLARING................................................................................................................................................................................180

..................................................................................................................................................................................................................180
SHELL – FLARING ...............................................................................................................................................................................181
SHELL – FLARING ...............................................................................................................................................................................182
SHELL – FLARING................................................................................................................................................................................183
Link – Oil.................................................................................................................................................................................................184
Internals – Low Prices = Flaring..............................................................................................................................................................185
Internals – High Prices Solve Flaring......................................................................................................................................................186
High NG price solves flaring...................................................................................................................................................................188
Subsidiesmake gas prices high.............................................................................................................................................................189
Internals – High Prices Solve Flaring......................................................................................................................................................190
Impact Booster – Methane.......................................................................................................................................................................191
FlaringWarming...................................................................................................................................................................................192
FlaringSpecies extinction.....................................................................................................................................................................193
SHELL – INDUSTRIES HYDROGEN..................................................................................................................................................194
SHELL – INDUSTRIES HYDROGEN..................................................................................................................................................195
SHELL – INDUSTRIES CAP AND TRADE..........................................................................................................................................196
SHELL – INDUSTRIES CAP AND TRADE..........................................................................................................................................197
Links – Hydrogen Cars............................................................................................................................................................................198
Links – Hydrogen Links..........................................................................................................................................................................199
Links – Cap and Trade.............................................................................................................................................................................200
Links – Cap and Trade.............................................................................................................................................................................201
Link Amplifier – Chemical Industry........................................................................................................................................................202
Brink – Chemical Industry.......................................................................................................................................................................203
Internals – Manufacturing........................................................................................................................................................................204
Internals – Chemical Industry..................................................................................................................................................................205
Internals – Chemical Industry..................................................................................................................................................................206
Impacts – Chemical Industry key to All Things......................................................................................................................................207
Impacts – Chemical Industry key to National Defense...........................................................................................................................208
Impacts – Chemical Industry key to Economy........................................................................................................................................209
Impacts – Chemical Industry key to Economy........................................................................................................................................210
Impacts – Air Power.................................................................................................................................................................................211
Impacts – Air Power.................................................................................................................................................................................211
Impacts – Disease....................................................................................................................................................................................213
Impacts – Food Supply............................................................................................................................................................................214
Impacts – Satellites..................................................................................................................................................................................215
Impacts – Hegemony...............................................................................................................................................................................216
Impacts – Terrorism.................................................................................................................................................................................217
Impacts – Nanotech .................................................................................................................................................................................218
Impacts – Nanotech..................................................................................................................................................................................219
Impacts – Nanotech..................................................................................................................................................................................220
Impacts – Agriculture...............................................................................................................................................................................221
Impacts – Manufacturing.........................................................................................................................................................................222
Impacts – Steel ........................................................................................................................................................................................223
Turns Case................................................................................................................................................................................................224
Impact Booster – Methane.......................................................................................................................................................................226
Impacts – Warming..................................................................................................................................................................................227
Impacts – Military....................................................................................................................................................................................228
Impacts – Human Rights..........................................................................................................................................................................229
Impacts – Value of Life............................................................................................................................................................................230
Impacts – Communities...........................................................................................................................................................................231
SHELL – INDUSTRIES HYDROGEN..................................................................................................................................................232
SHELL – INDUSTRIES HYDROGEN..................................................................................................................................................233
SHELL – INDUSTRIES CAP AND TRADE..........................................................................................................................................234
SHELL – INDUSTRIES CAP AND TRADE..........................................................................................................................................235
Links – Hydrogen Cars............................................................................................................................................................................236

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DDI 08 – SS Natural Gas Redux
Links – Hydrogen Links..........................................................................................................................................................................237
Links – Cap and Trade.............................................................................................................................................................................238
Links – Cap and Trade.............................................................................................................................................................................239
Link Amplifier – Chemical Industry........................................................................................................................................................240
Brink – Chemical Industry.......................................................................................................................................................................241
Internals – Manufacturing........................................................................................................................................................................242
Internals – Chemical Industry..................................................................................................................................................................243
Internals – Chemical Industry..................................................................................................................................................................244
Impacts – Chemical Industry key to All Things......................................................................................................................................245
Impacts – Chemical Industry key to National Defense...........................................................................................................................246
Impacts – Chemical Industry key to Economy........................................................................................................................................247
Impacts – Chemical Industry key to Economy........................................................................................................................................248
Impacts – Air Power.................................................................................................................................................................................249
Impacts – Air Power.................................................................................................................................................................................250
Impacts – Disease....................................................................................................................................................................................251
Impacts – Food Supply............................................................................................................................................................................252
Impacts – Satellites..................................................................................................................................................................................253
Impacts – Hegemony...............................................................................................................................................................................254
Impacts – Terrorism.................................................................................................................................................................................255
Impacts – Nanotech .................................................................................................................................................................................256
Impacts – Nanotech..................................................................................................................................................................................257
Impacts – Nanotech..................................................................................................................................................................................258
Impacts – Agriculture...............................................................................................................................................................................259
Impacts – Manufacturing.........................................................................................................................................................................260
Impacts – Steel ........................................................................................................................................................................................261
Turns Case – Chem Industry key to renewables – (and RPS).................................................................................................................262
AFF – Oil Prices Turn .............................................................................................................................................................................263
NEG At: Oil Prices turn...........................................................................................................................................................................264
At: Link turns...........................................................................................................................................................................................265
AFF – High Natural Gas Bad – Econ......................................................................................................................................................266
High NG priceshift to AE....................................................................................................................................................................267
Oil (and high NG prices) key to Russia Econ ........................................................................................................................................268
AFF Canada – NG reduction boosts revenues.........................................................................................................................................269
At: Wind Energy Trades off.....................................................................................................................................................................270
NG collapses chemical industry - econ ...................................................................................................................................................271
NG collapses Steel Industry – heg...........................................................................................................................................................272
NG solves Acid Rain – extinction/Calvin 98...........................................................................................................................................273
LNG – can’t stabilize prices....................................................................................................................................................................274
At: Trade off – generic............................................................................................................................................................................275
Natural Gas = Renewable........................................................................................................................................................................276
Natural Gasrenewables in other areas..................................................................................................................................................277
Low NG pricesno renewables..............................................................................................................................................................278
AT: AE Decreases Natural Gas................................................................................................................................................................279
Natural Gas Peak......................................................................................................................................................................................280
Natural Gas Peak......................................................................................................................................................................................281
Natural Gas Price Spikes.........................................................................................................................................................................282
Natural Gas Price Spikes.........................................................................................................................................................................283
Gas Markets Risky...................................................................................................................................................................................284
Energy Regulation Bad............................................................................................................................................................................285
AT: Resource War with China/India........................................................................................................................................................286
Impact Defense – Terrorism.....................................................................................................................................................................287
Terrorism Good – Econ (1/2)...................................................................................................................................................................288
Terrorism Good – Econ (2/2)...................................................................................................................................................................289
At: Terrorism kills econ...........................................................................................................................................................................290
Terrorism Good – Heg.............................................................................................................................................................................291
Impact Defense – Economy.....................................................................................................................................................................292
Econ Deline Inevitable.............................................................................................................................................................................293
AFF Canda...............................................................................................................................................................................................295

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DDI 08 – SS Natural Gas Redux
AFF LNG Safety......................................................................................................................................................................................296
AFF – LNG Opposition...........................................................................................................................................................................297
AFF – LNG demand low.........................................................................................................................................................................298
AFF – renewablesNG..........................................................................................................................................................................299
.................................................................................................................................................................................................................300
AFF – LNG Costs High...........................................................................................................................................................................300
AFF – Indonesia – shifting to regional markets/low...............................................................................................................................301
AFF - Indonesia.......................................................................................................................................................................................302
AFF – US = no investments in Indonesia................................................................................................................................................303
.................................................................................................................................................................................................................303
AFF – US Not Key..................................................................................................................................................................................304
AFF – Wind No-Link...............................................................................................................................................................................305
AFF – Ethanol No-Link...........................................................................................................................................................................306
AFF – Transition to Regional Markets Now............................................................................................................................................307
AFF – Indonesia LNG Market low..........................................................................................................................................................308
AFF – No IPI Pipeline.............................................................................................................................................................................309
AFF – IPI fails.........................................................................................................................................................................................310
AFF – IPIIran = nukes and terrorism...................................................................................................................................................311
AFF – Relations Good Now....................................................................................................................................................................312
AFF – No Pipeline...................................................................................................................................................................................313
AFF – Nuclear Demand...........................................................................................................................................................................314
AFF – Coal Demand................................................................................................................................................................................315
AFF – Pipeline Inevitable........................................................................................................................................................................316
AFF – Pipeline Bad – Terrorism..............................................................................................................................................................317
AFF – Pipeline Bad – Energy Security....................................................................................................................................................318
AFF – Pipeline Bad – Iran.......................................................................................................................................................................319
AFF – Pipeline Bad – Iran.......................................................................................................................................................................320
AFF – Iran Sanctions Bad........................................................................................................................................................................321
AFF – TAPI Pipeline Better.....................................................................................................................................................................322
AFF – Russia relations low......................................................................................................................................................................323
AFF – Russia Collapse now.....................................................................................................................................................................324
AFF – US not dependent on Russia ........................................................................................................................................................325
AFF – no Russia War...............................................................................................................................................................................326
AFF – Non-Unique..................................................................................................................................................................................327
AFF – Energy key to Russian Influence..................................................................................................................................................328
AFF – No US-Russia Cooperation Slayer...............................................................................................................................................329
AFF – US-Russia relations resilient........................................................................................................................................................330
AFF – No I/L – Too Much U.S. Supply...................................................................................................................................................332
AFF – Empirically Denied – Energy Relations.......................................................................................................................................333
AFF – I/L Turn – Retaliation...................................................................................................................................................................334
AFF – Relations Non-Unique..................................................................................................................................................................335
AFF - Flaring...........................................................................................................................................................................................336
.................................................................................................................................................................................................................336
AFF – Industries – Chem Industryrenewables now.............................................................................................................................337
AFF Industries – Solar power for Chem Industry...................................................................................................................................338

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DDI 08 – SS Natural Gas Redux

Uniqueness – NG Demand Increasing

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

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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DDI 08 – SS Natural Gas Redux

Uniqueness – NG Demand Increasing


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,

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

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,

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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DDI 08 – SS Natural Gas Redux

Uniqueness – NG Demand Increasing


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,


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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DDI 08 – SS Natural Gas Redux

Uniqueness – NG Demand Increasing


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.

10
DDI 08 – SS Natural Gas Redux

Uniqueness – NG Demand Increasing


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."

11
DDI 08 – SS Natural Gas Redux

Uniqueness – Demand will stay high

Natural gas demands will stay high through 2009


Targeted News Service 08 ( “Rising Natural Gas Prices And Lower Hydroelectric Power Supplies Expected To Increase Electricity Costs,” June 10,
Lexis)

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.

Demand for natural gas in the United States is rising


Alan Greenspan 04 Federal Reserve Board, 4-27-04, “Energy”, http://www.csis.org/energy/040427_greenspan.pdf

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.

12
DDI 08 – SS Natural Gas Redux

Uniqueness – NG demand Decreasing

Natural Gas demand is low


RTT News 7/22 (NASDAQ, “Natural Gas Dips To Six-Week Low,” http://www.nasdaq.com)

Natural gas plunged to a fresh six-week low on Tuesday, following the lead of crude oil. August natural gas
closed at $11.48 per million British thermal units, down 48.2 cents on the session. Prices fell as low as $11.376.
Prices closed modestly higher on Monday, up 5.5 cents on the session. Prices climbed as high as 12.137.
Natural gas slipped on Friday and finished down 40 cents on the day. Prices touched as low as $11.812, taking
out the lows from earlier in the week. Prices climbed on Thursday as traders considered a rise in crude oil prices
and natural gas inventory data. Traders looked ahead to Thursday's inventory data from the Energy Information
Administration. Last week's report indicated that natural gas inventories were up 90 billion cubic feet to 2,208
bcf in the week ended July 4. Analysts were looking for a rise of about 100 bcf. Stocks were down 389 bcf from
the year-ago pace and down 70 bcf from the five-year average. Stockpiles were up 85 billion cubic feet in the
prior week. Oil saw its largest single-day drop in more than 17 years on Tuesday as demand concerns led traders
to sell energy commodities. Light sweet crude for August delivery ended the session $138.74, down $6.44 on
the session. Oil touched as low as $135.92 following a sharp drop around the 11 a.m. ET. In electronic trading
before the open, oil moved as high as $146.73, taking out Monday's high, before heading sharply lower.
Traders indicate they feel demand could drop as Federal Reserve Chairman Ben Bernanke offered a bleak
economic outlook to Congress on Tuesday. Bernanke said downside risks to economic growth have increased
while at the same time the upside risks to inflation have intensified since he last testified in February.

13
DDI 08 – SS Natural Gas Redux

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 extracted
As 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."

14
DDI 08 – SS Natural Gas Redux

Uniqueness - Canada NG demand low


Natural Gas demand from Canada is decreasing
Herbert 03 (John, “Gas Crisis Forum: Prices Pointing Skyward!,” Renewable Power Analysis Director at Platts Research & Consulting, March 2003, Public
Utilities Fortnightly, http://www.pur.com/pubs/4230.cfm)

Natural gas imports from Canada were, until the last several years, a major source of new supplies, and often
the stopgap source of supplies in the depth of winter. For example, Canadian imports were 21 percent of
domestic natural gas production in December 2000, when the average price of gas was near $9.00/MMBtu.
Between November and December of 2000, imports rose by 1 billion cubic feet (Bcf) a day. n2 Without the 1
Bcf increase in Canadian imports, the price would have been still higher. Yet, Canadian imports will most likely
not increase and not be a stopgap source of supplies this year. Some Canadian companies and consumers
believe our recent policies on Canadian exports of agriculture, lumber and other commodities to the United
States amount to economic warfare. Moreover, the export/import pipe capacity between the United States and
Canada has increased hardly at all in the last two years, and last winter much of this pipe space was near or
above capacity limits. There are reasons not to push this capacity to the limit. The chance of operational
problems increases at these times.

Natural gas from Canada is low – they need it for their own domestic needs
Perry 08 (Mark, July 20, “Nuclear power plants,” The Eureka Reporter, http://www.eurekareporter.com/article/080720-nuclear-power-plants)

One-quarter of the natural gas supply is wasted on electricity generation. Since 1990, virtually all of the new
electric-power capacity in the country has used natural gas, and that has driven up its price.
Natural gas is a finite and dwindling commodity. North American production has been at a plateau in recent
years. Canada has told the U.S. not to expect additional shipments of natural gas because it now requires a
larger share of its gas reserves to meet its own domestic needs.

15
DDI 08 – SS Natural Gas Redux

Uniqueness – NG prices high

Gas price high now


AP 08 (July 3, “Avista warns of continued natural gas price hikes,”
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080703&id=8859531)

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.

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,, 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.

16
DDI 08 – SS Natural Gas Redux

Uniqueness – NG Prices High


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.

17
DDI 08 – SS Natural Gas Redux

Uniqueness – NG Prices High


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.

18
DDI 08 – SS Natural Gas Redux

Uniqueness – NG Prices High


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.

19
DDI 08 – SS Natural Gas Redux

Uniqueness – NG Prices High


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.

20
DDI 08 – SS Natural Gas Redux

Uniqueness – NG Prices High


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

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 highs


Energy Information Administration, July 10, 2008, “Natural Gas Weekly Update”,
http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp, Accessed July 15, 2008
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.

21
DDI 08 – SS Natural Gas Redux

Uniqueness – NG Prices Increasing


Natural Gas prices will increase

Bloomberg. 07/02/08. “Natural Gas to Converge With Oil Price, Exporters Say.”
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 Journal
http://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.

22
DDI 08 – SS Natural Gas Redux

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.

23
DDI 08 – SS Natural Gas Redux

Uniqueness – NG prices low

Natural gas prices low now


Fletcher 08 (Sam, July 25, Senior Writer for Oil and Gas Journal, “Market Watch: Natural gas price falls, oil price rallies,”
http://www.ogj.com/display_article/335369/7/ARTCL/none/none/MARKET-WATCH:-Natural-gas-price-falls,-oil-price-rallies/?dcmp=OGJ.Daily.Update)

The front-month natural gas contract fell July 24 on the New York futures market after the Energy Information
Administration reported a continued build in US gas storage. "A stock build slightly higher than expected…
made for another sharp fall of that commodity, but there was enough support on crude oil for the weakness in
natural gas not to spread to the rest of the complex," said Olivier Jakob at Petromatrix, Zug, Switzerland. "From
the high at the start of the month to the low of [July 24], natural gas has lost 35%."
Prices for crude and petroleum products rallied July 24 and continued to make moderate gains in early trading
July 25.

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.

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.

24
DDI 08 – SS Natural Gas Redux

Uniqueness – NG prices low


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.

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.

25
DDI 08 – SS Natural Gas Redux

Uniqueness – NG Prices Decreasing


Gas prices will collapse by winter
(Sam Fletcher 4-20-08 Experts predict Natural Gas collapse later this summer
http://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.”

26
DDI 08 – SS Natural Gas Redux

Uniqueness – LNG Increasing


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.

27
DDI 08 – SS Natural Gas Redux

Uniqueness – LNG Increasing


US is importing exponentially more LNG
Lanny 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 grow


Business 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 now


Business 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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Uniqueness – LNG Increasing


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.

29
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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 2009


Business 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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Uniqueness – LNG Increasing


LNG is poised for short-term and long-term growth
Reuters 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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Uniqueness – LNG Increasing


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 is 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 take
• Liquefied 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 increase
Bloomberg 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.

32
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Uniqueness – LNG Increasing


slowdown of other markets implicates an increase in US LNG imports
Joe 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 increasing


Joe 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 energy
greenparty.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 US
Canaport 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 increasing
Frank 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.

34
DDI 08 – SS Natural Gas Redux

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.

35
DDI 08 – SS Natural Gas Redux

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 US


Loren 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 down


Bloomberg 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.

36
DDI 08 – SS Natural Gas Redux

Incentives drop NG demand and NG prices


Incentives for renewable energy projects lower and drop prices of natural gas
Nogee 05 (Alan, Clean Energy Program Director of Union of Concerned Scientists,” http://www.ucsusa.org/clean_energy/clean_energy_policies/renewable-
energy-can-lower-natural-gas-prices.html)

On behalf of the Union of Concerned Scientists, I am writing in response to your request for suggestions regarding policy proposals that address concerns with natural
gas supply and demand constraints, and rising natural gas prices. The Union of Concerned Scientists (UCS) is a nonprofit organization of more than 50,000 citizens and
scientists working for practical environmental solutions. For more than two decades, UCS has combined rigorous analysis with committed advocacy to reduce the
environmental impacts and risks of energy. Our energy program focuses on encouraging the development of clean and renewable energy resources, such as solar, wind,
geothermal and biomass energy, and on improving energy efficiency. We understand that the goal of this process is to find ways to reduce the
cost of natural gas by identifying policies that increase natural gas supplies, and reduce demand for natural gas.
In short, UCS believes that implementing policies to increase energy efficiency and renewable energy use for
generating electricity would help to achieve both of these goals. These mechanisms are also needed to meet our future electricity needs,
diversify our electricity supply, stabilize natural gas and electricity prices, improve our nation’s energy security, and protect the environment. Specifically, we
recommend that the Committee consider a renewable electricity standard—a market-based mechanism that requires
utilities to gradually increase the portion of their electricity produced from renewable energy sources—as one of
the most effective approaches for reducing our reliance on natural gas and stabilizing prices. In addition, we
recommend a broad range of tax incentives and other financial support mechanisms to promote renewable
energy and energy efficiency

37
DDI 08 – SS Natural Gas Redux

Alternate Energy 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.

38
DDI 08 – SS Natural Gas Redux

Alternate Energy 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.

39
DDI 08 – SS Natural Gas Redux

Renewables 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

• As the cost of electricity generated from renewable resources falls, that electricity becomes competitive with electricity
One way in which renewable energy competes is as a hedge
generated from fossil fuels.
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.
40
DDI 08 – SS Natural Gas Redux

Renewables decreases NG Demand


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.

41
DDI 08 – SS Natural Gas Redux

Renewables decreases NG Demand


Renewable energy could be used as a hedge against natural gas
Mark 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 are
• immune to natural gas fuel price risk,1 provide a real economic benefit: unlike natural
gas-fired
• generation,2 renewable energy is typically sold under fixed-price contracts. Building
upon earlier analysis
• of this issue (Awerbuch 1993, 1994; Brower 1997; Hoff 1997; Kahn and Stoft 1993), this paper
aims to
• quantify the hedge value of renewable energy by equating it with the cost of eliminating natural
gas price
• risk through alternative means – specifically, through hedging with gas-based financial
derivatives. Our
• hope 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.

42
DDI 08 – SS Natural Gas Redux

Renewables decreases 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]

43
DDI 08 – SS Natural Gas Redux

NG competes with renewables


Renewable energy and natural gas compete – low gas prices make renewable investment impossible
Serchuck 97 (Adam, Ph.D president of Serchuk Associates, a clean energy consultancy erved five years as the Research Director of the Renewable Energy
Policy Project (REPP) , Renewable Energy Policy Project, Issue Brief, May, No.8, “Natural Gas: Bridge to a renewable energy future,” http://209.85.215.
104/search?q=cache:QxOA1xsAr9sJ:www.crest. org/repp_pubs/pdf/issuebr8.pdf+renewable+energy+natural+gas&hl=en&ct=clnk&cd=11&gl=us)

Renewable energy technologies have made remarkable technical and economic progress in recent years.
Despite these gains, American renewable energy firms face a serious competitive threat from natural gas.
The price of gas has dropped startlingly since the mid-1980s. In most settings, no renewable energy technology can match the cost
of gas-fired generating units in supplying power to the electric transmission grid. Changes in the electric
industry have heightened the importance of this cost difference by exposing power generators to increased
competition. The competitive problems facing renewable energy concern not only the firms that sell the energy
or the capital goods that produce it. Renewable energy has an essential role to play in meeting environmental
goals, perhaps, above all, those related to mitigating global climate change. Its ability to play that role requires
sustained and rapid growth; it therefore depends on expanding markets. Natural gas now defines one of the
competitive boundaries for those markets.

44
DDI 08 – SS Natural Gas Redux

Renewables decreases NG demand/prices


Recent studies show renewables would reduce natural gas demand and prices
Chen 05 (Allan, “Controlling Natural Gas Prices: Energy Efficiency to the rescue,” Science at Berkeley Lab, http://www.lbl.gov/Science-
Articles/Archive/sabl/2005/February/natural-gas.html)

A new study by researchers at Lawrence Berkeley National Laboratory suggests that renewable energy and
energy efficiency can help keep natural gas price increases in check. The study, titled Easing the Natural Gas
Crisis: Reducing Natural Gas Prices through Increased Deployment of Renewable Energy and Energy
Efficiency, was written by Ryan Wiser, Mark Bolinger, and Matt St. Clair of Berkeley Lab's Environmental
Energy Technologies Division."Our report shows that renewable energy and energy efficiency can displace gas-
fired electricity generation, reducing gas demand and putting downward pressure on natural gas prices and
bills," says Wiser. They based their findings on a review and analysis of recent modeling studies that evaluate
the effects of renewable energy and greater energy efficiency on reducing gas prices.
"The 13 studies and 20 specific analyses that we review consistently show that increased use of renewable
energy and energy efficiency can begin to reduce natural gas prices," says Bolinger.

45
DDI 08 – SS Natural Gas Redux

Renewables (and Efficiency CP) drop NG prices

Renewable energy ( and efficiency CP) drops natural gas prices


Elliott et al. 03 (Neal, Ph.D, P.E., Report Number E032, Anna Monis Shipley, Steven Nadel, and Elizabeth Brown, “Natural Gas Price Effects of Energy
Efficiency and renewable Energy Practices and Policies,” http://www.aceee.org/pubs/e032full.pdf)

policies to promote renewable energy and energy efficiency can reduce the price of natural gas by lowering
demand, especially gas used for electric power production. Modeling by the ACEEE and EEA finds that efficiency
improvements in furnaces, appliances, and industry, along with rapid increases in cost-effective renewable
energy (such as win power), can reduce wholesale gas prices by 20%, resulting in a significant reduction of fertilizer costs. This will
modestly reduce corn production costs, increasing profits in a very low-margin business.

46
DDI 08 – SS Natural Gas Redux

Renewables reduces NG Prices


Renewables ill 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.

47
DDI 08 – SS Natural Gas Redux

Renewables reduce NG demand – RPS mechanism

Solvency mechanisms like RPS reduce natural gas demand


Union Of Concerned Scientist 05 (“Renewable Energy Can Help Ease Natural Gas Crunch,” Fact Sheet,
http://www.ucsusa.org/clean_energy/clean_energy_policies/renewable-energy-can-help-ease-natural-gas-crunch.html)

Increasing Renewable Electricity Use From 2.5 Percent Today to 20 Percent by 2020 Would Reduce Natural
Gas use by 6 Percent, While Saving Consumers Nearly $27 Billion. An unprecedented surge of natural gas power plant construction (Fig. 1) over the past four years
has contributed to rising natural gas prices, hurting American families and businesses: Natural gas prices today are more than double their
1990s level of $2.00-$2.50 per thousand cubic feet (Mcf).The U.S. Energy Information Administration (EIA)
has increased its gas price projection for each of the last seven years (Fig. 2.) Some analysts believe EIA’s forecasts are still too
low, and project gas prices staying in the $4-$6/Mcf range.Some manufacturing plants that rely heavily on gas have already had to
reduce operation or move overseas.Natural gas accounts for about 90 percent of the cost of fertilizer, creating a
hardship for farmers.

48
DDI 08 – SS Natural Gas Redux

RPS Reduces NG prices

RPS would reduce natural gas prices


Utah Public Utilities 07 (“Federal Renewable Portfolio Standard Will Reduce Power and Natural Gas Costs, But Not Have a
Significant Impact on GHG Emission Levels,” Press release, http://publicutilities.utah.gov/archive/federalrenewableenergyportfoliostandard.pdf)

A 15-percent Federal Renewable Energy Portfolio Standard (RPS) will drive down natural gas demand and
price, lower the overall price of power, but only lead to a slowing in the growth rate of greenhouse gas
emissions (GHG), not an absolute reduction fromcurrent levels according to the new Wood Mackenzie report,
"The Impact of a FederalRenewable Portfolio Standard."

15% RPS will drive down demand and price of natural gas
Utah Public Utilities 07 (“Federal Renewable Portfolio Standard Will Reduce Power and Natural Gas Costs, But Not Have a
Significant Impact on GHG Emission Levels,” Press release, http://publicutilities.utah.gov/archive/federalrenewableenergyportfoliostandard.pdf)

Nm According to the report, the adoption of a 15% Federal RPS will require a flood of new wind and other
renewable projects well beyond current proposed projects, leading to a 500-percent increase in renewable
capacity from current levels by 2026. This increase translates into an incremental construction cost of $134
billion (2006 dollars) between 2006 and 2026. The report also shows the switch to renewable energy will drive
down demand and price of natural gas. "The lower fuel costs and fossil fuel consumption will lead to lower
electricity costs," continued Sannicandro

Studies show RPS will reduce natural gas prices and demand
Chen 05 (Allan, “Controlling Natural Gas Prices: Energy Efficiency to the rescue,” Science at Berkeley Lab, http://www.lbl.gov/Science-
Articles/Archive/sabl/2005/February/natural-gas.html)

The researchers also developed a simple analysis tool that can be used to evaluate the potential impact of
renewable energy and energy efficiency on natural gas prices and bills across all sectors of the economy.
"Based on our analysis, we find that the 18 existing state renewable portfolio standards [RPS] in the U.S. could
provide natural-gas bill savings of $7 to $18 billion on a net-present-value basis, while the California RPS alone
could deliver national consumer savings of $3 to $9 billion," says Wiser. A number of states are developing
renewable portfolio standards, which mandate that electricity suppliers meet their supply needs with a specific
minimum percentage of renewable energy."Overall, our study suggests that renewable energy and energy
efficiency can help to alleviate the threat of high natural gas prices over the short and long term, thereby
lowering gas and electricity bills for consumers," concludes Wiser.

49
DDI 08 – SS Natural Gas Redux

Cap and Trade reduce NG demand

Cap and trade reduces natural gas demand in the long-term


Stavins 07 (Robert, economist and National Bureua of Economic Research, “A US Cap-and-Trade System to Address Global Climate Change,”
http://www.brookings.edu/~/media/Files/rc/papers/2007/10climate_stavins/10_climate_stavins.pdf)

One of the ways in which the cap-and-trade system cost-effectively de-carbonizes the economy is through its
impacts on the production of electricity from various sources. Because sources of electricity differ greatly in
their carbon intensity, the gradually increasing CO2 allowance prices that characterize both cap trajectories lead
not only to (relatively small) reductions in electricity production, but also to dramatic changes in the mix of
fuels used to generate electricity. Conventional coal-fired generation drops sharply even under the less
aggressive policy and disappears completely by 2040 under the more aggressive policy, replaced mainly by
generation from new plants using CCS. In the short term, electric power generation from natural gas increases
with the price of CO2, but this source eventually declines as CO2 prices rise at the end of the period and CCS
technology becomes increasingly attractive.

50
DDI 08 – SS Natural Gas Redux

Nuke Power reduces NG prices


Nuclear power drops natural gas demands
Adams 08 (Rod, “CNG as a Vehicle Fuel – one way nuclear power can help ease the motor fuel crisis,” June 25, http://redgreenandblue.org/2008/06/25/cng-as-a-
vehicle-fuel-one-way-nuclear-power-can-help-motor-fuel-crisis/)

in the United States there are often market conditions where one
In Europe, oil prices and natural gas prices have a definite linkage, but
fuel develops a significant cost advantage over the other. Such a situation exists today. To compare different energy fuels, we
should think about convenience of storage, flexibility in consumption, delivery mechanisms, and cost per unit energy. The traders have not made that last bit easy, over
the many decades that energy fuels have been bought and sold, some rather unusual units have become the standard. Most of us are familiar with diesel or gasoline
prices in $/gal, but natural gas trades in a unit that looks really strange the first time you see it - $/MMBTU. MM is the Roman numeral representation of thousand
thousand or 1 million. A reasonably accurate thumb rule is that 7 gallons of diesel fuel contains one MMBTU. If you take a look at one of my most frequently visited
web pages - Bloomberg.com: Energy Prices you will find that heating oil - essentially diesel fuel without the taxes and retail mark-up - is trading today for $3.80 per
gallon ($26.60 per MMBTU) while natural gas - again without retail mark-ups or taxes - is trading at about $13.00 per MMBTU. In the wholesale market, natural gas is
selling at a 50% discount on a cost per unit heat basis compared to diesel fuel. I work in Washington, DC and live in Annapolis, MD, so I see a LOT of buses every day.
In our national capital city, about 1/3 of the 1500 buses run by the Washington Metro Area Transit Authority (WMATA) use Compressed Natural Gas (CNG) as their
fuel source while the rest run on diesel fuel. Most of the CNG buses have entered service within the past 7 years. They have won support from many environmental
groups like the NRDC. Of course, not everyone likes CNG buses, people that prefer to sell diesel fuel and diesel engines, for example, have worked hard to prevent
market share losses to the upstart competitor. The DC area CNG buses are very obvious - some are painted with jungle scenes to emphasize their green cred while
others simply have the large-letter marketing slogan - “This Bus Running on Clean Natural Gas” - plastered on three of the four surfaces of the vehicle. CNG works
especially well for a large fleet that gets refueled at certain fixed stations and includes enough vehicles to support a specialized group of mechanics and parts inventory.
CNG buses cost a bit more than diesel buses, but they can run more cleanly. When the fuel is available for a 50% discount, the economics look pretty attractive.
As school districts struggle with the high cost of diesel fuel for their bus fleets, perhaps it is time for more of them to take another look at CNG if they are planning any
large scale bus replacement purchases. The National Renewable Energy Laboratory (NREL) produced a comprehensive study of the choices titled Washington
Metropolitan Area Transit Authority: Compressed Natural Gas Transit Bus Evaluation in April 2006. In order to use the study for a current decision, it is important to
update the fuel price figures; the market has changed quite a bit since the evaluation period (2001-2002). One more thread to tie in. One big frustration from my
involvement in numerous energy related debates is that people with an anti-nuclear position often dismiss the value of increased use of nuclear power with regard to
helping to meet the demand for motor fuels. Their line is that nuclear power is only useful for producing electricity - which is demonstrably not true - and that oil is
used for transportation, not electricity production - which is also not true.All
that aside, there should be no argument that natural gas is
most definitely used for electricity production (approximately 20% of the electricity in the US comes from
burning natural gas), that the increased use of gas in electricity has caused part of the 600% increase in natural
gas prices over the past 10 years, and that new nuclear power plants can displace some of that gas to make it
more available for other uses. If there is more gas available, it would make CNG vehicles even more competitive against diesel fuel vehicles.
The law of supply and demand has never been repealed - if the demand for gas in electrical power plants goes down, the price of
gas will go down until other customers enter the market to purchase that newly available supply.

Nuclear power drives down natural gas prices


IACT and EnergyPath Corporation joint 04 (European Nuclear Society, “Texas Institute to Evaluate Nuclear Power as Alternative to Natural
Gas,” http://www.euronuclear.org/reflections/texas-instute.htm)

United States – the Texas Institute for the Advancement of Chemical Technology (TIACT) is to investigate the feasibility of
using nuclear power to meet the energy needs of US industrial end-users. High and increasingly volatile natural gas prices that
have created economic turmoil and led to plant closures in the US petrochemical industry have prompted this move, which
was announced by TIACT yesterday, 10 March 2004 – along with confirmation that it will receive financial assistance from the
U.S. Department of Energy (DOE) in the form of a cost-shared cooperative agreement.”Manufacturers are getting whipsawed
by high natural gas prices,” said Dr Charles Holland, TIACT’s president and emeritus professor of chemical engineering at
Texas A&M University, commenting on the significant energy requirements in manufacturing basic chemical commodities
such as ethylene. Natural gas is an essential feedstock for US petrochemical manufacturing. The lack of an alternative local
raw material equivalent to natural gas makes it more costly to produce everyday chemical commodities. The cost of electricity,
the other key ingredient in the production of chemicals, is also affected by high natural gas prices because almost all of the new
power plants built in recent years burn natural gas. Faced with global competition, chemical companies have been unable to
offset these higher costs and the unfortunate result is that production is moving offshore. Dr Holland says that nuclear power
is seen as a possible long-term solution to these problems.

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DDI 08 – SS Natural Gas Redux

Nuke Power reduces NG prices

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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DDI 08 – SS Natural Gas Redux

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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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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DDI 08 – SS Natural Gas Redux

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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DDI 08 – SS Natural Gas Redux

NG Demand key to LNG


Future US demand will force LNG use
Aruvian 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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DDI 08 – SS Natural Gas Redux

High NG Prices key to LNG

High prices are key to LNG


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

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Global Gas Market Rising

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+LN
G+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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LNG Market developing

An LNG market is developing now


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]
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 demand


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]
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 expanding


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]
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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DDI 08 – SS Natural Gas Redux

US key to global prices

US gas demand key to global gas prices

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

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.”
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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Perception - Berman

Prices are determined by perception of suppliers and policies


Berman 06 (Arthur, Houston Geological Society, “The Doors of Perception: Making Sense of Natural Gas Prices,”
http://www.hgs.org/en/articles/printview.asp?1011)

In the case of natural gas, sentiment guides what suppliers believe that gas is worth and are willing to pay
today, and a few months into the future. The fact that the is awash in natural gas supply, at least for the
near-future of several years, is less important than the perception that sufficient gas is immediately
available to be sent on its way to end users. William Blake wrote, "If the doors of perception were cleansed
every thing would appear to man as it is, infinite. For man has closed himself up, till he sees all things through'
narrow chinks of his cavern." (Blake, 1793) The caverns through which gas prices are viewed must be those in
which our precious volumes of surplus natural gas are stored underground.

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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 Russia


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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SHELL – RUSSIA
C. Cooperation on LNG is key to U.S.-Russia relations
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,
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.

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.
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 extinction


Mohamed Sid-Ahmed, Egyptian Political Analyst, August, 26, 2004, Al-Ahram Newspaper,
http://weekly.ahram.org.eg/2004/705/op5.htm | SWON.
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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DDI 08 – SS Natural Gas Redux

Uniqueness – Natural Gas Dependence Growing


America’s dependence on natural gas is growing
Gary 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 Russia
Energy 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 increasing


Sen. 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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DDI 08 – SS Natural Gas Redux

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 CM
MOSCOW: 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 worldwide


Reuters 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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DDI 08 – SS Natural Gas Redux

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 CM
LONDON -- 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 military
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. 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 relations
Dr. 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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Internals – Natural Gas Key to Relations


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 relations


Robert 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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Internals – Natural Gas Key to Relations


Russia natural gas is key for relations, economics and security
Robert 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.

Internals – Natural Gas Key to Relations


Both sides want a natural gas deal
The 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

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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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DDI 08 – SS Natural Gas Redux

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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DDI 08 – SS Natural Gas Redux

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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DDI 08 – SS Natural Gas Redux

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 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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DDI 08 – SS Natural Gas Redux

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
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
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Impacts – US-Russian War


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 market
Lionel 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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US-Russia Cooperation on Nuke Energy

Relations are high now and cooperation on nuclear energy is increasing


Carnegie Endowment 06 (“Nuclear Energy and US-Russian Cooperation,”
http://www.carnegieendowment.org/events/index.cfm?fa=eventDetail&id=918)

Despite the popular narrative, US-Russian relations are generally good. They have undergone and are
undergoing dramatic changes, but the relationship is maturing from an overly romantic partnership to a more
pragmatic one. Most people speak of this change to a more “selective partnership” as a tragedy, but in reality, it
is a natural evolution. During the 1990s and indeed continuing into the first terms of Presidents Putin and Bush,
the US and Russia shared unrealistic visions of our countries as strategic partners and created an agenda that
was beyond implementation. However, the false expectations created by this romanticism led to
disappointment; both Russia and the US were unable to deliver on their promises. As Bush and Putin entered
their second terms, it became clear that they could not continue to pretend that our countries shared a truly
strategic relationship. A new, more pragmatic partnership has emerged, centered on issues that matter to both of
our countries: counterterrorism, non-proliferation, and most importantly energy security. Of course, defining
this new relationship was and still is difficult and presents a major challenge. In many ways, it was easier to
maintain a relationship based on platitudes and false pretences, but the key to ensuring the health and stability
of our partnership is not lies, but rather, engagement on practical and technical issues, such as the challenges
presented to us in the field of nuclear energy. This new pragmatic relationship has made me much more positive
about our relations than I was three or four years ago.

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SHELL – CANADA
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,

natural gas demand is


Due to supply security and environmental concerns,
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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SHELL – CANADA
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

• 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.

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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SHELL – CANADA
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, 2008


http://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:2015200
8~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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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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1NC LNG Econ (1/2)


A). LNG imports on the rise now
BusinessWire 7/17, 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

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). Plan tanks natural gas prices


Wiser et al. 05 (Ryan, 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>>

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). RE 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.

C). High prices are key to LNG


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

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1NC LNG Econ (2/2)

D). LNG is key to the economy


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

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.

102
DDI 08 – SS Natural Gas Redux

Renewables LNG Tradeoff link


Incentives for renewables trade off with LNG demand
Paul 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.

103
DDI 08 – SS Natural Gas Redux

High NG 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, .

• 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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DDI 08 – SS Natural Gas Redux

NG 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, .



• 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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DDI 08 – SS Natural Gas Redux

LNG key to econ


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, .

• 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, .

• 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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DDI 08 – SS Natural Gas Redux

LNG key to econ


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 Spencer
Abraham 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/, .

• recent improvements in engineering and construction brought LNG production


Actually,
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.

107
DDI 08 – SS Natural Gas Redux

LNG key to econ


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, .

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,
.

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 accidents
LNG 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, .


• 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 world
Bryan 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 world
Frank 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)
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.

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, .

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.

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AT: LNG Accidents


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


• 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 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,
• 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 targets
David J. Lynch 12/19/05 (http://www.usatoday.com/money/industries/energy/2005-12-19-lng-usat_x.htm) [
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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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) .
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 demand


Paul W. Parfomak and Aaron Flynn. 1/28/04 (Import Terminals: Siting, Safety, and Regulation, RL32205) .
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 regulation
Paul W. Parfomak and Aaron Flynn. 1/28/04 (Import Terminals: Siting, Safety, and Regulation, RL32205) .
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) .
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 demands
David J. Lynch 12/19/05 (http://www.usatoday.com/money/industries/energy/2005-12-19-lng-usat_x.htm) .
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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Uniqueness – LNG Inevitable


The need for imports makes LNG inevitable
Energy Information Administration 2003 (The Global Liquefied Natural Gas Market: Status & Outlook. DOE/EIA-0637. Dec. 2003.)
.
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 US


Energy Information Administration 2003 (The Global Liquefied Natural Gas Market: Status & Outlook. DOE/EIA-0637. Dec. 2003.)
.
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 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) .
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 of
US 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 measures
Paul W. Parfomak and Aaron Flynn. 1/28/04 (Import Terminals: Siting, Safety, and Regulation, RL32205) .
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 security
Scott 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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Internals – LNG Demand key to Safety


The growing LNG market forces safety measures
Business 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 issue


Price 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 attack
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) .
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,

• 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 quo
Cindy 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 fireballs


Cindy 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 radius
Kate 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 now


Cindy 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 harbors
Jay 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 9/11


Tom 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 explosions


David J. Lynch 12/19/05 (http://www.usatoday.com/money/industries/energy/2005-12-19-lng-usat_x.htm) .
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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Impact – LNG Terror


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/,


• 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,

• 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 fails


Cindy 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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SHELL – INDONESIA
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

• 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.


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

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 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+LN
G+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
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+LN
G+economy&hl=en&ct=clnk&cd=45&gl=us&client=firefox-a

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

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

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
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

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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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.

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].

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.

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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

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]
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
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

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 Portfolio
India 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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Internals – India Natural Gas Demand


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.19
Although 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.

156
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Internals – India Natural Gas Demand


Natural Gas is preferred from lack of regulation

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. 311-312. [Takumi Murayama]
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.

157
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Internals – India Natural Gas Demand


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 com- mercial 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 gas
Sarmadi-Rad, Director of Regional Economic Cooperation and
MFA 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-rich


countries in the region. It is centrally located among the world’s major
oil and gas producers of the world. It shares land and sea borders with
15 countries. It has a vibrant economy with a major pool of skilled
manpower and a well-developed infrastructure. It has 70 million people
within its national borders, and as such it has the largest population in
the region. It is endowed with the second largest natural gas reserves of
the world. Thus, given its manpower and natural wealth as well as its
location advantages, Iran is rapidly emerging as a major supplier of
natural gas to the regional world markets. Our policy of peaceful
engagement with our neighbors and trade partners is an added
advantage.

159
DDI 08 – SS Natural Gas Redux

Impacts – Stability
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.

160
DDI 08 – SS Natural Gas Redux

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

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]
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”.

162
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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


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

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

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.
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.

164
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Impacts – IPI Key to Pakistan Industry


Trans-Pakistani route is beneficial for Pakistani industry

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. 315. [Takumi Murayama]
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.

165
DDI 08 – SS Natural Gas Redux

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

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.
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.

167
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Impacts – Indian Economy


Pipeline key for Indian economy and solving its energy crisis

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.

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

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. 317. [Takumi Murayama]
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

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. 317-318. [Takumi Murayama]
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 tension
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. 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

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. 308. [Takumi Murayama]
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 relation- ships
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

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.

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 conflicts
Sarmadi-Rad, Director of Regional Economic Cooperation and
MFA 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 being
seriously followed up. For this project the techno-economic study of an
1883-km pipeline to carry 45 mcm/day of Iranian gas to Pishin in
Pakistan via the Port of Asaluyeh in Iran has been completed. The
feasibility and commercial viability of this pipeline is no longer in
question.
At the same time, Iran is planning to develop its natural gas pipeline
network by extending it to its eastern and western borders to become a
major hub for natural gas transactions. Expansion of cross border
piped gas trade volume to a net of about 40 bcm/y by next 10 years is
one of the main strategic goals of Iran. The existing pipeline network
plus the ones under construction or study in Iran will eventually link
Central Asia, the Persian Gulf states, Azarbaijan, and Turkish gas
pipelines through Iran to everyones’ benefit. Further extension of this
loop to the East could supply Pakistan and India, and in the West a new
line from Turkey to Europe would complete the link between Asia and
Europe. Such a network will allow unprecedented major swaps with
remarkable 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

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

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

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


[Takumi Murayama]
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

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]
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

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]
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

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


[Takumi Murayama]
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

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


[Takumi Murayama]
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

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. 315. [Takumi Murayama]
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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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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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 wells
drilled into underground gas reservoirs, some natural gas is generated as a
by-product of oil production. Gas produced during oil production is called
associated gas. During oil and gas production, it may be necessary to burn
or release natural gas for a number of operational reasons, including
lowering the pressure to ensure safety. Burning natural gas is known as
flaring, while releasing natural gas directly into the atmosphere is called
venting. In addition to the operational reasons for flaring and venting, in
areas where the primary purpose of drilling is to produce oil, producers
flare or vent associated natural gas because no local market exists for the
gas and transporting it to a market may not be economically feasible.2
Natural gas prices are a major determinant of whether associated gas is
flared and vented or sold. Associated natural gas would be sold if prices
were high enough over a long enough period to justify building the
infrastructure—pipelines and ports—to transport the gas to a market. In
the United States, there are well-developed natural gas markets and
infrastructure to reduce the flaring and venting of associated natural gas.
However, in parts of the world like Africa and the Middle East, where the
natural gas market and infrastructure for transporting gas are not as welldeveloped,
flaring and venting are generally more prevalent. With increases
in natural gas prices, some countries have recognized the potential of
increasing exports to high-demand countries like the United States using
liquefied natural gas (LNG) technology. These countries liquefy the natural
gas and transport it in specially designed tanker ships to the United States
and other countries. When the liquefied gas arrives at an import facility, the
liquid 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.

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 gas is sometimes flared or vented because it has too little


economic value to justify its capture, flaring or venting this gas into the
atmosphere has an environmental cost. In general, flaring emits carbon
dioxide, while venting releases methane.3 These and other chemical
compounds found in the earth’s atmosphere create a greenhouse effect.
Under normal conditions, when sunlight strikes the earth’s surface, some of
it is reflected back towards space as infrared radiation or heat. Greenhouse
gases such as carbon dioxide and methane impede this reflection by
trapping heat in the atmosphere. Methane is 23 times more potent than
carbon dioxide in its ability to warm the atmosphere. While these gases
occur naturally on earth and are emitted into the atmosphere, the
expanded industrialization of the world over the last 150 years has
increased the amount of emissions from human activity (known as
anthropogenic emissions) beyond the level that the earth’s natural
processes can handle. Scientists generally agree that these increased
greenhouse gases are contributing to global warming, which can have
detrimental effects on the climate. In general, the environmental costs of
flaring and venting are not borne by the responsible parties because there
are no restrictions on greenhouse gas emissions. However, nations have
proposed international agreements to limit greenhouse gas emissions,
including those released during flaring and venting.

182
DDI 08 – SS Natural Gas Redux

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 Policy
National 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 envision


how deleterious changes in the monsoons in South Asia (which
encompasses half the world’s population and several nuclear-armed
nations) could quickly escalate into security threats for the United
States; or how an abrupt cooling in the North Atlantic region could
lead to consecutive severe winters that tax the energy resources and
economies 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 to
the 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 in
timely fashion.
Given our current state of knowledge, we cannot predict the
probability of any abrupt climate change. But since the possibility is
real, it seems a useful exercise to contemplate the military ramifications
of potential, abrupt climate changes. Many of these stem from
potential changes in the North Atlantic and Arctic Oceans. As previously
noted, changes within each of these ocean basins may be interrelated
and simultaneous, but let us consider each separately.

183
DDI 08 – SS Natural Gas Redux

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

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

While flaring and venting represent only 3 percent of the total natural gas
production, the natural gas flared and vented—about 100 billion cubic
meters a year—is enough to meet the annual natural gas consumption of
both France and Germany. In general, the amount of flaring and venting
emissions is related to the amount of oil produced: the higher the
production, the more gas flared and vented. Since 1990, the quantity of oil
produced 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 have
decreased.

184
DDI 08 – SS Natural Gas Redux

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.

185
DDI 08 – SS Natural Gas Redux

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.

186
DDI 08 – SS Natural Gas Redux

NG key to solve flaring


Natural gas is solves flaring
Baca 02 (VP of Affiliation: Health, Safety& Environment, “Capital Hill Hearing Testimony Committee: Senate Energy and Natural Resources Headline:
Technology and Transfer Programs Testimony, http://energy.senate.gov/hearings/testimony.cfm?id=412&wit_id=1109)

One potential solution to global gas flaring exists in the form of the North American natural gas market
where demand is expected to grow substantially in the coming decade. It is generally agreed that traditional
supply sources in North America will be insufficient and therefore, other supply sources will have to be tapped
in order to meet growing demand. Supply sources include Canadian and Alaskan natural gas and LNG from
Trinidad and West Africa. We believe that these LNG supply sources can compete in the US market and will
play a role in meeting demand. However, post-September 11 safety and security issues have complicated the
LNG debate and have forced governments to re- examine policies related to sighting and expansion of LNG
facilities.

Strong natural gas markets key to stop flaring


Baca 02 (VP of Affiliation: Health, Safety& Environment, “Capital Hill Hearing Testimony Committee: Senate Energy and Natural Resources Headline:
Technology and Transfer Programs Testimony, http://energy.senate.gov/hearings/testimony.cfm?id=412&wit_id=1109)

However, substantial reductions in flaring during the next 20 years may be possible if current national and
corporate policies and strategies designed to reduce flaring continue. These reductions can be achieved by
greater gas utilization in international and domestic markets, site use and re-injection. The key challenge is
developing markets for this resource. From BP’s perspective, the single most important step that can be taken
to address gas flaring on an international scale is the further development of international and domestic
natural gas markets. If these markets develop, incentives will be in place to encourage local governments to
monetize their natural gas resources, rather than allowing them to be vented. Further development of
international gas markets will create positive social and economic benefits including lower GHG emission,
poverty reduction and cost-effective, reliable, clean fuels through greater energy supply diversity.

187
DDI 08 – SS Natural Gas Redux

High NG price solves flaring


High natural gas prices prevent flaring
Nelligan 04 (Jeff, Managing director of GAO, Opportunities to Improve Data and Reducing Emissions Requestor: Natural Gas Flaring and Venting,
http://www.gao.gov/htext/d04809.html)

Although most natural gas production involves extracting gas from wells drilled into underground gas
reservoirs, some natural gas is generated as a by-product of oil production. Gas produced during oil production
is called associated gas. During oil and gas production, it may be necessary to burn or release natural gas for a
number of operational reasons, including lowering the pressure to ensure safety. Burning natural gas is known
as flaring, while releasing natural gas directly into the atmosphere is called venting. In addition to the
operational reasons for flaring and venting, in areas where the primary purpose of drilling is to produce oil,
producers flare or vent associated natural gas because no local market exists for the gas and transporting it to a
market may not be economically feasible.2 Natural gas prices are a major determinant of whether associated gas
is flared and vented or sold. Associated natural gas would be sold if prices were high enough over a long
enough period to justify building the infrastructure--pipelines and ports--to transport the gas to a market. In the
United States, there are well-developed natural gas markets and infrastructure to reduce the flaring and venting
of associated natural gas.

High gas prices stop flaring


NewScientist and Reuters 07 (“Rising prices could end wasteful gas flaring,” July 12, Special Report Energy and Fuels,
http://environment.newscientist.com/channel/earth/energy-fuels/dn12250-rising-prices-could-end-wasteful-gas-flaring.html)

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.

188
DDI 08 – SS Natural Gas Redux

Subsidies make gas prices high


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 associated


gas, they will decide in favor of that option rather
than flaring or venting only if they have access to
domestic or international energy markets and if
energy prices are favorable. Many developing
countries lack both a domestic gas market and the
infrastructure (liquefied natural gas facilities,
export-oriented pipelines) for selling associated
gas in international markets. Moreover, domestic
sales are often hindered by distorted energy pricing,
monopolistic behavior by vertically integrated
state-owned utilities, and lack of a
transparent legal and regulatory framework allowing
third parties to build and own a network for
selling gas to industries and power generators.
In many developing countries the relatively
low financial returns developers can expect
from investing in the construction of a gas network
have undermined the prospects for developing
a gas market. Part of the problem is often
subsidies for competing energy sources (oil,
coal, nuclear, hydropower), which lead to low
prices for competing fuels.
But in many oil-producing countries the perceived
value of associated gas has changed with
the rise in international natural gas prices since
the early 1970s and as economic and budgetary
pressures have led governments to abolish energy
subsidies. Higher gas prices have encouraged
many governments and companies to develop gas
infrastructure, eventually providing opportunities
to market associated gas domestically or internationally.
Some oil-producing countries, such as
Algeria and the Arab Republic of Egypt, have
developed domestic gas markets and earmarked
a substantial share of domestic production for
export. Even so, many operators in developing
countries continue to view associated gas, and the
requirement to develop gas infrastructure, as a
hindrance to increasing oil production.

189
DDI 08 – SS Natural Gas Redux

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.

190
DDI 08 – SS Natural Gas Redux

Impact Booster – Methane


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

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 gas is sometimes flared or vented because it has too little


economic value to justify its capture, flaring or venting this gas into the
atmosphere has an environmental cost. In general, flaring emits carbon
dioxide, while venting releases methane.3 These and other chemical
compounds found in the earth’s atmosphere create a greenhouse effect.
Under normal conditions, when sunlight strikes the earth’s surface, some of
it is reflected back towards space as infrared radiation or heat. Greenhouse
gases such as carbon dioxide and methane impede this reflection by
trapping heat in the atmosphere. Methane is 23 times more potent than
carbon dioxide in its ability to warm the atmosphere. While these gases
occur naturally on earth and are emitted into the atmosphere, the
expanded industrialization of the world over the last 150 years has
increased the amount of emissions from human activity (known as
anthropogenic emissions) beyond the level that the earth’s natural
processes can handle. Scientists generally agree that these increased
greenhouse gases are contributing to global warming, which can have
detrimental effects on the climate. In general, the environmental costs of
flaring and venting are not borne by the responsible parties because there
are no restrictions on greenhouse gas emissions. However, nations have
proposed international agreements to limit greenhouse gas emissions,
including those released during flaring and venting.

191
DDI 08 – SS Natural Gas Redux

Flaring Warming

Flaring leads to global warming


Elvidge 07 (Christopher, NOAA National Geophysical Data, Earth Observation Group, “A Twelve year Record of National and Global Gas Flaring Volumes
Estimated Using Satellite Data,” Report to World Bank, http://www.ngdc.noaa.gov/dmsp/interest/DMSP_flares_20070530_b.pdf)

Gas flaring is a widely used practice for the disposal of natural gas in petroleum producing areas where there is
no infrastructure to make use of the gas. The companion procedure called venting is the release of gas without
combustion. Venting is not only dangerous, but releases gases known to absorb thermal radiation much
better that carbon dioxide, contributing to the greenhouse affect. Gas flaring is widely recognized as a
waste of energy and an added load of carbon emissions to the atmosphere. Because the flaring combustion is
incomplete, substantial amounts of soot and carbon monoxide are produced, contributing to air pollution
problems.

192
DDI 08 – SS Natural Gas Redux

Flaring Species extinction

A). Flaring kills the sagebrush species


Welch 04 (Craig, “For good or ill, Bush clears path for energy development,” Seattle Times staff reporter,
http://seattletimes.nwsource.com/html/nationworld/2002046456_bushenergy26m.html)

The Wyoming state Department of Environmental Quality recently warned pollution from companies that
"flare" rigs to burn off natural gas was getting out of hand. Federal officials overseeing Green River
Valley gas drilling were so worried a mass of new wells would lead to unhealthy air they talked about how
they someday may need to keep hikers or hunters off public land, according to internal Bureau of Land
Management e-mails. This summer, a report by the Wyoming Game and Fish Department, the state agency that
manages everything from deer to trout for hunters and anglers, was blunt about the risks: "Impending, large-
scale development of these domestic energy reserves is placing sagebrush communities and wildlife at
risk." Much of this boom is the result of technology that helps energy companies retrieve hard-to-get resources.

B). Sagebursh is key to the ecosystem – it prevents other species from being endangered
Bureau of Land Management 05 (“Budget Justification 2005,” http://www.blm.gov/pgdata/etc/medialib/blm/wo/Business_
and_Fiscal_Resources/justification.Par.1963.File.dat/2005Justification.pdf)

Sagebrush habitat is also home to 300 other species of plants and animals that are at risk and in need of
additional conservation efforts. For this reason, the BLM is also focusing on restoration of the sagebrush
ecosystem, as this is key to preventing future listing of threatened or endangered species. In 2005, the BLM
will expand its efforts to support the restoration of fisheries in the Columbia River basin by continuing to
participate in an interagency effort to implement actions identified in the Columbia River Hydropower System
Biological Opinion’s Reasonable and Prudent Alternative.

C). That’s key to avoid extinction


Brown 08 (Lester, “Disappearing Plants and Animals,” Plan B 3.0: Mobilizing to Save Civilization, New York: W.W. Norton and Company, Earth Policy Institute,
http://www.earth-policy.org/Books/PB3/PB3ch5_ss7.htm)

We are now in the early stage of the sixth great extinction. Unlike previous extinction events, which were
caused by natural phenomena, this one is of human origin. For the first time in the earth's long history, one
species has evolved, if that is the right word, to where it can eradicate much of life. As various life forms
disappear, they diminish the services provided by nature, such as pollination, seed dispersal, insect control, and
nutrient cycling. This loss of species is weakening the web of life, and if it continues it could tear huge gaps in
its fabric, leading to irreversible changes in the earth's ecosystem. Species of all kinds are threatened by habitat
destruction, principally through the loss of tropical rainforests. As we burn off the Amazon rainforest, we are in
effect burning one of the great repositories of genetic information. Our descendents may one day view the
wholesale burning of this genetic library much as we view the burning of the library in Alexandria in 48 BC

193
DDI 08 – SS Natural Gas Redux

SHELL – INDUSTRIES HYDROGEN

A. 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.

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.

194
DDI 08 – SS Natural Gas Redux

SHELL – INDUSTRIES HYDROGEN

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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DDI 08 – SS Natural Gas Redux

SHELL – INDUSTRIES CAP AND TRADE


A. 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.

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.
1http://66.102.7.104/search?q=cache:ZrCVxe3WCZ4J:www.rand.org/publications/CT/CT184/CT184.pdf+%22terroris
m,+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.2These 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+%22terroris
m,+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
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
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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 United States 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 United States 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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Impacts – Nanotech
NANOTECH LEADS TO UTOPIA AND TURNS ALL YOUR IMPACTS

Bill Joy, April 2k. Cofounder, chief scientist of Sun


Microsystems. “Why the future doesn’t need us” Wired
Magazine. http://www.wired.com/wired/archive/8.04/joy.html
The many wonders of nanotechnology were first imagined by
the Nobel-laureate physicist Richard Feynman in a speech
he gave in 1959, subsequently published under the
title "There's Plenty of Room at the Bottom." The book
that made a big impression on me, in the mid-'80s, was
Eric Drexler's Engines of Creation, in which he described
beautifully how manipulation of matter at the atomic level
could create a utopian future of abundance, where just
about everything could be made cheaply, and almost any
imaginable disease or physical problem could be solved
using nanotechnology and artificial intelligences.
A subsequent book, Unbounding the Future: The
Nanotechnology Revolution, which Drexler cowrote, imagines
some of the changes that might take place in a world where
we had molecular-level "assemblers." Assemblers could make
possible incredibly low-cost solar power, cures for cancer
and the common cold by augmentation of the human immune
system, essentially complete cleanup of the environment,
incredibly inexpensive pocket supercomputers - in fact,
any product would be manufacturable by assemblers at a
cost no greater than that of wood - spaceflight more
accessible than transoceanic travel today, and restoration
of extinct species.

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Impacts – Nanotech
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.
1http://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.2These 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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225
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Impact Booster – Methane


Methane is 21 times worse then CO2
The 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 CO2


American 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 CO2
Safiya 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 Policy
National 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 envision


how deleterious changes in the monsoons in South Asia (which
encompasses half the world’s population and several nuclear-armed
nations) could quickly escalate into security threats for the United
States; or how an abrupt cooling in the North Atlantic region could
lead to consecutive severe winters that tax the energy resources and
economies 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 to
the 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 in
timely fashion.
Given our current state of knowledge, we cannot predict the
probability of any abrupt climate change. But since the possibility is
real, it seems a useful exercise to contemplate the military ramifications
of potential, abrupt climate changes. Many of these stem from
potential changes in the North Atlantic and Arctic Oceans. As previously
noted, changes within each of these ocean basins may be interrelated
and 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=BOOLE
AN&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 list
Ofeibea 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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SHELL – INDUSTRIES HYDROGEN


A. 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.

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.

232
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SHELL – INDUSTRIES HYDROGEN


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

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.

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.
1http://66.102.7.104/search?q=cache:ZrCVxe3WCZ4J:www.rand.org/publications/CT/CT184/CT184.pdf+%22terroris
m,+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.2These 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+%22terroris
m,+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 United States 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 United States 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.

254
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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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Impacts – Nanotech
NANOTECH LEADS TO UTOPIA AND TURNS ALL YOUR IMPACTS

Bill Joy, April 2k. Cofounder, chief scientist of Sun


Microsystems. “Why the future doesn’t need us” Wired
Magazine. http://www.wired.com/wired/archive/8.04/joy.html
The many wonders of nanotechnology were first imagined by
the Nobel-laureate physicist Richard Feynman in a speech
he gave in 1959, subsequently published under the
title "There's Plenty of Room at the Bottom." The book
that made a big impression on me, in the mid-'80s, was
Eric Drexler's Engines of Creation, in which he described
beautifully how manipulation of matter at the atomic level
could create a utopian future of abundance, where just
about everything could be made cheaply, and almost any
imaginable disease or physical problem could be solved
using nanotechnology and artificial intelligences.
A subsequent book, Unbounding the Future: The
Nanotechnology Revolution, which Drexler cowrote, imagines
some of the changes that might take place in a world where
we had molecular-level "assemblers." Assemblers could make
possible incredibly low-cost solar power, cures for cancer
and the common cold by augmentation of the human immune
system, essentially complete cleanup of the environment,
incredibly inexpensive pocket supercomputers - in fact,
any product would be manufacturable by assemblers at a
cost no greater than that of wood - spaceflight more
accessible than transoceanic travel today, and restoration
of extinct species.

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Impacts – Nanotech
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.
1http://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.2These 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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DDI 08 – SS Natural Gas Redux

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.

261
DDI 08 – SS Natural Gas Redux

Turns Case – Chem Industry key to renewables – (and RPS)


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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DDI 08 – SS Natural Gas Redux

AFF – Oil Prices Turn


A). Shift to alternate energy would drop oil prices
The Huffington Post 08 (“US energy chief: Low oil production drives price,” july 23, http://www.huffingtonpost.com/2008/06/21/us-energy-chief-low-
oil-p_n_108459.html)

Rising demand in the developing world has coincided with historically low levels of spare oil production capacity, which fell below two million barrels per day among
the
OPEC countries in May for the first time since the third quarter of 2006, according to the International Energy Agency. Bodman made clear that
responsibility for reducing oil prices did not simply fall on the shoulders of producing nations, saying
consuming countries must increase energy efficiency and invest in the development of alternative fuels. But he
saved his strongest words for oil producers like Saudi Arabia, who he said must step up long-term investment in
production and spare capacity.

B). Low oil prices means increase demand for natural gas
Brown 03 (Stephen, Director of Energy Economics and Microecnomic Policy Analysis, Federal Reserve Bank of Dallas, "U.S. Natural Gas Markets in Turmoil,”
testimony, http://resourcescommittee.house.gov/108cong/energy/2003jun19/brown.htm)

For some industries and electric utilities, natural gas and residual fuel oil (a petroleum product) are good substitutes. Although declining in number, these energy
users are able to switch back and forth between these fuels quickly, depending upon which is cheaper.
Rising oil prices push these energy users
toward natural gas, and falling oil prices attracts them back to residual fuel oil. Consequently, economic research finds that
oil and natural gas prices have tended to track each other over long periods of time.

263
DDI 08 – SS Natural Gas Redux

NEG At: Oil Prices turn

Demand for gas strong meaning higher prices will not decrease its usage.
Foster Natural Gas Report 05 (“Supply Uncertainty, Infastructure are Top Concerns in Report on North American Gas Industry,”)

Natural gas has become the fuel of choice for industrial users and power generators. The authors note that
U.S. gas-fired generation capacity is overbuilt, and adding more coal, nuclear or other generation capacity in the
short-to-medium term is "extremely difficult." Thus, gas demand for power "is expected to be very strong,
even if natural gas prices are high."

264
DDI 08 – SS Natural Gas Redux

At: Link turns


No turns – alternative energy is not increased by high gas prices
Feder 04 (Naby, NY Times, “A Different Era for the Alternative Energy Business,” http://www.energybulletin.net/node/395)

Alternative energy - solar, wind, geothermal and a grab bag of other sources - is doing better than ever.
But the main reason is not the increase in oil and natural gas prices. When the cost of fossil fuels rose and
fell in past years, the fate of many alternative energy projects rose and fell with them. But that is no longer true.
Indeed, even if prices eventually recede from their current level of about $40 a barrel to something in the $30
to $35 range, as many expect, analysts predict that most renewable energy projects will not suffer as badly
as they once did. We're in a very different era from the late 1970's," said Dan Reicher, who served as the top
energy official responsible for alternative and renewable energy sources under President Bill Clinton.

265
DDI 08 – SS Natural Gas Redux

AFF – High Natural Gas Bad – Econ


Increasing natural gas prices will cause a recession
Herbert 03 (John, “Gas Crisis Forum: Prices Pointing Skyward,” http://www.pur.com/pubs/4230.cfm)

Plentiful supplies in storage in November 2002 should have caused some decline in price, so why didn't
prices decline? Because there had been a fundamental increase in demand. The recent reported EIA
consumption statistics for November 2002 through January 2003 indicate this. n8 Unless the weather turns
out to be extraordinarily mild, with a cool summer and a warm fall and winter, consumers will need to cut
back expenditures on other items as expenditures on natural gas continue at elevated levels. The chance that
this could move the economy back into recession is very real indeed.

High natural gas prices kill consumer spending and hurt competitiveness – causes a recession
Cicio 03 (Paul, “41 Month Natural Gas Crisis has Cost US Consumers Over 111 Billion,” Executive Director, Industrial Energy Consumers of America
http://republicans.resourcescommittee.house.gov/archives/ii00/Press/reports/energy/41mnthnatgas_ieca.pdf)

Every U.S. economic recession has been preceded by high energy prices and this recession was no
different. IECA believes the natural gas crisis started in June 2000. Government officials say the U.S.
recession officially began in March 2001. High sustained natural gas prices are a hidden tax on consumers,
depressing disposable personal income and savings, and ultimately consumer spending which accounts
for two-thirds of the economy. Sustained high natural gas prices impede economic growth and severely
impacts competitiveness of industry.

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,


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

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DDI 08 – SS Natural Gas Redux

High NG price shift to AE


High gas prices will increase the incentives for alternative energy
Matsuyama 06 (Brian, ceo of Cascade Natural Gas Corp, http://sec.edgar-online.com/2006/12/08/0001104659-06-080246/Section4.asp)

Competition among these forms of energy is based on price, reliability, efficiency and performance. Higher
natural gas prices have eroded or, in some cases, eliminated the competitive price advantage of natural gas
over alternative energy sources. If the higher gas price environment is sustained, our ability to attract
new customers could be significantly affected, which could have a negative impact on our customer growth
rate and results of operations. Volatility in the price of natural gas could result in large industrial
customers switching to alternative energy sources and reduced revenues, earnings and cash flow.

267
DDI 08 – SS Natural Gas Redux

Oil (and high NG prices) key to Russia Econ

High oil and natural gas prices are key to Russia’s economy
Gelb 07 (Bernard, Specialist in economic resources, congressional research service, http://www.fas.org/sgp/crs/row/RL33212.pdf)

Energy exports have been a major driver of Russia’s economic growth over the last five years, as Russian oil
production has risen strongly and world oil and gas prices have been relatively high. This type of growth has
made the Russian economy very dependent on oil and natural gas exports, and vulnerable to fluctuations in
world oil prices. Based upon an International Monetary Fund study, a $1 per barrel increase in the price of Urals
blend crude oil for a year results in a $3 billion increase in Russia’s nominal Gross Domestic Product

268
DDI 08 – SS Natural Gas Redux

AFF Canada – NG reduction boosts revenues


Even if a trade off occurs, a reduction in natural gas will increase Canadian export revenues
Herbert 03 (John, “Gas Crisis Forum: Prices Pointing Skyward!,” Renewable Power Analysis Director at Platts Research & Consulting, March 2003, Public
Utilities Fortnightly, http://www.pur.com/pubs/4230.cfm)

Demand for natural gas also continues to grow in Canada. n3 Accordingly, Canadian companies may be
unwilling or unable to supply incremental gas to the United States. This may even work to their advantage. If
cold weather occurs and domestic supplies become tight, price levels will soar. When a necessity such as
natural gas is perceived to be in short supply, prices can double from already high levels. Hence, a reduction in
natural gas export volumes from Canada may be more than offset by an increase in price, and Canadian export
revenues could grow, not decline, from lowered Canadian export volumes.

269
DDI 08 – SS Natural Gas Redux

At: Wind Energy Trades off

Even if wind energy trades off, it would be small – only 5 %


AWEA 06, AWEA, formed in 1974, is the national trade association of the U.S. wind energy industry. The association’s membership includes turbine
manufacturers, wind project developers, utilities, academicians, and interested individuals. “Industry Expected to Build on Momentum; No Slow-Down for 2006,”
http://www.awea.org/news/US_Wind_Industry_Ends_Most_Productive_Year_012406.html)

AWEA estimates that an installed capacity of 9,149 MW of wind power will save over half a billion cubic feet
of natural gas per day (Bcf/day) in 20063, alleviating a portion of the supply pressure that is now facing the
natural gas industry and is driving prices upward. The U.S. currently burns about 13 Bcf/day for electricity
generation, which means during 2006, wind power will be reducing natural gas use for power generation by
approximately 5%.


Wind energy would only make the US use natural gas in transportation – the trade off is small
Platts 08 (Electric Power Daily, T. Boone Pickens unveils grand plan to replace gas with wind; critics scoff,
http://www.platts.com/Electric%20Power/highlights/2008/epp_gpr_071008.xml)

Texas oilman T. Boone Pickens, saying the US' dependence on imported oil has reached the level of a national
crisis, on July 7 unveiled a plan he said would cut imports by one-third within five to 10 years.
The scope and scale of the plan is daunting, however, and some analysts have questioned its feasibility.
Pickens is proposing a shift away from natural gas-fired generation, which now produces about 22% of the
nation's electricity, and toward wind power. The natural gas that would be freed up would be put to use as a
transportation fuel, he argued, and reduce the nation's dependence on foreign oil by one-third.

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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DDI 08 – SS Natural Gas Redux

NG collapses chemical industry - econ


A). Increased natural gas demand for electricity generation collapses the chemical industry
Gupta 03 (Chairman and CEO of Rohm and Haas company, hearing on Enhancing Energy Security,
http://republicans.resourcescommittee.house.gov/archives/ii00/archives/108/testimony/rajgupta.htm)

A crisis of this magnitude poses a grave threat to America's economic and national security. Current energy
prices are making it impossible for the US chemical industry, and other critical industries, to compete in global
markets. Because the business of chemistry produces the building block materials that the rest of our modern
economy relies upon, we are somewhat of a "canary in the coalmine." As we go, so goes the rest of the nation.
In particular, the US chemical industry's economic survival depends on having access to an abundant and
affordable supply of natural gas. Natural gas is almost exclusively a domestic energy source, yet we all must
operate in a global marketplace. We compete with producers from Asia, Europe, and the Middle East. Current
natural gas prices have turned the US chemical industry into the world's high-cost producer. From our
perspective, it is not an exaggeration to say that an economic disaster is unfolding in this nation because of
dangerously volatile prices in natural gas markets. Critical infrastructures like the chemical industry are
extremely sensitive to wild swings in energy prices. Without a secure supply of energy, the industries that
contribute to the nation's economic and national security are deeply compromised. What we are facing is not a
seasonal disturbance, but a fundamental structural imbalance in supply and demand for natural gas. America has
developed a tremendous thirst for natural gas. It is clean. It is efficient. And until recently, it was abundant and
cheap. Consumers love it for heating their homes. Environmentalists love it because it is clean burning.
Industries, including the chemical industry, love it because it is an excellent raw material that makes its way into
thousands of products that everyone one of use, every day. Because we love it, America is using more and more
gas. Natural gas used to generate electricity has increased by 35 percent in the past five years and will nearly
double in the next decade.

B). The chemical industry is key to the economy


Gupta 03 (Chairman and CEO of Rohm and Haas company, hearing on Enhancing Energy Security,
http://republicans.resourcescommittee.house.gov/archives/ii00/archives/108/testimony/rajgupta.htm)

The $460 billion business of chemistry is a key element of the nation's economy, providing the building
block materials that the rest of the U.S. economy relies upon. It is the country's largest exporter, accounting
for ten cents out of every dollar in U.S. exports. Chemistry companies invest more in research and
development than any other business sector. Safety and security have always been primary concerns of ACC
members, and they have intensified their efforts, working closely with government agencies to improve
security and to defend against any threat to the nation's critical infrastructure.

C). Economic decline causes large-scale nuclear conflict


Walter Russell, Mead 92, Senior Fellow – Council on Foreign Relations, NEW PERSPECTIVES QUARTERLY, Summer, 1992, p. 30

The failure to develop an international system to hedge against the possibility of worldwide depression- will open their
eyes to their folly. Hundreds of millions-billions-of people around the world have pinned their hopes on the international
market economy. They and their leaders have embraced market principles-and drawn closer to the West-because they
believe that our system can work for them. But what if it can't? What if the global economy stagnates, or even shrinks?
In that case, we will face a new period of international conflict: South against North, rich against poor. Russia. China.
India-these countries with their billions of people and their nuclear weapons will pose a much greater danger to world
order than Germany and Japan did in the 1930's.

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DDI 08 – SS Natural Gas Redux

NG collapses Steel Industry – heg

A). High natural gas prices collapses the steel industry – they can’t compete with foreign imports
Peterson 04 (John, “The impact of high natural gas prices on small farmers and manufacturers,”
testimony,http://republicans.smbiz.house.gov/hearings/databaseDrivenHearingsSystem/displayTestimony.asp?hearingIdDateFormat=040922&testimonyId=233)

And Mr. Chairman, you can't mention higher natural gas prices without thinking of its impact on the steel
industry. The dumping of foreign steel into our markets has put American steel makers in a very precarious
situation - and high natural gas prices only make things more difficult. For example, despite the Jersey Shore
Steel Company's efforts to modernize their manufacturing process, natural gas prices that have increased as
much as 168% over the previous years have resulted in price increases that resulted in major losses in business
for this small company. Within the last year, Jersey Shore Steel has had to lay off 70 employees due to business
conditions - employees who were once making $18 per hour.

B). That’s key to heg


Cole 04 (Researcher at AISI, 9/1, http://www.steel.org/facts/defense.htm)

"If you're worried about the security of the country and you become over-reliant upon foreign sources of steel, it
can easily affect the capacity of our military to be well supplied. Steel is an important jobs issue; it is also an
important national security issue. I am here to trumpet one of the great values of America. That's the enterprise
of the American worker, the hardworking American citizens who make this economy go. And those are the
steelworkers of America. I appreciate what you do for our country." President George W. Bush, August 26, 2001
The American steel industry has developed special steels and processes to satisfy the critical demands of the
government for defense-related applications. American steel and specialty metals are found in virtually every
military platform—from nuclear aircraft carriers to missile systems to every U.S. military plane flying today.
These include landing gear for aircraft, plate for ship hulls, plate and sheet for tanks and other ground vehicles,
forgings for gun barrels, and wire rope and cable for aircraft controls. Security, reliability and assured supply
channels dictate that these critical applications be supplied from US domestic sources. According to Department
of Defense officials, the types of steel utilized are very specialized, high-quality, high-strength steels and are
procured strictly from American mills. Sophisticated military plate steel grades in many unique sizes are
produced by only a few U.S. mills, which must be retained for defense security purposes.

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DDI 08 – SS Natural Gas Redux

NG solves Acid Rain – extinction/Calvin 98

A). Natural Gas reduces acid rain


FERC 04 (Natural Gas Market Analysis, Britannica Internet Guide Selection, Naturalgas.org, Natural Gas and the Environment,
http://www.naturalgas.org/environment/naturalgas.asp)

Acid rain is another environmental problem that affects much of the Eastern United States, damaging crops,
forests, wildlife populations, and causing respiratory and other illnesses in humans. Acid rain is formed when
sulfur dioxide and nitrogen oxides react with water vapor and other chemicals in the presence of sunlight to
form various acidic compounds in the air. The principle source of acid rain causing pollutants, sulfur dioxide
and nitrogen oxides, are coal fired power plants. Since natural gas emits virtually no sulfur dioxide, and up to 80
percent less nitrogen oxides than the combustion of coal, increased use of natural gas could provide for fewer
acid rain causing emissions.

B). Acid rain causes food shortages and extinction


Phamornsuwana 08 (Sarn, “Causes, Effects, and solutions of acid rain, April 8, Director of Website Development and Technology. graduated with Summa
Cum Laude distinction from DeVry University)

Acid rain is an issue that can not be over looked. This phenomenon destroys anything it touches or interacts
with it. When acid rain damages the forest or the environment it affects humans in the long run. Once forests
are totally destroyed and lakes are totally polluted animals begin to decrease because of lack of food and
shelter. If all the animals, which are our food source, die out, humans too would die out. Acid rain can also
destroy our homes and monuments that humans hold dearly.

C). Food shortages cause World War III.


Calvin 98 (William, neurophysiologist @ U. Washington, Atlantic Monthly, January, The Great Climate Flip-Flop, Vol 281, No. 1, p. 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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DDI 08 – SS Natural Gas Redux

LNG – can’t stabilize prices

LNG can’t stabilize natural gas prices


Powers 04 (Co-Char of Border Power Plan Working Group, “Liquid Natural Gas: A roadblock to clean energy future,” greenpeace.org )

According to a recent analysis of the North American market for natural gas, PEMEX customers are also
unlikely to gain financially from the importation of LNG into Mexico. Although some commentators have
stated that LNG imports will reduce the cost of natural gas, recent analysis of the economics of natural gas in
North America indicates that LNG importation will cause essentially no natural gas price depression either
locally (at point of importation) or nationally. This is not surprising since the finding basically confirms that
LNG developers will not be “shooting themselves in the foot” financially by undercutting gas prices with LNG.
The static North American natural gas models being used by many to show a dramatic price depression with the
importation of LNG are inappropriate models because they fail to take into account the depletion of low-cost
conventional natural gas in North America. There are insufficient supplies of low-cost domestic gas left for it to
remain at the margin, so higher cost unconventional gas must be drilled. The abundant, higher cost domestic
sources of gas, such as conventional (small gas field), unconventional, and arctic will be the marginal source of
supply—with or without LNG importation—and these higher cost supplies will set the domestic price of gas at
$4.00 to $4.50/MMBtu. Because these will set the market price of gas, “injections” of imported LNG will have
little or no impact on the marginal price of natural gas.

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DDI 08 – SS Natural Gas Redux

At: Trade off – generic

No risk of impact – natural gas would just be shifted into the transportation sector
Business Journal of the Greater Triad Area 08 (“Pickens backs renewable energy plan,” July 8,
http://www.bizjournals.com/triad/stories/2008/07/07/daily20.html)

Dallas oil tycoon T. Boone Pickens is throwing his money behind a campaign to solve the nation's dependence
on foreign oil. Pickens says he is funding an aggressive multimedia advertising and Internet education campaign
designed to focus attention on this crisis and to advance an energy plan of his own dubbed, "The Pickens Plan,"
that he said would reduce foreign oil dependency by more than one-third. The Pickens Plan calls for investing in
power generation from domestic renewable resources such as wind and using natural gas as a transportation
fuel, replacing more than one-third of the country's imported oil and saving more than $230 billion a year.

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DDI 08 – SS Natural Gas Redux

Natural Gas = Renewable

Natural Gas is renewable


Serchuck 97 (Adam, Ph.D president of Serchuk Associates, a clean energy consultancy erved five years as the Research Director of the Renewable Energy
Policy Project (REPP) , Renewable Energy Policy Project, Issue Brief, May, No.8, “Natural Gas: Bridge to a renewable energy future,” http://209.85.215.
104/search?q=cache:QxOA1xsAr9sJ:www.crest. org/repp_pubs/pdf/issuebr8.pdf+renewable+energy+natural+gas&hl=en&ct=clnk&cd=11&gl=us)

In the following Issue Brief, Adam Serchuk and Bob Means address implications of this trend for renewable
energy, both in the United States and globally. The paper provides a valuable resource for environmental and
energy professionals seeking to understand the complex relationship between the two cleanest energy options
now available. For practical policypurposes in the near term, natural gas can be considered a “renewable”
resource. Even in the United States, where the resource base is well known, new sources of gas are being
discovered. Potential discoveries are even greater elsewhere.

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DDI 08 – SS Natural Gas Redux

Natural Gas renewables in other areas


Despite competition, natural gas serves as a bridge to other renewable energy projects
Serchuck 97 (Adam, Ph.D president of Serchuk Associates, a clean energy consultancy erved five years as the Research Director of the Renewable Energy
Policy Project (REPP) , Renewable Energy Policy Project, Issue Brief, May, No.8, “Natural Gas: Bridge to a renewable energy future,” http://209.85.215.
104/search?q=cache:QxOA1xsAr9sJ:www.crest. org/repp_pubs/pdf/issuebr8.pdf+renewable+energy+natural+gas&hl=en&ct=clnk&cd=11&gl=us)

Today, inexpensive natural gas limits the market for renewable energy. Yet, substantial opportunities for
renewable remain; the availability of gas is uneven across the world and accelerating climate change will
require a conversion to carbon-free energy sources. Happily, competition between the two resources does
not preclude cooperation since both technologies will benefit from similar policies and market structures.
In the long term, natural gas can serve as a bridge to a renewable energy future if each community, acting
in its own interest, supports the development of the other. The growing use of natural gas is among the most important recent
developments in America’s energy picture. In the following Issue Brief, Adam Serchuk and Bob Means address implications of this trend for renewable energy, both in
the United States and globally. The paper provides a valuable resource for environmental and energy professionals seeking to understand the complex relationship
between the two cleanest energy options now available. For practical policypurposes in the near term, natural gas can be considered a “renewable” resource. Even in the
United States, where the resource base is well known, new sources of gas are being discovered. Potential discoveries are even greater elsewhere. The supply of gas is
finite but, for the time being, fears of depletion will not drive policy. Increased natural gas use is both a boon and a bane to the renewables industry. On the plus side,
natural gas is inherently cleaner than coal or oil, and the gas sector is a significant potential ally in the effort to
achieve environmental goals. For example, both industries are well represented in the Business Council for
Sustainable Energy, an important voice for action to reduce greenhouse gas emissions. Since renewables will be
unable to meet most energy needs for some time, gas is an essential bridge to a renewable energy era.
Opportunities for the complementary use of natural gas and renewable energy technologies are illustrated by the
gas-supported solar thermal system developed in California by Luz International.

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DDI 08 – SS Natural Gas Redux

Low NG prices no renewables


Low natural gas prices prevent shift to renewables
Serchuck 97 (Adam, Ph.D president of Serchuk Associates, a clean energy consultancy erved five years as the Research Director of the Renewable Energy
Policy Project (REPP) , Renewable Energy Policy Project, Issue Brief, May, No.8, “Natural Gas: Bridge to a renewable energy future,” http://209.85.215.
104/search?q=cache:QxOA1xsAr9sJ:www.crest. org/repp_pubs/pdf/issuebr8.pdf+renewable+energy+natural+gas&hl=en&ct=clnk&cd=11&gl=us)

On the other hand, the lowcost of natural gas is a serious obstacle to renewables. In recent years, gas has fueled
most new generating plants built or planned in the United States. The prospect of improved drilling methods
and continued low prices, as predicted by the Energy Information Administration, have caused a substantial
reduction in the government’s estimated contribution of renewable energy to U.S. energy consumption over the
next decade.

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DDI 08 – SS Natural Gas Redux

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.

279
DDI 08 – SS Natural Gas Redux

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+Simon
s+%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 that
President Bush and Vice President Cheney were both staggered to watch a drilling
boom for natural gas occur as gas prices spiraled from $3 to over $10 per mcf and to
then see that this unprecedented drilling boom merely kept the daily supply of natural
gas flat. Despite the fact that gas well completions grew from 10,000 wells completed in
1999 to over 22,000 wells completed in 2001, daily supply did not grow. It stayed as flat
as 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+Simon
s+%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.

280
DDI 08 – SS Natural Gas Redux

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.

281
DDI 08 – SS Natural Gas Redux

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
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+LN
G+economy&hl=en&ct=clnk&cd=45&gl=us&client=firefox-a

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.

282
DDI 08 – SS Natural Gas Redux

Natural Gas Price Spikes


A decrease in natural gas demand is good – supply crunch now
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+LN
G+economy&hl=en&ct=clnk&cd=45&gl=us&client=firefox-a

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.

283
DDI 08 – SS Natural Gas Redux

Gas Markets Risky


The natural gas market is incredibly risky and unpredictable for both consumers and producers
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+LN
G+economy&hl=en&ct=clnk&cd=45&gl=us&client=firefox-a

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?

284
DDI 08 – SS Natural Gas Redux

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,

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.

285
DDI 08 – SS Natural Gas Redux

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.

286
DDI 08 – SS Natural Gas Redux

Impact Defense – Terrorism

No impact to terrorism – 3 reasons


1. damage will be small
2. US can absorb the attack
3. terrorist can’t deploy WMD’s
Mueller 06 (John, Prof of Pol. Sci. and IR at Ohio State, “Overblown,” NY Times, http://www.nytimes.com/2007/02/18/books/chapters/0218-1st-
muel.html?pagewanted=print)

In general, terrorism, particularly international terrorism, doesn't do much damage when


considered in almost any reasonable context. Although airplanes can still be blown up, another attack like the
one on 9/11 is virtually impossible. In 2001 the hijackers had the element of surprise working for them;
previous hijackings (including one conducted by Muslim terrorists six months earlier) had mostly been fairly
harmless as the perpetrators generally landed the planes some where and released, or were forced to release, the
passengers. After the 9/11 experience, passengers and crew will fight to prevent a takeover, as was shown on the
fourth plane on 9/11. The likelihood that any individual American will be killed in a terrorist event is
microscopic. Just about any damage terrorists are likely to be able to perpetrate can be readily absorbed. To
deem the direat an "existential" one is some where between extravagant and absurd. The capacity of al-Qaeda or
of any similar group to do damage in the United States pales in comparison to the capacity other dedicated
enemies, particularly international communism, have possessed in the past. Lashing out at the terrorist threat
is frequently an exercise in self-flagellation because it is usually more expensive than the terrorist attack itself
and because it gives the terrorists exactly what they are looking for. Chemical and radiological weapons, and
most biological ones as well, are incapable of perpetrating mass destruction. The likelihood that a terrorist
group will be able to master nuclear weapons any time soon is extremely, perhaps vanishingly, small. Although
murderous and dedicated, al-Qaeda is a very small and very extreme group, and it is unlikely by itself to have
the capacity for taking over any significant government. Al-Qaeda's terrorist efforts on 9/1 i and in the years
since have been substantially counterproductive. Although additional terrorist attacks in the United States
certainly remain possible, an entirely plausible explanation for the fact that there have been none since 2001 is
that there is no significant international terrorist presence within the country. Policies that continually, or even
occasionally, focus entirely on worst-case scenarios (or worst-case fantasies.) are unwise and can be
exceedingly wasteful.

287
DDI 08 – SS Natural Gas Redux

Terrorism Good – Econ (1/2)

Terrorist attack is beneficial to the economy in the long term outweighing short-term recession
Noah 01 (Timothy, staff writer for Slate Magazine, “Will Terrorism Resuscitate the U.S. Economy?” http://www.slate.com/id/1008279/)
The Wall Street Journal and Washington Post both predict in their Sept. 12 news columns that the havoc wrought by yesterday's events may bring on a recession.
Chatterbox thinks they couldn't have it more wrong.
While the destruction of the World Trade Center, the multiple plane crashes,
and the damage to the Pentagon are morally obscene because of the (probably thousands) of deaths and
countless injuries they caused, economically the net result of the terrorists' actions is likely to be beneficial to
the United States."The U.S. economy will go into a recession as a result of the terrorist attack," Sung Won San,
chief economist for Wells Fargo & Co., told the Post's John M. Berry and Steven Pearlstein. Why? Consumer
confidence will tumble. But what does anxiety about a terrible but decidedly non-monetary tragedy have to do with consumer confidence? In the Journal,
Greg Ip and John D. McKinnon explain that by causing an oil spike, the Gulf War depressed consumer confidence and eventually helped cause a recession. Yesterday's
oil prices did indeed spike, and "as political tensions rise again in the Mideast" we may see oil prices stay high for some time. Translation: If the United States bombs or
invades Afghanistan in order to take out Osama Bin Laden--the increasingly likely mastermind of yesterday's mayhem--then oil-producing nations might get mad and
cut back oil production. Could be, but there are an awful lot of "ifs" there. (Certainly the oil-producing Saudis seem unlikely to shed any tears for Bin Laden, who for
years has been on the lam from Saudi law enforcement.) Another consumer confidence argument is that people will stay out of airplanes in droves for fear of fatal
hijackings.
But Chatterbox bets that won't happen. After a traumatic event like this one, people are eager to reassert
normal patterns of behavior, even--perhaps especially--if it means suppressing rational fears. Call it a laudable
refusal to be bullied, or call it a pathological amnesia, but it's real and it's beneficial to the economy. (Consider, for
example, all the people who rebuild their California houses after earthquakes.) As for the stock market, Chatterbox defers to Moneybox columnist Rob Walker's wise
Why does Chatterbox think
judgment that there probably won't be any significant effect. OK, so the World Trade Center disaster won't harm the economy.
it will benefit the economy? Simple: because we live in a very wealthy nation that responds to horrible disasters
by spending large sums of money. In this case, the spending will come both from private insurers and from the
federal government's Federal Emergency Management Agency, which over the past decade has established
itself as a politically unstoppable source of federal largesse. FEMA helped Southern California's recession-plagued economy to boom
after it suffered various natural disasters in the early 1990s. In that instance, of course, California benefited from a Democratic administration's reliance on its votes in
the upcoming 1996 election. Since New York is unlikely to go for Bush in 2004, this president will likely be less enthusiastic about rebuilding it. But rebuild it he must
if he wants to demonstrate that terrorists can't damage U.S. morale.Why
will the entire U.S. economy benefit, as opposed to just New
York's? Because the money will be spent in the nerve center of American finance, which is having a rough time
of it these days. Chatterbox believes that the mere presence of construction activity around Wall Street will have
a beneficial psychological effect on bankers and brokers. It will also provide a meaningful Keynesian stimulus
to a national economy that, let's face it, was tottering on the brink of recession well before Sept. 11. The
recession may still come, but the countercyclical spending should help shorten it.

288
DDI 08 – SS Natural Gas Redux

Terrorism Good – Econ (2/2)


Terrorist attack will pull the US out of recession in the longterm
Mieszkowski 01 (Katharine, senior writer for Salon, “Will the war on terrorism be a recession buster?”
http://archive.salon.com/tech/feature/2001/09/21/fiscal_stimulus/index.html)

Will last week's terrorist attacks and the coming war effort finally plunge the U.S. economy into the recession
it's been teetering on the brink of for months? Or will the opposite happen? Might wartime spending act as a
fiscal stimulus package that would jump-start the country's flagging finances? Congress has already approved
$40 billion in spending to rebuild and fight terrorism after last week's attacks, and there's a good chance that
many more billions will be ladled for tasks such as rescuing the beleaguered airline industry and upgrading
national security. Economists are hoping that the burst of wartime spending will counteract not only the
financial fallout from last week's attacks, but also the long decline of the economy over the last year."The
bottom line is that, in a sufficiently aggressive military posture, you could actually have a positive economic
effect from this," says Robert Litan, director of economic studies at the Brookings Institution, in a briefing. Just
look, for example, at the postwar prosperity resulting from the United States' involvement in World War II. Such
government spending acts as a stimulus, because those funds would have otherwise been languishing in the so-
called Social Security lock box. "Otherwise that money would have been sitting in T-bills [Treasury bonds] with
an IOU to the Social Security trust fund," said Ross DeVol, an economist at the Milken Institute. The terrorist
attacks signaled an immediate change in the government's economic priorities. "All the talk about balancing the
budget and protecting social security -- that's gone now," said Steve Golub, an economics professor at
Swarthmore College, adding, "I'm fairly confident that they'll do what it takes to prevent a sustained recession."

289
DDI 08 – SS Natural Gas Redux

At: Terrorism kills econ


Terrorism only tanks the psychological aspect of the economy – no losses – only a risk it helps in the
longterm
Mieszkowski 01 (Katharine, senior writer for Salon, “Will the war on terrorism be a recession buster?”
http://archive.salon.com/tech/feature/2001/09/21/fiscal_stimulus/index.html)

As usual, when it comes to the U.S. economy, it's all about how consumers will react to events. As business
growth has flagged and layoffs have mounted this year, stable consumer spending, which makes up some two-
thirds of the U.S. economy, has kept the country from slipping into recession. Shoppers' continuing to rack up
purchases on their credit cards, despite a weakening stock market and economy, have had the effect of propping
up that economy. So, the financial impact of last week's terrorist attacks is not limited to the loss of business and
the loss of buildings. "The actual specific damages do not hurt the economy," says New York economist Jeff
Madrick. "It's the uncertainty that harms the economy -- the psychological deflation that could hurt the
economy, not the actual losses."

290
DDI 08 – SS Natural Gas Redux

Terrorism Good – Heg

Terrorism is key heg and military dominance


DuBoff 03 (Richard, “US hegemony: Continuing Decline, Enduring Danger,” prof of Economy at Bryn Mawr College, http://home.aubg.bg/students/SIG020/)

Nowadays, cooperation among states is promoted in order to create a stable international community. When the
bipolar model was destroyed after the end of the Cold War, the idea of balance of power shared by a certain
number of greater political actors became more and more popular. This idea lied behind the creation and the
operation of all international organizations, both military alliances (like NATO) and non-military ones (like the
United Nations). The main point has been to look for consensus among the major powers to avoid conflicts and
to prevent the excessive influence (or domination) by a particular state so that it cannot dictate world order.
Having in mind the recent events, however, more and more sceptics appear who argue whether balance of
power is currently present or achievable on the international stage of politics. Scholars in the field of political
science start to believe that the USA use the notion of benign hegemony in order to justify their expansionist
goals (meaning increase in political, economic and cultural influence) for the establishment of a “new world
order”. Balance of power is not desired, not pursued, but undermined.A benign hegemony requires some moral
grounds for a guise of his actual search for influence and power. Thus, it is already clear how the tragic terrorist
attacks of September 11th in New York were used by the US to unleash a massive military campaign. The
declaration of an all-out war on terrorism served to justify the subsequent military operations in the Middle
East. They were carried out officially by international forces but, undoubtedly, the US were the leading stimulus
and driving force. They engaged the international community in invading two countries on the grounds that
humanitarian intervention was needed there - that human rights were abused, terrorists developed their
networks, or that secret weapons were being developed. Finally, neither the terrorists claimed to be in
Afghanistan, nor the nuclear weapons reputedly developed by Saddam Hussein. But, these two countries ended
up with the establishment of pro-US puppet regimes under the fragile claim they were under the jurisdiction of
the international community. These events, as well as the possible US projects for dealing with North Korea and
Iran, clearly presents their determination to proceed in order to become the undisputed leading power on the
international arena.

291
DDI 08 – SS Natural Gas Redux

Impact Defense – Economy

US economy is resilient
Dawson 04 (Michael, US Treasury Deputy Sec. for Critical Infrastructure Protection and Compliance Policy, “Protecting the Financial Sector from Terrorism and
Other Threats,” http://www.ustreas.gov/press/releases/js1091.htm)

Fortunately, we are starting from a very strong base. The American economy is resilient. Over the past few
years, we have seen that resilience first hand, as the American economy withstood a significant fall in equity
prices, an economic recession, the terrorist attacks of September 11, corporate governance scandals, and the
power outage of August 14-15. There are many reasons for the resilience of the American economy. Good
policies – like the President’s Jobs and Growth Initiative – played an important part. So has the resilience of the
American people. One of the reasons are economy is so resilient is that our people are so tough, so determined
to protect our way of life. Like the economy as a whole, the American financial system is resilient. For example,
the financial system performed extraordinarily well during the power outage last August. With one exception,
the bond and major equities and futures markets were open the next day at their regular trading hours. Major
market participants were also well prepared, having invested in contingency plans, procedures, and equipment
such as backup power generators. The U.S. financial sector withstood this historic power outage without any
reported loss or corruption of any customer data. This resilience mitigates the economic risks of terrorist attacks
and other disruptions, both to the financial system itself and to the American economy as a whole.

292
DDI 08 – SS Natural Gas Redux

Econ Deline Inevitable


Economic decline inevitable
Xinhua News Service, 7/15/08, World News Economic, “Bernanke says U.S. Economy continues to Face Numerous
Difficulties” pg lexis

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.

293
DDI 08 – SS Natural Gas Redux

Impact Defense – Flaring

Flaring releases small amounts of gas emissions – plus impact of flaring is hyped because of limited
information
GAO 04 (“Natural Gas Flaring and Venting,” Report to Jeff Bingaman, ranking minority member, committee on Energy and natural Resources, US senate,
http://www.gao.gov/new.items/d04809.pdf)

U.S. and global data on natural gas flaring and venting are limited. First, the of Energy’s Energy Information
Administration (EIA) collects and reports data voluntarily provided by oil- and gas-producing states. Because
EIA has no authority to require states to report, some do not, leading to incomplete data. Second, EIA has
provided limited guidance to states to promote consistent reporting. As a result, only about one-fourth of
the states reporting provide data that EIA considers consistent. Third, the data EIA collects do not distinguish
between flared gas and vented gas—an important distinction since they have dramatically different
environmental impacts. Data on flaring and venting outside the United States are also limited, since many
countries report unreliable data or none at all. To improve data on flaring and venting, EIA could use its
authority to collect data directly from oil and gas producers; to obtain more consistent data, EIA could improve
its guidelines for reporting. From an environmental perspective, EIA, the Minerals Management Service, and
the Bureau of Land Management could require flaring and venting data to be reported separately from each
other. Globally, the federal government could set an example by continuing to improve U.S. data, continuing to
support global efforts, and using U.S. satellite data to detect unreported flaring. On the basis of the limited data
available, the amount of gas emitted through flaring and venting worldwide is small compared with global
natural gas production and represents a small portion of greenhouse gas emissions.

Flaring contributes only small amounts of emissions


GAO 04 (“Natural Gas Flaring and Venting,” Report to Jeff Bingaman, ranking minority member, committee on Energy and natural Resources, US senate,
http://www.gao.gov/new.items/d04809.pdf)

Worldwide flaring and venting is estimated to contribute, respectively, about 4 percent of the total
methane and about 1 percent of the total carbon dioxide emissions caused by human activity. Despite these
small contributions, several countries have undertaken efforts to reduce flaring and venting emissions that have
the potential to reduce greenhouse gases while saving an energy resource. Specifically, many countries have
imposed requirements on oil and gas producers to eliminate emissions of gas within the next few years.

294
DDI 08 – SS Natural Gas Redux

AFF Canda
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.

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 extracted
As 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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DDI 08 – SS Natural Gas Redux

AFF LNG Safety


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.

296
DDI 08 – SS Natural Gas Redux

AFF – LNG Opposition


LNG is facing opposition now
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]

• 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.

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DDI 08 – SS Natural Gas Redux

AFF – LNG demand low


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.”

298
DDI 08 – SS Natural Gas Redux

AFF – renewables NG
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

299
DDI 08 – SS Natural Gas Redux

AFF – LNG Costs High


Security costs will increase
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]
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.

300
DDI 08 – SS Natural Gas Redux

AFF – Indonesia – shifting to regional markets/low


Indonesia is shifting to regional markets as they lose out in the global market
US Embassy, Jakarta Indonesia, 9/1/03, “Natural Gas Changes in Indonesia,” Energy News,
http://jakarta.usembassy.gov/econ/natural_gas2003.html

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.

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.

301
DDI 08 – SS Natural Gas Redux

AFF - Indonesia
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.

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.

302
DDI 08 – SS Natural Gas Redux

AFF – US = no investments in Indonesia

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.

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.

303
DDI 08 – SS Natural Gas Redux

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.

304
DDI 08 – SS Natural Gas Redux

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.