Thursday, October 6, 2022

“When Pigs Fly”

“When Pigs Fly”
(...or The Archaic Nature of the Jones Act)
by Addison Wiggin

“You can’t fatten the pig on market day.”
- John Howard

“Pigging” is the method used to clean sediment build-up in pipelines. You may have known that before the Nordstream Pipeline was sabotaged. Or maybe not. Allow us to indulge in the mechanics: Devices known as “pigs” are inserted into a “pig launcher” (or “launching station”). The launching station is then closed and the pressure-driven flow of the product in the pipeline is used to push the “pig” down the pipe until it reaches the receiving trap — the “pig catcher” (or “receiving station”).

As the pig travels through the pipeline, it pushes out sediment and cleans the pipe walls, leaving the pipeline ready for the next transfer of gas or oil. Liquified Natural Gas (LNG) in this case. The pig is frequently propelled with nitrogen. The original pig designs were made from straw wrapped in barbed wire – they made a squealing noise while traveling through the pipe, like a pig, which gave the method its name.
The starting phase of an otherwise benign pig launch.
“This is where you could have easily put explosives on the Nord Stream 2 pipeline,” suspects Mark Rossano of C6 Capital Holdings. Mr. Rossano continues: "You would know in which direction it exploded based on which way the metal is bent. Is it bent outwards, facing in which direction…? And then if it’s something where it was done from external, obviously everything would be bent inward. We could get a decent amount of information just from pictures. So we have to wait for it to empty out completely, just for fear of getting too close."

Conjecture aside, Mr. Rossano’s running joke is that “the US diver and the Russian diver bonked heads going down, and they just decided to divide and conquer… who would blow up what.” You can listen to his whole description of pigging and the Nord Stream 2 sabotage by clicking here.

The explosion off the coast of Denmark and Sweden last week – just outside NATO territorial waters, mind you – exacerbates global LNG supply concerns. If gas is not coming through that pipeline then more LNG has to come from the United States, or some other place in the global market, to heat the homes of Danes, Swedes, Germans, the Dutch... and all those other little monarchies this winter. And that’s just the problem. Winter is coming. The clock is ticking. The cold months are a pig’s snort away.

We’re currently in what Rossano calls “the shoulder season.” Prices remain stable for the most part until demand picks up for real. LNG is mainly frozen. Without the pipeline, other methods of transportation will have to be used. Europe is bracing for less product in exchange, plus a drastic slow down in the time it takes for the gas to be delivered. “We have a ton of natural gas in the US,” Rossano says. “We have a ton of natural gas liquids. We really need to focus on tapping that and moving it through the system in the most efficient way.”

The way it works today, however, is fraught with inconsistency… He refers to an archaic policy on the books known as The Jones Act. The Jones Act of 1920 has been a fixture of U.S. law and an imposition on the U.S. economy for almost 100 years.
Keeping up with The Jones Act.
The law was presented as a plan to ensure adequate domestic shipbuilding capacity and a ready supply of merchant mariners to be available in times of war or other national emergencies. A century of evidence supports the conclusion that the Jones Act has failed in its main objectives while imposing substantial economic costs. Rossano continues: "You’re looking at a very inefficient system in the United States purely because of an archaic policy standing in the way of… let’s call it safety. Just an example, there’s no way to get LNG cargo from Houston to Boston because there isn’t a Jones Act vessel.

A Jones Act vessel is a vessel that was built, manned, and flagged in the U.S. So that means if Boston wants U.S. cargo, it has to go from the U.S. to the UK, get put into a tank, get put back on the boat, and then it can come over to Boston. And then it’s not even enough to maintain the pressure of the system. Then they have to take compressed gas in trucks all throughout Pennsylvania, drive them over to injection points along the system, stack them eight to 12 deep, so that if you have a cold spell and people start pulling that gas out quickly, they start lining those trucks up and injecting the gas in order to maintain flow."

All the rules get weird when gas must get shipped across the gargantuan puddle known as the Atlantic. The Cato Institute expands on the Jones Act, calling it “archaic” and “perfunctory”: As a result of these restrictions, the U.S. economy endures artificially inflated shipping costs because the transport of cargo between U.S. ports and within the country’s vast inland waterways is off-limits to foreign competition and domestic shipping firms must pay vastly higher prices for the ships they use.

Basic supply and demand dictates a hellish future for consumers in the coming months. We’ve been anticipating a “Nightmare Winter.” And thus far, we don’t see any reason the trend will change.

So it goes,"

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