In 2006, I moved back to Houston after a two-year ex-pat assignment in The Hague (NL). In my new Houston assignment, I managed the North Region gas trading and marketing department. One of the roles I had within Shell was to work with the Broadwater Energy project team. Broadwater was an LNG regasification project in Long Island Sound near New York State and Connecticut. LNG is gas that is super cooled into a liquid, transported long distances by vessels, then re-gasified and shipped by pipelines to customers. The LNG business is technologically advanced and required billions of dollars in capital investments. An offshore (1,200 ft) floating regasification facility would be installed so that LNG vessels could discharge the LNG and then the liquid gas regasified into an offshore gas pipeline for the populous New York City region.
For Shell, the northeast US market was financially lucrative because onshore gas pipelines into the northeastern US were unable to supply enough gas, especially during the peak winter heating season when gas prices spiked due to high demand. The urban northeast made building additional onshore pipelines impractical. An offshore LNG platform bypassed the onshore logistical problems and supplied up to 1 Bcf per day of additional gas for customers in this high-demand region. Financially, it looked like a win-win for all: customers would pay less, suppliers would profit, and large capital would be deployed to fund thousands of good paying jobs. However, the project was rejected on April 10, 2008. Why?
The Broadwater regasification platform was located in Long Island Sound and while appearing small when viewed by Long Island onshore residents, the project was bitterly contested. The platform was an eyesore to island residents who were also worried about possible environmental damage. In contrast, the economically disadvantaged in New York City would pay lower energy costs and would not see the offshore facility. A positive economic project turned into a political fight.
Dr. Victor V. Claar, professor of economics at Henderson State University, and Dr. Robin J. Klay, emeritus professor of economics at Hope College, authored Economics in Christian Perspective: Theory, Policy and Life Choices (InterVarsity Press, Downers Grove, IL, 2007). These two authors combine their economic expertise with their faith. “Our guiding conviction is that Christians who are serious about problems like environmental damage, unemployment and poverty cannot afford to ignore the achievements that economists are making with these issues. Mainstream economics helps Christians understand economic problems and respond as good stewards of God’s creation. … We articulate a set of Christian principles and values needed to undergird economic and social action in order to produce a just and prosperous society anywhere in the world.” (page 10)
The authors “picture society as a tripod, supported by three poles, each of which must have the size and integrity to enable people and their communities to thrive. These poles are democratic government, the market economy, and strong religious and cultural institutions.” (page 17) The Broadwater project touched all three poles. But there were spillover effects: an economic event in one context that occurs because of something else in a seemingly unrelated context. Lower priced energy benefited the people of New York City (positive externality) while the economically advantaged and politically connected Long Island residents viewed the platform as undesirable (negative externality). Economically, the net social benefit must be greater than zero (total social benefit less the total social cost). (page 55) But the Broadwater project’s net social benefit is not a simple mathematical analysis. What is the social cost of a view from the Long Island shore? What is the probability of environmental damage and the related social costs?
When I was working on this project, I asked the question: “What is Shell’s opinion, as a member of the world community, towards placing a platform in Long Island Sound?” The answer I received from the project team: “Shell does not have an opinion; we only put forth the project and let the community decide.” I was troubled by this answer as it placed all the social responsibilities on others and my corporation did not take a position on the deeper social issues. Shell had biased financial incentives in the Broadwater project, so remained neutral on the net social benefits. I believe that the third pole should be considered by Christians within corporations.
On March 17, 2008, I was in New York City meeting with National Grid, a northeast utility who was interested in buying the Broadwater gas for their regional customers. That day, New York Governor Eliot Spitzer resigned as governor after a scandal. Lt. Governor David Paterson became governor and on April 10, 2008, rejected the Broadwater project.
Looking back after more than 12 years, it was a dual blessing. US fracking success lowered North American gas prices and LNG imports into the US were not needed. Shell was spared the negative project economics, NYC residents received lower priced gas, and Long Island residents have an unobstructed water view. Perhaps it was the provident hand of God at work. But there would have been a better solution if all three ‘poles’ gathered together and balanced the externalities as a community rather than representing their individual interests. “The responsibility of stewards is to manage resources, over which each has been given oversight, in the best interest of the owner (in this case, God) and in service to others.” (page 22)