25 Jul 2011

Shale natural gas looking more like THE sustainable bridge to a more secure, cleaner and lower carbon energy future

Written by Jim Pierobon

While not all geologists agree, the estimated reserves of natural gas from shale deposits make natural gas the fuel of choice for the economy, U.S. energy security and the environment. How much depends on whom you believe.

Chesapeake Energy’s CEO Aubrey McClendon has asserted on CBS’ 60 Minutes there is now twice as much natural gas in the U.S. on a BTU-equivalent basis than the Saudi’s have crude oil (see accompanying map). And yet a leading industry trade association estimates there is ‘only’ roughly the same amount of natural gas as Saudi oil. Either way, we’re talking about a LOT of new natural gas. It is very difficult not to pay a LOT of attention to its compelling value proposition given the partisan politics dominating energy debates in Washington and growing global demand for energy generally.

Before one leaves this issue for 60 Minutes to settle, read this review of the segment. It accuses Correspondent Lesley Stahl of letting McClendon off the hook on a few questions for which there are no easy answers, especially when it comes to the relatively new practice of hydraulic fracturing, or “fracking,” which involves injecting water and various toxic chemicals deep underground at pressures high enough to blow apart shale and release the gas trapped in it.

This is where natural gas from various shale formations is to be found in the lower US 48 states. Credit: U.S. Energy Information Administration

Now the industry faces several hurdles, five of which are:

1. Producing the gas safely with relatively few mishaps and no major accidents, especially that affect drinking water supplies;

2. Agreeing on rules that can realistically and reasonably regulate the industry;

3. Producing gas without a major accident that could do to natural gas was Fukushima has done to nuclear power in Japan and elsewhere;

4. Building the pipelines, storage and other infrastructure to get this gas to market; and

5. Credibly tempering enthusiasm that could lead to an over-dependence on this the cleanest of all fossil fuels.

“This positive news was simply unthinkable a few years ago,” Dow Chemical Vice President George Blitz told a U.S. Senate hearing July 18 in Washington. But, Blitz was quick to add: “We’ve not reached the point of seeing natural gas as the silver bullet.”

“Recent history suggests we should be cautious,” opined Sen. Jeff Bingaman, D-NM, who chairs the Senate Energy and Natural Resources Committee.

Just five years ago, natural gas was selling at more than twice today’s price (in excess of $10 per million BTUs vs about $4.50 today). This fundamental shift has energy planners salivating at what it could mean for creating tens of thousands of new good-paying jobs, generating millions in new tax revenues, retiring traditional coal-fired power plants, improving the U.S. trade balance and reducing dependence on Mideast oil — all without significantly inflating the cost of natural gas for various industrial processes, power generation, residential heating and transportation.

Today, natural gas-fired generators constitute 39% of America’s total electric generation capacity. Much like renewable energy sources such as wind and solar, natural gas is a relatively new player to the nation’s electric grid — 65% of America’s natural gas-fired capacity has been added since 1980. That is bad news for renewable sources and dirty coal. Without an extension and expansion of state requirements to meet electricity demand from renewables, natural gas is bound to crowd out more prospective clean energy projects and force the retirement of aging coal plants.

Even the Sierra Club is willing to embrace the potential for natural gas IF the hurdles spelled out above, and others, can be managed transparently. State chapters such as those in Pennsylvania and New York seem willing to let the industry proceed with drilling while others, including Maryland, are studying the risks before offering a green light.

The national Sierra Club office has set six conditions for allowing companies to drill for “deep shale gas.” Among them are disclosing the ingredients of fracking fluids and demonstrating that drinking water supplies and surface waters are adequately protected from contamination.

Part of the July 18 Senate hearing focused on recent assessment by The New York Times that new natural gas may not be as easy and cheap to extract from shale formations deep underground as many gas drillers are claiming. The Times said it accessed hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.

To many experts, the future of shale natural exploration and production is there for the industry to exploit reaping many positive benefits. But sloppy operators could gum up the works if a massive human error throws ice water on this party.

Leave a Reply