The breathing room provided
by the bounty of natural gas
by Allen Best
Five to 10 years ago, a plausible case could be made that production of oil and gas in the United States – and really, most of the world – was peaking and, just as important, unable to keep up with growing demand. Shelves bulged with books like “High Noon for Natural Gas” and “The End of Oil.”
Very few people make that argument now. Improved extraction technology has allowed oil and gas companies to dramatically increase production in the United States. Now, instead of declining supplies of oil or gas, people talk about energy independence.
What are we to make of this new bounty of relatively inexpensive hydrocarbons?
Focusing especially on the natural gas, speakers at the Vail Global Energy Forum on March 2-3 credited it with giving the United States – and perhaps the world – breathing room. Still remaining is vital work in figuring out how to use existing energy more efficiently, which will require both technological innovations but a deeper understanding of human behavior. Also essential is figuring out more cost-competitive forms of renewable energy, including wind and solar, but also energy storage.
Advances in all these areas must be made briskly we are to reduce the risks of creating disruptive, potentially catastrophic climate changes through continued growth in greenhouse gases, say speakers. They said these innovations must be applied globally, although many indicated they believe the U.S. must show leadership in forging solutions.
In the United States, the rapid escalation of greenhouse gas emissions seems to have slowed and, on a per capita basis, it has actually dropped, according to Colorado Gov. John Hickenlooper.
He implied it is the result of the rapid switch from coal to natural gas, although others have pointed to the slowed economy, including a reduction in automobile traffic, as contributing to the decline. Absolute growth, because of population increases, has continued.
The most immediate impact of the natural gas bounty has been in the electrical sector. In the United States, 52 percent of electricity was created by burning coal as of 2005. Now, it’s dropped to 43 percent – and being undercut by low-priced natural gas. Many observers expect aging coal plants to be replaced by natural gas, as is scheduled to happen with two major plants in Colorado during the next several years.
Tom Petrie, former vice chairman of Bank of America and of Merrill Lynch and an energy analyst since the 1970s, said he believes it’s possible that coal’s share of the electrical market will dip to around 35 percent during this decade, and perhaps lower. This is important because burning natural gas produces only half the carbon dioxide as compared to burning coal.
In addition to displacing coal, how else should this bounty of natural gas be used? Some believe it has a role in displacing gasoline for transportation. Hickenlooper believes so, and he has teamed with the governor of Oklahoma in creating a coalition of 23 states to aggregate purchase of natural-gas burning vehicles for state fleets, thus increasing the buying power to justify new assembly lines and hence lower vehicle costs. School districts may also want to switch fuels.
“Pretty much everyone in the know agrees there are 100 years of natural gas at present usage,” said Hickenlooper. “I think we have more than we know.”
Of course, we’ve had gluts before of fossil fuels. In the early 1980s, Hickenlooper was a petroleum geologist in Denver when the Organization for Petroleum Exporting Countries opened the spigots, bringing cheap Mideast oil onto market. He and hundreds of other geologists who had been combing the Rocky Mountains for pockets of oil lost their jobs.
Seeds of innovation
Even then, the seeds were being planted for this new cornucopia of oil and gas in North America. Just who should be credited with this dramatic turnaround seems to be open to debate.
Hickenlooper cited investment of $5 billion to $6 billion over the course of eight years in drilling technology and hydrofracturing, which at first was called cracking, as being at least partly responsible for creating what he called a tipping point. He implied that the money came from the federal government, and he said that even in times of tight budgets, we must continue to invest in the future.
Another speaker. Jim Brown, who is president, Western Hemisphere for Halliburton, the giant oil-services supplier, cited the role of the private market and competition in creating better techniques.
Yet another oft-told story is about the efforts of George Mitchell, an oil field explorer in the Dallas-Fort Worth area. After 17 years of trial-and-error tinkering, he achieved “overnight success” in the Barnett shale, spurring others to replicate his success in other so-called unconventional source rocks. Many have succeeded.
The new techniques have had profound success in allowing tiny particles of oil and gas locked in tight sandstone rock to be extracted. Three-dimensional imaging gives geologists a much better sense of what lies in the subterranean, and directional or horizontal drilling has vastly expanded the lateral tentacles, allowing a single well to produce 10 to 15 times as much as the old-fashioned vertical well, said Halliburton’s Brown.
The third technique, hydraulic fracturing, has been far more controversial. First done in the 1940s, it sends primarily water and sand at high pressure into the shale formations, to create gaps from which the molecules of natural gas can flow into collecting pipes. The major controversy has surrounded the use of small amounts of sometimes dozens of chemicals, many but not all of them benign, to help improve the effectiveness of the fracking process.
Defenders, including Halliburton’s Brown say there has never been a confirmed case in the United States of fracking solutions entering potable water sources. Natural gas-bearing formations are deep underground, separated by near-surface water aquifers by thousands of feet of dense rock. More than one million “fracks” have been done in North America, 400,000 alone since the turn of the century. He said much of the concerns have been misguided. The real focus needs to be on the integrity of well-bore casings, the concrete sleeves that prevent fluids and gas from escaping.
Another speaker, Mark Zoback, a professor of geophysics at Stanford University who studies extraction of gas and oil from the unconventional rocks, agreed that concerns about fracking have been misguided and called out the involvement of Yoko Ono.
“I’m still mad at Yoko for breaking up the Beatles,” he said.
Zoback, however, stressed the need for oversight and healthy skepticism about the integrity of the drilling process. He pointed to BP’s Deepwater Horizon disaster in the Gulf of Mexico.
Environmental safety, he explained “all comes down to three things: well construction, well construction, well construction.”
“It’s not sexy. It’s very basic,” he said. “When you drill 20,000 wells a year, that’s 20,000 potential problems. We have to be sure we’re doing this right.”
A greater problem yet for natural gas may be fugitive emissions. Methane, the primary constituent, has 20 to 100 times the heat-trapping properties of the more common carbon dioxide. If allowed to escape into the atmosphere during extraction or handling, the damage to the atmosphere might well negate its value in displacing coal.
For that reason, any broad application to transportation should be done very carefully, said Sally Benson, a professor of energy resources engineering at Stanford University and director of the university’s Global Climate and Energy Project.
Benson said work must continue to improve the technology for carbon capture and sequestration if the world is to reduce carbon dioxide emission 80 percent by 2050, as many prominent climate scientists say is necessary.
Coal remains abundant, however, and the world’s population is growing rapidly. If people in places like Africa are to achieve greater well-being as enjoyed by people in advanced countries, the world may need six times more energy than it now consumes.
That’s a daunting statistic, but Benson also delivered a hopeful thought. She wondered whether Africa will be able to bypass the dependence on atmospheric-wrecking fossil fuels in a way similar to the way it leap-frogged conventional phone lines and poles, instead proceeding immediately to cell phones.
She also pointed out that sunshine is the most promising source for future advances, because the resource is so abundant. Usually, developing energy source at large scales can have unpleasant side effects. With sunshine, that should be less of a problem. It just has to be done with greater efficiency and hence less cost.
The other side of the bridge
Natural gas is a perfect partner for renewables, “and I think we need to deflect the idea they’re in competition,” she said.
But she also emphasized that the glut of natural gas should not allow us to lose sight of the need to continue to improve renewables.
“That would be a terrible, terrible mistake,” she said.
China was mentioned frequently in the two-day conference, most frequently as a partner in innovation. Petrie, the former Bank of America executive, said he doesn’t think the Chinese public will continue to accept the deadly air pollution caused by the profusion of coal-fired power plants.
Jeff Bingaman, a former U.S. senator, pointed out that China is the source of financing for many companies trying to create sustainable energy systems.
Taking stock of Congress, Bingaman said that he believes few of its members doubt the science of climate change, but some of its Republicans won’t admit to it, for fear of being branded as moderate.
He sees little future for cap-and-trade, a model that advanced in the U.S. House of Representatives in 2009 before sputtering in the U.S. Senate. It is neither simple nor does it send a strong price signal, he said.
Bingaman likes a clean energy standard, an idea mentioned by President Barack Obama in two major speeches, but which has received little attention. The standard would force utilities to reduce carbon dioxide emissions, but allow them latitude in figuring out how to do so.
The standard would send a price signal that is long term and would tell investors there is a potential return on investment, spurring innovation – and helping the United States lead the innovation in new technology.
While Congress remains in locked in disagreement about climate and energy legislation, said Bingaman, Obama will use authority under the Clean Air Act to clamp down on emissions of carbon dioxide from power plants.