In late August the Vancouver Sun ran an article on the bullish prospects for Canadian shale gas. The piece began this way: “What energy crisis? Despite what you may be hearing about a global peak in oil production, waning reserves, and $100-plus oil prices, North America is suddenly awash in fossil fuel.”

The most arresting quote came from Mike Graham of EnCana, a Canadian company that holds dominant positions in British Columbia’s Montney and Horn River plays. “Natural gas will displace coal. It will displace oil. There is no reason North America shouldn’t be energy self-sufficient if we can displace a lot of the oil with natural gas.”

Are we all of a sudden “awash in fossil fuel?” On the road to “energy self-sufficiency?”

You may have your doubts, but when talking with key gas industry insiders, it’s clear they believe shale gas has changed the game. (We’ll explore the topic in depth at the upcoming ASPO conference in Denver, October 11-13th. To register: http://www.aspo-usa.com/2009denver/ )

For example, Aubrey McClendon, CEO of Chesapeake Energy, believes the Marcellus shale, which underlies Appalachia, holds as much gas-in-place as the U.S. has used in its entire history. Production from the Marcellus is still negligible, and not all of that gas is recoverable, but the belief that America’s gas future is much brighter than we thought a few years ago is beginning to take root.

Ignoring the ubiquitous hype, let’s presuppose for a minute that increased domestic drilling, combined with large hikes in LNG imports, could lead to big increases in U.S. gas supply. What would be the highest and best use of that new gas?

To reduce the trade deficit and lessen U.S. dependence on foreign oil, you could launch an effort to use compressed natural gas in vehicles. (After decades of half-hearted efforts, there are still way fewer than one million CNG vehicles on American roads, out of a fleet nearing 250 million.) If the goal is to save money and enhance national security, this would be the smartest strategy.

But if the goal is to save carbon, you would use the natural gas to displace coal in the electric sector. This idea seems to be gaining traction. For example, in July Colorado governor Bill Ritter addressed hundreds of natural gas executives at a conference in Denver. A year ago Ritter was in the midst of a bruising battle with the industry, as he championed aggressive new standards for drilling and wildlife protection. Now, facing a tough re-election challenge, he struck a conciliatory note.

“Natural gas is a vital part of the new energy economy – not a bridge fuel, not a transition fuel, but a mission-critical fuel,” the Governor proclaimed. “We can’t begin to address climate change in a meaningful way without using more natural gas.”

In recent months clean energy advocate Robert F. Kennedy, Jr. and former Colorado Senator Tim Wirth have echoed similar sentiments. “Climate disruption is real,” Wirth told the Denver conference. “We are in very deep trouble, the edge of catastrophe. The gas industry must play a major role in saving the world.”

In Colorado, as in China, the question is what to do about coal. Each day 10,000 hopper cars heaped with coal – enough to fill a train 110 miles long – trundle out of the Rockies, bound for power plants as distant as Florida. (One insatiable coal plant near Atlanta owns 35 complete train sets, which trundle incessantly back and forth to Wyoming. That’s necessary since a trainload takes five days to get there, and is burned within eight hours.)

Ritter is one of many governors who have called for a 20 percent reduction in greenhouse emissions by 2020. This is a very tall order, in no small part because his state may add one million people by then. Population is rarely broached in climate discussions, which is unfortunate because growth is a big deal. Reducing emissions while people are increasing is like running down an up escalator. To hit Ritter’s target, all growth in demand would need to be met through conservation and a multi-billion investment in carbon-free wind, solar, or nuclear. Simultaneously, you’d have to retire nearly one-half of Colorado’s coal plants, and somehow replace their output.

Could conservation fill the entire gap? That’s unlikely. The potential for energy saving is enormous but getting it to happen on such a large scale in such a short time would be difficult. Efficiency may be the new apple pie, but the inconvenient truth is that the typical household is using 10 percent more electricity than it did a decade ago, due to the proliferation of air conditioning, plasma TVs, and other gadgets. That leaves burning more natural gas, a lot more, nearly twice as much as the state burns for electricity now.

The politics of fuel switching are difficult, because it would raise electric rates and because coal’s markup rivals that of Fiji Water. Each year, the nation’s utilities spin $40 billion worth of coal into $160 billion of electricity. Thus, although the average coal plant is nearly 40 years-old, there’s no incentive to retire it, even though it produces three times more carbon dioxide than a modern gas turbine. If the nation was really serious about addressing climate change, the “cash for clunkers” program would have targeted those ancient coal plants, not F150s.

Does Colorado produce enough natural gas to support such a strategy? Yes, plenty. One-fifth of the state’s current exports would suffice. The math is much more difficult at the national level.

If the goal was to displace half the coal now burned in the power sector, the U.S. would have to increase its annual gas consumption from roughly 20 trillion cubic feet to 28 trillion cubic feet. That’s a big lift, since U.S. gas production peaked 35 years ago at 21.7 trillion cubic feet, and is today 5 percent lower.

Right now, the Rockies gas industry is suffering through its worst year in recent history. Due to the recession, commodity prices have cratered. Not a single coalbed methane well was drilled in Wyoming’s Powder River Basin in June, welcome news to local environmental groups.

For the next year or two, the nation is likely to indeed remain awash in gas. But if the country were to embrace fuel switching, as it may need to do to reduce greenhouse gas emissions quickly, the glut would disappear and boatloads more LNG and dramatic increases in drilling would be needed.

Indeed, to displace half the coal we now use with gas, we’d need to complete 30,000 to 50,000 new wells a year for decades to come. If that’s our strategy for averting climate disaster, then we’ll need to put somebody like Sarah Palin in charge of drilling.

4 thoughts on “Mission Critical: Can Shale Gas Save the World?”

  1. I would save as much fossil fuel as possible by using as much nuclear energy as possible to generate electricity. Electrical generation and transmission are inefficient processes, and natural gas has too many other valuable uses. Shell(nice dividend)is making liquid fuel from natural gas as you read this. Coal is a junk fuel compared to natural gas or oil, but it is very abundant. Yet, the air pollution from burning coal kills thousands of people every year and releases a lot of toxic metals and radiation into the environment.
    I am always amused by people who worry about the disposal of radioactive waste from nuclear power plants. Is there a commandment that says that we can’t just set up a force to watch the stuff, forever, if necessary? When do we plan to close down all the hospitals, police stations, schools, fire departments, armies, the internet, or sewer treatment plants? The last time I checked, the United States Government (that is us) still owned 40% of the Country, including most of the West. You think a nation of over 300,000,000 people could train a few hundred people to watch and guard a mountain complex containing reprocessed waste on a tiny part of all that land. If we can’t, we sure had better all evacuate immediately, since thousands of nuclear weapons are stored at various locations throughout the Country. Each contains plutonium which is dangerous for hundreds of thousands of years, should it escape into the environment. I like the waste disposal option that I heard Robert Zubrin mention on “Coast-to-Coast a.m.” last Friday night. He said, “If you are so worried about it, you can reprocess the radioactive waste, glassify it, seal it in stainless steel containers, and then dump it in deep ocean areas.” As long as you stay away fron the rifts, and don’t drill there in the future, sedimentation will bury it deeper and deeper as time passes. Only large governments could ever get to it, so it would be safe from terrorists. It would be harmless long before it could ever return to the biosphere in hundreds of millions of years. Will Homo sapiens last that long? Look out for big comets. Over a very long time period, they are a far, far greater threat than radiation. But, I’ll put both way down on my worry list. I just need to keep the AC on as it is still a humid 90 F. at 6:05 p.m. !

  2. If you believe in peak oil, then natural gas gets pulled in as a transportation fuel. In power, the value of natural gas today is about $4; for transport, it would be $10. Unless producing gas gets much more expensive or producing oil gets much cheaper, natural gas will tend to be arbitraged into the transportation fuels market.

  3. I’d levy a tax on fossil fuels which scales with the base price and mandate this money be used to create energy infrastructure of wind, solar PV and solar energy. The tax rate should scale at (1/1-% of increase by suppliers) times the base rate. This accelerates the accumulation of revenues for alternatives tied directly to the Peak Oil crunch coming. Offer a massive jobs program to the unemployed to move to these windy, sunny locations and construct, as we did with the Hydro projects, a massive, renewable energy grid and source.

    Plutonium is the most poisonous substance man has ever made, and nature made that killing side effect for a reason: telling us “don’t go there”.

    Taking one giant step toward renewables will, like the hiway system, create a new view of society in America again working together for innovation, investment, and general public benefits. The side effects are, like the highway system more sales of clean energy related products and services.

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