There is much talk of the electric industry converting most of its generation to use natural gas as a primary fuel. In addition to the oil and gas industry, the Obama Administration and some prominent environmental groups have joined the chorus, calling for a rapid fuel switch to natural gas.
In fact, natural gas has increasingly been touted as a “bridge fuel” from high-carbon sources of energy (like coal and oil) to a renewable energy future. This is based on the ability of horizontal drilling and hydraulic fracturing to access natural gas from previously inaccessible shale gas deposits. However, there is much debate over both the actual reserves available and the possible pollution resulting from advanced drilling techniques using an old technology known as hydraulic fracturing, or “fracking.” The oil and gas industry projects a disputed figure of 100 years supply using this technique.
This post focuses on the proposed widespread use and possible consequences of fracking shale deposits containing natural gas and oil reserves. It will not get into the technical and operational details of fracking.
Horizontal drilling, which began in 1930 and predated hydraulic fracturing by two decades, made it possible to “significantly reduce the overall number of well pads, access roads, pipeline routes, and production facilities required, thus minimizing the habitat fragmentation, impacts to the public, and the overall environmental footprint,” according to a 2009 report sponsored by the U.S. Department of Energy. Shale gas is characterized by high-costing, rapidly depleting wells that require high energy and water inputs. The hydraulic fracturing treatments used to stimulate gas production from shale have stirred environmental concerns over excessive water consumption, drinking water well contamination, and surface water contamination from both drilling activities and fracturing fluid disposal.
However, the truth is that many accusations of water contamination and resulting fines for violations may be misplaced if tied solely to fracturing. By the definition of industry, along with most observers who followed oil and gas issues before the current shale drilling boom, fracturing didn’t cause those problems.
In the debate over the possible consequences of hydraulic fracturing, observers without agendas are not relegated to the sidelines. In fact, they have been called on to separate fiction from fact. In Dallas, a natural gas drilling task force (which includes ordinary citizens along with industry officials and academics) has been created to rewrite drilling regulations. This comes in the middle of a drive to ban drilling altogether.
The ability to stick to legitimate facts, not shut down drilling or over-rely on hydraulic fracturing due to a tide of emotion is very important, given the role shale gas might play in meeting future energy needs. The U.S. DOE Energy Information Administration estimates that by 2035, shale gas production will represent 50 percent of all natural gas production in the U.S. “It is projected that this increased production will enable natural gas to provide 60 percent of electricity supply increases necessary to meet demand through 2035,” the EIA was quoted as saying in background material provided to the U.S. House Committee on Science, Space, and Technology for a May 11th hearing reviewing the widespread use of this technology.
Hydraulic fracturing, along with advanced horizontal drilling technologies used primarily for natural gas, have been developed to not only meet the growing energy needs of a modern society, but also to address the concerns of environmental groups over global warming impacts of coal use. Natural gas has about 45% of the greenhouse gas emissions of coal, not including impacts of drilling, production, and distribution.
However, even assuming the EIA forecast for growth in shale gas production can be achieved — and many experts don’t — replacing coal would require a 64% increase in gas production over current levels, heavy vehicles a further 24% and light vehicles yet another 76%. This would also require a massive build-out of new infrastructure, including pipelines, gas storage and refueling stations, and other facilities.
Natural gas production is also a story about a rapidly increasing number of producing gas wells and a declining amount of gas produced from each well. There are now more than 500,00 producing gas wells in the United States, nearly double the number in 1990. Yet, according to industry statistics, gas production per well has declined by nearly 50% over this period. This requires a complex infrastructure nearly 100% larger than that in 1990 to achieve a 21% increase in natural gas production.
Conventional gas wells typically decline by 25% to 40% in their first year of production. Shale gas wells decline at much higher rates, between 63% and 85%. To increase U.S. gas production as projected by the EIA, U.S. drilling rates will likely have t0 increase to at least 30,000 wells per year in the near term and continue to grow to 40,000 wells per year to meet production requirements by 2035, more than double current numbers.
As noted at the beginning of this post, there have been calls from the oil and gas lobby as well as environmental groups and the Obama Administration to shut down coal-fired generating plants and replace them with gas. Electricity generation from gas would have to more than double from current levels and, as noted earlier, overall gas production would have to increase by 64% to offset the electricity generated by coal in 2009. Given that achieving the 265% growth in shale gas production in the existing EIA base case will be extremely challenging in itself and could involve major environmental impacts, the concept of replacing coal with gas is not based on a solid foundation.
Some of the logistical bottlenecks to the wholesale transition from coal to natural gas include the lack of sufficient pipeline capacity in 21 states as well as the lack of storage capacity on the East Coast, in the Central Plains states, and in Nevada, Idaho, Arizona, and Missouri. The cost of building gas plants to replace all existing coal plants, plus new pipeline requirements and ancillary infrastructure, is estimated to exceed $700 billion.
Globally, the U.S. is second only to China in estimated recoverable gas shale resources. There is an important role for shale gas in our energy future. Much debate and a public policy consensus are required before these resources can be developed and used in an affordable, reliable, timely and environmentally acceptable manner. The biggest losers in a misguided rush to rely on shale gas as America’s energy savior will be energy consumers, who need sound energy policy based on realistic expectations for future supply, as well as sound assessments of both economic and environmental costs. The current rush by its proponents to crown shale gas as our energy savior does not meet this test.