“Natural Gas Nation,” the first conference conducted by the Bush Institute on Economic Growth, addressed the question of what needs to be done to make America’s explosively growing reserves of natural gas a true game-changer – for the environment, for the economy and for national security.
Conducted by the Bush Institute on Economic Growth, the event took place on March 25, 2010, and was produced in partnership with the SMU Cox Maguire Energy Institute. An audience of 300 business and political leaders, economists, geologists, chemists, oil and gas producers and distributors, engineers, environmentalists and policy experts in energy, defense and economic growth gathered to learn about the astonishing transformation in the U.S. domestic energy picture in the last five years – a transformation brought about by the technological and financial revolution in natural gas production.
Because of the technological achievement that combines horizontal drilling with fractal extraction, billions of gallons of theoretical reserves of natural gas, thought to have been locked in inaccessible shale formations, have become available now – and can be extracted with far less impact on the environment than other domestic energy sources. The natural gas reserves within the United States have increased by 35% in the last decade.
Natural gas is domestic – when it replaces coal as a fuel it nearly eliminates particulate pollution and cuts CO2 emissions in half – a tested pipeline distribution system is in place – it is an ideal solution for a variety of energy, economic and national security needs. But putting this solution in place is not as easy as it sounds, as an extraordinary panel of experts from the energy production and distribution industries, the transportation industry, academia, politics,government regulation, law and policy came to the Bush Institute to explain.
The barriers to making natural gas the game-changing energy source that it could be are complex. On the production side they include ensuring that local communities, national environmentalist organizations and regulators at every level of government understand the low risks and enormous benefits of gas extraction through horizontal drilling and hydro-fracturing. On the demand side it involves understanding where the market share growth opportunities are. Electrical generation has taken a big hit from the economic crisis, and may not return to 2007 levels for another five years – and although the number of coal-fired plants is probably at its peak, they will only slowly be replaced – and their replacement will include nuclear plants as well as gas-fired plants.
One big opportunity to expand market share is in the transportation sector, now dominated by petroleum fuels like gasoline and diesel. But conversion to natural gas transportation – beyond trucking fleets that operate within a radius of a few hundred miles – may be difficult. Long-haul truckers would have to make more frequent stops due to the more limited range CNG[1] permits – and an infrastructure must be extended along major Interstate highway corridors to supply truck stops and eventually consumer vehicles with CNG.
How does the increase in natural gas reserves and production affect national security? There were different viewpoints – in the long term, to have 100 years of consumption at present-day rates (and perhaps a multiple of that) in secure domestic reserves is a strategic asset. On the other hand, our appetite for OPEC-controlled oil imports is entirely a function of how much our transportation system that relies on petroleum-based fuels. Not until some 80% of our automotive fleet adopts CNG and electric power will OPEC’s control over oil pricing be substantially diminished.
Most of all, the panelists emphasized the degree to which the natural gas market will depend not on consumers and suppliers and the market that links them, but upon decisions in Washington and state capitals – and in city halls and town meetings. The decisions of federal and state environmental and energy regulators, national and state politicians, and mayors and county executives have an enormous effect on the methods, the tempo and the economics of extracting natural gas from shale. And these effects make themselves felt not only when regulators and lawmakers address natural gas directly, but also when the same powers make decisions about investments, rewards and penalties for competing energy sources such as coal, oil and oil refining, solar, wind and biomass.
As the Institute’s Executive Director James K. Glassman summed up the day’s work, “we began by counting the many ways that natural gas boom is a game-changer, and by the end of the day we heard the words “conundrum” and “intractable” more frequently. Natural gas well may be a game-changer, but the lesson is that it’s not easy.”