The world’s projected natural gas supplies jumped 40 percent last year. How is such a thing possible? Until a decade ago, experts believed that it would be technically infeasible to exploit the potential resource base of natural gas locked in 48 shale basins in 32 countries around the world. Then horizontal drilling combined with hydraulic fracturing, also known as fracking, was perfected. The shale gas rush was on, and last year the U.S. Energy Information Administration (EIA) issued an analysis revising its estimates of available natural gas dramatically upward.
The ability to produce clean burning natural gas from shale could transform the global energy economy. Right now we burn about 7 trillion cubic feet (tcf) of natural gas to generate about 24 percent of the electricity used in the United States. The U.S. burns a total of 23 tcf annually to heat homes and supply industrial processes as well as produce electricity. Burning coal produces about 45 percent of U.S. electricity.
A rough calculation suggests that 100 percent of coal-powered electricity generation could be replaced by burning an additional 14 tcf of natural gas, boosting overall consumption to 37 tcf per year. The EIA estimates total U.S. natural gas reserves at 2,543 tcf. This suggests that the U.S. has enough natural gas to last about 70 years if it entirely replaced the current level of coal-powered electricity generation.
Similarly, it would be notionally possible to replace all current U.S. gasoline consumption with about 17 tcf of natural gas per year. So replacing coal and gasoline immediately would require burning 54 tcf annually, implying a nearly 50-year supply of natural gas.
What about the greenhouse gas implications? The EIA estimates that the U.S. emitted 5.2 billion tons of carbon dioxide in 2009 (the last year for which figures are available). Burning coal emitted 1.75 billion metric tons of carbon dioxide into the atmosphere. Similarly, burning petroleum in the transportation sector emitted 1.7 billion metric tons of CO2, of which about two-thirds came from consuming gasoline. By comparison, the natural gas burned to generate electricity emitted 373 million metric tons of CO2. A rough calculation suggests that replacing coal and gasoline with natural gas would reduce overall U.S. carbon dioxide emissions by about 25 percent.
Given its greenhouse gas benefits, environmental activists initially welcomed shale gas. For example, in August 2009 prominent liberals Timothy Wirth and John Podesta, writing on behalf of the Energy Future Coalition, hailed shale gas as “a bridge fuel to a 21st-century energy economy that relies on efficiency, renewable sources, and low-carbon fossil fuels such as natural gas.” The same year, environmentalist Robert Kennedy, Jr., head of the Waterkeeper Alliance, declared in the Financial Times, “In the short term, natural gas is an obvious bridge fuel to the ‘new’ energy economy.”
That was then, but this is now. Practically en masse, the herd of independent minds that constitutes the environmentalist community has now collectively decided that natural gas is a “bridge to nowhere.” Why? In his excellent overview, The Shale Gas Shock [download], published last week by the London-based Global Warming Policy Foundation, journalist Matt Ridley explains: “As it became apparent that shale gas was a competitive threat to renewable energy as well as to coal, the green movement has turned against shale.”
And indeed natural gas is cheaper than renewable sources of energy even if one includes the costs of carbon capture and sequestration. The EIA’s Annual Energy Outlook for 2011 calculates the levelized costs of electric power generation for various fuel sources. Levelized costs include all capital, operating and maintenance, fuel, and transmission costs for building plants now that would switch on by 2016.
In cost terms, natural gas is the clear winner. Electricity produced using natural gas in a combined cycle generating plant comes in at $66 per megawatt-hour. If one includes carbon capture and sequestration, basically burying carbon dioxide underground, the cost rises to $89 per megawatt-hour. In contrast conventional coal costs $95 per megawatt-hour rising to $136 using carbon capture and sequestration.
How does natural gas compare with various carbon-free and renewable energy sources? Nuclear clocks in at $104 per Mwh, offshore wind at $243 per Mwh, photovoltaic at $211 per Mwh, solar thermal at $312 per Mwh, geothermal at $102 per Mwh, and biomass at $113 per Mwh. The only renewable sources that are close to competitive with natural gas are onshore wind at $97 per Mwh and hydroelectric at $86 per Mwh. With regard to transportation, the price of compressed natural gas currently hovers around the equivalent of $2 per gallon of gasoline.
Keep in mind that the above is just a thought experiment. Junking coal-fired plants and dramatically expanding natural gas production as well as the infrastructure to burn it to generate electricity and dispense it as transport fuel would be costly. Increased demand for natural gas would also tend to boost its price.
Since renewables come off so badly in comparison with natural gas and offer energy independence as well, once-enthusiastic activists evidently began to search for other reasons for opposing it. Ridley cites five claims: fracking fluids contain dangerous chemicals that might contaminate groundwater; wells allow gas to escape into aquifers; well waste water is contaminated with salt and radioactive elements that pollute streams; it uses too much freshwater; and drilling damages landscapes.
First, the shale that contains natural gas lies below thousands of feet of impermeable rock so that the fracking process itself will not contaminate drinking water aquifers that are generally only a few hundred feet below the surface at most. A 2010 Pennsylvania Department of Environmental Protection report “concluded that no groundwater pollution or disruption of underground sources of drinking water have been attributed to hydraulic fracturing of deep gas formations.”
On the other hand, the drilling companies did their industry no favors by keeping their proprietary fracking fluid formulas secret. The cloak-and-dagger approach alarmed the sorts of folks who are easily alarmed. But as Ridley points out, the fracking fluids are actually 99.9 percent water and sand. The small amounts of added chemicals reduce friction, fight microbes, and prevent scaling. In any case, many states are now requiring companies to reveal their formulas. The U.S. Environmental Protection Agency is expected to issue a report on the safety of fracking in 2012. In the meantime, the Obama administration appointed a new panel last week to look into fracking and make recommendations in 90 days on how to improve on the safety of the technique. It is unlikely that whatever new regulations that emanate from these bureaucracies will derail the shale gas industry.
Just as for conventional wells, it is possible that natural gas can escape into aquifers if the wells are not properly sealed using steel and cement casings. A new study in the Proceedings of the National Academy of Sciences published today finds elevated levels of natural gas in groundwater wells within 3,000 feet of active gas well sites. The researchers conclude that the source is likely leaky casings.