Monday, March 29, 2010

Will Congress Kill Natural Gas Before Its Time?

By Sheila McNulty in Houston
Published: March 29 2010 00:32 | Last updated: March 29 2010 00:32
Even as the oil and gas industries band together to promote natural gas as the fuel of the future, questions are emerging about whether US regulations will limit its potential.
A way has been found of combining the technologies of “horizontal drilling” and “hydraulic fracturing” to extract gas from tightly packed shale rock, raising estimates of US supplies, at current usage rates, from 30 to 100 years.
To the gas industry, the benefit is clear: energy security and via the least polluting of the fossil fuels. Natural gas is about 50 per cent less carbon-intensive than coal and 30 per cent less than oil. Infrastructure exists to carry it throughout the country, which gives it an edge over renewables.
Andrew Clyde, partner at Booz & Company, the consultancy, says natural gas will enable the US to shift away from coal to help it meet greenhouse gas targets and lessen national energy security concerns.
But while coal seems to have secured its future in bills under consideration in Congress, the gas industry was not well prepared to lobby when climate legislation talks began.
Producers have since worked to correct this and have made inroads, with the formation of the 70-plus-member Congressional Natural Gas Caucus, a bipartisan effort to educate, promote awareness on the importance of natural gas in the nation’s energy portfolio and develop policy.
Remarks by Steven Chu, the energy secretary, to the IHS Cera energy conference in Houston this month, that gas produces fewer emissions than other fossil fuels, has given the industry hope.
He also said natural gas was important for enabling renewable energy, as it can provide power when sun or wind are unavailable.
Jim Hackett, chief executive of Anadarko, the oil and gas producer, and chairman of America’s Natural Gas Alliance, says the fact Mr Chu spoke up for natural gas showed that some parts of the administration understand its benefits.
But, he cautions: “We still need to have a statement from the president that national policy includes natural gas.’’ While he waits, other efforts, to ensure the role of natural gas in energy policy, continue.
Oil and gas companies are facing scrutiny on Capitol Hill about the impact of shale gas, as concerns grow about the potential impact on the environment and human health.
The process involves drilling down for up to 20,000 feet and sideways for up to 4,500 feet. Water laced with chemicals and fine sand is pumped through, fracturing the shale rock. The sand remains propping it up so the gas can escape.
“‘Fracking’ is controversial and is likely to be so over the next few years,’’ says Joseph Coote, head of the Global Energy Practice at consultancy Arthur D Little. “It is suggested that the US may contain upward of 100 years of supply, but this may come at a significant cost and create public uproar challenging the pursuit of these reserves.”
Henry Waxman, Democrat chairman of the House energy committee, has sent eight companies information requests about the chemicals they use and the Environmental Protection Agency announced in March that it will investigate the potential adverse impact that hydraulic fracturing may have on water quality and public health.
Noting the trend, ExxonMobil, when it agreed in December to buy shale specialist XTO Energy for $41bn, included a clause allowing it to walk away if regulation makes extraction uneconomical.
Still, Exxon says it expects the deal to close in the second quarter. Royal Dutch Shell, too, continues to make shale gas a priority. According to Russ Ford, executive vice-president for Onshore Gas, “Shell has placed a big emphasis on North American gas; it’s an area of growth for us. We've invested about $15bn since 2004 in the onshore.”
Spectra Energy, a natural gas infrastructure company, is also betting its future on shale. “I don’t think gas is going away. We now have more than 100 years supply,’’ says Dorothy Ables, chief administrative officer.
Individual state governments in places benefiting most from shale gas, such as Louisiana, are firmly behind the industry.
Scott Angelle, Louisiana secretary of natural resources says: “I believe there is an agenda to move us off fossil fuels prematurely. But we do have this natural gas resource. It is clean. It is abundant. It is cheap. The conversation must be real. There is no panacea. We cannot go to renewables overnight.’’

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