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01/05/2011

Natural Gas: A Cleaner Energy Solution Grapples with Environmental Risks


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The natural gas industry has recently been the beneficiary of the Obama administration’s efforts to strike a bipartisan pose in the wake of the Republican midterm-election ascendancy. At a news conference the day after the elections, when asked if there were ways he might find to collaborate with the new Congress, Obama responded that there was certainly broad agreement that the country has “terrific natural gas resources.” He went on to ask, “Are we doing everything we can to develop those?” His response was welcomed by the natural gas industry but viewed with mixed emotions by environmentalists. On the one hand, the latter acknowledge that natural gas is a significantly cleaner burning fuel than oil or coal and is a necessary complement to renewable sources of energy. According to the Environmental Protection Agency, the burning of natural gas produces a third of the quantity of nitrogen oxides, half the amount of carbon dioxide, and only one percent of the quantify of sulfur oxides as the burning of coal. Natural gas also emits negligible amounts of mercury compounds. But environmentalists are equally concerned about the environmental impacts of the boom in hydraulic fracturing—a technology used to extract natural gas from rock formations.

Improvements in hydraulic fracturing technology have pumped up the supply of natural gas on the market at a time when overall energy demand remains suppressed by the economic downturn. Natural gas inventories are consequently at record highs, and the price of gas has hovered at an average of $4.25 per thousand cubic feet in 2010, half of its peak price. Low natural gas prices and a generally hostile climate for the construction of new coal-fired power plants is encouraging more and more utilities in coal states to convert from coal to natural gas as a power source.


American Gas Association Luncheon


But the natural gas industry faces numerous environmental risks and increasing oversight from regulators and policymakers. The industry has suffered from the fallout of the explosion of a natural gas pipeline in San Bruno, California, last September, which caused massive destruction and the loss of life. In Wyoming the EPA has recently been investigating contaminants discovered in ground and well water, which may be linked to natural gas extraction. The agency has announced that it is undertaking a study, to be released in 2012, of the relationship between hydraulic fracturing and the contamination of water supplies. The Interior Department, which regulates oil and gas drilling on public land, is also considering requiring companies that extract natural gas from shale to disclose the chemicals they use in the fracturing process. Residents of communities in Pennsylvania have filed lawsuits to halt fracturing in the natural gas-rich Marcellus Shale formation, and Pennsylvania Senator Bob Casey has introduced legislation that would require closer regulation of fracturing on a federal level. The New York State legislature recently placed a moratorium on fracturing in the state to allow time for the investigation of the impacts on surrounding groundwater.

At a November 30 forum on Hydraulic Fracturing on Public Lands, Department of the Interior Secretary Ken Salazar noted, “There is a bright future with respect to natural gas in the United States of America.” But he also cautioned the industry that it must reassure the nation of its commitment to extraction practices that are “safe and protective of the environment.” The industry’s response will be crucial as domestically produced natural gas is increasingly seen as a way to a cleaner energy future, a powerful job creation tool, a low-cost means for the US to meet greenhouse gas reduction targets, and a strategy to assist the country to reduce its dependence on foreign sources of fuel.

–Susan Arterian Chang is a financial journalist and is the director of content development for Capital Institute.

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Comments

Ms. Artenrian-Chang:

I urge most vigorously a review of the recent book “Rational Optimist.” Mr. Ridley provides an enlightening review of energy use over the history of human development.

In short, when “renewables” like timber were the source of energy, there was a severe cap on human development and deforestation of Europe. When we learned to use fossil sources, development in the Anglosphere soared.

Increasing wealth from 1800-2000 brought improvements, not degradation, to the environment. As Ridley so eloquently shows, we are better off developing and then accommodating, rather than stifling human enterprise from the outset.

There is no pleasing the retrograde environmental extremists. As the Simon-Erhlich wager showed, history proves human ingenuity will always outstrip the neurotics.

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