[The Vector] Clean Energy News: Bipartisan Natural Gas Study
Natural Gas is controversial.
Some say it is a fossil fuel with all of the inherent issues involved, and that in obtaining gas through the ‘fracking’ process, groundwater can be polluted if care isn’t taken. Others say natural gas is plentiful in the U.S., that it burns comparatively cleaner than other fossil fuels and is less carbon-intensive. It works well in concert with renewable energy and could serve as a bridge between renewables and dirtier fossil fuels. If one of the goals of the U.S. is to reduce imports, create jobs and become more energy secure, natural gas may have its place in the story.
The Task Force on Ensuring Stable Natural Gas Markets at the Bipartisan Policy Center published a report on the issues. Of course, the report is somewhat biased towards natural gas though both political parties have agreed on the findings and recommendations. That says something in today’s climate. Near the end of the report, the author say,
“At a time when political and economic conditions have paralyzed much of the national-level energy policy debate, the fact that a group as diverse as the Task Force could reach consensus on these measures suggests that here is at least one important area – natural gas markets – where progress is well within reach.”
Let’s look at the report’s key points:
Ample supply of natural gas is an important factor for stable American energy security and stable pricing over the next decades. The report points out that natural gas burns far more cleanly than coal or oil.
Natural gas markets have only been open and competitive for about 17 years, says the report. Starting in the 1950s and to early 1990s, concerns about adequacy of domestic supply and desire to limit gas resources led to extensive regulation and government intervention. Upon deregulation of gas markets in the early 1990s, increasing demand and declining production led to a tightening of the supply-demand balance. Prices spiked in 2000 and then again in 2005 after Hurricane Katrina. Prices remained high until the economic downturn of 2008 along with the rapid growth of gas production from shale (by “fracking.”)
Because the capacity to import is limited, the market for gas is relatively national. In the early 2000s, an expectation that demand would soon outstrip supply led to new investments in infrastructure to store gas and to import liquefied natural gas (LNG), which now is equivalent to about 20% of national demand.
Between 2005 and 2010, dramatic changes occurred when new technologies for removing gas from shale were enhanced and new discoveries were made. In 2003, it was estimated that about 35 trillion cubic feet of recoverable shale gas existed in the U.S. By 2009, due to developing technologies and discoveries, it was estimated that 616 trillion cubic feet was recoverable.
The efficient use of natural gas has the potential to reduce harmful air emissions, improve energy security and increase operating rates and levels of capital investment in energy-intensive industries. Oversight and care must be taken not to contaminate groundwater.
Public and private policymakers should remove barriers to price: long-term contracts and hedging programs are valuable tools to manage natural gas price risk.
Policymakers need to recognize the important role of natural gas pipeline and storage infrastructure in promoting stable pricing.
The report concludes that the U.S. is well positioned to take advantage of its plentiful natural gas resources as a domestic fuel throughout the economy in an efficient way.
