If Natural Gas Is Bad for Coal, Is It Good for Us?
Ever since reading Adam Federman's cover story on natural gas drilling in the Northeast (Spring 2010), I've been mildly obsessed with natural gas, particularly shale gas, which is reached via a controversial drilling technique called hydraulic fracturing. Hydraulic facturing, "fracking" for short, has been around for decades, but when combined with new horizontal drilling techniques, it's suddenly made shale gas financially viable. There's a ton of shale gas in the U.S. (or several trillion cubic feet to be exact), and the fact that we can now get to it has driven the price of natural gas down. That's sparked a global shale gas rush, which I've been reporting on a lot lately.
As with most things, the more I know, the more obvious it is to me that there's no one perfect answer to the question of whether the environmental impacts of fracking are worth dealing with in order to get to a cleaner-burning fossil fuel. A recent report by Deutschebank only makes the decision tougher. The report essentially states that as global natural gas prices are converging, the price for natural gas is going lower than the price of coal in many of the world's top energy-consuming nations. In the United States, in particular, it's the low price of natural gas--not the threat of climate legislation or a price on carbon--that may finally unseat King Coal.
That conclusion was backed up by a conversation I had recently with Bill Massey, lead counsel for the Compete Coalition, a group of energy producers and utilities advocating for competitive energy market in the U.S., and the former FERC commissioner responsible for much of the build-out of natural gas infrastructure in the United States. According to Massey, at the moment natural gas prices are currently dictating the price for power in the United States. And right now that price is cheap. “Shale gas has just burst on the scene over the last couple of years, and if you look at the price strips going out they’re heavily affected by expectation of shale gas production,” Massey said. “We’ve seen major price reductions in the last two years, up to 40 percent in some regions.”
Cheap natural gas would seem like a clear positive; few dispute the fact that both getting at and burning natural gas produces fewer emissions than getting at and burning coal. The trouble is, with so much natural gas available, will investors and politicians lose their appetite for renewable energy projects? More over, how do you do a cost-benefit analysis on lower carbon emissions versus contaminated water sources (fracking has been linked to water and air toxics)? And if, as many are hoping, the EPA begins to regulate hydraulic fracturing and the price of natural gas goes up, will we be back to square one with coal?
We'll be tackling this very subject in our next Plus/Minus column. As the natural gas industry continues to develop over the course of the next few years, the answers to these and other questions will become clearer. Whether we like those answers remains to be seen.