Shale Gas as a Game Changer

 

THE DAWN OF THE SHALE GAS REVOLUTION has happened really fast, and it's happening in parts of the country that are densely populated and are not accustomed to this kind of energy development.

As for the efforts to extract the shale gas, it is extremely unlikely that any of the small amounts of chemicals that are used in the hydraulic fracturing process could go through thousands of feet of impermeable rock into the water supply.

People in the debate have not been paying much attention to the economic significance of shale gas. If we were going to be importing large volumes of liquefied natural gas to meet demand, we'd be on track to spending $100 billion a year for that, which would be a significant addition to our trade imbalance. Shale gas in the last few years created 600,000 jobs in direct and indirect employment. There are very few industries in the United States that have created 600,000 jobs in the last five or six years.

The advent of abundant shale gas supplies is bringing back industries that have left the United States, like the petro chemical industry. And it also means lower electricity prices - at least 10 percent lower, and in some parts of the country considerably lower than that.

For decades, the relationship between the electric power industry and natural gas has been tempestuous and turbulent. There have been expectations of low prices, and then prices have gone up and created a lot of economic problems. Is this time different? John Rowe, the chairman of Exelon, which operates the largest nuclear fleet in the country, said last year that he wouldn't bet against cheap natural gas. Since 2008, the shale revolution has happened very fast. It became apparent to the world and the energy industry that something big was happening. Up until then, natural gas production was expected to decline. Some utilities in the Midwest were planning to import liquefied natural gas to fire up their generating plants.

Now, the shale gas revolution is triggering a debate about the roles of the state and the federal government in regulating the industry. There's a lack of knowledge about how extensive state regulation is and a tendency to dismiss it or ignore it. I read in one newspaper that shale gas is unregulated activity. In fact, it's a highly regulated activity.

Shale gas has grown so rapidly it's going to be under a kind of scrutiny that the traditional gas industry really did not experience. It is also a major new resource that is going to change the energy policy in the United States.

Shale gas is 34 percent of our gas now. It's changed the economics of the energy marketplace. It's changed the economics for electric power. The big issues that utilities wrestle with are about fuel choice: What kind of generation do you build? What kind of capacity do you want to have?

Natural gas is really going to be the default fuel for electric generation. World consumption of natural gas tripled in 30 years, and can increase another 50 percent in the next two decades, in large part as a result of the newly tapped shale gas resources in America and around the world.