Energy Independence and Its Enemies

[Geee]

Commentary Magazine:

“In my 50 years of following the energy business, this is by far the biggest event I’ve seen.” So says John Deutch, the chemist who ran the CIA under Bill Clinton and is now a professor at MIT. The “event” to which Deutch refers is the development of the technological process known as fracking, which is the shorthand term for hydraulic fracturing. Fracking makes possible the extraction of oil—natural gas in particular—from shale rock formations thousands of feet underground. A mixture of water, sand, and chemicals is pumped downward and sideways at high velocity. It fractures the rock and releases gas upwards to the surface.

The normally dry experts from Citi wrote breathlessly in a recent study called “Energy 2020” that fracking portends nothing less than the “potential re-industrialization of the U.S. economy.” They concluded: “The cumulative impact of new production…and associated activity may increase real GDP by 2.0 to 3.3 percent.” A significant portion of the growth will come, they claimed, “directly from the output of new hydrocarbon production alone, while the rest is generated by multiplier effects as the surge in economic activity drives higher wealth, spending, consumption, and investment effects that ripple through the economy.”

Polls show that when presented with these facts, most Americans support the development of natural gas. At the same time, however, there is strong opposition to this energy opportunity coming from those for whom man-made climate change is of paramount concern. Among this group, extracting and consuming more fossil fuels, even relatively cleaner natural gas, will cause too much harm to the planet to be worth the economic benefit. The question facing policymakers today is which side of this argument will win the day: those who want to use the earth’s resources to achieve greater human progress or those who want to protect the earth from that progress.

Geologists had known for years that there was gas trapped underground, but they did not know how to get it out. Enter George P. Mitchell, a Texas wildcatter who was determined to get it to the surface. Mitchell and his team discovered that by combining a traditional vertical well with horizontal fracturing of the rock, engineers could extract gas that had been trapped in the Barnett Shale in North Texas. After 10 years of trial and error, Mitchell sold his Barnett “play” for $3.5 billion in 2002, by which time his gas field had become one of the most productive in the country. The fracking revolution had begun.

According to government experts, the United States possesses more than 2,500 trillion cubic feet of technically recoverable natural gas. That is the equivalent of 412.5 billion barrels of oil, and it means that America right now produces more natural gas per day than Saudi Arabia produces oil. One-third of it is trapped inside shale rock. In 2001, shale gas provided less than 2 percent of the total U.S. natural gas production; now the figure is approaching 30 percent. The U.S. government estimates that based on current consumption rates here at home, these deposits are so rich they could last for 95 years before they are exhausted. Nongovernmental sources say the estimates are far too low and that there may be enough natural gas to last three times longer.

Why is all this natural gas from shale important to the economy? The most immediate result is that it lowers the cost of heating homes. Natural gas used to cost $15 per thousand cubic feet. Today, the cost is $2. “The natural gas glut has pushed down heating bills for millions,” according to Bernard L. Weinstein, the associate director of the Maguire Energy Institute. The federal government estimates that home-heating bills in 2012 will be 25 percent lower than they were in 2008.

The abundance of natural gas has also had a huge impact on the cost of electricity. Weinstein says the average electric bill is “half what it was a few years ago.” According to a recent analysis by Exxon, “an increasing amount of…electricity will be generated by natural gas, which will pass coal as the world’s second-largest fuel source, behind crude oil, by 2025.” An MIT study says the “electricity sector is the principal growth area for natural gas.”