In pledging fealty to domestic natural gas production during January’s State of the Union address, President Barack Obama ventured into territory that may resemble what passes for middle ground in the fractious political climate that surrounds energy policy.
With its potential to fuel power plants and transportation, many see natural gas as a panacea for a sluggish economy as well as a catalyst for finally achieving the long-elusive American goal of energy independence — a point Obama brought home during his annual address to Congress. “The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and the economy,” he declared.
The remarks drew applause from lawmakers of both parties, reflecting the appeal the current domestic natural gas boom seemingly holds for officials all along the political spectrum. Republicans tout the job creation and manufacturing benefits associated with increased production, which has lifted the economies in the parts of Ohio, Pennsylvania and New York that overlie a massive natural-gas-bearing shale formation. And because it burns far cleaner than other fossil fuels, natural gas has also won cautious accolades from Democrats and environmentalists who see it as a transitional power source on the way to the dreamed-of clean energy economy.
Still, the president is treading into some delicate terrain rife with political and economic repercussions. For starters, any discussion of natural gas inevitably leads to debate about the safety of hydraulic fracturing, the technique used to extract gas trapped in sedimentary rock formations. Multiple administration inquiries into the environmental consequences of “fracking” suggest the greater federal oversight long sought by environmentalists may be inevitable. White House Economic Adviser Gene Sperling told an energy conference last year that the natural gas industry should get behind “common-sense regulation to ease public worries about potential water contamination from hydraulic fracturing.”
The industry insists the practice is safe and already well regulated by state governments, and it predicts that another layer of controls will simply spoil the boom.
At a House hearing on fracking in February, freshman Rep. Andy Harris (R-Md.) decried Obama’s “remarkable display of arrogance and disregard for the plain facts” in proclaiming support for shale gas “while at the same time allowing every part of his administration to attack these practices through scientific innuendo and regulatory straitjacketing.”
Further complicating matters is the seismic shift that record-low natural gas prices have had on energy markets. As production has surged, prices have plummeted, forcing some companies to reconsider whether joining in the drilling boom is worth the trouble. Others are starting to look overseas to the high prices fetched for natural gas in Asian markets.
That frightens U.S. industrial consumers of natural gas, who fear exports will simply jack up the low domestic prices they’ve become accustomed to. They’re already applying political pressure against a boost in exports, which requires federal approval. Nor are they any more excited about proposals — embraced by the administration — to spark large-scale use of natural gas to power cars and trucks, which is also seen as leading to higher domestic prices.
The end result is that the president must juggle multiple moving parts to ensure that any federal actions on natural gas don’t produce a cascade of economic effects. And it’s a guarantee that the intense political pressure the administration already faces will only increase if Obama wins a second term.
Fueled by drilling advances that have unlocked vast underground shale reserves that were considered economically out of reach just a decade ago, the United States became the world’s leading producer of natural gas in 2009.
Production of shale gas increased fivefold in the five years ending in 2010 — to 5 trillion cubic feet, which is enough to heat 75 million homes or power 60 million natural-gas-powered vehicles for a year. Shale gas production overall has increased twelvefold over the past decade, and the Energy Information Administration estimates that 482 trillion cubic feet of the fuel — one-fifth of the country’s known natural gas reserves — remains embedded in rock underground but could be extracted.
The drop in natural gas prices has prompted a “game changing” shift on U.S. energy dynamics, prompting electric utilities to replace aging coal-fired plants with cleaner natural gas units and complicating the prospects for expanded — and more expensive — renewable and nuclear generation. Persistently high crude oil prices also have revived interest in using natural gas as transportation fuel.
In January, Obama vowed to make the most of this unexpected energy resource. “We have a supply of natural gas that can last America nearly 100 years, and my administration will take every possible action to safely develop this energy,” he said.
The White House energy blueprint aims to keep the boom going in part by opening new parts of the Gulf of Mexico’s and Alaska’s waters to drilling. The administration is also pushing for new tax incentives and grants to encourage the use of natural gas in transportation, as well as research for converting it into liquid fuel for vehicles.
But it’s any possible steps the president might take to address fracking anxieties that are most anticipated. The process — injections deep into the earth of highly pressurized mixtures of water, sand and chemicals — has been used in some form for decades. But its use to liberate natural gas from shale is a recent development facilitated by advances in directional drilling. Environmentalists maintain the practice can contaminate underground reservoirs of drinking water — a theory that was lent credence by a recent Environmental Protection Agency study of fracking in Wyoming. There is also worry about air pollution and fears that the enormous quantities of water used will eventually return to the earth’s surface laced with the drilling chemicals and even some naturally occurring radioactive particles. The industry and its backers strongly dispute that fracking threatens groundwater supplies, which they say are protected by hundreds or even thousands of feet of impervious rock that rests above the depth where most drilling occurs.
Despite their safety claims, drillers in 2005 secured an exemption in the federal safe drinking water law that largely puts fracking beyond the reach of federal regulators, leaving it to the states.
Critics dub it the “Halliburton loophole” — after the construction conglomerate that was a pioneer in using the technique. The exemption was pushed by Dick Cheney, who ran the company before becoming vice president.
Legislative efforts by Democrats to reverse the exemption have gone nowhere. The same is true for bills to mandate more disclosure of the chemicals used in fracking, which energy companies say would wrongly expose their trade secrets
But the administration is taking some steps to address fracking fears. The Interior Department is writing regulations to make companies drilling on public lands disclose the chemicals they use and the quantities injected. The EPA has proposed rules to reduce air pollution from fracking operations — including “fugitive” emissions of methane, the chief component of natural gas and also a far more potent heat-trapping greenhouse gas than carbon dioxide when released into the atmosphere. The agency is also developing guidelines for the use of diesel in fracking — one of the few powers it retained over the practice in the 2005 drinking water law rewrite.
Other administration initiatives could add weight to calls for greater federal oversight of the practice. This year, the EPA will release its initial conclusions from a Congressionally mandated investigation of fracking’s purported role in water pollution. And Obama’s budget for the coming year seeks $45 million for additional research into fracking risks, including $12 million for the Energy Department. Republicans say the study would amount to an unnecessary do-over of work done last year — “an effort to try to find a smoking gun about some bad news,” as Sen. Lisa Murkowski (R-Alaska) put it at a hearing in February.
“It’s actually the exact opposite,” Energy Secretary Steven Chu responded at the time. “The intent is actually to work with industry to help improve practices whenever possible so that we can actually extract this resource in an environmentally responsible way.”
Some companies have decided that slowing the gas gold rush may not be a bad idea, especially in light of the price swoon from overproduction, and they are making plans to idle some drilling operations. (The government estimated in January that at current rates, production would exceed consumption within a decade; partly as a consequence, the government predicts the United States could become a net exporter of liquefied natural gas as early as 2016 and an overall exporter of natural gas in 2021.)
The prospect of increased exports gives pause to major industrial consumers of natural gas, including the chemical industry and manufacturers, who have benefited from lower prices. Those fears were boosted by a recent DOE estimate that, because of increasing exports, domestic natural gas prices could rise 54 percent in the next six years. Pressed about this at the February hearing, Chu was equivocal. “That creates great difficulties for businesses, for people who heat their homes with natural gas,” he said of price increases. But noting reports of drilling companies “pulling their rigs up because the prices are too low,” he also described “a flip side of this that we also have to consider, that it does create American jobs, and if prices are kept moderate, then it does bring money into the United States.”