By Tom Farrell
August 1, 2014 at 8:59 am ET
The American shale gas revolution, which began just a few short years ago, is reshaping our country’s energy outlook on many fronts, leading to:
This is a far cry from where our country was four decades ago, when President Jimmy Carter’s energy secretary spoke of a “bleak” future with a “chronic stringency in traditional energy supplies.” As recently as 2003, a Time magazine article declared that the U.S. was “running out of energy.”
Now, there is talk about the U.S. as “the new Middle East” and “Saudi America.” Why? Because of hydraulic fracturing, the technology that is unlocking new supplies of oil and natural gas from shale rock formations across the continent.
Yet, unlike other transformative events in our nation’s history, such as the California gold rush in the mid-1800s or the Texas oil boom of the early 1900s, the news of the shale gas bonanza is being met with different opinions – and different interpretations of reality.
What should be a story of innovation, ingenuity and people with a light in their eyes who desire to make something happen has been met in some quarters with a cacophony of “no’s.”
Some environmentalists oppose any further natural gas production, and believe instead that non-nuclear carbon-free energy sources ought to provide all of our energy needs.
That would be great, if we could ignore laws of physics and economics of keeping the lights on, houses warm and energy bills reasonable – all favored by the public.
Of course, the energy sector ought to minimize the environmental impact of energy. But we also must produce and deliver that energy reliably, affordably and at a scale sufficient to deliver what our homes and businesses require – at all times.
Natural gas ranks as today’s fuel of choice because of price, abundance and reliability, thereby relegating renewable energy sources, such as wind and solar, to niche roles – at least for now. This is not an either/or proposition. Our country needs natural gas and renewables. And carbon-free, large-scale nuclear. At this time, however, natural gas is the only fuel that offers our industry short lead times, affordability and reliability while also protecting the environment.
Broad switching from coal to natural gas in electric production is producing impressive environmental benefits.
Between 2008 and 2012, for example, sulfur dioxide emissions dropped at a rate three times the average of the preceding eight years. And according to government data, 2012 greenhouse gas emissions from the power sector were about 15 percent below their level in 2005.
Among other things, this means the U.S. is fulfilling the pledge it made in Copenhagen in 2009 to reduce carbon emissions 12 percent below 2005 levels – without legislation, and without an in-place greenhouse gas rule.
Fracking does involve certain environmental risks. However, those risks can and are being managed. The U.S. Environmental Protection Agency, states and the energy sector are working together to better mitigate these risks. Just as with renewables, the technology is improving every day.
At this point, the shale boom is a uniquely American phenomenon.
Of all the horizontal drilling that has taken place in the past five years, 99 percent of it has been done in the U.S. The surge in shale gas production has driven prices down by about 70 percent since 2008 – and that is great news for consumers and the American economy – particularly manufacturers.
American companies that left for lower-cost overseas locations in the past decade are coming home – bringing with them new investment and jobs. Daniel Yergin, a leading analyst of global energy issues, foresees more than $100 billion of new investment in U.S. manufacturing in the next few years – principally because of the cost advantage of natural gas.
Our country will also have the opportunity to shape events beyond our borders.
Within the next few years, the U.S. is expected to produce more natural gas than it consumes. And with estimated reserves of more than 100 years, our nation is expected to be a net exporter of energy – an incredible reversal of fortune. That is, if the U.S. is willing to increase and diversify the global supply of energy through exports of liquefied natural gas. Such a move could help put downward pressure on global gas prices and diminish the influence of Russia and Iran, for instance.
Dominion is on the leading edge of this remarkable opportunity. We are in the late stages of securing federal and state permits to transform our Cove Point LNG terminal on the Chesapeake Bay into a bi-directional facility, with exports headed to India and Japan.
Although about 40 LNG export facilities have been proposed, experts believe only a few will come online – including Cove Point.
But LNG projects have become something of a cause célèbre for those who categorically oppose all fossil fuels and related developments. To wit, one leading environmental activist recently said that the Cove Point project would benefit no one but the “richest gas tycoons.” Tell that to millions of customers in India and Japan.
Government forecasts indicate that over the next two decades, global natural gas consumption will grow by about 80 percent – with most of the demand coming from the Pacific Basin, a market valued at $150 billion.
Russia, perhaps better than the U.S., understands what this means. That is why it has signed a 30-year contract to supply natural gas to China. The ink was hardly dry on that deal before Japan began making noise about building a pipeline of its own from Russia.
Will our country take advantage of this window of opportunity to become a global energy leader? Will we work to use our abundant energy resources to support our allies in Europe and Asia?
U.S. policymakers have some choices to make. And the consequences could be great and lasting.
The U.S. has the opportunity to use its vast natural gas resource base to improve the economy and promote trade stability while also producing environmental benefits. I remain optimistic that our country’s leaders will do the right thing.
Thomas F. Farrell II is chairman, president and chief executive officer of Richmond, Va.-based energy provider Dominion Resources, Inc.