Does America Have a Stranglehold on This Valuable Resource? – NASDAQ.com

In addition, the regulations in the U.S. are designed to incentivize experimentation with new techniques, such as tax breaks that allow for faster depreciation of assets, while those in other countries do not. According to Robert Beck of Anadarko Petroleum , “It’s just set up for conventional oil and gas production. There’s no way in the traditional production sharing contract that we as an industry can come in and make money.”

Meanwhile, in Europe, governments are far more hostile to fracking. For example, sighting environmental concerns popularized in the controversial documentary Gasland, France has made fracking illegal. This is despite the EIA estimating that France contains enough shale gal to provide 80 years of the nation’s current gas consumption.

Thus far, only Bulgaria has joined France in outlawing the practice, but German Environment Minister Barbara Hendricks, has publicly called for such a move. Mrs. Hendrick’s reasons for her stance aren’t entirely environmental; they are also geographic. “Unlike the USA, our country is densely populated and small,”This brings me to the second category of obstacles, geology and geography.

America: wide open spaces, lots of water

The United States has been blessed with large, relatively easy geologically exploitable shale formations located in underpopulated areas. We also have the world’s largest gas infrastructure, with 1.22 million miles of pipeline — a number that has quadrupled in just the last six years.

Compare this abundance of infrastructure with China, who, until recently, had the goal of reaching 22%-37% of 2013 U.S. gas production levels by 2020. China’s shale gas ambitions may prove impossible to achieve , partially because its pipeline infrastructure is 41 times smaller than that of the U.S., despite being 16% larger in area.

In fact, according to the CIA World Factbook, China currently has only 29,940 miles of gas pipeline. To put that in perspective, Kinder Morgan , America’s largest pipeline operator, has 70,000 miles of gas pipelines.

China also has a major water problem, and fracking is thirsty work. Fracking requires an average of 4.4 million gallons of water per well, enough to supply 11,000 American families for a day.

In fact, China’s water shortage is such a problem that the government is worried it might cause power disruption from water intensive coal, nuclear, and gas power plants. To address the issue, the government is in the middle of a 100-year, $62 billion engineering effort call the South-North water diversion project. When complete, it will be the equivalent of diverting the Thames river in London across the width of the United States.

Bottom line

All told, the combination of a favorable legal and regulatory framework, vast infrastructure, large water resources, and favorable geology result in U.S. fracking costs per well being 135%-788% cheaper than in other nations. Given that many of these obstacles cannot easily (if ever) be overcome, it is very possible the shale gas boom will prove to be a mostly American affair.

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