To deliver significant cuts in greenhouse gas emissions, a new proposal from the U.S. Environmental Protection Agency foresees a growing role for natural gas. But will there be enough of it at affordable prices?
The U.S. Energy Information Administration and industry sources say there’s plenty that can be extracted at a reasonable price. But some experts question those estimates or say that, at least, the nation shouldn’t bank on them. Hydraulic fracturing, or fracking, coupled with horizontal drilling, has unlocked large gas deposits in shale rock, which had been long recognized but weren’t profitable to extract until about a decade ago. Over the past five years, with improvements in fracking, shale gas production has soared. At the same time, however, production from all other sources—such as conventional gas fields on land and offshore as well as so-called tight gas and coal-bed methane—has been declining at a rate of about 5 percent per year.
Shale gas now accounts for half of all U.S. production, according to EIA statistics—a milestone that many studies expected wouldn’t be reached until the mid-2020s or later. “Assuming that technology will allow ever more shale gas production at low prices—and betting energy policy and the future energy security of the country on it—is risky business,” says geologist David Hughes, who retired from the Canadian Geological Survey and is now doing assessments of shale gas and oil for the nonprofit Post Carbon Institute, a California-based environmental think tank.
The EPA’s proposal for cutting power plants’ greenhouse gas emissions through 2030 is based partly on the expectation that natural gas will play a crucial role, especially during the next five to 10 years. The agency laid out various scenarios under which states might meet targets for cutting their emissions. Overall, all the scenarios foresee an increased reliance on natural gas; the EPA calls for switching over coal-fired power plants to burn natural gas and for more use of existing natural gas plants that are idle.
With the increased reliance on natural gas, the agency’s lower-emission scenarios foresee U.S. natural gas production continuing to rise, increasing nearly 15 percent by 2020. Meanwhile, natural gas prices would rise only about 50 cents over what they otherwise would be, to about $5.50 rather than $5 per thousand cubic feet.
Further, there are hopes for relatively low-cost natural gas to revive U.S. industries—from steel to plastics—that could take advantage of current prices, which by world standards are cheap.
At the same time, there is a hope that the U.S. will be able to export large amounts of natural gas. The EIA expects the nation to be a net importer for a few more years but then for net exports to soar through the 2020s, reaching about 10 percent of the nation’s production. “Certainly a couple of years back, before the Marcellus Shale added so much low-cost resource…we would have worried about the upward price pressure associated with adding that amount of new market in the gas space,” says Jen Snyder, a gas analyst with the research and consulting firm Wood Mackenzie. Now, Snyder says, Wood Mackenzie’s outlook is that “the resource base can handle the added demand, even with proposed LNG [liquid natural gas] export facilities, even with planned gas-intensive industrial projects.”
Nevertheless, Wood Mackenzie sees some limits to the resource. For example, gas production in the Marcellus Formation, which extends across New York State, Pennsylvania and West Virginia, has soared despite relatively low gas prices, driven in large part by especially prolific wells in northeastern Pennsylvania. But there are only so many wells to drill in that core area of the state. “In our view, by 2020, that inventory of wells will be exhausted,” Snyder says.