Opportunities and Challenges for U.S. Shale Gas Development — A Special Report From the Bipartisan Policy Center
Bipartisan Group of Leading Industry, NGO, and Policy Experts Provides Updated Survey of Energy, Economic and Environmental Implications of Expanding Shale Gas Development
Washington, D.C. – The Bipartisan Policy Center’s Energy Project has released a consensus report, Shale Gas: New Opportunities, New Challenges, on the implications of expanded U.S. shale natural gas production.
The report is authored by the 20-member BPC Energy Project board that includes CEOs from the oil and gas industry, former top government officials from both parties, environmental group representatives and economists, among others.
It articulates opportunities associated with newly accessible and economically recoverable domestic shale gas resources, and highlights the critical need to develop those resources efficiently and responsibly.
Read the Report: Shale Gas: New Opportunities, New Challenges
“New domestic natural gas supplies could have a transformative effect on U.S. energy policy, our economy and our energy security,” said former Senators Trent Lott and Byron Dorgan, who co-chair the Energy Project. “Because natural gas has many diverse end-uses, including in the residential, commercial, power, industrial, chemical, and even a small portion of the transportation sectors, any expansion of low-cost domestic supply has far-reaching positive economic impacts. It is critical that this resource be developed responsibly so that we can gain these benefits.”
Key points from the report include:
- Natural gas prices declined approximately 37 percent from February 2008 to January 2010. In addition, recent forecasts by the U.S. Energy Information Agency estimate that the spot market price of natural gas will not exceed $5.00 per million Btu until 2020.
- The price of natural gas has decoupled from the price of crude oil for the first time in over twenty years—and is projected to remain on this trajectory for decades to come.
- Lower natural gas prices could reduce costs for integrating intermittent renewable power generation, and offer an opportunity for co-location of natural gas and renewable facilities.
“Long-term lower prices for natural gas, should they continue, can bring appreciable economic benefits to many average residential electricity consumers, to key gas-intensive industries, and to the broader economy. It is also important to note that renewable energy can benefit from low cost shale gas if generation from those different sources can be integrated efficiently,” Lott and Dorgan said.
- The BPC report finds that natural gas supply could support as much as 100 years of domestic gas demand at present levels of consumption. Natural gas extraction from shale formations has exhibited rapid growth, and currently comprises approximately one quarter of total U.S. natural gas production.
- The report also shows that employment in oil and natural gas extraction and support services is up 11 percent since October 2008 (pre-recession) according to the Bureau of Labor Statistics.
“Factors contributing to the increase in oil and gas employment in recent years include not only high oil prices, but also new shale oil and gas production and technology,” Lott and Dorgan said.
- The expanded U.S. natural gas supply outlook is prompting interest in gas export opportunities, which are likely to be modest (less than 5 percent of the market) for at least the next decade.
- In describing opportunities and issues associated with shale gas development, the report identifies some key parallels with oil shale. A recent private study suggests that oil production from the Eagle Ford shale in South Texas could potentially meet 7.8 percent of domestic demand by 2015 at present consumption levels.
“Shale oil and gas development is helping to alter America’s energy equation, boosting domestic production, and in the case of oil, reducing imports,” Lott and Dorgan said.
- Capturing the benefits of shale gas requires prudent and responsible development that engenders public confidence and mitigates community impacts.
- Concerns persist about the potential for fracturing fluids or methane gas to migrate into drinking water if wellbore integrity is not assured, or if proper surface handling procedures are not followed. In addition, impacts on water resources in water-constrained areas must be addressed.
- The average shale gas well requires about 3 to 5 million gallons of water for both drilling and hydraulic fracturing—significantly less than coal production. On a life-cycle basis, natural gas-fired electric power generation uses less water than coal or nuclear generation.
- Air emissions and methane leakage are also issues that must be addressed for responsible production.
“Adequately addressing environmental challenges necessitates a technically-sound state oil and gas regulatory framework with effective enforcement mechanisms,” Lott and Dorgan said.
- The National Petroleum Council (NPC) and the Secretary of Energy’s Advisory Board (SEAB) studies make valuable recommendations regarding environmental performance issues, including: sharing best practices, transparency and disclosure, air emissions, groundwater protection, and regulatory resources.
- Industry has issued its own standards and best practices, and states have been adapting or updating regulations and participating in a voluntary program for review of state regulatory processes.
- The BPC Energy Project will track the implementation of those recommendations, and examine how new shale gas supplies impact other fuels, sectors, and infrastructure.
The full report is available here.
The members of the Bipartisan Policy Center’s Energy Project are:
Former Senator Byron Dorgan (D-ND)
Former Senator Trent Lott (R-MS)
Energy Security Chair:
General James L. Jones (USMC-Ret), former U.S. National Security Advisor; President and CEO, Jones Group International
Energy and Environment Chair:
William K. Reilly, former U.S. EPA Administrator
Ralph Cavanagh, Energy Program Director, Natural Resources Defense Council (NRDC)
Clarence Cazalot, Chairman, President and CEO, Marathon Oil Corporation
William M. Colton, Vice President, Corporate Strategic Planning, Exxon Mobil Corporation
David Cote, Chairman and CEO, Honeywell International, Inc
Mark Gerencser, Executive Vice President, Booz Allen Hamilton
James T. Hackett, Chairman and CEO, Anadarko Petroleum Corporation
Edwin D. Hill, International President, International Brotherhood of Electrical Workers (IBEW)
William A. Von Hoene, Jr., Executive Vice President, Finance and Legal, Exelon Corporation
Colette Honorable, Chairman, Arkansas Public Service Commission
Thomas O. Hunter, Former President and Lab Director, Sandia National Laboratories
Ellen J. Kullman, Chair of the Board & CEO, DuPont
VADM Dennis V. McGinn, President, American Council on Renewable Energy (ACORE)
Matt Rose, Chairman and CEO, BNSF Railway Company
Richard Schmalensee, Ph.D., Economist, Professor of Applied Economics & Dean Emeritus, Massachusetts Institute of Technology (MIT)
Susan Story, President and CEO, Southern Company Services, Inc.
Susan Tierney, Ph.D., Managing Principal, Analysis Group; Former Assistant Secretary for Policy, U.S. Department of Energy