Just as the history of unconventional natural gas production in America was fundamentally shaped by government support for new technology development, so too will the future of natural gas depend on America’s willingness to make long-term public investments in advanced energy technologies.
A convenient narrative has taken hold concerning the development of unconventional gas extraction from shale formations. It goes like this: Once a marginal and shrinking contributor to domestic primary energy, hydraulic fracturing, or “fracking” has unlocked vast reserves of shale gas and ignited a revolution in North American natural gas production, leading to sharp increases in proven reserves and decreases in gas prices. Technical improvements in fracking technology and the diligence of private sector gas companies led by independent wildcatter George Mitchell brought about this renaissance, guaranteeing a future of lower energy prices, cleaner-burning fuel, and a more energy-secure economy.
It’s a convenient narrative of independent American ingenuity. But like so many similar stories, this popular tale belies the critical partnership of the federal government in the development of the key technologies that enabled today’s shale gas boom.
As an independent investigation by the Breakthrough Institute revealed, the federal government performed the requisite R&D and demonstration that led to massive hydraulic fracturing, directional drilling, and microseismic imaging — the key component technologies that made the shale revolution possible. The gas industry was languishing in the 1970s, suffering from falling annual production and increased energy prices. Gas companies reached out to the federal government for assistance in mapping unconventional gas resources and developing the technologies needed to extract them. This partnership was sustained through the 1990s, when Texas-based Mitchell Energy experimented with hydraulic fracturing technologies pioneered with federal government assistance and partnered with the Department of Energy to complete its first horizontal drilling installation. By the late 1990s, Mitchell had perfected a cost-effective fracking technique and the shale boom had begun.
It is no small exaggeration to say that government investment in unconventional gas extraction and mapping technologies fundamentally changed the history – and future – of American natural gas markets. Domestic gas prices have plummeted and production has steadily increased, reversing decades of decline. America now possesses a seemingly abundant and relatively clean substitute for polluting, carbon-intensive coal-fired power plants, potentially accelerating a transition to a healthier, lower-carbon electricity system. With increasing pollution controls on coal-fired power plants and lower relative prices for natural gas, all signs point to natural gas eclipsing coal in the electric power sector in the next couple decades. With natural gas prices achieving an unprecedented divergence from global oil prices, the United States may even enhance domestic energy security and reduce exposure to oil markets by substituting gas for oil in certain transportation segments (e.g. heavy duty trucking or fleet vehicles).
Cheap gas simultaneously puts pressure on higher-cost nuclear, wind, and solar energy, however. If cheap gas leads to complacency in the development of sustainable, low-carbon electricity sources, today’s gas boon may become tomorrow’s curse, as natural gas eclipses not only coal, but also cleaner, carbon-free energy sources.
An increasingly dominant role for natural gas in America’s energy mix also exposes the United States to the inherent volatility of natural gas markets. As a gas, methane flows much faster from wells than crude oil. Natural gas wells thus produce and deplete quite rapidly, with roughly 50 percent of a typical well’s lifetime production expended in the first three or four years. This basic dynamic of rapid production and depletion often leads to a boom-bust cycle in markets, as anyone observing North American natural gas markets over the past half century can attest. If North America begins to export large quantities of natural gas, this inherent volatility will only be exacerbated.
The future of natural gas is unlikely to part with this history of boom and bust – unless the United States once again commits to long-term investment in the development of affordable, clean, domestic energy technologies.
Without significant and strategic investments in next-generation solar, wind, nuclear, and electric vehicles, there’s every reason to believe the natural gas revolution will continue and gas will ultimately become an increasingly dominant share of the U.S. energy supply. The result will likely be near-term declines in CO2 and pollutants along with growing reliance on another volatile and increasingly costly fossil energy source. The shale gas “bridge fuel” may well become a bridge to nowhere.
If instead the United States makes smart, sustained investments in clean energy R&D, demonstration, manufacturing, and infrastructure, there’s no reason to believe America can’t continue to unlock even greater supplies of cleaner, cheaper, domestic energy technologies, from next-generation solar to advanced nuclear reactors. In short, America’s energy future, just like its past, depends on our willingness to invest in innovation.
Jesse Jenkins and Alex Trembath are Director and Policy Associate, respectively, with the Breakthrough Institute’s Energy and Climate Program. This post was originally published as a contribution to the National Journal online discussion “What’s Ahead for Natural Gas?”