Will Shale Transform America’s Energy Future? Yes!

Mark Green
Posted September 24, 2012

Highlights from the first session of this week’s forum on the impact of shale gas on the U.S. energy outlook, hosted at the Newseum by the Howard Baker Foundation and the Lawrence Livermore National Laboratory:

Energy security

• The revolution in hydraulic fracturing and horizontal drilling is dramatically increasing estimates U.S. natural gas and oil reserves. Pioneer Natural Resources Company Chairman and CEO Scott Sheffield said the United States might have a 200-year supply of hydrocarbon reserves.
• While it’s premature to declare U.S. energy “independence,” IHS-CERA’s Daniel Yergin said not since President Nixon established the goal in the early 1970s has there been a better time for making the case.

In sum: The United States is in an energy position that couldn’t have been imagined a decade ago: the energy wealth to make America secure, the technology to maximize resources and a robust energy business sector that is developing the energy, creating jobs and contributing tax revenues to governments. With greater access our industry can do more: According to one study, 1.4 million jobs, $800 billion in additional tax revenue and energy production by 2030.

Access

• Greater access will bring private-sector growth, Yergin said, and with it more tax revenue for governments that wouldn’t have been generated otherwise. Growth means jobs that address the “scourge” of U.S. unemployment, he said. The economic potential in natural gas development is “pretty big” and not limited to just a few states.
• Access to new domestic resources is the key energy question facing the U.S., said the Council on Foreign Relations’ Michael Levi. Lack of access is like a regulation that says to energy companies, “you can do nothing.”

In sum: The United States is an energy-rich nation, with far greater reserves than previously were imagined. Yet so much of what we have is off-limits by policy – more than 85 percent of our offshore areas as well as vast acreages in Alaska and other western states. Including shale oil and natural gas, the U.S. has the most technically recoverable oil and gas reserves in the world. With the right policies in place North American energy source, combined with domestic biofuels development, could provide 100 percent of our liquid fuel needs within 15 years.

Regulation

• The states are the regulatory experts, Sheffield said. Texas, Pennsylvania, North Dakota, Oklahoma and others have sensible and efficient regulatory regimes – each one demonstrating environmental concern and a desire to manage their resources wisely. The federal government should learn from the states’ experience, Sheffield said.
• A state-by-state approach to regulation can work, said Rice University’s Amy Myers Jaffe, but the states “have to get it right.”
• There’s an “underestimation” of the role of states in energy regulation, Yergin said. A plan for shale gas development should include sensible regulation, the use of best practices, technological innovation and community engagement.

In sum: As Wyoming Gov. Matt Mead and others have stressed, the states have a compelling interest in properly overseeing their energy resources. EPA Administrator Lisa Jackson has said they’re doing a good job. Through organizations like STRONGER, state officials are coordinating with counterparts to set up efficient regulatory structures. Industry recognizes it must conduct well-run, transparent operations while listening to the concerns of local communities.

Exports

• The United States’ traditional embrace of free markets and trade should apply to natural gas, Yergin said. U.S. credibility suffers, he said, if we urge others not to import Iranian oil but then refuse to export “a single molecule” of natural gas.
• Jaffe and Yergin said the natural gas export issue is complicated by the fact there are others in the game – Australia, Canada’s British Columbia and Mozambique, for example.

In sum: The abundance of natural gas in the U.S. market means there’s enough supply to keep meeting American consumer and manufacturing needs while also providing quantities for export that will help our trade balance with other countries. There’s no reason to treat excess natural gas differently than other marketable commodities that are exported. As Energy Secretary Steven Chu has said, exports “means wealth comes into the United States.”