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The Takeaway: We Gotta Get Natural Gas Right
After yesterday’s session, a small group of us retired to the Faculty Commons for a glass of wine, dinner, and conversation. We were treated to a short talk by Richard Newell, a Duke professor and the director of Duke’s Energy Initiative, who returned last fall from a stint in the Obama administration as the head of the Energy Information Administration. Richard provided a fascinating overview of the issue from the perspective of someone who has spent the last two years trying to make sense of the nation’s long-term energy future.
Some relevant history: Hydraulic fracturing is as old as … well if not quite the hills, let’s just say it’s not new. A kind of hydraulic fracturing was first done in the late 19th century using nitroglycerin (see here, here and here [pdf]). Horizontal drilling is also not all that new, dating back to the 1950s. It wasn’t until the 1990s that the two were put together, and the application of the process to extract shale gas didn’t really begin until the middle part of the last decade, but since then, it’s become a game changer — initially responsible for a percent or two of all natural gas production, it’s now producing about 30 percent of U.S. supply.
The economic impact has been huge. For instance, in 2006, the federal government was discussing ways to accelerate the construction of billion-dollar port facilities for processing imported liquified natural gas because it was believed we faced an imminent natural gas shortage that would put our electricity supply at risk. Today we have an overabundance of natural gas, prices are down and few are lining up to invest in such a facility.
Another point Richard made: The global shale gas resource is huge, so large that exploiting it will dominate supply and therefore set natural gas prices at least for the next decade. So from today’s perspective, shale gas is here to stay, a resource that will be exploited. So we’d better get it right.