A Look at the Role of Policy in America’s Shale Oil and Gas Era

Feb 6, 2013 by

Dot Earth - New York Times blog



You probably already read about California being added to the list of states facing the economic opportunities and environmental issues that come with abundant shale oil or gas (oil in California’s case, because of the Monterey Shale). And if you’ve been reading here for awhile, you’re aware of the reality, for better and worse, of “oil’s long goodbye” and “the gas age.

But there’s now more vital reading for anyone interested in understanding the reasons for the U.S.-centric surge in oil and gas extraction from such shale layers, which exist in many places around the world. In an Op-Ed article, Christof Rühl, the group chief economist of BP, explains how this revolution — with its attendant benefits and risks — is not simply about geology or technology. Here’s a core excerpt:

North America’s oil and gas renaissance, which has the potential to fuel a U.S. industrial recovery with cheaper energy, is not a happy accident of geology and lucky drilling. The dramatic rise in shale-gas extraction and the tight-oil revolution (mostly crude oil that is found in shale deposits) happened in the United States and Canada because open access, sound government policy, stable property rights and the incentive offered by market pricing unleashed the skills of good engineers.

Here are a couple of additional passages of interest to Dot Earth readers:

Policy, not geology, is driving the extraordinary turn of events that is boosting America’s oil industry. East Asia boasts shale and tight-oil resources greater than those of the United States. Latin America and Africa too have very substantial endowments. However, the competitive environment, government policy and available infrastructure mean that North America will dominate the production of shale gas and tight oil for some time to come….

Communities must decide whether the carbon-reducing benefit of using natural gas in power generation outweighs the fear of new drilling technologies. Europe too must grasp the market nettle. Without a clear signal that carbon has a price, European power utilities will be charmed by the cheapness of coal, increasingly available thanks to America’s embrace of shale gas.

These are strange and wondrous (that’s different than wonderful) times, indeed, for those grappling with the world’s entwined energy and climate challenges.

In a speech at Pace University yesterday, Veerappa Moily, India’s minister of petroleum and natural gas, described how, as part of a government plan for energy self sufficiency by 2030, India is planning an aggressive push to extract natural gas from its large shale deposits.

There are hints that the country has many times more recoverable shale gas than the 2011 estimate of 38 trillion cubic feet from the United States Energy Information Administration.

But as Rühl explains, this is not simply a matter of more drilling rigs. For more on why this is so, it’s worth a quick look back at what the energy analyst David Victor, from the University of California, San Diego, wrote here last year about impediments to shale extraction in Asia:

In the real world I suspect that this source of gas will emerge slowly because none of these markets has the conditions in place to encourage the kind of private-sector drive that has made the gas revolution so dramatic in the U.S. It’s also important to remember that there are lots of other sources of gas. China, for example, is still struggling to tap its coal bed methane and other sources of gas, and a viable large-scale business model for gas doesn’t fully exist in that country. Shale gas is still down the list of the best ways for China to boost its gas supplies. The same is true of India, where a nightmare of gas pricing regulations and pipeline troubles hobble gas of any kind.

I also encourage you revisit recent input on impediments to expanded Asian gas drilling from Derek Scissors of the Heritage Foundation and Julio Friedmann of the Lawrence Livermore National Laboratory.

Finally, this all points to another reality — that if you care about blunting the buildup of carbon dioxide in the atmosphere, you’d better start hoping for a lot more basic science on how to capture that gas cheaply and stash it away for safekeeping.

It was fascinating to read how basic science on sea urchin biology revealed a nickel catalyst that could greatly improve the efficiency of processes capturing carbon dioxide.

But investment in such basic science is still a dribble. Note to Obama (once again): “Are Chemists, Engineers on Green Jobs List?


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