BY DENISE FUREY
A wind of change is blowing through the economy of Philadelphia and the Keystone State – gushing up from deep underground.
The Marcellus Shale Coalition held its annual “Shale Gas Insight” conference at the Pennsylvania Convention Center in Philadelphia to discuss its ramifications. The MSC has 258 members, including drillers, oil & gas producers, engineers, and consultants as well as other materials-, product- and service-providers.
The conference’s 33 presentations or panel discussions swung around three themes. First, the relatively newfound ability to economically develop our extensive shale-gas reserves has been a game-changer in the US energy sector. Second, the Marcellus Shale has and will continue to have a positive and profound effect upon the Pennsylvania economy. Third, we have and must continue to produce shale gas in a manner that has minimal impact upon our environment.
The abundance of shale gas has contributed to the low price of natural gas, which is about $2.90 per MMBTU currently. (A “million British Thermal Units” or MMBTU is a standard measure of energy in physics.) To put this in perspective, the energy equivalent of crude oil costs roughly $15.00. So if you could run your car on natural gas instead of gasoline, which is produced from crude oil, with engines as efficient as the gasoline-burners we now have, the fill-up that now costs you $40 would run about $7.60 instead.
Enormous engineering advances would have to be made before such a dream could become a reality. But prices like these are bound to transform our entire economy, which is driven by energy.
For the first time, natural gas surpassed coal as the primary fuel used in electric generation in the US this year, owing in large part to its cheaper relative price. Natural gas is a cleaner-burning fuel than coal and on average emits 50% fewer greenhouse gases.
The hydraulic-fracturing (fracking) technology that has enabled drillers to economically access shale-gas formations is also being used to develop shale-oil plays in the US. The abundance of these fuels will lead to better energy security in the US, if not energy independence, in the opinion of many conference attendees.
XTO President Jack Williams believes our supply of natural gas is sufficient for the US to become a net exporter of the fuel if we expand our liquefied natural-gas processing capacity. Williams further stated shale gas-development “is expected to support 1.5 million jobs in the country and contribute nearly $200 billion to the national gross domestic product by 2015.”
Gov. Tom Corbett, in his address to the conference, noted nearly 240,000 Pennsylvanians are employed in the natural-gas industry or ancillary businesses. He also stated jobs within the natural-gas industry in the state typically pay $30,000 per annum more than the average earned by other workers in Pennsylvania. A study performed by HIS Global indicates development of unconventional gas contributed $7.1 billion in value-added economic output in the state in 2010 and is projected to increase to $42.2 billion by 2035.
The abundance of this gas is a two-edged sword. Excess supply has driven the price of gas to a level that has caused some producers to stop or slow development of new wells. The industry will add 26% fewer wells in Pennsylvania in 2012 than in 2011. Most of the reduction in drilling has occurred in the northeastern part of the state, where the gas is “dry”, which means it is almost all methane. Methane is the gas used in home heating and electric generation. Many of the wells in the western part of the state produce “wet gas”, which has methane but also other carbons such as ethane, which are used by the chemical industry.
As we find new uses for natural gas and overall demand rises as the economy improves, the price of natural gas is predicted by IHS Global to rise to $3.00 per MMBTU by 2013 and remain in the $4.00-$5.00 range through 2015. At these prices, natural gas is still a cheap fuel compared to oil and coal.
New buyers of shale gas may include the Philadelphia Energy Solutions refinery in Philadelphia. The facility will be run by a new joint venture between the private-equity firm Carlyle and Sunoco. The owners plan to refine shale oil from North Dakota and run the facility with Marcellus Shale natural gas.
Other potential “new” uses for natural gas include cars and trucks. Tod Hartje of Chrysler discussed his company’s gas-fired cars, but noted one of the challenges to increasing sales include the lack of sufficient refueling locations. Clean Energy, the largest provider of natural gas for transportation in the US, plans to open 150 more refueling stations in 33 states by the end of 2013. Clean Energy believes truckers can save on average $1 per gallon by using natural gas rather oil-based products. Clean Energy claims that replacing older trucks with natural gas fired vehicles will reduce carbon dioxide emission by 20-30%. The differential in emissions when comparing new vehicles is closer to 10% according the US Dept. of Energy.
Many of the panel discussions included engineers and other technical experts who discussed not only current fracking and related techniques, but evolving products designed to make the process even safer. To date there has been no evidence, according to Michael Krancer, Secretary of the Pennsylvania Dept. of Environmental Protection, that the fracking process has harmed the aquifers from which Keystone State’s water is drawn. There have been some spills of fracking fluid on the ground surrounding wells, but the environmental impact has been very limited.
Despite the enhanced environmental regulations put in place in Pennsylvania earlier this year as well as increased oversight, there remains a very vocal group in the environmental community that claims fracking has already polluted our water and is responsible for methane occurrences in well water. Some of these anti-fracking groups were picketing outside the convention. Klaber asserted their claims are not true and that this “vocal minority has had an undue influence on the debate (about fracking).”
The Greater Philadelphia Chamber of Commerce sponsored a panel to address “Natural Gas and Public Opinion: the Philadelphia Story”. Panelists were State Sens. Tim Solobay (D-Washington), Vincent Hughes and Anthony Williams (both D-W. Phila.) as well as MSC’s VP of Communications and Policy Steve Forde and former State Senator and CEO of the Greater Philadelphia Chamber of Commerce Rob Wonderling.
While most of the economic development that has resulted from the Marcellus Shale is outside of Philadelphia, much of the drama has played out in the press here. Forde MSC believes this is in large part owing to disinformation. Solobay and Williams agreed.
Williams noted he is an independently minded Democrat. Unlike many other Philadelphia area Democrats, he believes fracking has been and can continue to be done safely. The benefits to Philadelphia of cheap natural gas cannot be ignored, he said. PGW rates are down 48%. Since natural gas is replacing coal as the leading fuel in electric generation, he pointed out this means reduced emissions of greenhouse gas and other pollutants. Williams stated, “If you care about the environment and poor people, then you should not oppose fracking.”
How to deal with the negative perception of fracking was a key part of former General Electric CEO Jack Welch’s keynote luncheon comments on Friday. He advised not to spend “too much time trying to convert the unconvertible.” But he stated the industry does need to be “transparent and accurate” and in doing so will counter the negative voices with the facts. Welch suggested the MSC reach out to communities which do not want to lose their shale-gas-related jobs and consumers who benefit from cheap natural gas. He and others noted the industry must be diligent in ensuring there are no material mishaps, because that would only “feed into the negative hype.”
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