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The Potential of Natural Gas Development

By Ideas Lab Staff January 9, 2013

Both the energy industry and the U.S. government predict significant growth in natural gas production for the next year.

Hydraulic fracturing, or ‘fracking’ as it’s known, is one of the most effective ways to drill for natural gas, according to the U.S. government. The U.S. Energy Information Administration estimates that over 50 percent of natural gas wells in the country are drilled in this way.

The method gets the Hollywood treatment with the release of a new film that raises questions about its possible environmental effects, something the Environmental Protection Agency is currently studying.

But there’s more to natural gas and its impact on the U.S. economy than the ways in which it is extracted. The EPA says it has a “key role” in the clean energy future of this country and its production, and the lowering of fuel prices for American consumers, in turn lessens reliance on overseas suppliers.

In its “2012 Annual Energy Outlook,” the U.S. Energy Information Administration expects natural gas to increase its service of the industrial and electric power sectors, “as well as an expanding export market”.

That overseas market is studied in the latest report by global management consulting group Accenture, which says that the United States, along with Canada, “accounts for more than 25 percent of global natural gas production”.

American consumers, the report says, will benefit from lower and less volatile prices for natural gas, and with shale gas expected to increase to 49 percent of total U.S. gas production by 2035, other countries are already beginning to explore the possibilities within their own borders.

The Institute for Energy Research, responding to the EIA’s Outlook summary, said “sensible regulations can unlock hundreds of years of affordable energy supply under our feet, create good-paying jobs, and promote our nation’s energy security,” senior vice president Daniel Kish said in a statement.

Kish predicts that by 2040, “onshore production of tight oil rises to 51 percent of total onshore production in the lower 48, up from 33 percent last year”. He also expects a decline in the import of liquid fuels and limit the country’s reliance on foreign governments for supply. “The potential to produce all the energy we need in the U.S. by domestic sources is clearly within reach, but Washington continues to restrict access to taxpayer-owned resources that we could safely and efficiently begin to tap,” Kish said.

In its Early Release Overview, however, the EIA said it based its predictions on current legislation remaining largely the same and much of its positive findings were steeped in present day regulations.

In the Accenture report, the group considers key findings for other countries now investigating natural gas production within their own borders. One of its conclusions is the need for a “balance between standard national legislation and regulation optimized for local shale characteristics”.

And while countries such as Argentina, Poland, China and South Africa have embraced the cause, others in many parts of western Europe as well as in the United States, have raised concerns over the environmental impact, particularly in air and water quality, as well as greenhouse gas and seismic emissions.

France and Bulgaria, Accenture notes, have imposed nationwide moratoriums on shale gas production through fracking. In the U.S., New York and Maryland have issued moratoriums, while Maryland Governor Martin O’Malley called for a three-year study into the effects on the Marcellus Shale before issuing permits.

One of its main recommendations to operators is to collaborate with regulators and others in the industry to share logistics and infrastructure and calls enabling water treatment a “key option to overcome the challenges of increased regulation”.