The Growing Fallout of the Shale Revolution: A sign that shale gas has great potential is that greens are trying to shut it down

Energy, Environment, Frontier Centre, Uncategorized, Worth A Look

Alberta Energy Minister Ron Liepert said this week that Alaskan natural gas would likely flow through the province ahead of gas from the Mackenzie Delta. Not so long ago, such a statement would have been regarded as treasonable. Now it appears merely common economic sense. In fact, the real issue is whether either source of Arctic gas will be developed before the age of hydrocarbons ends. That is due to the stunning improvements in the technologies of hydraulic fracturing and horizontal drilling that have made the production of vast amounts of shale gas feasible.

This gas not merely presents the possibility of an economic bonanza in many areas, including B.C. and Quebec, but of enhancing much-coveted U.S. energy independence. It also promises to rearrange energy geopolitics. But for the moment, it is aggravating a supply glut in North America. On Thursday, prices on the New York Mercantile Exchange slumped 6.4% to US$3.62 per million British thermal units (which is roughly equal to a thousand cubic feet).

Last year, the “Potential Gas Committee,” a group of specialists linked to the Colorado School of Mines, reported the biggest increase in U.S. natural-gas reserves in its 44-year history, from 1,532 trillion cubic feet (TCF) in 2006 to 2,074 TCF in 2008.

The Marcellus shale field alone, in New York and Pennsylvania, has been estimated to be worth as much as US$2-trillion. The American Petroleum Institute has calculated that it could support 280,000 jobs. In Quebec, a report this week suggested that the industry could create almost 5,000 jobs a year for the next 10 years. So much for running out of hydrocarbons. As for the geopolitical implications, shale gas, which is also present in large volumes in Europe, promises to reduce the significance of both Russian and Iranian gas, along with those suppliers’ potential for causing trouble. It also augurs a huge boost to gas-fired electricity, and further undermines the economics of nuclear, wind and solar power. According to Amy Myers Jaffe of Rice University, “It will prevent the rise of any new cartels. It will alter geopolitics. And it will slow the transition to renewable energy.”

Last month, energy consultant and Pulitzer Prize-winning author Daniel Yergin declared that shale gas was the most important development in the energy industry so far this century. Royal Dutch Shell’s chief executive, Peter Voser, also told the World Energy Congress in Montreal that shale gas developments in B.C. exemplified a “natural gas supply revolution.” Canada’s ambassador to the U.S., Gary Doer, recently told a meeting of the Global Business Forum that when it came to shale gas “Get your running shoes on … in terms of what that means for opportunities for all of us.”

Another sure sign that shale gas has great potential is that environmental activists are trying hard to close it down (or at least use it as a new source of fundraising). At the World Energy Congress, protestors covered in oily-looking molasses (Where’s a hornet’s nest when you need one?) carried banners that read: “No to shale gas.”

Certainly there are potential environmental dangers, and particular concern about the pollution of groundwater. but such problems can be addressed by prudent regulation. The solution to controlling risks is to make sure that there are clear, consistent and sensible rules (preferably across North America), and that drillers and producers are made to pay for any harm they may cause. In the meantime, the industry is already developing non-toxic drilling fluids.

This week, environmental hearings are taking place in Quebec about the development of the province’s shale gas. The point man for its promotion is André Caillé, president of the Quebec Oil and Gas Association (which this week produced those job projections). Mr. Caillé, a former head of Hydro-Québec, was considered something of a hero for the way he handled the great winter storm of 1998, but he recently needed police protection at a town hall meeting. After the ruckus, Mr. Caillé noted wryly that “The Jesuits used to teach us, ‘When your argument is weak, raise your voice.’ It’s in our culture.”

One political problem is that the scandal-plagued Liberal government of Jean Charest has been accused of trying to rush through drilling regulations for its corporate “friends.” Critics have dubbed the province’s Natural Resources Minister, Nathalie Normandeau, “Drill Baby Drill” Normandeau.

An additional complication is that of the Quebec government being hoist on its own green petard. Mr. Charest has made a great point of posturing over climate change, going so far in Copenhagen last December as to criticize Alberta and Ottawa for their wicked ways. Now this pose is coming back to bite him, since gas production will inevitably mean more provincial emissions, about which green groups are publicly fretting.

Still, we might remember that environmentalists did energy companies a great favour by holding up northern gas pipeline development in the 1970s. With current prices, if either of those pipelines had been built, they’d now be losing a bundle. With the prospect of shale gas providing a “natural” lid on gas prices of perhaps US$6 per mcf or less, the northern pipelines may be dead as dodos. But while potential pipeline jobs may have disappeared in the far north, a whole bunch of new job potential has sprung up in much less inhospitable places.