Unlike renewable energy sources, natural gas is a proven fuel with mature associated technologies. And it has a cost advantage over other forms of energy such as wind, solar and geothermal. Along with clean coal, natural gas is perhaps the most practical energy option for the United States to decrease its dependence on foreign oil and reduce its vulnerability to outside threats.
Natural gas is methane, which is what remains after gases extracted from underground are refined and others such as butane and propane are removed. Natural gas occurs geologically either with crude oil or by itself. While Russia has the world’s largest reserves, North America is not far behind. When burned, natural gas emits significantly less CO2 and fewer traditional pollutants per unit weight than does oil. Of the three main fossil fuels, natural gas is the poorest in carbon content per unit weight, while coal is the richest, and crude oil that is refined into products like gasoline, is somewhere in between.
Natural gas and oil have had a competitive historical existence. Back in the 19th century, light was provided to American homes by the burning of whale oil and candles made from animal fats.
When it was discovered that the black liquid oozing out of the ground and destroying the resale value of farms in Pennsylvania was actually an asset to be prized, whale oil and candles were replaced by the first commercially successful refined product from crude oil: kerosene.
Well before natural gas became the darling fossil fuel of environmentalists because it was cleaner burning and less polluting than oil or coal, it was primarily used as a key input for making chemicals, including fertilizers and explosives.
Some players in the chemical industry have moved parts of their production abroad where natural gas is produced more cheaply. An example is the proposed joint venture between Dow Chemical and the Kuwaiti government. Dow would provide the specialized technologies to use natural gas to produce anything from plastics to petrochemicals and Kuwait would contribute capital, land and the raw materials. This project is on hold because of a contract dispute but it will most likely restart soon.
There are many ways to respond to either the high price or the low supply of natural gas at home. One possibility is to use the vast supplies of U.S. coal to produce gas fuel through coal gasification. Instead of burning coal the old fashioned way, coal is crushed into superfine particles and baked without igniting it. The baked coal emits gases which can be made into synthetic natural gas. The big barrier to this solution is not the technology, which continues to be refined and improved, but the cost.
Just like many other alternative energy projects, synthetic natural gas from coal gasification is cost-effective only when natural gas from traditional sources is expensive enough and/or in short enough supply. While that is not the case today, it certainly looked that way only last summer. Factors other than the spot price of natural gas should also be kept in mind when considering building some domestic capacity in coal gasification plants. The abundant supply of coal in the United States represents a real advantage. Part of the future for coal may well be tied to providing synthetic gas to help meet some of the demand for natural gas, just as oil from tar sands or other less traditional sources can help meet demand for crude oil.
Natural gas has the greatest potential for replacing some capacity in coal-burning power plants.
“Combined cycle” systems that use gas turbines and steam turbines together to produce electricity are extremely efficient. The problem is that most utilities still use natural gas only for peak output.
Coal and nuclear power are still cheaper and more reliable to run continuously. Only when peak rates are in effect — for example, during the day time in the summer when it’s hot and everyone is running their air conditioner — is electricity from natural gas considered economical. If the nation had a “smart grid” that allowed generators to gauge their output more closely to the needs of consumers, it would be possible to “bank” the over production, and electricity from natural gas would be considered competitive.
Natural gas also has great potential for heating homes. In many parts of the country, oil-burning furnaces are still common, such as in New England. Older oil-burning furnaces have efficiency ratings as low as 60 percent — that is, 60 percent of the fuel burnt goes to heating the home, the rest is wasted. Modern natural gas furnaces have efficiencies of up to 90 percent. The problem is that for owners of older homes, switching to a new natural gas-burning furnace may cost several thousand dollars. Consumers will begin to make the move to efficiently heating their homes with natural gas only when the economy picks up and energy prices start rising again.
Natural gas is less suited for personal vehicles. There isn’t much of a natural gas refilling infrastructure in the United States. The cost of natural gas in most states also makes it much more expensive than using other fuels. Last but not least, natural gas in a personal vehicle raises safety issues — the gas is kept compressed in tanks and in the case of an accident can explode violently.
On the other hand, mass transit fleets can overcome the problem of spotty infrastructure. Most buses drive locals routes and return to a central depot, where often only one refueling station is needed. Also, given the larger size of the vehicle, a bus can carry compressed natural gas in safer places — the hump on top of the passenger cabin is where the tanks are carried. Such positioning keeps tanks safe in most traffic accidents.
Natural gas reserves are found in conventional and unconventional sources. The former are traditional drilling in oil fields where natural gas occurs, as well as in fields where only natural gas occurs. Unconventional sources of natural gas include geological formations where non-traditional forms of drilling are required to release the trapped natural gas. Just as the energy industry is looking for oil in sands in the United States and Canada, it is also looking for natural gas in shale. Drilling in shale is more complicated and costly than traditional drilling.
There is also an immense amount of energy on continental shelves in the form of methane hydrates. This is natural gas trapped in frozen form under sediment on the sea floor. The continental shelf off the Carolinas and Georgia is estimated to be the “Saudi Arabia” of natural gas. The problem is that methane hydrates are unstable and dangerous. Underwater seismic events often free the frozen methane from the sea bottom, and being lighter than water, the ice rushes up to the surface where it melts explosively. There also may be methane hydrates on the continental shelf off the coasts of Alaska and Canada.
All these proven and potential reserves of conventional and unconventional natural gas should make Washington hesitate about simply mandating more use of natural gas without allowing more drilling. To ban further drilling would frustrate U.S. national security interests twofold. First, it would increase the nation’s dependence on foreign natural gas. Second, it would increase imports of LNG. The cargo is explosive. Maritime and port security professionals worry about an LNG ship being hijacked and driven into a terminal and detonated by terrorists. The damage could rival that caused by a small nuclear weapon.
So what should the government do to spur conversion to natural gas and how much will it cost? The good news is that much of that conversion is already happening. Government started 20 years ago and now industry is busy pursuing conversion as a market-driven opportunity. The example of conversion to natural gas that the United States should follow is not the taxpayer-subsidized approach that T. Boone Pickens advertises on TV commercials (for which he paid $40 million).
A better example was quietly set by ExxonMobil. The company was attacked in a recent Business Week story for being “Weaker Than You Think.” One of the company’s greatest failings, according to the authors, was Exxon’s recent steep increase in its reserves replacement with far more natural gas and less oil. The authors implied that Exxon was committing some sort of business suicide by moving to lower profit margin natural gas in combination with Exxon’s continuing refusal to incorporate alternative and exotic energy businesses into its portfolio. At the same time, the authors noted that Exxon had earned the greatest profits ever of any publicly traded private company in the world during 2008, 2007 and 2006.
Exxon is showing the way by enlarging and securing an energy portfolio with not just more oil, but with a lot more natural gas. This move is not only working for Exxon but also turning a nice profit for the company and its shareholders.
John M. Manoyan is a chemical engineer, nuclear physicist and is now an investment advisor in San Francisco. Michael G. Frodl is a tax attorney, former chairman of the Environmental Law Committee of the Bar Association of Washington, D.C., and is now an adviser on emerging risks. They are co-founders of the Forum for Environmental Law, Science, Engineering and Finance. Their personal views do not represent those of FELSEF. Manoyan can be reached at jmanoyan@snet.net and Frodl at mgfrodl@tidalwave.net.
