Dateline: Copenhagen

Exxon Mobil and XTO announced their merger last month.

When Exxon Mobil and XTO Energy Inc. announced their $41 billion merger last month, the news was big enough to penetrate the fog of war in Copenhagen – and to prompt Representative Ed Markey (D-MA), co-author of the House climate and energy bill, to call a hearing on the merger’s impact on U.S. energy markets. Congress and the natural gas industry have a lot to talk about this year, and as the hearing, which took place last week in the House Subcommittee on Energy and Environment, revealed, concerns over consolidation in the industry will be only a small part of the agenda. 

After their notable absence from the table while the House crafted climate and energy legislation last year, natural gas interests began the new year with newfound momentum. Natural gas caucuses have formed in both the House and Senate, and environmental leaders including Worldwatch Institute president Chris Flavin and former Sierra Club president Carl Pope have expressed optimism about the role that natural gas, which emits less than half as much carbon dioxide as coal when burned, can play in the transition to a low-carbon economy.

In the coming year, Congress will consider the NAT GAS Act (H.R. 1835, S. 1408), which creates and expands incentives for natural gas vehicles. Natural gas could offer numerous benefits over gasoline and diesel as a transportation fuel, chiefly its lower emissions and domestic availability, now thought to be almost a hundred year supply thanks to technological advances unlocking vast reserves of shale gas.

The natural gas industry will also have an opportunity to redefine its role in the national discussion of climate and energy legislation. As the cleanest fossil fuel, natural gas stands to gain in the power and transportation sectors – if Congress succeeds in putting a price on carbon. 

At Wednesday’s hearing, Rex Tillerson, CEO of Exxon-Mobil, and Bob Simpson, XTO’s Chairman of the Board, proved that they are polishing their message. In virtually identical language, each declared that their companies’ merger would “support our nation’s economic recovery, strengthen our nation’s energy security, and help meet our nation’s environmental goals.” These sentiments were echoed by congressmen on both sides of the aisle, who expressed interest – and in some cases, outright glee – over the jobs the merger might bring to their state, and the supply of abundant and relatively clean energy that the companies could unlock in American shale gas formations. Nevertheless, hydraulic fracturing, the controversial technique driving the shale gas boom, quickly emerged during Wednesday’s hearing as an area of concern for congressmen on both sides of the aisle. 

Representative Joe Barton (R-TX) lamented congressional attempts to restrict hydraulic fracturing.  “If we can prevent the Congress or EPA from mucking around in hydraulic fracturing,” Barton noted, “this merger should go through….Because you have a codicil in your pending merger agreement that if Congress passes legislation then I guess either party has the right to call the merger off.” 

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The Washington Metropolitan Area Transit Authority has found that transit buses running on compressed natural gas emit less carbon monoxide, particulate matter, and oxides of nitrogen than their diesel counterparts.

T. Boone Pickens is at it again. Following on his initial $62 million ad campaign touting the benefits of both wind power and natural gas, he’s back on the advertising trail. This time, Mr. Pickens’ ad campaign focuses on the role of natural gas in reducing our dependence on imported oil through increasing its use in transportation.

Pickens is proposing that natural gas be deployed strategically in fleets of heavy trucks as a first priority, and not advocating a broader immediate takeover of the transport sector by natural gas as the primary fuel as he seemed to do initially.

His plan triggers a broader set of questions. Whether it’s because we agree to address humans’ contribution to climate change, or because we see the necessity of transforming an energy economy currently primarily reliant on coal, oil and natural gas—three finite fossil fuels—we are at a profound juncture regarding what that 21^st century low-carbon energy economy can and should look like.

Natural gas is an interesting fuel in that mix. It is the least carbon intensive of the three fossil fuels. New-found reserves in “unconventional” formations have altered supply estimates dramatically.

But important questions remain regarding use of the resource. At what cost can these unconventional sources be exploited? What are the environmental, economic and community impacts to be expected? At what scale will we choose to develop the resource, and what then are commensurate impacts?

What is the most strategic deployment of the resource? Is Mr. Pickens right about the merits of increasing use of natural gas in the transportation sector? What are the infrastructure investments required to make that happen effectively and is that also factored in to a broader strategy regarding an optimal low-carbon transportation vision for the U.S.?

From the perspective of lowering carbon in the atmosphere, the first best strategy resides in the power production sector. Retiring coal plants that have reached or are near the end of their useful life and repowering a good portion of those with cleaner burning natural gas could have an enormous effect on GHG contributions from the U.S. power sector.  Thinking through further innovations on combined heat and power and significant efficiency gains in which natural gas can be an ally is also a sound strategy.

Strategic deployment of all fossil fuels going forward is an extraordinarily important topic. We owe it to ourselves to place that question squarely before us for hard and honest examination. 

Because we agree with Mr. Pickens that natural gas may have a particularly distinct role to play in reducing greenhouse gas emissions and transforming our energy economy, Worldwatch has started a specific initiative on natural gas, renewables and energy efficiency. Strategic deployment recommendations will be part of that. Stay tuned!

Video of Worldwatch’s Copenhagen event on Natural Gas, Renewables and Efficiency: Pathways to a Low-Carbon Economy is available on the American Clean Skies Foundation website.

On the question of climate change, energy producers and environmental leaders haven’t found much common ground.  Yet on December 12, in a Worldwatch-sponsored forum on “Natural Gas, Renewables, and Efficiency: Pathways to a Low Carbon Economy,” representatives from the natural gas industry, environmental non-governmental organizations, and government discussed one energy resource with which a growing number of these groups finds significant agreement: the potential for natural gas to facilitate the transition to a low-carbon economy.

The event, which Worldwatch cosponsored with the American Clean Skies Foundation and the United Nations Foundation, marks the launch of a new Worldwatch Natural Gas and Sustainable Energy Initiative.  As part of this initiative, Worldwatch will study the opportunities and challenges that the newfound abundance of U.S. and global natural gas presents.

A few short years ago, talk centered on a day not too far in the future when we would run out of natural gas.  The expected abundance of unconventional resources has changed that horizon and there is now discussion of 100 years or more of supply.

Vello Kuuskraa of Advanced Resources International presented information about unconventional resources, where they are known to reside, and where more work needs to be done to determine what the resource is.  While North America has abundant shale gas supplies, for example, more work needs to be done in China and India to know more precisely what is there.  Kuuskraa also noted that while there is a lot of gas worldwide, the question of developing it must be asked consistently through the lens, “at what cost?”

Senator Tim Wirth, President of the United Nations Foundation, noted that natural gas has the potential to provide a ready-to use alternative to burning CO₂ intensive coal, as gas in the electricity sector, on average, is 50% less carbon intensive than coal.  

Christopher Flavin, President of Worldwatch, painted the picture of the role that natural gas can play in the transition to a low-carbon economy.  Natural gas, Flavin noted, is best viewed as a key component in a broadened fuel portfolio that includes far greater reliance on renewables and energy efficiency.  Gas can provide key baseload power as a complement to variable renewable energy if the two are married.  Flavin also pointed out that the current fleet of natural gas plants in existence in North America runs at less than 50 percent capacity, so better use of the current infrastructure is a good first step toward greater efficiency as well.

Aubrey McClendon, CEO of Chesapeake Energy, offered a broad tutorial on the extraction and use of natural gas.  McClendon pointed out that natural gas represents a 25 percent reduction in greenhouse gases in the transport sector when compared to oil.  Chesapeake is one of the leading companies developing shale gas reserves in North America.  McClendon called on the industry to voluntarily engage in transparency practices, as his company does, by listing on the company website the chemicals used in the hydraulic fracturing process used for extraction.

These points, as well as discussion of the politics and policy governing use of natural gas continued through a panel discussion that included Ian Smale, Group Head of Policy and Strategy for BP, Maggie Fox, Executive Director of the Alliance for Climate Protection, Holmes Hummel, a Senior Policy Advisor with the U.S. Department of Energy, Jörg Gigler of KEMA in the Netherlands, and Jyoti Parikh from Integrated Research and Action for Development (IRADe) in India.

Discussion focused, in part, on the environmental impacts associated with extraction of conventional and unconventional natural gas resources.  Fox noted that impacts on water, air, and on communities is something to which companies and regulators alike need to pay careful attention.  Transparency and willingness to pay for necessary safeguards was the call to action.

The policies surrounding extraction and use of natural gas, and the accompanying politics that can lead or prevent good policies was a theme that ran through the afternoon.  Agreement that deployment of this resource, in the context of an expanded portfolio of energy resources, including renewables and efficiency, can help boost the glide path to a low carbon 21^st century economy.

A video of the event is available online from Clean Skies TV.

The only fossil fuel that can reduce carbon emissions

The need to dramatically reduce carbon dioxide emissions while enhancing energy security and providing economical energy services is one of the greatest challenges facing the world today. Achieving these goals will require a transformation of the global energy economy and must be based on a robust combination of resources and technologies.

Natural gas has recently emerged as a vital but neglected complement to the paragons of low-carbon energy: renewable energy and energy efficiency. Recent developments in technology, from gas wells to home appliances, suggest a need to fundamentally reevaluate the role of natural gas in the energy system. Together with renewable energy and energy efficiency, natural gas should be a cornerstone of strategies to advance energy security and reduce the threat of climate change—a conclusion that has recently been supported by U.S. environmental leaders, including Robert Kennedy, Jr., John Podesta, Carl Pope, and Tim Wirth.

Compared with coal, natural gas allows a 50–80 percent reduction in greenhouse gas emissions, depending on the application. While U.S. oil production and reserves have been declining for nearly four decades, natural gas production and reserves have risen dramatically in just the last few years. Some estimates indicate that gas may actually be more abundant than coal and that U.S. gas production can continue rising for decades to come, allowing it to serve as a transition fuel—eventually replaced by hydrogen derived from renewable sources. Most countries have not yet fully explored their potential for unconventional gas, but early research indicates that it is equally abundant globally.

Natural gas is the only fossil fuel that can, with existing technology, immediately contribute to reducing oil dependence and solving the climate problem by reducing carbon dioxide emissions. Expanded use of natural gas could rapidly substitute for the older coal-fired power plants that are not targets for carbon capture and sequestration (CCS). And natural gas-based electricity can provide the reliable power supplies that are needed to complement intermittent energy sources such as wind and solar power.

The potential of natural gas to contribute to advances in energy efficiency and to facilitate renewable energy deployment have so far been ignored by most policymakers. This was abundantly clear in the American Clean Energy and Security Act (ACES) passed by the U.S. House of Representatives this June. That bill is tilted heavily toward support for coal and includes little support for natural gas.

Policy support for natural gas is one of the keys to rapid reductions in carbon emissions over the next few years. And beyond that, it holds out the promise of eliminating coal-based electricity by 2030.