Thursday, September 15, 2011

Natural Gas: Climate Friend or Enemy? Depends

Natural gas emits less CO2 than coal and fewer smog-causing pollutants. As a source of power generation, it helps smooth out the intermittent nature of renewables such as wind and solar. It appears to be plentiful, thanks to improved horizontal drilling technologies and “fracking” techniques that allow us to better exploit and monetize shale-gas reserves. In fact, the International Energy Agency has hailed the coming “golden age” of natural gas, while the wise folks at MIT see natural gas use worldwide as “likely to continue to expand under almost all circumstances.” Shale gas reserves are local, meaning natural gas relieves much of the angst regarding America’s energy security, or its current lack of it.

That’s the good news — and let’s be clear, that is truly good news. But it comes with some bad news as well that we simply can’t ignore.

Indeed, the list of items on the bad news side is just as long — maybe even longer — which makes me wonder whether this love affair we seem to be having with natural gas is justified. It’s a relationship that can’t end well over the long term, not on a planet that needs to end its dependence on fossil fuels — all forms of fossil fuel. Natural gas, increasingly coming from shale gas projects, is like smoking “light” or “mild” cigarettes as part of a strategy to stop smoking and lower the risk of getting lung cancer. It’s an illusion. As we know from studies, smoking light cigs only strengthens the addiction, it doesn’t reduce cancer risks, and it gives the smoker a false sense that they’re taking meaningful action to avoid a deadly disease.

So, what is so bad about natural gas? Used strategically to realize efficiencies or as a bridge to renewables, there’s not a heck of a lot wrong with natural gas. But with shale gas on the scene, natural gas is cheap and plentiful, meaning that it is being used less strategically and more generally as a fuel of choice. What were once called “smart gas” strategies are out the window. To use the smoking analogy again, natural gas was once thought of as a more expensive nicotine patch designed to gradually wean us from smoking. Now, it’s a lower-cost light cigarette that only encourages us to smoke more. As a result, we’re seeing a mad dash to gas, and because a greater portion of that gas is coming from shale projects, we should be concerned. Here’s why:

Shale gas projects are a serious threat to local drinking water, as concluded in a recent Duke University study. It found that methane levels were 17 times higher in water wells located within 1 kilometer of a shale-gas fracking site, adding weight to anecdotal evidence from folks living near shale-gas projects. The study also shined a light on the lack of research and regulation in this area, and how the industry’s “trust us” approach doesn’t provide the transparency needed to keep this emerging industry in check.There’s also big concerns about the chemical cocktails used during the hydraulic fracturing process. Do they leak into wells? Certainly, there’s the potential for accidents. A Chesapeake Energy shale gas well in Pennsylvania had a blowout in April that sent thousands of gallons of toxic fracking fluid into nearby farm fields and streams. Companies are not required to disclose what chemicals they use for fracking. Why not? Again, the trust-us approach doesn’t cut it and has failed us in the past.There are even concerns that the fracking process can trigger earthquakes. This is, in my view, an overblown concern but it adds to the public’s perception that fracking on a large scale is potentially dangerous.There is concern that fugitive methane emissions from shale-gas projects make this form of natural gas no better than coal from a GHG emissions perspective, as raised by Cornell University’s Robert Howarth in a recent study. This, of course, has been widely challenged by industry and others, such as MIT. Again, it’s tough to know for certain as the industry has not historically disclosed the data required to make a proper assessment. At this point, IMHO I think it’s fair to say that shale gas lies somewhere between conventional natural gas and coal and the outcome depends heavily on drilling and fracking practices. Also, I think we underestimate the short-lived climate impacts of stray methane emissions from shale-gas projects. If methane emissions aren’t a big issue, why is the U.N. Environment Program churning out reports preaching the need to crack down on tropospheric ozone, including methane, to slow down the global temperature increase and delay tipping points that could trigger runaway climate change?

I’d like to say at this point that many of the above issues can be addressed with technology and best practices, but without adequate industry transparency or regulation, and with environmental protection agencies seeing budget cuts across the continent, how can we assume industry will act in the best interests of the environment and citizens? There’s the added challenge that these projects are small and distributed — i.e. there’s a heck of a lot of them, making it difficult even under a stricter regulatory environment to monitor compliance. Furthermore, what happens when developing countries such as China begin their shale gas revolutions? Can we expect the highest of standards and most advanced technologies to be used there? Yes, shale-gas development can be made to be cleaner. That industry worldwide will aim for the highest bar is a big, dangerous assumption to make.

Here are some other reasons why shale gas is potentially a greater problem than solution:

Certainly, it’s great if plentiful, cheap natural gas is used instead of coal for power generation. The concern is if, in a post-Fukushima world, natural gas is chosen to fill the gap left behind in countries that have declared a moratorium on nuclear power generation or declared their intention to close down older nuclear plants. Likewise, it wouldn’t be good if solar, wind and other renewables are impacted by the dash to gas. Yes, natural gas generation is a good bedfellow with certain renewables, but the fear is that natural gas will hog the bed, steal the covers and overstay its welcome. It may bridge the transition to renewables but it could also delay it significantly, and time is something we can’t afford when it comes to keeping the worst effects of climate change in check. Nobuo Tanaka, executive director of the International Energy Agency, made this point recently when the agency issued its “golden age” of gas report. “An expansion of gas use alone is no panacea for climate change,” Tanaka warned. Absent a carbon tax with some bite, it’s unlikely industry or utilities will care much.One of my biggest concerns is how cheap gas — i.e. the impact of shale gas on natural gas prices — is spurring the production of dirtier oil, mainly from oil sands. It’s well known that natural gas is a key fuel input for oil sands mining, bitumen extraction and refining. It can represent more than half the cost of production, and in-situ projects that represent about half of all projects require tremendous amounts of steam, meaning tremendous amounts of natural gas. We’ve got this interesting scenario in which natural gas is consistently below $5 per million BTU and oil is consistently around or above $100 a barrel, creating a 20-to-1 spread. For perspective, the spread at the height of the 2008 oil sands boom was 13-1, so certainly the economics of producing dirty oil in an age of plentiful, cheap shale gas has improved significantly. The end result is a dirtier form of natural gas threatening to slow down the deployment of renewables while also driving greater production of a dirtier form of oil.

Again, this is why a carbon tax is so important. In B.C., for example, a $25 a tonne carbon tax is having a significant impact on natural gas costs by effectively adding a 25 per cent levy. “This sends quite a different price signal in terms of substitution,” say Don Roberts, who heads up the cleantech and renewables practice as CIBC World Markets. “At the end of the day it’s still the best policy to get that carbon tax.”

On a final note, I’d like to consider the land footprint of shale gas. Some people in the oil and gas sector take issue with the land footprint of wind turbines while ignoring the similar footprint that comes with shale gas development. Let’s compare the two. In the United States, there are roughly 20,000 installed wind turbines and roughly 20,000 shale-gas wells. Both forms of energy extraction require access roads, access to ideal sites, and connection to a main collector (transmission in the case of wind; pipelines in the case of shale gas). Over 25 years, the average shale gas well might produce 2 billion cubic feet of gas that, when used for power generation in a combined-cycle natural gas plant, produces about 285,000 megawatt-hours of electricity. Over 25 years, a 2.3-megawatt onshore wind turbine would produce about 150,000 megawatt-hours of electricity based on a 30 per cent capacity factor.

From this very rough calculation, it would seem that a shale gas well could result in roughly twice as much electricity production than a wind turbine over a 25-year period, but the question we need to ask is whether the additional energy is worth it for the footprint it occupies. A shale-gas well results in both upstream and downstream GHGs emissions; a wind turbine doesn’t. A shale-gas well poses a risk to local drinking water; a wind turbine doesn’t. A shale-gas well requires that a stew of toxic chemicals be injected underground at high pressure; a wind turbine doesn’t. A shale-gas well can pose local odour problems; a wind turbine doesn’t. A shale-gas well can leak bad stuff; a wind turbine can’t. A shale-gas well requires a large amount of water during drilling and fracking; a wind turbine doesn’t require water. I should point out that a wind-turbine site can produce energy practically forever, though the turbine will have to be replaced with a new one around the 25-year mark. Not so for shale gas — once a well is depleted it is of no more use, though its impact on the surrounding environment can be felt much longer.

Yes, wind turbines can kill birds and bats, and yes, some people don’t like the look of them and they can produce bothersome noises, but given the choice — a wind turbine within 1 kilometre of your home or a shale-gas well — which would you choose?

All of this isn’t to completely crap on natural gas and the many benefits it can offer. We need natural gas, and it will be an important part of the transition to an economy powered by renewables and other emission-free sources of electricity. It is, generally, cleaner than the other fossil fuels out there. But shale gas is making natural gas dirtier than it has been, just like the oil sands are making the world’s oil resources dirtier and less climate friendly. And if we depend on it too much, we risk taking a serious step backward by delaying our embrace of truly low-carbon and zero-emission energy sources. This will happen — guaranteed — if the market is left to its own devices.

Increased environmental regulation, requiring both transparency and best practices, and a carbon tax are what will keep natural gas a climate-friendly fuel. Left unchecked, it will become a climate enemy and our hope of keeping the global average temperature from exceeding 2 degrees C will be sunk.

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