Fracking Technology & Energy Supplies

October 3, 2012 06:57 AM
Fracking Technology & Energy Supplies

With credit duly given to Vice President Biden, I think his famous assessment of the passage of the health care law applies to another event that continues to gain momentum: the use of fracking technology to loosen energy supplies, especially natural gas, from previously impermeable geologic layers.

The fracking phenomenon defies prediction. Nonetheless, the consequences will almost certainly reach every farm and completely disrupt some.

To give you some sense of the rapidity of the natural gas explosion (forgive the pun), consider that one year ago it was estimated that NG would overtake coal as our primary source of electricity as soon as 2019. By early 2012, that date had been advanced to 2016.

It happened in April.

New regulations on coal plant emissions likely hastened the crossover, but the speed of the transition is still breathtaking. Now consider that the largest factor slowing the expansion of NG production is storage and transmission. All the caverns and pipelines are full. The warm winter only added to the glut. Nor is fracking just a tool for NG. Thanks to fracking, North Dakota just passed Alaska as the No. 2 oil-producing state.

Nobody predicted NG prices dipping below $2. This stunner, coupled with increased confidence in energy reserve estimates, completely reshuffles the energy picture for the U.S. and its agriculture sector. A few possibilities seem to be emerging from the chaos:

• We are going to need a whole mess of pipelines. Especially in the East, the yield from the Marcellus Shale could lower energy costs for the last few oil-heated homes and businesses. Getting NG to the right places means full employment for the pipeline industry.

• We might end up building a new basic chemical plant—something we haven’t done for a long time. Even with our strict regulations, dirt-cheap NG is a feedstock that makes chemical production capacity worth the effort. It could even mean a new nitrogen plant, like those contemplated in Iowa and North Dakota.

• We can bid farewell to one of our favorite, albeit grossly overblown, international boogeymen: the Mideast oil producer, with his camel, mustache and sneer. Although the Persian Gulf has never been the major supplier of our imported oil (Canada and Latin America are far more important), we could stop using its oil right now. While much of the change has been brought about by efficiency gains and consumption declines, the "tight" oil bonanza in the U.S. ensures that oil politics are going to change.

• What does it mean that more coal trains might be heading west for export to China? Will grain to the Pacific Northwest be helped or hindered by the competition for rolling stock, routes, backhauls, etc.? Rail transportation just got thrown a curve, for sure.

• A smarter grid would preserve some chance for the flagging wind energy industry. As federal subsidies fall under the ax, competition from low-cost gas turbines adds to wind’s uphill climb. Still, since gas plants can come online so much faster than coal, grids should be able to handle more variable-output wind energy. It will take better transmission facilities, I suspect.

Who Needs the Lottery? When it all sorts out, the Arctic National Wildlife Refuge drilling debate might quietly fade away. Ditto for offshore drilling urgency. Of course, for many farmers and ranchers the focus is on windfall income. Judging from North Dakota and Pennsylvania, communities are the first casualties. Never underestimate the corrosive effect of creating essentially random, instant millionaires.

Fracking technology should and will be under scrutiny by those who watch for environmental degradation. To date, the drilling industry has withstood those challenges. Groundwater issues have been isolated to surface problems from transporting nasty chemicals. The environmental improvement over coal is significant for particulate emissions, but not so much for carbon dioxide. Meanwhile, our surplus coal will end up in Chinese skies. Not much of a win.

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