POWER June 2012 - 52

Power Views
Unconventional Gas:
The Great Game-Changer
Dr. Daniel Yergin, chairman of IHS Cambridge Energy Research Associates,
is a Pulitzer Prize-winning author; leading authority on energy, international
politics, and economics; and a recipient of the United States
Energy Award for " lifelong achievements in energy and the promotion
of international understanding. " He recently spoke with POWER about
his latest book-and more.
D
r. Daniel Yergin's latest book, The
Quest: Energy, Security, and the
Remaking of the Modern World, is a
fascinating saga about the " quest for sustainable
resources of energy. " It provides
valuable insight into natural gas markets,
including the shale gas revolution and its
effect on worldwide power generation
markets. The Quest is the follow-up to
The Prize: The Epic Quest for Oil, Money
& Power, for which Yergin received the
Pulitzer Prize.
Congress has been ineffectual in formulating
any useful energy policy proposals
for the past several years. Instead,
policy has set been set by stimulus money
investment and loan guarantees for
Department of Energy (DOE)-selected
companies (with mixed results) and legislative
inducements, such as the production
tax credit, that are expiring.
What should we expect in the future?
Yergin: The whole political discussion
on energy is pivoting towards natural
gas and even oil, given the extraordinary
growth of shale gas and, now, tight oil-
and high gasoline prices. Government incentives
and mandates at both the federal
and state level have been critical in the
growth of renewables. Costs have come
down, and these renewables have grown
dramatically, but they are still small when
measured against the total energy business.
What's ahead is less support. The
United States, like other developed countries,
is in a period of austerity, and that
will affect the willingness to provide incentives
and subsidies.
At the recent CERA conference, Apache
CEO Steven Farris boldly announced
a 200-year supply of natural gas in
52
the U.S. and news that Chevrolet had
announced a " check the box " factory
option for gasoline + natural gas " bifuel "
vehicles. T. Boone Pickens promoted
natural gas vehicles for several
years without success. Is the market
now ready?
Yergin: One of the questions we have
been examining is the comparative economics
of natural gas as a transportation
fuel either directly or to generate electricity
that goes into a vehicle. Price matters,
however, and I think that the picture is
changing. There is a lot of momentum now
for gas to enter the transportation system
either in the form of LNG [liquefied natural
gas] for long-distance trucks or as [compressed
natural gas] in fleets, where there
is a central charging point. The economics
of natural gas versus diesel are becoming
pretty compelling, and manufacturers
are developing new truck engines. At this
point, in terms of private automobiles, the
hurdles, however, are much higher.
The U.S. Energy Information Administration
is predicting that the U.S. will
be exporting natural gas in a few years.
Do you think the gas exporters will be
able to overcome U.S. political obstacles
to allow sizeable exports of resources?
How do you see this playing out?
Yergin: Five years ago the debate was
about how much LNG we would import.
Now it's about how much will we export!
Natural gas prices in the United States are
now unsustainable. They're below costs
in many cases. So new markets will be
developed. In some parts of the country,
natural gas has become a byproduct of
producing oil. The conclusion I've come
to is the result not only of our analysis but
a lot of time on Capitol Hill, talking with
www.powermag.com
decision-makers, as well as with utilities,
industrial users, and gas producers themselves.
There is some fervent opposition
to LNG exports in some quarters! It adds
up, in my view, to the likelihood that the
United States will be a relatively minor
LNG exporter, but political constraints
will end up putting a cap on the number
of projects.
How deeply will the Environmental
Protection Agency (EPA) insert itself
into the regulatory process for shale
gas production now controlled by the
states?
Yergin: As a member of the Secretary
of Energy's Advisory Board, I served on
the committee that was set up last year to
respond to President Obama's call for an
analysis of the safety of shale gas. With
the exception of water, drilling has been
regulated by states for over a century. That
is a responsibility that was confirmed by a
1900 Supreme Court decision. The states
have the experience and are closer to the
public. The states that are new to drilling
are setting up regulatory systems to manage
the process, and there is a great deal
of collaboration and learning among the
states. Sometimes the impression is given
that shale gas drilling is unregulated. In
fact, it's highly regulated.
I think the expansion of federal authority
in place of the states will be a contentious
issue, as conditions vary widely
among states. We have addressed what
we think are mistakes by EPA on methane
in a paper called " Mismeasuring Methane. "
It's a cautionary tale. I think you
also have to ask: What is the objective of
expanded EPA regulation in light of the
states' responsibility?
POWER | June 2012
http://www.powermag.com
POWER June 2012

Table of Contents for the Digital Edition of POWER June 2012
