Natural gas: It’s American, affordable and abundant. So goes the marketing slogan but increasingly its accuracy is being questioned.
The new way of extracting natural gas from shale rock in America has been viewed the past few years as a game-changer for the energy industry: creating more of the cleaner burning fuel, lowering prices and decreasing dependence on foreign countries. Connecticut’s politicians seek new subsidies to use more natural gas, and the state utilities are expanding their natural gas systems.
But this so-called game changer is not everything it is cracked up to be. The wonderful predictions about potential high yields from these resources have been called into question amid environmental concerns about the way the resources are harvested.
Despite these concerns, major players in Connecticut’s natural gas industry surge forward with their expansion plans, even though energy prices will rise and dependence on foreign countries will increase if the domestic supply turns out to be not as great as predicted.
“Even if the shale predictions are reduced, it still represents a large quantity of natural gas to the region and an opportunity for Connecticut,” said Karen Samide, spokeswoman for Berlin utility Yankee Gas, which is expanding its system.
Natural gas trapped in shale rock formations throughout the country was long considered impossible to harvest, until new technology made extraction much cheaper. This new method called hydraulic fracturing — or fracking — involves splitting the rock formation open with water and then harvesting the natural gas inside.
From 2006 to 2010, American shale gas production increased 48 percent per year, according to the U.S. Energy Information Administration. Based on bullish predictions on the amount of gas that could be extracted from shale formations — particularly the Marcellus formation in New York, Pennsylvania, Ohio and West Virginia — EIA predicts shale gas will constitute 46 percent of the U.S. natural gas supply by 2035, up from 14 percent last year. It’s on pace to become the single biggest source of the country’s supply.
But articles published this summer by the New York Times indicate shale gas predictions are overstating its impact, equating the excitement around the resource to the housing bubble that burst at the onset of the economic recession.
The New York Times articles indicate the large amounts of natural gas harvested from shale wells is not sustainable over the long-term and internal e-mails from officials inside EIA doubt the future of shale gas.
Officially, the EIA has maintained its stance on the positive prospects for shale gas, but admits there is uncertainty in the resource’s future. Shale gas wells are only a few years old, and their long-term productivity is untested; gas production from shale has been limited to sweet spots, so it’s unknown whether the whole formations will have similar yields; and many formations are so large that they haven’t been extensively tested.
Because of the recent influx in supply of natural gas, the subsequent drop in price and the predictions for the future, Connecticut natural gas distribution companies Yankee Gas, Southern Connecticut Gas Co. and Connecticut Natural Gas Corp. are trying to expand their customer bases.
“Additional supply into Connecticut is always a good thing,” said John Dobos, director of marketing and sales for Southern Connecticut Gas and Connecticut Natural Gas. “We have been building some good momentum.”
Southern Connecticut Gas has 175,000 customers and Connecticut Natural Gas has 165,000. Over the next three years, their parent company — New Haven-based UIL Holdings — wants to add another 30,000 customers.
The companies believe the lower costs of natural gas, driven lower by shale gas, give them the advantage to switch that many customers, Dobos said.
Unlike the whole of the U.S. that heats 53 percent of its homes with natural gas, the bulk of Connecticut homes — 59 percent — heat using fuel oil. A quarter of Connecticut households use natural gas for heat.
Because fuel oil is more expensive than natural gas — 30-50 percent, depending on market factors — Connecticut’s utilities sell the idea that gas is the economical choice. UIL says the $4,000 to $8,000 investment to convert a home to natural gas heating has a payback period of three years for equipment that lasts at least two decades.
Shale gas plays a significant role in keeping the price of natural gas cheap and stable during the high-demand winter months, said Samide at Yankee Gas.
“With shale gas developments, the U.S. now has more natural gas than Saudi Arabia has oil,” Samide said.
Even if shale gas doesn’t turn out all it is predicted to be, Dobos said, the New England utilities and their new customers will still be covered because the price of oil will remain high. The rest of the nation might suffer, but the unique situation where Connecticut relies heavily on fuel oil gives the state more price cushion with shale gas.
“We have enough supply in Connecticut to do those plans,” Dobos said. “We didn’t base these predictions on shale gas.”
Another selling point for natural gas is that is emits 30 percent fewer carbon dioxide emissions than oil and 50 percent less than coal, whether the natural gas comes from shale, offshore or from a foreign nation.
For its large domestic supply, cleaner burning and lower prices, U.S. Rep. John Larson, D-East Hartford, is working to make the transportation sector more reliant on natural gas.
His NAT GAS Act gives subsidies to automakers and business fleet manager for cars and trucks that run on natural gas instead of gasoline. Larson has proposed the legislation since 2008; and this year he appeared to have enough momentum to pass the bill through the House of Representatives, but the measure was tabled when Congress recessed following the fight over the debt ceiling.
Larson is aware of the many issues surrounding shale gas, particularly the environmental concerns that fracking could contaminate groundwater, spokesman Christopher Licata said. But the importance of getting more reliant on natural gas in transportation is to lower the country’s heavy dependence on oil.
“Natural gas is American, abundant and affordable, and we should be exploring it in addition to other alternative fuels as a means to an end our dangerous dependence on foreign oil,” Licata said.
As shale gas becomes more prevalent through 2035 and makes up 46 percent of the American supply, EIA predicts our reliance on foreign countries for natural gas will dwindle from 11 percent to 1 percent.
That prediction is based, though, on robust returns from shale gas.
The No. 1 exporter of natural gas in the world is the Middle East country of Qatar.
