New, abundant supplies of U.S. natural gas are transforming America’s energy landscape with the promise of reliable, affordable power from domestic fuel sources – and federal policymakers should craft the right policies to allow America to seize this unprecedented opportunity to increase America’s energy security and modernize the U.S. electric power system with the cleanest fossil fuel available.

On the production side, shale gas producers are expected to invest more than $40-$60 billion per year over the next six years in North America. It is important that these resources be developed in an environmentally responsible manner. In publications such as the National Petroleum Council’s report to the Secretary of Energy, the industry has committed to doing that.

And on the generation side, advanced technology is capable of highly flexible and efficient operation that can balance power from intermittent renewable sources. 
 GE supports increased transparency, continued development of industry best practices and reasonable regulations that promote the adoption of advanced technologies that can be efficiently implemented with appropriate reviews and approvals. GE also supports collaboration among government, industry, non-governmental organizations, universities and the private research community to develop and deploy additional technologies and cost-effective best practices and regulations to minimize potential environmental concerns.

Advanced water treatment and recycling technology is available to reduce wastewater produced by natural gas exploration and production activities. Likewise, advanced natural gas engines are available to produce cleaner power on site and reduce the use of diesel motors and generators in drilling operations.

GE believes that currently available advanced technologies not only make natural gas exploration and recovery sustainable, they can help support further growth of this industry and enhance U.S. energy security.

Natural gas is a great energy solution for America, but it is one of many. U.S. policy should encourage deployment of the full complement of next-generation energy technology options, including natural gas.

As America prepares for the upcoming fall 2012 elections, it is important to take account of the major issues that the outcome if this election will help to frame for many years to come. High on that list is energy—from supply and production to demand and price—all energy development and energy processing in the United States will continue to be both a major source of job creation and political contention.

It is important that, as we emerge from the abyss created by the 2008 financial collapse, our nation continues to embrace domestic energy production. We as a nation are making good progress and the American energy industry is helping to lead the way for our immediate economic recovery and our longer term future. Both natural gas production and petroleum production are outstanding examples.

In Texas and Pennsylvania more than 200,000 jobs have been created in the last year, as a result of the booming natural gas sector. For Texas, that amounts to some $13.7Billion in additional economic output in 2008 alone. In Pennsylvania, each well is estimated to create some 62 jobs and $5.46 million in new output. Manufacturing, construction, and laborers in these states are benefiting from above average salaries, in addition to growing state and local tax revenues. North Dakota now has the lowest unemployment rate in the nation, attributed almost exclusively to oil and gas development there.

2012 will be a critical year for the future of American domestic energy policy. It is vital that our national political leaders at both the state and the federal levels continue to support job-creating opportunities to safely develop and transport our natural resources.

Later this year, New York will evaluate plans by the State Department of Environmental Conservation (DEC) to open the state’s Marcellus shale region to safe natural gas production. These plans, some four in the making, have been praised by the federal EPA “for its leadership,” helping “set the pace for improving safeguards across the country.” New York should adopt the plans laid out by its DEC and allow them to serve as a model for future natural gas regulations across the country.

America is at an energy policy crossroads. The questions could not be more clear. It is not whether or not we, as a country, should embrace new energy technologies such as fracking, clean coal technology, horizontal drilling, concentrated solar, the new generation of nuclear reactors, offshore wind, or hydrogen technologies. The question now is how to, most effectively and most efficiently, embrace these new technologies and meet both our economic and environmental responsibilities. If we have to adopt strong, enforceable, affordable regulations to ensure energy activities are done safely without compromising the economic potential, then so be it. We have come too far, and we are too close, to be turned around now.

By Jesse Jenkins and Alex Trembath

Just as the history of unconventional natural gas production in America was fundamentally shaped by government support for new technology development, so to will the future of natural gas depend on America’s willingness to make long-term public investments in advanced energy technologies.

A convenient narrative has taken hold concerning the development of unconventional gas extraction from shale formations. It goes like this: Once a marginal and shrinking contributor to domestic primary energy, hydraulic fracturing, or “fracking” has unlocked vast reserves of shale gas and ignited a revolution in North American natural gas production, leading to sharp increases in proven reserves and decreases in gas prices. Technical improvements in fracking technology and the diligence of private sector gas companies led by independent wildcatter George Mitchell brought about this renaissance, guaranteeing a future of lower energy prices, cleaner-burning fuel, and a more energy-secure economy.

It’s a convenient narrative of independent American ingenuity. But like so many similar stories, this popular tale belies the critical partnership of the federal government in the development of the key technologies that enabled today’s shale gas boom.

As an independent investigation by the Breakthrough Institute revealed, the federal government performed the requisite R&D and demonstration that led to massive hydraulic fracturing, directional drilling, and microseismic imaging -- the key component technologies that made the shale revolution possible. The gas industry was languishing in the 1970s, suffering from falling annual production and increased energy prices. Gas companies reached out to the federal government for assistance in mapping unconventional gas resources and developing the technologies needed to extract them. This partnership was sustained through the 1990s, when Texas-based Mitchell Energy experimented with hydraulic fracturing technologies pioneered with federal government assistance and partnered with the Department of Energy to complete its first horizontal drilling installation. By the late 1990s, Mitchell had perfected a cost-effective fracking technique and the shale boom had begun.

It is no small exaggeration to say that government investment in unconventional gas extraction and mapping technologies fundamentally changed the history – and future – of American natural gas markets. Domestic gas prices have plummeted and production has steadily increased, reversing decades of decline. America now possesses a seemingly abundant and relatively clean substitute for polluting, carbon-intensive coal-fired power plants, potentially accelerating a transition to a healthier, lower-carbon electricity system. With increasing pollution controls on coal-fired power plants and lower relative prices for natural gas, all signs point to natural gas eclipsing coal in the electric power sector in the next couple decades. With natural gas prices achieving an unprecedented divergence from global oil prices, the United States may even enhance domestic energy security and reduce exposure to oil markets by substituting gas for oil in certain transportation segments (e.g. heavy duty trucking or fleet vehicles).

Cheap gas simultaneously puts pressure on higher-cost nuclear, wind, and solar energy, however. If cheap gas leads to complacency in the development of sustainable, low-carbon electricity sources, today’s gas boon may become tomorrow’s curse, as natural gas eclipses not only coal, but also cleaner, carbon-free energy sources.

An increasingly dominant role for natural gas in America’s energy mix also exposes the United States to the inherent volatility of natural gas markets. As a gas, methane flows much faster from wells than crude oil. Natural gas wells thus produce and deplete quite rapidly, with roughly 50 percent of a typical well’s lifetime production expended in the first three or four years. This basic dynamic of rapid production and depletion often leads to a boom-bust cycle in markets, as anyone observing North American natural gas markets over the past half century can attest. If North America begins to export large quantities of natural gas, this inherent volatility will only be exacerbated.

The future of natural gas is unlikely to part with this history of boom and bust – unless the United States once again commits to long-term investment in the development of affordable, clean, domestic energy technologies.

Without significant and strategic investments in next-generation solar, wind, nuclear, and electric vehicles, there’s every reason to believe the natural gas revolution will continue and gas will ultimately become an increasingly dominant share of the U.S. energy supply. The result will likely be near-term declines in CO2 and pollutants along with growing reliance on another volatile and increasingly costly fossil energy source. The shale gas “bridge fuel” may well become a bridge to nowhere.

If instead the United States makes smart, sustained investments in clean energy R&D, demonstration, manufacturing, and infrastructure, there’s no reason to believe America can’t continue to unlock even greater supplies of cleaner, cheaper, domestic energy technologies, from next-generation solar to advanced nuclear reactors. In short, America’s energy future, just like its past, depends on our willingness to invest in innovation.

Jesse Jenkins and Alex Trembath are Director and Policy Associate, respectively, with the Breakthrough Institute's Energy and Climate Program.

(These comments are by Rich Kolodziej, president of NGVAmerica.)

Of all the energy challenges facing the U.S., the one that has been the most historically intractable has been our continued dependence on foreign oil.

From 2008 to 2010, the United States spent almost $700 billion on imported petroleum—an expenditure that some expect will increase to $3.3 trillion dollars over the course of the next decade, if left unchecked.

Along with exporting this money, we are also exporting American jobs. Meanwhile, the domestic natural gas resource base is huge, and production keeps increasing. In fact, production is so great and prices so low, that there are now plans to export America’s natural gas.

Since natural gas is an excellent vehicle fuel—a ready substitute for both gasoline and diesel, it is lunacy for public policy to encourage the export of our domestic natural gas while continuing to import petroleum to power our vehicles.

Natural gas vehicles are the “here and now” option. No technological breakthroughs are needed. In fact, there are over 14 million natural gas vehicles on the road worldwide, and, by 2020, NGV Global—the international natural gas vehicle association—forecasts that there will be 65 million.

Unfortunately, the U.S. lags behind much of the world. Thirteen countries have more natural gas vehicles on their roads than the U.S., despite the fact that the U.S. has more vehicles than all countries combined.

But, fortunately, that is changing. The use of natural gas for vehicles is starting to expand in the U.S.—especially in some niche markets. For example, in 2011, almost 40 percent of all trash trucks and 25 percent all transit buses purchased were powered by natural gas. But the demand for natural gas vehicles could accelerate even more if federal public policy encouraged it.

What is needed is reduction in the vehicles’ first cost. Natural gas vehicles currently cost more to buy than gasoline or diesel vehicles, but they cost less to operate. So, the more fuel a vehicle uses, the faster the first cost premium can be paid back.

A payback period of three years is a must for most commercial fleets. For the most fuel intensive fleets—like trash trucks and transit buses—natural gas vehicles are economic today. In other words, they meet that three-year payback threshold.

But, for natural gas vehicles to make a much larger contribution to reducing foreign oil use, vehicles that use less fuel per year must also meet that three-year payback threshold. As demand for NGVs grows, economies of scale and competition are bringing down (and will continue to bring down) that first cost. This is happening—but it is happening slowly.

Some states—including Oklahoma, Louisiana and West Virginia—have passed legislation that helps reduce this first cost premium via incentives. But foreign oil dependence is a national problem and needs federal attention. That’s why the NAT GAS Act (H.R. 1380 and S. 1863) is so critical. Those bills, which have substantial bipartisan support, would provide financial incentives for five years to accelerate growth in the number of natural gas vehicles and displace more foreign oil faster with American natural gas.

It is time America took serious steps toward energy independence, and the fastest and most affordable way to do that is through natural gas. The fact that this fuel also helps reduce urban pollution and greenhouse gases, all the while helping businesses to lower their transportation costs, thus improving economic prosperity, makes the decision that much easier. But Congress still needs to make that decision.

That hissing sound isn’t a gas leak but the pressure building in the debate surrounding natural gas production as the controversy over the safety of fracking has created an uproar in numerous communities and prompted legislation in several states.

In Congress, there’s a controversial effort to create massive federal tax credits – up to $64,000 for each truck - to artificially promote natural gas use in commercial trucks in the U.S. The NAT GAS act also provides federal tax credits up to $100,000 for the installation of natural gas vehicle refueling stations. And for good measure, the NAT GAS act hands out $7,500 tax credits if you buy a natural gas passenger car. Ka-ching $$!

If these were such rational and worthwhile concepts, wouldn’t American (or foreign) businesses be investing in these endeavors? The NAT GAS Act would provide several billion dollars in tax credits only to those who purchase natural gas trucks – not hybrids, electrics, or clean diesel trucks - just natural gas trucks. They say this would just be a short term subsidy – only five years.

However, it’s extremely important to remember that once enacted, it took over 30 years to finally get rid of the federal ethanol subsidy. Once in the books, many subsidies are virtually impossible to remove.

It’s little wonder that federal budget watchdogs and American taxpayers are not particularly supportive of the NAT GAS act, especially when federal, state and local governments are facing record deficits and cutting countless important programs. Not to mention the as yet unclear GHG implications of massive extraction of gas and the leaks of one of the most potent warming gases - methane.

To think that we can or should pour billions of dollars into subsidizing one fuel source -- especially in this economy-- would be a mistake.

Truckers can, and do, already buy natural gas trucks today-- if they want them. Truckers will buy natural gas trucks if it makes sense for their operations. But trying to shove through special interest funding for a fuel that doesn’t work for everyone is doomed for failure at the outset. Let natural gas compete on its warts and merits along with everyone else.

During a recent press conference, former U.S. Transportation Secretary Norm Mineta stated that policymakers should employ technology neutral policies in implementing the new CAFE regulations proposed by President Obama.

Former Secretary Mineta said: “State and federal public officials should resist the temptation to pick winners and losers, to let politics and fads enter the debate, or to engage in centralized planning in a highly complex industry. Market acceptance is also critical to defining the best technology or portfolio of technologies necessary to reach the targets set by government.”

He’s absolutely correct. We just ended the federal ethanol subsidies but now a new subsidy looms with the NAT GAS act.

There is a reason today that diesel powers the overwhelming majority of the nation's commercial trucking, school and transit bus fleets. Diesel's unmatched combination of availability, safety, energy efficiency and economical operation and performance have made it the technology of choice.

In addition, when it comes to conventional emissions of particulate matter and nitrogen oxides, 2011 diesel engines have leveled the playing field with natural gas. Clean diesel is now near zero emissions - and is meeting the same environmental standards as natural gas technology.

On top of this, the new generation of 2011 clean diesel trucks is gaining four to six percent improvement in fuel efficiency over previous year's models. Today, ultra-low sulfur clean diesel fuel is available nationwide

In the future, the U.S. transportation system will very likely rely on a combination of gasoline, clean diesel, electric, hybrid and natural gas energy sources. The American people and the market place should be able to decide for themselves which fuel source powers their automobiles and trucks. They should not be hindered by federal mandates and forced to pay special interest subsidies that favors just one energy source.

As Cliff Rothenstein, my colleague at K&L Gates, told me, the tremors caused from the recent earthquakes in Youngstown, Ohio, were felt as far away as Capitol Hill and at the Environmental Protection Agency.

Natural gas is a comparatively cleaner and abundant fuel source, offering significant potential for achieving U.S. energy independence, reducing greenhouse gas emissions and creating jobs, especially in rural America. Pennsylvania's Marcellus Shale region has become ground zero for this debate. According to some estimates, this region alone could produce more than 13 billion cubic feet of natural gas a day, creating 200,000 jobs and generating $1 billion annually in state and local tax revenues.

But this success will depend on the ability to navigate the political fault lines. While congressional legislation regulating hydraulic fracturing is unlikely this year, don't make the mistake of assuming that nothing will happen in Washington, DC. Most of the action will take place inside the bureaucracy. EPA's study evaluating the impacts of hydraulic fracturing is expected later this year and may be a regulatory game changer. Throughout the year, EPA will also continue its efforts to develop effluent guidelines for hydraulic fracturing, continue its review of a petition from the environmental community on whether to regulate oil and gas wastes as hazardous, and initiate chemical disclosure requirements under the Toxic Substances Control Act. EPA will have much to say on the future of fracking and therefore the future of shale gas.

The final federal regulatory structure for hydraulic fracturing will certainly not be settled this year, but the foundation may begin to take shape -- so it behooves everyone with a stake to participate actively in the debate.

The Presidential election cycle allows us to pin down current and aspiring politicians regarding their positions on the important issues facing our country. While it’s easy to get caught up in the highly divisive and mostly irrelevant social issues that those on the fringes of political ideology stake their reputations, it is important to discuss issues of real substance as well. In President Obama’s effort to establish his record as a job creator, there is one issue that he appears to have flipped on heading toward November, and the economy could benefit if his new stance is consistent.

A recent White House jobs report included a section titled “America’s Natural Resource Boom” intimating that the President supported development of natural gas resources in the Marcellus shale. The shale gas boom has already created tens of thousands of ancillary jobs in industries ranging from sand mining to steel pipe manufacturing, and it appears the Obama re-election campaign will try to capitalize on these jobs and use the shale gas boom to buffer the President resume as a jobs creator.

Until now, the Administration has remained skeptical of the drilling technique used to extract natural gas, buying into environmentalist rabble-rousing regarding ground water contamination. This isn’t to say it’s not important to keep water supplies safe, but to date there hasn’t been a single clear case of ground water contamination resulting from natural gas drilling or fluid disposal.

Additionally, the divisive rhetoric being thrown at companies involved in gas production is hardly helpful as the industry has a vested interest in maintaining safe and secure drill sites to prevent accidents and potentially costly litigation. Unfortunately, the pro-development and anti-drilling factions are entrenched in their positions and the result is continued uncertainty regarding the future of natural gas production from shale formations.

Should the President step forward as a leader on this issue, bringing all parties to the table to discuss the best steps forward to ensure continued investment in shale gas with reasonable regulatory oversight, that would reassure the industry and the public that he truly embraces America’s natural resource boom as an economic generator. There is precedent for this kind of leadership from the current head of state.

When Harvard Professor Henry Louis Gates Jr. was arrested early in Obama’s term, the President invited him and the arresting officer to a beer summit at the White House to bury the hatchet. Why not pull a similar move on an issue that is infinitely more important for the future of the country? Instead, key agencies have been responsible for establishing the administration stance on the issue, and the result has been costly delays and regulatory confusion.

The Wall Street Journal has called for Obama to fire Interior Secretary Kenneth Salazar and EPA Administrator Lisa P. Jackson – whose agencies are imposing roadblocks to natural gas development – to prove his commitment to the resource boom. While such actions may be a little extreme, it is imperative that department heads align their agencies’ actions with the policies of the President and Congress, as well as the public interest.

The very public platform upon which campaigns are carried out – including prime time television debates, massive advertising efforts, and direct contact with voters – offers voters and the media an opportunity to make the President lay out his plans for shale gas development. Will he send a directive to EPA mandating the timely creation of drilling rules, or leave regulation to the states? What are his targets for production, domestic gas prices, exports, etc.? To date, the President and his advisors have projected a mixed message regarding the future of fossil fuels. Drilling companies, state regulators, and agency officials are looking for clarity on these issues, and the upcoming election offers a great opportunity to find that clarity.

The growing emergence of natural gas as a major energy source has nowhere near reached its peak. A few years ago, most said the U.S. was doomed to be a net fuel importer. In recent years, horizontal drilling and hydraulic fracturing, pioneered by America’s independent producers, have unleashed reserves of natural gas that have astounded economists and government officials alike. As for the effect on the sluggish economy, natural gas development will indubitably leave job creation and economic rebirth in its wake.

The Obama administration is either finally catching on or jumping on the electoral bandwagon. In the most recent White House report on jobs, the administration advocates for an “all-in” energy strategy, citing the benefits of natural gas and particularly focusing on the investment that development attracts to gas-rich regions.

IPAA certainly agrees – but this refined stance may be coming from the Obama campaign rather than the Obama administration. After all, the Wall Street Journal noted this week that opposing hydraulic fracturing would be particularly unpopular in swing states like Pennsylvania and Ohio, where natural gas development has spurred industrial buildup in formerly withering rust belt towns.

Furthermore, as President Obama touts the benefits of natural gas, his administration has embarked upon a double-flanked assault on the oil and natural gas industry, led by the Environmental Protection Agency and the Interior Department. These federal agencies have sought to regulate hydraulic fracturing and instill unfounded fear about its side-effects and management at every turn.

The states are well-equipped to handle the environmental issues surrounding development. After all, they have been regulating hydraulic fracturing for decades. More and more states have been utilizing FracFocus, the chemical registry website on which companies voluntarily disclose their hydraulic fracturing fluids to the public. The state regulatory systems can deal with each state’s different geological and environmental complexities. Attempting to operate a federal regulatory regime out of Washington, with limited funds and regulators, would cause confusion and cost many jobs.

America’s natural gas industry has quite a future – as long as it’s not impeded by politically motivated forces. The administration must make its campaign rhetoric a reality and call off its massive federal overreach. If states remain empowered to continue their responsible regulation of hydraulic fracturing, natural gas will certainly power America’s future.

Though the natural gas bonanza in the U.S. has the potential to create jobs and reduce air and climate pollution, there are serious questions about the environmental and public health impacts of natural gas drilling. Environmental Defense Fund (EDF) believes natural gas could be a game changer—but only if it can be extracted safely.

Get the rules right to protect communities, water supplies and the environment
As the U.S. moves to shut down dirty coal plants, natural gas is an important and growing part of our nation’s energy portfolio. Rapid regulatory reform is necessary to ensure that shale gas reserves are tapped safely, so that natural gas can be a trusted alternative to coal and oil and a reliable on-demand backup for renewables, including:

-Mandating disclosure of hydraulic fracturing chemicals;

-Modernizing rules for well construction and operation and improve enforcement;

-Strengthening state regulations for reducing risks from waste and water management;

-Improving state regulations for lessening harm to local and regional air quality; and

-Piloting market-based mitigation to reduce community, landscape and habitat impacts.

Get the science right to reduce climate pollution
Methane, the main ingredient of natural gas, is a greenhouse pollutant many times more potent than carbon dioxide. Although natural gas burns cleaner than coal, recent studies have raised questions about whether the venting and leakage of methane during the production and distribution of natural gas undermines its potential benefits. Rigorous scientific data about leakage rates is needed to design and adopt policies that yield measurable reductions in climate and air pollution. Aside from its relevance in establishing the GHG value of substituting natural gas for coal in power generation, reducing methane emissions is one of the most immediate, effective and cost-effective things we can do to reduce peak warming potential.

Engage industry to improve production practices
Emerging, progressive leaders within the natural gas industry understand that excellent environmental performance is a critical path to resource development. Improved performance is clearly in industry’s bottom-line interest as it will reduce the amount of wasted product lost to leaks, decrease regulatory and financial risk and defuse community backlash by being responsive to their concerns.

Domestic natural gas holds the potential to yield unsurpassed economic and energy benefits for the United States. Fully developing the natural gas resources from the shale formations across the country has the potential to help reduce our dependence of foreign sources of energy and boost our economic growth, while spurring an American manufacturing renaissance.

These potential economic and energy benefits have no greater potential than in the domestic steel industry. The industry consumes large amounts of natural gas, and will benefit from the increased supply resulting from shale production that keeps gas both reliable and available at a low cost. Natural gas production is also an important market, as steel pipe and tube is integral to both the gathering and transmission of this resource. Producing more natural gas will help maximize industry market opportunities due to the increased demand for steel, which in turn generates more jobs benefiting workers and the overall U.S. economy.

New natural gas supply and cleaner technologies are enabling a manufacturing renaissance in America. With affordably-priced energy, U.S. manufacturers are able to develop a competitive advantage over foreign manufacturers. And increasing U.S. manufacturing leads to more demand for steel being sold domestically to American manufacturers. It will also mean the construction of new factories and utility plants, which will ultimately serve as customers for the steel industry.

Natural gas policy must continue to be sensitive to the direct effects on the U.S. manufacturing sector. The supply and availability of natural gas must be allowed to grow as projected in order to satisfy increasing demand from domestic manufacturers. This includes access issues and having regulatory certainty and infrastructure development that allows for the development of natural gas. Most importantly, the cost for natural gas must remain at a competitive advantage because we are clearly seeing that the current low cost and availability are driving this remarkable manufacturing renaissance.

The facts are clear: natural gas holds great potential for our nation’s economy, energy security and job creation. Numerous recent studies serve as evidence of the opportunities. According to a report conducted by The Pennsylvania State University, Marcellus Shale development could create 76,000 jobs in Pennsylvania, 20,000 jobs in New York and 17,000 jobs in West Virginia by 2015. In addition, a study by the Ohio Oil & Gas Energy Education Program notes that development of Ohio’s Utica Shale could support more than 204,000 jobs in just four years (IHS Global Insight).

Quite simply, the biggest threat to the U.S. realizing these benefits is overly aggressive and misplaced federal regulations. We agree that it is necessary to maximize the potential benefit while balancing impact on the environment. However, environmental regulations on shale gas drilling are best developed and implemented at the state, rather than federal, level where there is better flexibility to deal with local issues. If federal regulators in a multitude of agencies are permitted to undertake massive regulatory efforts on natural gas production, the competitive advantage for low cost and available energy will disappear. So too will the potential for an American manufacturing renaissance.

Where is natural gas going?

That is a very wide ranging question at present and will entail wide ranging answers in the short, medium and long runs.

As an economist I see very large differences between the costs of gas in East Asia, one of the fastest growing places on the planet and in the US. There are also large differences in the price of gas here and in the EU, but the EU is not exactly growing quickly and it is not expected to for some years now.

We have massive reserves of shale gas, coal bed methane gas, and other unconventional gas reserves that are becoming profitable or are now profitable to explore and produce.

We would become a major exporter of natural gas to the world. The market I would focus on is East Asia. Its demand for gas is increasing rapidly. Its needs for gas may be increasing for “unusual reasons” as well, such as the reactions that may occur toward nuclear plants in Japan in the future. The only real alternative for Japan for electricity production on a very large scale and for base-load generation in the medium term will be gas. Almost all of their gas is imported. The US could be part of that increase in imports. Qatar, Australia and others would be competitors in these markets, but we could be a very big player if:

1. Fracking is allowed on much larger scales

2. The political and environmental debates on fracking in some states.

3. We build natural gas liquefaction plants, especially on the west coast to develop the Asian markets at first. Then, or contemporaneously, on the east coast to develop European markets. But Asia would be the really big play.

4. We expand and improve our natural gas pipeline systems to get the “stranded gas” in shale fields, etc. to these export facilities and move the gas overseas in LNG tankers.

Markets for natural gas liquids also seem to be looking good for the future in both the US and in many places overseas. . There may also be a growing market for GTL or gas-to-liquids. Right now Qatar has the largest part of this market. The technology is complex, but the idea is simple: producing liquid fuels for transport, etc from natural gas. Then there is the huge potential for methanol in transport. One of the major feed-stocks for methanol is natural gas. Then there is the potential for the greater development of CNG (compressed natural gas) as a transport fuel in the future. Then there is the chance for even greater use of natural gas in electricity production. With how cheap natural gas could be in this country there could be a much faster growth of these direct and indirect transport fuels production and in the production of electricity by gas.

As we develop our gigantic natural gas resources there will likely also be technological changes and choices that will lead to some changes in industrial fuel choices and feed-stock choices may change form other sources to natural gas.

The future for natural gas is so far looking very good. That is, if the US and the many states were the unconventional gas is found allow the gas to be taken out -- and if the gas is taken out safely and in an environmentally sound manner. If there are any real or politically manufactured disasters in shale gas and other unconventional production these could be real bumps in the road. It behooves the energy companies to make sure the development of their production methods, transport methods and more are done properly. This is for their good and for the good of the US economy. One big disaster and the industry could have some real problems going forward.

The US Government might also help out the country by focusing more on invention and innovation in the uses of natural gas. The national laboratories, ARPA-E, etc could be very much involved with this. DOD could focus a bit more on natural gas for fuels, especially for domestic training, domestic bases, and more.

Fracking and the extraction of fuels and feedstock from shale and other unconventional places are not exactly new. As technologies improve and as the markets grow this could be one of the biggest energy plays for companies and countries in the future. However, technologies and costs need to constantly change to keep up with market shifts. The US will not be the only country getting out shale and other unconventional gas resources. It is vital that we become a fast mover in the early days of the market in order to not get caught back when the rest of the competition catches up.

It is also important that the US in its laboratories gets to the cutting edge of new natural gas technologies in exploration, production, transport and use so we become a leader, and not a follower. There are many levels to natural gas markets and markets and technologies connected with them. For example, natural gas is a feedstock into many industrial processes. We could as a country exploit those ideas and introduce new ones.

The new natural gas future could also move electricity production away from such a large percentage in coal. One might expect the relative price of coal in the US to start increasing over time given that China and other major coal users are likely to import more from us. New environmental regulations could also push coal out and leave more room for natural gas electricity generation.

The natural gas and associated industries in the US are looking at a potentially massive gold mine of ideas, new markets and more. One would hope that they don’t’ fritter this away because the opportunities in the short run may prove to be too good to think about the long term decisions and changes that will need to be made to survive and prosper as world gas markets also change over time—and they will.

The benefits of clean-burning natural gas are well known, and even the White House recently acknowledged that natural gas production has resulted in increased manufacturing jobs and decreased energy prices for consumers. The huge natural gas success story over the last few years is the result of producers innovating and increasing supply in response to market signals. The surge in production over the last few years, even as the government has actively tried to block the oil and natural gas industry, is a testament to the resiliency of producers and the effectiveness of the market.

However, some are now calling for the government to use its regulatory muscle to slow natural gas exports. In a recent letter, Congressman Ed Markey, who has been quick to find any angle to slow natural gas development, seems to urge Energy Secretary Chu to take an active role in determining the best use of natural gas resources. Rather than relying on a market properly regulated by a government limited in its jurisdiction, the implication is that the government knows better than producers responding to market signals, and should interfere to ensure prices to consumers remain low.

Setting aside the concern about consumer prices from the co-sponsor of cap-and-trade legislation that would have caused electricity prices to “necessarily skyrocket,” recent history has already shown how natural gas producers have successfully increased supply and lowered prices substantially while reducing environmental impact per unit of production. That success demonstrates that producers would also respond favorably to the added demand created by natural gas exports, while yielding additional benefits of American jobs, economic growth, and an improved trade balance.

Western natural gas companies are ready and able to increase American production of natural gas further. They would be developing even more today if not stymied by the federal government on several fronts, particularly on public lands where the government’s hand is heaviest. The government should encourage the natural gas job and economic growth engine by stemming the flow of counterproductive regulations and allowing market solutions to flourish.

Bottom line: increased focus on natural gas displaces renewables from the market. Natural gas is mainly attractive from a price perspective - and that can't be counted on long-term. Its environmental emissions benefits aren't strong enough to overcome concerns about the sustainability of gas extraction.
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In the decade that I've worked on energy policy, I've never witnessed the kind of genuine, grassroots concerns about the impacts of fracking on water and the environment. We need to acknowledge that citizens' concerns are based on the real threats certain aspects of fracking present - and a continued mistrust of the industry doesn't help. That's why a strong federal response is needed, which includes full and public disclosure of all fracking fluids; repeal of the recent, special exemptions to federal clean water laws; requirement of seismic assessments (to deal with the rash of fracking-induced earthquakes in several geological formations), federal regulation of above-ground water contamination from fracking fluid removal and disposal; well integrity standards (including verification of nearby abandoned well integrity); and New Source Performance Standards for fracking well emissions.

As with any fossil fuel, the current market price radically undervalues the financial risks fracking poses to our water and environment. And we must also acknowledge that natural gas owes its current popularity primarily because of its current low and stable price, with the environmental emissions benefits of the fuel a distant second. We have seen North America's natural gas markets lurch from oversupply (during Enron's ill-fated 90s promotion) to staggering price increases, to 2003 calls from Alan Greenspan to globalize natural gas prices by promoting LNG imports, to today's price-stabilizing Marcellus shale "revolution" that now calls for LNG exports! Those who boldly predict a permanent era of cheap gas are wrong. We're already seeing market forces attempt to address these low prices with the promotion of LNG exports; and plans to expand domestic demand in the industrial, transportation and power sectors (through switching coal generation to natgas).

Until that price rise happens, the current natural gas fad serves to depress renewable energy markets. Cheap gas pushes out wind, solar and even investments in efficiency. The longer we allow natural gas' mirage to district us from creating distributed, renewable energy demand markets in the US (through feed-in tariffs), the further we fall behind the cleantech race. The future of America's economy will not be based on fossil fuels.

On December 4, Congressman Edward Markey of Massachusetts wrote a letter to Energy Secretary Steven Chu questioning the wisdom of exporting large quantities of U.S. natural gas. His concerns were wide-ranging and included the potential price impacts of exports and the residual impact of higher gas prices on electricity generation and manufacturing, the potential for more volatile natural gas prices, and the environmental impact of raising the cost of gas, which he characterized as a “bridge” fuel from coal to renewable energy.

The question of exporting energy resources, whether crude or refined, from the United States is politically sensitive. Like Congressmen Markey, many consumers argue that exporting a resource or product that can be consumed domestically unnecessarily raises prices and increases price volatility. Manufacturers maintain that sending a vital feedstock overseas rather than retaining it domestically is the equivalent of directly exporting U.S. jobs: a charge that has particular resonance in the current climate of high unemployment.

The reality is far more complex. The Energy Security Initiative at Brookings this week released an interim report examining the feasibility of large-scale U.S. natural gas exports. The report shows that there are a range of factors – political, economic, and technical – that will have an impact on the feasibility of natural gas exports. Being an interim report, it has not yet come to any conclusions on the merits of natural gas exports. But that is precisely the point: the issue is too nuanced for a brief analysis. The impacts of exports on domestic gas prices, industry and manufacturing, and gas-price volatility outlined by Congressman Markey and others require more examination.

The charge that exports will result in a spike in prices is likely to be an exaggeration. A report often cited by opponents of natural gas exports, compiled by Navigant Consulting, states that exporting 2 bcf/day of gas would result in a $0.35 (11 percent) increase in natural gas prices by 2015. However, the model is based on a static supply curve, which means that it does not incorporate increased investment in production as a result of higher natural gas prices, and therefore exaggerates the domestic price response. Navigant itself acknowledges in its report that it views the price outcomes modeled in its analysis as “establishing the upper range of impacts that exports […] might have on natural gas prices.” Other consultancies have published reports on the quantitative impacts of U.S. natural gas exports using dynamic supply curves, in which investment in production increases with higher prices. These found less dramatic increases in natural gas prices. Deloitte, a consultancy, found that by 2035, exporting 6 bcf/day will result in, on average, a $0.12 (1.7 percent) increase in natural gas prices. ICF International, another consultancy, found that exports of 6 bcf/day would result in a $0.64 (11 percent) increase in price by 2035.

Congressman Markey points to the oil market as a cautionary tale, saying that the U.S. was once a major oil exporter, but now finds itself as the world’s largest importer. This is a misleading comparison: unlike the global oil market, which converges around a single price, the natural gas market is still very segmented, with regional gas prices dependent on a range of factors including pipeline and storage availability, and contract structure. Unlike oil, the export of liquefied natural gas (LNG), is limited by liquefaction capacity, raising the economic and transaction costs of exports and giving domestic customers a buffer against direct competition with international consumers.

It is also important to note that any increase in natural gas prices as a result of exports is likely to vary significantly across the country. As in the international market, domestic natural gas prices vary by location, often due to the proximity to natural gas resources. According to the Deloitte study, New England, which traditionally has some of the highest natural gas prices in the country, will likely see only a minimal increase in response because of its proximity to the Marcellus Shale with its giant reserves of unconventional gas.

The uncertainty surrounding the pricing implications of exports also applies to the potential impact on industrial production. The American Chemistry Council, a trade association that represents many of the U.S.’s largest industrial companies and manufacturers, is inconclusive on the impact of gas exports simply acknowledging that “the economic effects arising from the development of shale gas for … possible exports could be examined.” If price-impact projections of exports noted above are accurate, U.S. industry and manufacturers will likely remain competitive with foreign competitors, many of which depend on higher-cost oil as an industrial feedstock. Moreover, exports of dry gas would have minimal impact on the availability of natural gas liquids, such as ethane, which are the principal components of a number of manufactured goods.

The final argument made by many opponents to natural gas exports contends that exporting natural gas will result in greater volatility in the domestic natural gas market. The merits of this argument are unclear. There has been little quantitative analysis of the issue. In an article last year, Michael Levi, an energy expert at the Council on Foreign Relations, suggested that increased exports could lead to an increase in domestic price volatility. Dr Levi suggested that an international price shock could provide an opportunity for exporters to export natural gas at the expense of domestic consumers; however, this argument ignores the fact that export capacity is, and will likely continue to be, capped. Of the country’s potential total export capacity, only a portion of it will be available for spot market consumption (with the rest being locked into long-term contracts), minimizing the impact on domestic prices. (In fairness to Dr. Levi, he also concluded that the impact on volatility is uncertain.) Opponents of natural gas exports should also consider not only the domestic price but also the price of imported goods from natural gas. If manufacturers in Asia or Europe are paying less for energy and electricity to produce U.S.-bound goods, the benefits accrue to the U.S. consumer.

The debate on the prospect of natural gas exports from the United States will only become louder this year. In addition to Cheniere Energy’s export facility in Louisiana, a number of other companies have received preliminary approval from the Department of Energy to export gas to free-trade agreement countries (Cheniere is currently the only company allowed to export gas to non-free-trade-agreement countries). As the debate continues, the full range of factors needs to be considered; too simplistic an analysis may lead to decisions based on politics rather than economics, and that end up being costly to U.S. consumers in the long-run.

Over the next few years, we think that the growth of natural gas for electricity generation is likely to be especially notable, producing large economic and health benefits for the country. In this area, market and government policies seem to be complementing one another.

On the market side, thanks to an abundant new domestic supplies from shale gas reserves, North American gas prices are providing a historic opportunity to replace an aging, coal-dependent electric fleet with affordable and flexible natural gas units.

On the government side, legacy coal plants face new and proposed environmental regulations for air as well as water emissions, with the EPA’s recent Mercury and Air Toxics Standards (MATS) and Cross State Air Pollution Rule (CSAPR) having been finalized in 2011. These environmental rules along with additional proposals could cost some coal-fired power plants $2,000 per kilowatt (KW) to comply. But why spend $2,000/KW on an aging unit when a new natural gas combined-cycle can be built for $1,000/KW?

Capital costs aside, natural gas combined cycles are already more efficient in converting fuel to electricity (50% efficiency vs. 30%) and cheaper to operate than many coal units. Based on a recent natural gas spot price of approximately $3.00/MMBTU, a combined cycle plant can produce electricity for about $22 Megawatt Hour (Mwh). An aging coal plant with a delivered coal cost of $90/ton produces electricity at almost $40/Mwh. The gap becomes even greater when you add the costs for emissions allowances (SO2, NOx), and operations and maintenance. With significant excess capacity available at existing gas-fired power plants, in 2012 generators, grid operators and public utility commissions now have the ability to lock in today’s low fuel prices and phase out the most uneconomic coal-fired plants.

An expansion of gas-fired power plants, which can cycle output up and down more quickly and efficiently than legacy coal (or nuclear) plants, will help accommodate the integration of intermittent renewable power sources, such as solar and wind. Flexible gas-fired units can also accommodate greater use of demand-side resources (eg, price sensitive electricity consumption) underpinned by smart grid investments.

In short, thanks to the remarkable new production we have seen from America’s shale energy plays, gas-fired power is fast becoming the lowest cost and cleanest way to generate electricity in the U.S. And it will help the country more rapidly transition its power sector to a sustainable lower carbon future.

In making decisions on natural gas issues in 2012, it is important that the president and Congress keep in mind the strategic importance of natural gas to America’s energy future.

The American natural gas resource base is far greater than thought even a few years ago. Development of this resource base already is enhancing the nation’s energy security and improving air quality. Abundant natural gas is fueling America’s economic recovery, supporting industrial expansion, creating American jobs, generating tax and other revenue for the local, state and federal government and benefiting homeowners, businesses and other consumers of natural gas.

We, as an industry, understand natural gas’ importance to our nation’s future, and we are committed to its safe development and transportation. An open public dialogue and stakeholder engagement is vital to securing broad-based support for natural gas supply and infrastructure development, as are state, local and federal policies that balance appropriately the need for increased natural gas supply with concerns over the environment and other impacts.

We hope that President Obama and Congress continue to support the use of natural gas by letting markets, and not mandates, dictate the best use of our nation’s diverse energy resources. Some fear the shale gas revolution will lead to rampant natural gas exports and higher U.S. natural gas prices. Multiple experts, however, point to this as an unwarranted overreaction. The LNG export market is likely to remain modest because the high capital costs to develop LNG export facilities and related infrastructure plus the expense to liquefy and transport natural gas in ocean-going tankers will constrain the volume of LNG exports.

Still, at any level, LNG exports could benefit the nation. At a time when the U.S. has been importing increasing amounts of goods and materials from abroad, LNG exports provide an opportunity to help whittle away the U.S.’s huge trade deficit. LNG exports also would be consistent with President Obama’s initiative announced in December 2010 to promote exports of clean energy.

America’s natural gas resource base is enormous. A National Petroleum Council report released in autumn 2011 showed that even if natural gas demand grew to the highest potential levels – which would include vehicle conversions to natural gas, exports to Mexico and LNG exports on top of dynamic gas growth in the power-generation and industrial sectors – supply would be plentiful to meet demand. Having a dynamic and diverse market gives producers the confidence they need to invest. And that investment in safe and prudent domestic natural gas development, with all the benefits it will provide on economic, energy security and air quality fronts, is good news for America.

Last week, the White House largely answered this question by releasing a briefing paper highlighting the significant benefits to our economy from responsible natural gas production. Among those benefits are lower consumer costs, reduced air emissions and more American jobs.

A recent IHS Global Insight study found that by 2015, shale gas alone will support nearly 870,000 American jobs, and by 2035, this number will grow to 1.6 million. Shale gas will also generate more than $940 billion in federal, state and local tax and royalty revenues over the next 25 years. What’s more, thanks to lower natural gas prices, U.S. households are projected to save an average of $926 annually in disposable income over the next three years. By 2035, these savings are expected to increase to more than $2,000 per household.

In the White House briefing paper, the Administration attributed much of the rebound in U.S. manufacturing to the boom in domestic natural gas production, saying lower prices thanks to new production technologies have led to cheaper industrial inputs and indirect employment in related industries. Translation? More competitive U.S. workers and companies.

I do believe that our nation should make far greater use of this homegrown energy source—right here in America. For the environment, natural gas is a cleaner source of energy than other widely-used fuels. With greater use of this domestic energy, America can advance its economic, energy and environmental interests together. Used for power generation, natural gas emits no mercury and virtually no sulfur dioxide or particulate matter into the air. And there is enough natural gas in America to fuel our nation’s energy needs for generations to come.

The natural gas community shares the Obama administration’s commitment to ensuring natural gas continues to be produced responsibly. And significant oversight is in place today with state regulators taking the lead. Our nation does not have to choose between economic growth and environmental stewardship. Thanks in no small part to our nation’s vast abundance of natural gas, we can indeed have both.

The astonishing boom in American shale gas production continues to rock the energy world. Perceptions of fuel abundance and scarcity, projection of the U.S. energy mix, forecasts of the price environment for renewables—all of these are now in flux thanks to recent breakthroughs in gas production.

And yet, for all of these repercussions of the gas glut, none is quite so dizzying as the sudden recent pivot of discussion from anxiety about natural gas imports to debates about whether to export huge quantities of the fuel—something that requires approvals from the Department of Energy.

On this topic, a few isolated voices—like the Michael Levi of the Council on Foreign Relations—have raised questions about the standard argument that the U.S. should clearly export what is suddenly cheap here to European and Asian countries where prices are much higher. Leaving aside basic gas-drilling safety issues, he wonders if exporting will lead to greater price volatility. However, for the most part commentators—such as Charles Blanchard of Bloomberg New Energy Finance—have brushed aside uncertainties and tended to embrace the conventional free trader’s view that prices on the global energy market will decide things and that everybody gains from free exports and imports.

All of which is in theory sensible. However, I want to add two considerations to the discussion—one about uncertainty and the other about America’s industrial interests. The point comes in the spirit of Rep. Ed Markey’s recent letter to Energy Sec. Steve Chu. In that letter, Markey asks Chu 11 basic questions about the possible implementation and impacts of natural gas exportation, ranging from queries about the procedures for issuing LNG terminal permits to questions about the price impacts of exporting. So basic are Markey’s questions (which leave aside broader unresolved questions about the environmental safety of shale gas extraction, governments’ future regulatory stances, and even about the actual yield of nat gas wells) that they underscore how early it is in the latest gas boom and how little is really known about the “shale gale.” On this front, the excellent and generally favorable assessment of the prospects of LNG exports recently released by my Brookings colleague Charles Ebinger and his team is noteworthy for how frequently it acknowledges major uncertainties surrounding such basic issues as the availability of the resource, its production sustainability, its future regulation, pipeline and storage capacity, equipment availability, and future market dynamics. The bottom line, in my view, is that proponents of exporting are rushing forward in an atmosphere of major uncertainty. And I think that’s not wise.

But beyond that, I would like to add another perspective that flows from our emphasis at the Metropolitan Policy Program on the long-run need to restructure the U.S. economy and move toward higher-value production and export activities.

Along these lines, I would place the overall wellbeing of higher-order U.S. industrial production at the top of my priorities list, and consider the benefits of cheap natural gas to the growth and health of the U.S. economy. To be sure, having companies like Cheniere Energy liquefy and export natural gas to cash in on the spread between low U.S. prices and higher European and Asian ones would allow U.S. producers to reap a bonanza and help cut into the U.S. trade deficit. However, it bears recalling that large-scale exports of natural gas could tighten domestic supply and raise prices.

Higher prices for consumers, as Michael Levi notes, represent one possible economic drag on the nation’s recovery associated with exporting gas. But so do higher costs to U.S. industrial producers. Today, nearly 45 percent of U.S. natural gas consumption flows to industrial concerns that use it to produce chemicals, fertilizers, metal, plastics, paper, refinery products, glass, and food products. In that fashion, cheap natural gas is a critical input to numerous production and export industries in America. And so maintaining low gas prices should stand now as a major strategic and competitive interest of the U.S. Already the Department of Commerce has observed that “a boom in natural has production has supported manufacturing” by helping to reduce energy costs for industrial producers. For its part, PricewaterhouseCoopers last month deemed shale gas a driver of a “renaissance in U.S. manufacturing.” So what does this look like on the ground? To pick just a few examples, Bayer MaterialScience is exploring opening an ethane cracker in West Virginia to process the shale gas from the Marcellus formation while Dow Chemical and Shell Chemical have announced plans to expand and open, respectively, crackers on the Gulf Coast. Similarly, Nucor is investing $750 million in an iron plant that would depend on a low-cost gas supply agreement. More broadly, the American Chemistry Society recently noted the potential for sizable job and output benefits in the chemical industry associated with the shale gas revolution. The trade association projects that a 25 percent increase in the supply of ethane in the U.S. could result in 17,000 new direct jobs in the chemical industry. All of which suggests that cheap natural gas represents an important point of competitive advantage for desirable, higher-value industries and the promotion of investment in U.S. industry.

My tentative conclusion: It would be premature for DOE to conclude that the U.S. now has so much gas that it can afford to export it overseas without risking domestic price dislocations. At least for now, gas should be husbanded as a low-cost input to industrial production as well as held as a high-potential, cleaner substitute fuel for use in the electric power sector to displace coal in generating plants and in the transportation sector to displace oil. No, this is not to say the nation should bar natural has exports either now or later, but it is to say that there’s a lot that needs thinking through before a precipitous decision is made to lock in major exportation facilities and contracts. In short, for the present moment gas should be exported not in its raw form but only as a low-cost input to higher-value production and job creation by American companies.

Such are the sort of considerations that must increasingly inform the energy decisions of a nation that needs to—all at once—reduce carbon emissions and more actively attend to the emergence of a higher-value production economy.

It’s ironic that less than a decade ago, our country was so concerned about dwindling natural gas supplies that we built new LNG import terminals to secure a supply from overseas. Fast forward to today when newly discovered shale formations around the country, and new technology, are giving us the chance to access an amazing domestic supply of natural gas, and are simultaneously presenting us with a unique opportunity to revitalize our domestic energy industry, and stimulate growth for decades to come. It’s ironic because as this question outlines, we can’t seem to completely embrace the opportunity.

Despite the positive outlook for natural gas in the United States (see below), the federal government is moving to hinder the development of this vital resource through unreasonable regulations and red tape. The EPA and other federal agencies are proposing and exploring new regulations that could thwart gas development projects and needed infrastructure through stringent licensing requirements and other barriers. These steps will severely limit how America can capitalize on this valuable resource.

Even the White House, which has presented conflicting views on shale and natural gas, released a report last Wednesday acknowledging that our natural gas reserves are key to revitalizing our domestic manufacturing sector. Indeed, these reserves have the potential to create a manufacturing boom that can have a tremendous impact on the US economy. The natural gas industry supports more than 2.8 million U.S. jobs TODAY and contributes $385 billion annually to the national economy. And unlike many sectors, these jobs actually represent a 17% growth over the past several years.

When we make the most of our natural resources, we can make a meaningful difference in the amount consumers and businesses pay for energy. At a time when the is economy struggling and world oil is turning political again, we need all the domestic energy we can get. This story from the Associated Press highlights how the boomin domestic natural gas has been a blessing to homeowners who use it for heat and appliances. And we need to take advantage of it before others do. International investors are jumping at the chance to invest in our natural gas reserves. The U.S. shale could revolutionize domestic energy production, revitalize our economy, and shield us from the geopolitical volatility beyond our borders. This could truly be a game changer.

With the global explosion of unconventional gas production, reports of the death of the fossil fuel economy are, to paraphrase Mark Twain, greatly exaggerated. Gas may not stay at its current extraordinarily low price, but the market landscape seems to be altered for quite some time.

The explosion of low-cost shale gas reserves is a two-edged climate sword. Generating electricity with gas is 30 to 50 percent less carbon-intensive than coal when leaks and releases of methane, the main component of natural gas, are accounted for. (For other uses like vehicle fuel, we haven’t seen any evidence that gas is better than other fossil fuels, and if vehicles leak even a small amount, natural gas could be worse than gasoline). But even for electricity, gas is still a high-carbon fuel: replacing all coal-fired generation with gas would get us only part of the way to the 80 percent CO2 reduction needed by mid-century. Moreover, new gas plants are more likely to displace new zero-carbon generation sources than to displace existing cheap coal plants. Carbon dioxide emitted to the atmosphere stays there, causing warming, for many centuries. By some estimates, the amount of CO2 already emitted has committed the world to warming in excess of 2 degrees Celsius, which is well outside human experience; to hold the increase to 3-4 degrees might well require zeroing out carbon emissions by mid-century.

It would be very nice if we could supply most energy demand with wind, solar and energy efficiency. But there are a lot of real reasons to doubt that these technologies can achieve the necessary scope and scale to displace fossil fuels in the next thirty years. Serious challenges lie ahead for renewables, notably their low output, affordable energy storage, large land area requirements, and the need for back them up with fossil power such as gas when they are naturally not available. Biofuels in use and development today won’t do it because the large amount of new energy crops they require cause substantial carbon emissions (direct and indirect) and would cause other large-scale environmental problems. And, while more energy efficiency is important, it is notable that twenty-five years of the world’s most aggressive electric energy efficiency programs, in California, have reduced electric demand by only around 15 percent from business as usual – not enough to displace the 100% electric demand growth we expect to see in the world over the next two decades.

So, gas is less a “bridge to zero-carbon energy,” than it is a very long highway – gas will be used for some time. What must be done to ensure it makes more than a modest contribution to climate protection?

First, we must ensure that gas production itself does not get in the way. Gas that leaks and is released from US gas systems warms the climate about 40% as much as America’s coal plants, because methane, pound for pound, warms the climate seventy times more than CO2 (considering the warming over twenty years). Addressing this problem is not rocket science – it’s a matter of dollars and engineering. The EPA is currently considering rules that could have the co-benefit of reducing this leakage by about a quarter, but we can cost-effectively – certainly more than half – by focusing on methane directly.

Second, as a recent report of the National Petroleum Council, a petroleum industry-led organization, noted:

"[I]f very deep reductions in GHG emissions are desired over the long run, fossil fuels, including natural gas, could play only a limited role in providing energy unless there is a means to capture and sequester the CO2 emissions from burning fossil fuels."

Fortunately, there is. CO2 capture technology is available now for natural gas power plants, geologic carbon sequestration is available in many areas of the country, and geologic sequestration through enhanced oil recovery has been in use for decades. Perhaps the single most important message EPA could send to the clean energy market when it sets CO2 performance standards for gas plants, would be to indicate that CCS will eventually be required on existing natural gas power plants (as well as on coal plants). Because gas is the cheapest new power option, and typically undercuts cleaner forms of energy on price, requiring CCS on gas in the next decades could level the environmental and economic playing field between zero- and near zero-emitting sources of electricity, spurring substantial incremental investment in all forms of clean energy going forward. The sooner we get started, the better.

It may be a stretch, but not a great one, to say that we are entering the golden age of natural gas. The combined processes of horizontal drilling and hydraulic fracturing have unlocked incredible quantities of natural gas, enough to sustain the U.S. for more than 100 years of consumption. This kind of abundance of a low cost, cleaner fuel offers great benefits to our economic growth, public welfare, and national security.

Yet, government interference could jeopardize these benefits. Politicians trying to “fix” issues they don’t understand or simply appease radical factions of their base may represents the biggest challenge ahead for natural gas.

The overreact crowd cites an isolated number of incidents involving well construction and waste water disposal (problems which can arise from drilling in general, not hydraulic fracturing itself) in order to push for all sorts of regulatory and legislative intervention into the development of shale resources—oil and gas trapped far underground in an incredibly hard geologic formation known as “shale” rock. In fact, opponents have yet to produce a case of water contamination caused by fracking. That has, however, not stopped them from propagating claims to that effect.

Late political satirist H. L. Mencken once observed:

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

Given that reality, sorting out hobgoblins from real problems in shale development is an essential first step in effectively capturing the benefits of the natural gas boom.

Key stakeholders have already begun contributing to that process. The industry is working with states to reduce risks and provide useful information about the composition of fracking fluids. Federal policymakers should allow these collaborative approaches to mature before Congress or the President starts seriously considering national intervention. It would be surprising if the federal government didn’t already have sufficient authority to obtain information necessary to ensure public health and safety.

Market forces, technology, facts, and the best practices of first rate companies will lead to drilling, process, and disposal practice improvements that allow the nation to realize the full benefits of this natural gas revolution. Overreaction will have the opposite effect in the near term. The abundance of natural gas reserves makes it inevitable that they will be used. The issue is whether they will be used smartly?

It is well recognized that there are a large number of older coal fired power generation units that should be replaced. EPA’s preferred approach is command and control—the agency’s utility MACT rule, for example. That will work in shuttering older power plants but at an enormous cost and risk of electricity shortages. It would be better to structure economic incentives to hasten the transition of these coal fired units to natural gas ones. Accelerated depreciation, which has a lot of merits for encouraging capital investments, is one such incentive.

Power generated with natural gas reduces air pollutants and has fewer carbon dioxide emissions, both of which meet objectives pushed by the environmental community. In addition, natural gas—transported through pipelines—would reduce the truck, barge, and rail traffic that moves coal.

As is the case in an integrated economy, increased abundance and affordability of natural gas will trigger an increase in its industrial uses, which range from fertilizers to chemical products. That means an increase in capital investment and new U.S. jobs across the economy. Moreover, our abundance can help other nations to meet their energy needs through exports of U.S produced natural gas. A natural gas export industry would help our balance of trade while creating jobs in construction, shipping, and operations.

Some proponents of natural gas are pushing for incentives to use natural gas as a substitute for gasoline and diesel. The government should tread softly in going down this alternative fuel highway. There are obvious benefits in using natural gas for centrally fueled fleets like buses and delivery trucks. However, the benefits for personal transportation are less clear and at this time are mostly hype by people who will benefit by any actions that increase the demand, and hence the price, for natural gas.

Incentives to encourage the purchase of natural gas vehicles are just another subsidy that takes money from one group of taxpayers and gives it to another group. The range of natural gas vehicles is far less than that of gasoline vehicles because of natural gas’ lower energy density. Natural gas vehicles require larger tanks as a result in less trunk space. Until it becomes clear that natural gas vehicles are commercially viable, the needed infrastructure will be slow in developing. That will lead proposals by proponents for all sorts of credits and guarantees to develop it. We don’t need a new class of Solyndra projects for natural gas. Market forces developed our gasoline infrastructure. And the same will hold true for natural gas when the time is appropriate.