Another Default Option for Gas

Not many people are paying attention to the US's other big energy problem, in natural gas. It hasn't intruded much on our lives this winter, because of prudent inventory management and a remarkably warm start to the season in the Northeast. That's why the price of natural gas is currently $7/million BTUs on the New York Mercantile Exchange, instead of up to $14, as it was last winter. But this year-ago comparison masks two important facts: $7 is still more than three times the average gas price in the 1990s, and US net dry gas production has been declining steadily and is currently 6% below its recent peak in 2001. The reasons for this are complicated, but the consequences are straightforward: our reliance on imports will grow and the economic incentives to turn coal into synthetic gas will increase. Although the latter looks beneficial from an energy security standpoint, the environmental impact could be severe. We need to think seriously about whether we prefer that to the environmental risks of opening up the country's untapped gas potential.

The history of turning coal into gas goes back a long way, even longer than that of turning it into liquid fuels. The gas lights that electric lights displaced a century ago typically burned a fuel produced by the local "gas works", which literally cooked coal to make synthetic gas, or "town gas." There are a number of updated processes for doing essentially the same thing, including the gasification processes frequently mentioned as a way to burn coal more cleanly and efficiently in power plants. MIT's Technology Review recently highlighted another new process, the goal of which seems to be the production of gas that competes into non-power markets, including chemicals and fertilizer. From a purely financial perspective, I can see the desirability of doing this, and it might just result in fewer facilities being "offshored."

The problem is that we'd effectively be replacing our cleanest fossil fuel with our dirtiest. If every such instance had as convenient a way to dispose of CO2 as the plant cited in the MIT article--thus freeing up natural gas for other uses where that's not possible--this would be a good thing. But if this idea takes off, it could quickly outstrip the market for CO2 in enhanced oil recovery, and the extra CO2 will simply be emitted to the atmosphere, compounding the challenge of reducing our greenhouse gas emissions.

Some analysts suggest that US natural gas production has peaked for geological reasons, just as our oil production peaked in the early 1970s. Although a growing share of our gas supply now comes from "unconventional" sources such as coal bed methane and "tight" gas, the US still has a lot of natural gas left. Political constraints on drilling matter as much as geology, here, and while I don't necessarily question the value judgments behind them, I do wonder if these constraints were imposed with a full understanding that the alternative to that foregone supply might not be coming from a wind farm or a landfill, but from yet another new opportunity for coal producers.