Some Good Frackin’ Reading

Here’s a trio of natural gas articles for your reading pleasure.

First up, Richard Epstein from the Hoover Institution argues not to block fracking entirely, but to proceed cautiously:

The Fracking Pancea?

Not quite. The new technology is promising, but environmentally risky.

A number of recent reports have indicated that new techniques of “fracking” are able by intense hydraulic pressures to unlock huge amounts of oil and gas reserves from once abandoned sites. Right now a land boom is taking place in the conspicuous locations of yesterday, such as the Permian Basin, in West Texas, the Eagle Ford region in Central Texas, and the Bakken in the Dakotas. The numbers are quite staggering. Production in the Bakken has jumped from virtually nothing a few years ago to 400,000 barrels a day today, with the prospects that better technology will push that total up to a million barrels a day by 2020. Similar gains are reported in both the Permian Basin and Eagle Ford. It is almost as if the laws of scarcity have been repealed. Daniel Yergin, a notable energy expert, puts the point in geopolitical terms: “This is like adding another Venezuela or Kuwait by 2020, except these tight oil fields are in the United States.”

These sites have already been exposed to a great deal of environmental wear and tear, so sensible developments concentrated in these areas could well cause fewer environmental dislocations than fresh explorations undertaken in pristine areas, including sites located close to large population centers or fragile ecological systems, like the Gulf of Mexico. With oil prices again hovering above $100 per barrel, bringing these sites on line quickly could well reduce our dependence on both deep water drilling and Middle Eastern imports. Under some scenarios, the rapid displacement of old energy sources might even reduce pollution levels overall.

The proper response to these new developments, therefore, should be one of guarded optimism. Quite simply, new viable technologies improve the odds of having energy available at lower prices. As I have argued earlier on this site, these technological improvements should be especially welcome today in the face of the increased (if misguided) resistance to new nuclear power in the aftermath of the Fukushima Daiichi plant’s near meltdown in March, 2011—that plant, by the way, was first commissioned in 1971 and stood in desperate need of an upgrade. Nonetheless, public sentiment about improved nuclear energy often runs negative: think of Germany’s recent announcement that it will shut down, not upgrade, its current nuclear facilities.

The rest here.

While Robert Bryce of the Manhattan Institute argues that natural gas and nuclear are “greener” than solar or wind because of the vast amount of space solar and wind need to generate equivalent amounts of energy:

The Gas is Greener

In April, Gov. Jerry Brown made headlines by signing into law an ambitious mandate that requires California to obtain one-third of its electricity from renewable energy sources like sunlight and wind by 2020. Twenty-nine states and the District of Columbia now have renewable electricity mandates. President Obama and several members of Congress have supported one at the federal level. Polls routinely show strong support among voters for renewable energy projects — as long as they don’t cost too much.

But there’s the rub: while energy sources like sunlight and wind are free and naturally replenished, converting them into large quantities of electricity requires vast amounts of natural resources — most notably, land. Even a cursory look at these costs exposes the deep contradictions in the renewable energy movement.

Consider California’s new mandate. The state’s peak electricity demand is about 52,000 megawatts. Meeting the one-third target will require (if you oversimplify a bit) about 17,000 megawatts of renewable energy capacity. Let’s assume that California will get half of that capacity from solar and half from wind. Most of its large-scale solar electricity production will presumably come from projects like the $2 billion Ivanpah solar plant, which is now under construction in the Mojave Desert in southern California. When completed, Ivanpah, which aims to provide 370 megawatts of solar generation capacity, will cover 3,600 acres — about five and a half square miles.

The math is simple: to have 8,500 megawatts of solar capacity, California would need at least 23 projects the size of Ivanpah, covering about 129 square miles, an area more than five times as large as Manhattan. While there’s plenty of land in the Mojave, projects as big as Ivanpah raise environmental concerns. In April, the federal Bureau of Land Management ordered a halt to construction on part of the facility out of concern for the desert tortoise, which is protected under the Endangered Species Act.

Wind energy projects require even more land. [. . .]

The rest here.

And also from the Manhattan Institute, a new report on how the fracking ban in New York state is costing thousands of jobs and billions of dollars to the state:

Directional drilling and hydraulic fracturing have unlocked vast new reserves of natural gas in the United States. Development of these resources is now well under way in Pennsylvania and West Virginia. Unlike their neighbors to the south, however, New York residents are not directly benefiting from natural gas development as the result of a government-imposed moratorium, itself a response to environmental concerns surrounding hydraulic fracturing. This study analyzes the economic and environmental impacts of shale gas drilling in New York and finds the net economic benefits to be significantly positive. Specifically:

  • An end to the moratorium would spur over $11.4 billion in economic output.

  • Some 15,000 to 18,000 jobs could be created in the Southern Tier and Western New York, regions which lost a combined 48,000 payroll jobs between 2000 and 2010.

  • Another 75,000 to 90,000 jobs could be created if the area of exploration and drilling were expanded to include the Utica shale and southeastern New York, including the New York City watershed. (This assumes a regulatory regime that protects the water supply but permits drilling to continue.)

  • Localities and the state stand to reap $1.4 billion in tax revenues if the moratorium is allowed to expire.

This study also reviews the public records of environmental violations reported by the Pennsylvania Department of Environmental Protection over the period 2008–10. It then quantifies the impact of these violations on land, water, and air resources. The costs of these environmental impacts are then estimated on the basis of the value of the environmental amenities at stake. Our main finding is that the cost of these environmental impacts is far smaller than the economic benefits that drilling can provide.

  • The typical Marcellus shale gas well generates about $4 million in economic benefits.

  • The economic damage resulting from the environmental impacts of a typical shale gas well comes to $14,000.

The expected environmental costs are so low because the probability of an environmental event is small, and those that do occur are minor and localized in their effects.

Those environmental problems that have arisen in connection with hydraulic fracturing in no way call into question the soundness of that procedure. In reality, they result from improper drilling and well-casing technique and defective formulation of cement. Such errors and flaws allow wells to penetrate shallow gas deposits, permitting the gas within them to escape and enter groundwater supplies. Marcellus gas resides far below these deposits and any aquifers. More stringent design standards should be adopted, and more active regulatory oversight should be exercised. These steps would reduce the incidence of such problems.

Our findings suggest that the current shale gas drilling moratorium imposes a significant and needless burden on the New York State economy. In short, the economic benefits of developing shale gas resources in New York State are enormous and could be growing, while the environmental costs of doing so are small and could be diminishing if the moratorium is lifted and if proper policies are put into place.

The whole report can be read here.


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