An energy answer in the shale below?
New technology opens vast stores of natural gas, and the land rush is on
Thursday, December 3, 2009
The first time Chesapeake Energy tried to buy mineral rights from Diana Whitmore, a 74-year-old retired real estate broker in southern New York, it offered her $125 for every acre of land plus a 12 percent royalty on whatever natural gas it extracts.
Nearly two years later, she's still holding out. Along with hundreds of other landowners, she has joined a coalition that is negotiating with nine oil and gas companies. The latest offers in the area are running as high as $5,500 an acre with 20 percent royalties.
"It's what's really going to turn this whole place around," said her son Daniel Fitzsimmons, who has since helped form the Binghamton Conklin Gas Lease Coalition.
This corner of the state is at the forefront of an old-fashioned land rush that has implications far beyond Conklin, N.Y. Oil and gas companies are vying to stake out territory where they can tap natural gas trapped in shale rock. Just a few years ago, the industry didn't have the technology to unlock these reserves. But thanks to advances in horizontal drilling and methods of fracturing rock with high-pressure blasts of water, sand and chemicals, vast gas reserves in the United States are suddenly within reach.
As a result, said BP chief executive Tony Hayward, "the picture has changed dramatically."
"The United States is sitting on over 100 years of gas supply at the current rates of consumption," he said. Because natural gas emits half the greenhouse gases of coal, he added, that "provides the United States with a unique opportunity to address concerns about energy security and climate change."
Recoverable U.S. gas reserves could now be bigger than the immense gas reserves of Russia, some experts say. The Marcellus shale formation, stretching across swaths of Pennsylvania, New York and West Virginia, has enough gas to meet the entire nation's needs for at least 14 years, according to an estimate by two Pennsylvania State University experts. Just in Broome County, N.Y., where Fitzsimmons lives, shale gas development could create $15 billion in economic activity, according to consultants hired by the county.
The country is carpeted with shale gas plays, including the Barnett in Texas, Fayetteville in Arkansas and Haynesville in Louisiana. Since 2000, gas from shale has grown from less than 1 percent of the nation's production to about 10 percent, according to the consulting firm PFC Energy, and it's picking up fast.
That's changing the energy and economic landscape from Broome County to the Gulf of Mexico. It could mean lower prices and reassurance to homeowners who heat with gas, or towns and companies with vehicle fleets running on the fuel. As winter begins, the price of natural gas is about a third of the level it was 14 months ago. Storage facilities are bursting.
With new supplies, the country will be less vulnerable to disruptions from Gulf Coast hurricanes and need to rely less on imports. Already, deliveries of liquefied natural gas from places such as Qatar, Nigeria and Trinidad are down 58 percent in 2008, idling costly U.S. terminals.
The prospect of new gas supplies at stable prices is also transforming debates over climate change. It deals another blow to proposals for new coal plants. And because gas plants can be switched on and off quickly, unlike coal and nuclear, natural gas could supplement wind and solar power facilities, whose output varies with the weather.
"Natural gas can serve as a bridge fuel to a low-carbon, sustainable energy future," said former Colorado senator Timothy Wirth, now head of the U.N. Foundation. Indeed, this year, coal use is down about 13 percent, while electricity demand has fallen only 5 percent and natural gas use has remained about steady.