While it's no secret that the popular media and the energy industry don't always agree, a particularly radical split occurred approximately six years ago on the subject of natural gas.

The popular media foresaw an imminent gas shortage, a price increase of nearly 50 percent in a single year, with worse to come. They saw interrupted supply in response to Hurricanes Katrina and Rita. They bemoaned the slow pace of liquefied natural gas (LNG) facilities coming onstream. And they saw gas as yet another area of US dependence on foreign energy.

At the same time, the energy industry press were enthusiastically publicizing the growing potential of shale gas. They were tracking discoveries and inventory growth, chronicling foreign investment in US reserves and service company expertise, and celebrating a spiraling rig count and signaling the pipeline industry's next boom. And they were raising the possibility of natural gas as an export product. All these predictions have come to pass.

The popular media's pessimism continues today and is all the more puzzling because shale gas is already a significant support for the US economy. Think of it in this context: in the 1990s, the economy was helped by extraordinary productivity gains via the dot-com revolution. In the first decade in this century, the economy owed a debt to the big-box stores whose marketing and combination of streamlined logistics and least-cost procurement held down prices and inflation.

In this decade, abundant domestic shale gas production is already having as significant an impact as the dot-com and big-box revolutions did and, looking forward, it can do more. High-volume shale gas production can make industrial and electrical generation conversions to gas-secure, long-term investments. It can also help US employment by rebuilding domestic gas and associated pipeline and support industries.

Secure, domestically produced gas can help restore a competitive edge to overall US manufacturing. Clean-burning gas can be a bridge to the environmental future with low-emission fuel until renewables can be brought onstream without costly subsidies.

There is, however, one big difference between the dot-com and big-box eras, on the one hand, and the impact of shale gas development, on the other. In the first two, people knowingly changed their lives to participate. They began using computers for many things and they changed many of their buying patterns. The result has been new lifestyles, and most would not go back to their previous behaviors.

In contrast, the impact of shale gas development is comparatively invisible. Most people who turn on their stoves, heat their homes or use electricity generated by gas-fueled boilers will not know they are benefiting from the growth of shale gas production. They may never know about—let alone appreciate—the technology that tapped new supplies or built the pipelines that brought gas from new fields.

Shale Gas and Industrial Competitiveness

While conferees were bullish about what shale gas can contribute to America's competitive edge and overall economy, they agreed that this form of energy will not give the United States a unique boost indefinitely as China appears to have at least as much shale gas as the United States. If the United States has one real advantage, it is the speed with which it can bring the gas on stream.

China will face pressure from trading partners to convert to cleaner burning gas to offset the pollution now resulting from the country's growing use of coal-fired boilers. To the extent that the Chinese respond to those pressures, they will be pragmatic and purposeful. Today, the Chinese are adding the equivalent of total UK electrical generation every year, much of it in coal-fired plants. But in five years, they likely will be converting coal-fired boilers to shale gas at the same rate.

If they do so, there is a good likelihood that the Chinese will have adequate gas supplies on stream. China is investing in US shale gas production and working with companies with special expertise in shale gas production. The reason for their investment, and for investment by other foreign energy companies, is not only immediate economic return, but also the specific intent to gain the technology, and the "hands-on" knowledge, that will allow the Chinese to tap shale gas.

Finally, the impact of shale gas is not confined to the United States and China. Many countries with shale gas deposits are looking to avoid reliance on external energy sources.

An International Gas Market

When conventional gas was thought to be the only natural gas in quantity, there was some fear that Russia and the Persian Gulf gas exporters might form an OPEC-like organization, complete with price floors and production allocation. However, the widespread geographic distribution of shale gas makes this unlikely.

There is no doubt that Persian Gulf LNG delivery capability will continue evolving to meet the spot needs of consumers, and the ongoing needs of gas producers. In fact, the LNG market for conventional gas was well underway before shale gas production was thought possible. LNG production growth will continue until differentials between markets no longer provide adequate incentives. As margins decline, LNG will assume the traditional role of the swing supplier, meeting the market. It should still be profitable—but on tighter margins.

Some have suggested that the availability of shale gas will exert downward pressure on oil prices. If overall energy demands were static, that might happen. But many countries are rapidly improving their standards of living and using more energy to do so. While commodity prices will always be subject to big surprises, total worldwide energy demand will, over a significant period of time, sustain today's crude oil prices. The most influential crude oil price variable will probably continue to be volatility in the Middle East.

Competition with Nuclear Power

Until recently, it looked as if nuclear power would stay on a steady, low-key expansion track—at least in those countries where it had overcome the fear of catastrophic incidents and had no problems to speak of. But as a result of the Japanese earthquake and tsunami of March 2011, the viability of the nuclear power model is undergoing serious reassessment.

For example, the German government has announced the immediate closing of eight of their 17 nuclear plants, with the remainder scheduled to shut down by 2022. This was a sudden and unexpected reversal on the part of Chancellor Merkel. It also changed the political balance of forces within Germany, which combines a high degree of industrialization with one of the most aggressive Green lobbies in Europe.

It is too early to predict the result of these announced closings. Nuclear power generates 23 percent of Germany's electricity. Replacing this much capacity seems too great a demand for renewables to supply within 11 years. If the shut-down decision remains in effect, this may be good for shale gas as an intermediate, environmentally friendly fuel. More rethinking on the role of nuclear power may be going on behind the scenes.

Foreign Investment in US Shale Gas

Some people fear foreign participation in the US shale gas plays. Their concern is that non-US participation will lead to exporting domestic gas to foreign markets, and to scarcity and higher prices in the United States. I disagree.

First, foreign participation is needed not only in the gas plays, but in the expertise that finds, produces and transports it. The spread of expertise to other countries, as well as increased domestic production, will reduce foreign need for our gas.

Second, widespread production and use of shale gas will reduce—not enhance—the cartel pricing that all oil-importing economies have labored under for 40 years. It will also make customers less dependent for so much of their energy on long sea lanes and a volatile part of the world.

Finally, those that worry about low prices to consumers often ignore the effects of low prices on producers. Today's low gas prices in the United States would make it hard to develop the shale gas plays optimally. The infusion of capital from major companies from at least nine countries has put billions of dollars to work in the Marcellus shale play alone, resulting in thousands of wells, and accelerating the need for new pipelines and other infrastructure to monetize the gas.

The Future of Shale Gas

Shale gas has strong global environmental and economic potential. Economically, many companies and workers will benefit by growing domestic energy industries. Negative impacts will be mostly felt in countries that are expected to have long-term control of a profitable gas export market.

In the United States, the shale gas boom could not have come at a better time. Our economy needs the jobs, cleaner energy and lower balance of payments that a domestic gas industry can provide. Ideally, regulatory and tax policies should encourage investments in gas exploration, production, transport, use and even export.

With all these positive indications, there are still two troubling factors: media negativity and the restrictive regulatory climate such negativity can generate and support.

Both factors are real. Last Spring, several negative articles relative to shale gas development appeared in a major newspaper. In substance, the publication attacked shale gas development over a wide range of issues, including: speculations about the life of shale gas plays and individual wells, allegations of high expenses in maintaining production and dire warnings about the potential environmental side effects of fracking, including groundwater contamination from chemicals used in drilling and production.

The articles were largely drawn from anonymous emails circulating in the US Department of Energy. The writers dwelt on all the "what ifs" that non-industry government officials could produce. The editors did not look for positives to balance those possibilities. For example, they totally ignored the significance of multibillion dollar investments that international companies from China, Japan, South Korea, India, Australia, the United Kingdom and Norway, among others, are making in the Marcellus field alone.

Those whose businesses are solving problems and producing and transporting energy tend to see such criticism as baseless, biased and insubstantial. And they are right. The point is not the objective validity of the criticism, but its weight in policy formulation. And that influence should not be discounted.

One year ago, who would have thought that Germany—the fourth largest economy in the world—would retire 23 percent of its total electrical generation capacity as a result of events related to an earthquake in Japan?

A backdrop of negative criticism made that decision seem optimal to the German government. Similar criticism no doubt carried weight in decisions not to permit drilling in the ANWR in Alaska and off the outer continental shelves in the lower 48 states, and in the heartbreakingly slow return of active exploration and production in the Gulf of Mexico.

Shale gas is an answer to many US economic and environmental problems. As profitable and useful as the gas is, however, the regulatory road to its successful development is unclear. Based on regulatory decisions and their impact in the United States and abroad, it is perhaps best to remain cautiously optimistic: optimistic about the positive potential of shale gas, but cautious about the negative potential of the regulatory environment.

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