Posted: February 04, 2013
New hope for natural gas autosEric Peterson
Genovese praises South America’s diverse transportation fuel markets; in Brazil, ethanol accounts for nearly 20 percent of transportation energy, and bifuel vehicles are common. "If we switch half of our transportation to natural gas, that’s going to increase the price of natural gas and decrease the price of oil," he says. "I say that’s the best thing that ever happened. If you have substitution, prices begin to reach parity, and you have a real stability to it, too."
The Colorado Energy Office’s Schroeder calls it "resource hedging," noting that the state is aggressively pursuing other sources of transportation fuel beyond oil and gas.
The changing economics of natural gas
"Traditionally, BTUs (British Thermal Units), or energy content, whether it was oil, natural gas or another commodity, all tracked together," says Chesapeake’s Genovese. "If oil went up, natural gas went up, ethanol went up, and all these other things. They cycled up and down with each other. When we started producing all of this shale gas in 2006, you saw this decoupling. As oil went up, natural gas went down. Therein lies the long-term advantage for natural gas as a transportation fuel. It no longer tracks the cost of oil."
Early 2013 prices for natural gas were around $3.25 per million BTUs, or about 75 percent cheaper than oil. A decade ago, the equivalent-energy price for natural gas was sky high, a bit higher than gasoline. Fracking brought those prices down to the ground.
But are today’s low natural gas prices artificially depressed? There’s a pretty good argument that they are: The market is closed (although some exports have been OKed by courts this year), and storage is nearly maxed out.
Genovese sees $4.50 as a good price for a million BTUs of natural gas. "I think there’s a point in time where all the valves are turned on but also the drilling rigs start going back to drill those reserves that are out there. Markets achieve equilibrium."
Laws restricting energy exports "are old rules," he says. "There’s a tremendous amount of talk of exporting now."
Exports wouldn’t have a big long-term impact on price because "shale is everywhere," adds Genovese. "You might well see shale production in other countries. It’s been advanced and perfected here in America, but it’s not necessarily a technique that’s been exported."
Environmental pros and cons
There is considerable debate over the environmental merits of natural gas. Gov. Hickenlooper sparred with activists at a December meeting of the Colorado Climate Network, an association of local governments seeking to mitigate and adapt to climate change.
According to a December 11 article in the Durango Herald, Hickenlooper argued at the Aurora conference that natural gas was the only way forward to cut greenhouse gas emissions in the near term. Anti-fracking activists pushed the governor for a move away from fossil fuels, but Hickenlooper said horizontal drilling and fracking have put the country on a course to significantly cut emissions.
Time was too short to wait for a renewable replacement for all fossil fuels, he added. "I’m willing to push the political reality as hard as I can, but I think it’s morally reckless not to embrace natural gas as a short-term transition fuel."
NGVAmerica’s Kolodziej says that federal standards have made for cleaner cars of all varieties, and NGVs are about 25 percent cleaner than gasoline vehicles, but every car is cleaner than it was a few years ago. "The EPA gets a lot abuse, but I just went to L.A. and I saw mountains I didn’t used to see."
The environmental conversation on NGVs "has become a major liar’s contest, and many of the environmental groups are the biggest liars," Kolodziej says. "They used to support natural gas vehicles, but they stopped because it’s taking away from the luster of electric vehicles."
Kolodziej says the environmental lobby’s support for natural gas at power plants but not on the highways amounts to hypocrisy. "Their logic doesn’t make any sense. They want to use natural gas to power electric vehicles but they don’t want NGVs because they are a threat to EVs.
"The data assumes the natural gas industry leaks or throws away a couple of billion dollars of natural gas every year. That’s a nonsensical position. There are leaks, but it’s not that bad."
Kolodziej cites a 2009 study by TIAX, a Massachusetts-based consulting firm, for the California Air Resources Board that found NGVs emit 29 percent less greenhouse gases than traditional gasoline vehicles.
Denver-based writer Eric Peterson is the author of Frommer's Colorado, Frommer's Montana & Wyoming, Frommer's Yellowstone & Grand Teton National Parks and the Ramble series of guidebooks, featuring first-person travelogues covering everything from atomic landmarks in New Mexico to celebrity gone wrong in Hollywood. Peterson has also recently written about backpacking in Yosemite, cross-country skiing in Yellowstone and downhill skiing in Colorado for such publications as Denver's Westword and The New York Daily News. He can be reached at Eptcb126@msn.com