Taking it to the bridge

If politics makes for strange bedfellows, check out what the elixir of surprisingly abundant supplies of natural gas has done. Environmental organizations and natural gas drillers have gotten almost gooey-eyed with visions of gas backing up renewables and displacing coal in electrical generation. Throw in T. Boone Pickens, with his claim that natural gas can secure American independence from imported oil, and you have quite the ménage à trois.

It’s a tempting vision, this idea that natural gas can play a much larger role in the economy of Colorado and the nation. Estimates of proven reserves in unconventional deposits, including the tight sands of Colorado, have expanded rapidly in just the last three years. “It’s almost divine intervention,” one natural gas executive told The New York Times in 2008.

The Potential Gas Committee, a national consortium of geologists and producers headquartered at the Colorado School of Mines, last June announced a more clinical conclusion. The group’s biennial assessment found 1,836 trillion cubic feet of “technically recoverable” gas in the United States, a 40 percent increase since 2000. This is the highest evaluation in the committee’s 44-year history, says John B. Curtis, a professor of geology and geological engineering who directs data collection and analysis.

If that estimate is correct, the United States has 90 years of supply at current rates of consumption. Politicians from Denver to Washington, D.C., have taken note. “Natural gas has always been part of the New Energy Economy, and this year we look forward to solidifying its role for the future,” said Colorado Gov. Bill Ritter at his state-of-the-state address in January. Ritter specifically cited the generation of electricity, but his energy office soon after announced that $1 million in grants would be available to create fueling stations in the Rifle area for compressed natural gas for vehicles.

But some geologists dispute these cheerful estimates of abundance. They warn that many wells tapping these unconventional deposits have played out rapidly. They contend that too much remains unknown to justify new state and national policies.

Dissenters include Vince Matthews, the Colorado state geologist. A former oilman, he worked for several major companies in a 30-plus-year career across the country, including Alaska, the Rocky Mountains and the Gulf of Mexico. He recalls many bumpy times. “I understand that what is supposed to be good isn’t always as good as it looks,” he says.

Matthews said he would love to see evidence that there’s enough natural gas to displace coal-fired power plants and foreign oil. But he’s skeptical.

“A lot of people want to prevent more nuclear power by using (natural gas),” he says. “And at least some of us want to heat our homes with it. More than 51 percent of our homes in this country are heated by natural gas – which is its best use, actually. I would love to have natural gas do all these things, but when I look at the data and the record of the industry, I don’t see where we can do that.”

Geologists for decades have known about the natural gas found in shales, tight sand and coal beds. But these were always higher-shelf deposits, requiring far more work and expense to extract. Tapped first were the more economical deposits. Then came the offshore work, mostly in the Gulf of Mexico. Expenses were higher, but rewards again were great.

Now, new and advanced exploration, well drilling and completion technologies have allowed greater extraction of natural gas from the unconventional formations, Curtis from the School of Mines points out.

Matthews and other dubious geologists describe more meager returns per well, and hence more wells.

“In 1985, we drilled 8,900 wells in this country, and in 2007 we drilled 30,180 to get essentially the same amount of gas,” Matthews says. “We have to drill more and more wells just to stay even.”
And despite this new abundance, production in the United States lags that achieved in 1973. Imports began in the mid-1980s and now constitute about 13 percent of U.S. consumption, mostly from Canada. Some of the world’s largest deposits are in the Middle East. Matthews warns that too much faith in natural gas could yield greater reliance on imports. “Do we want to get hooked on (imported) liquid natural gas, like we’re hooked on (imported) oil?”

{pagebreak:Page 1}

II. DEVELOPING THE TECHNOLOGY
Natural gas has wonderful utility. In addition to making electricity and propelling trucks, buses and cars, it can be used as a feedstock for fertilizer, chemicals and plastics. Demand surged after World War II as natural gas heating became part of the great housing boom.

That boom ended in the 1970s as the oil embargoes prodded the nation to undertake home insulation and other energy efficiency measures. But something else was going on. As with domestic oil supplies, the easy-to-get natural gas supplies began disappearing.

Drillers in the 1980s began turning their attention to the so-called unconventional deposits in such places as the Wattenberg Field north of Denver and the Piceance Basin of the Western Slope, two of Colorado’s leading fields for natural gas. Here and elsewhere, incremental steps in technology coupled with improved understanding of gas deposits opened the way for the gush of gas deposits of the last few years. The U.S. Department of Energy reported that Colorado in 2008 ranked sixth among states in natural gas production, contributing 6.1 percent of the nation’s total. Together with oil, natural gas provided earnings that were 2.8 percent of the state’s total, according to the Bureau of Economic Analysis.

Conventional gas supplies come from permeable sand deposits. Just as sand on a beach readily absorbs water, so do these underground deposits have high porosity. Extracting the gas from these porous but confined layers of sand involves, as Matthews notes, drilling a hole and allowing the gas to escape.

The tight-gas sands of the Piceance Basin, however, required greater work. The space between the sand particles is far smaller. To free the gas from these microscopic spaces, a technique called hydraulic fracturing was used. Water coupled with sand is injected at high pressure down the well along with a small amount of chemicals designed to reduce friction. The sand particles, called proppants, temporarily open passages in the sandstone to allow the gas molecules to escape. The technique has become controversial because of worries that chemicals such as benzene used in fracking have contaminated drinking water at some locations, a threat described by most geologists and engineers as a remote one.

Horizontal drilling has also allowed extraction of these unconventional sources. Widely used in the Gulf of Mexico, it allows drillers to send down one drill, and then send several snaking laterally and into horizontal configurations to tap a broader region of the subsurface. This reduces expenses and also surface disturbances.

Jennifer Miskimins, an associate professor of petroleum engineering at the Colorado School of Mines, also points to a multimillion-dollar study conducted by the U.S. Department of Energy in the late 1980s near Rifle that made an effort to understand tight sands. But no technology breakthrough alone explains the new accessibility of natural gas.

“It was a lot of these technologies. It wasn’t any given one,” she says. “But they just sort of came together in the perfect storm and over about 20 and 30 years of development.”
Among those in the trenches of gas-field development in Colorado was Bill Barrett, now formally retired from the Denver-based company he founded, Bill Barrett Corp. He talks about gas prices that at times were “pathetic,” and long, long learning curves as his companies tried to develop the tight-gas sands, first in the Denver-Julesberg Basin (where the Wattenberg Field is) and then, in the 1980s and 1990s, in the Piceance Basin.

“I don’t care whether you’re talking about tight gas sands, shale, or coal (bed methane), there is a learning phase,” Barrett says. “They’re all a little bit different. They all have sweet spots (in the formations), and fracturing plays a big part. We spent four to seven years trying to figure out how to best complete these things – but we did.” Technology, he adds, “has changed our whole damn business.”

Still, just a few years ago, production of natural gas looked to be on the skids in the United States. Production was declining in all regions of the country except for the Rocky Mountains. Then, about 2005, wells from a formation in the suburbs of Fort Worth, Texas, called the Barnett shale began producing astonishing volumes of gas. National attention has more recently shifted to the Marcellus shale that is found in a broad swath from New York through Pennsylvania and West Virginia. But there are some two-dozen so-called gas-bearing formations underlying millions of acres in the country, plus Europe and Asia. Among the newer ones now being explored is the Mancos shale of Southwestern Colorado.

“We’re in the very, very early stage of developing this shale gas,” Barrett says.

{pagebreak:Page 2}

And that, says Matthews, is exactly the point. Only time will tell, he says, whether there’s as much natural gas for it to be the fuel everybody wants it to be.

III. TAMING EMISSIONS
Prominent leaders of the environmental community have called for a broad embrace of natural gas. Their principal worry is global warming, and they see natural gas as a glass-half-full solution. When burned, it has about 45 percent less carbon dioxide emissions than coal and 30 percent less than oil.

“Given its domestic abundance and its lower pollutant levels, natural gas should play a larger role in our energy mix,” said Timothy Wirth, former U.S. senator from Colorado, and John Podesta, co-founder of the Center for American Progress and co-chairman of the Obama transition team, in a paper released last August.

“Natural gas can serve as a bridge fuel to a low-carbon, sustainable energy future,” they wrote. “In particular, natural gas can provide the critical low-carbon ‘firming’ or backup fuel that can enable deep market penetration of both wind power and concentrated solar thermal power.”

A month before that paper was posted, Wirth scolded the industry during the annual conference of the Colorado Oil and Gas Association. Now head of Ted Turner’s United Nations Foundation, he said natural gas producers needed to both support and help craft cap-and-trade legislation.

“You will help yourselves, leave a legacy for your grandchildren, and play a major role in saving the world,” Wirth told the assembly of 2,000 people, and then added: “You have huge supply, you have low demand; good government policy will go a long way to putting a sound base under the industry. You can help form that policy, or you can stay in the wilderness.”

Three months later, another conference in downtown Denver offered a sharply divergent view. The Association for the Study of Peak Oil and Gas USA was founded six years ago by a group that included Coloradans Steve Andrews and Randy Udall. This year’s conference drew 400 people from 28 nations. Among the speakers was Art Berman, a Colorado School of Mines graduate and now a consultant based in Houston. He said that not only do wells in these shale formations deplete more rapidly than wells in conventional deposits, but they cost far more to produce. As such, he said, the marginal cost for most shale plays so far is $7 to $8 per million cubic feet.

Natural gas prices have been notoriously unstable, rising in July 2008 to $13.50 per million British thermal units, before crashing to about $2.50 in the early stages of the recession. Prices lately have hovered around $5.50.

Echoing Berman’s argument in testimony before the Colorado Public Utilities Commission has been David Hughes, a geoscientist based in Calgary, Alberta. A veteran of 32 years with the Geological Survey of Canada, he identifies declining production rates as being the key story. One-third of U.S. gas production must be replaced each year by new wells because of overall declines. It’s just too soon to know for sure how much sustained yield the shale formations can deliver, he says.

“All these shale plays only add up to 14 percent of the total. We are basically extrapolating the Barnett shale (of Texas) over a huge number of other shale plays,” he says. Until more is known about the geology, he adds, “we’re jumping the gun.”

Hughes spent much of his career studying coal deposits in Canada, and only after 1995 became absorbed with the question of natural gas. But it’s just part of a broader challenge he perceives of both resource depletion and accumulating greenhouse gases even as the world’s population rapidly grows.

“The average person in the world today uses as much renewable energy as he did in 1850,” he says, “but the average use of energy is eight times as great.” Considering that the world has five times as many people as it did in 1850, the world is consuming 46 times as much energy as it did then.

Natural gas and other fossil fuels, he says, are inherently part of our future. “People who tell you that we can get off fossil fuels are dreaming in Technicolor,” he says. But he believes we should use fuels to their maximum value while also embarking on a radical effort to reduce energy use per capita. “I would say 50 percent as a starter.”

Boulder-based activists who have pushed grittily to get Colorado off its foundation of fossil fuels make the same point about the need for radical change. They fear that natural gas, instead of being a short bridge fuel, will become a fixture. They contend that human ingenuity focused on non-fossil fuel solutions can achieve a lasting solution.

Among those with this sentiment is Leslie Glustrom, a biochemist by profession and by avocation Xcel Energy’s most persistent gadfly. “It’s not just about getting through the next 20 years,” she says. “This is about generations forever, and the planet has created all the natural gas it is going to make during the human time scale.”

Mike Chiropolos, lands program director for Western Resource Advocates, also points to a potential devil’s bargain. “If we bet on gas in this state, folks might not be so happy about their choice 10 to 20 years down the line when they see what is happening to our public lands. There will always be choices and tradeoffs.”

Coming back from the other direction is Boulder’s Alice Madden, Ritter’s climate adviser. “Natural gas is something we can incorporate immediately into our energy portfolio, and it has immediate results,” she says, pointing to the reduction in mercury that is associated with coal-fired generation. She goes on to argue that Colorado’s adoption of stricter rules governing drilling will, in the long run, benefit drillers, by avoiding black eyes that swing public opinion against them. “I would say that Gov Ritter’s administration in the end will be doing more for the natural gas industry than any other governor – which, I know, is incredibly ironic, and nobody may believe it at the time.”

Colorado, she notes, pushed past Wyoming in new drilling permits early this year. Her point: It wasn’t the state’s regulations after all that caused the slowdown in drilling.

IV. UTILITIES UNSURE
Natural gas is already the giant in Colorado. According to the Colorado Energy Profile, a website created by the University of Colorado at Boulder, 57 percent of British thermal units produced in 2006 came from natural gas, compared to 35 percent from coal, 6 percent from crude oil and 2 percent from renewables.

But in the narrower sector of electrical generation, coal is still king, at about 71 percent, compared to 24 percent for natural gas. Stuart Sanderson, president of the Colorado Mining Association, would like to keep coal king.

“I think it is inappropriate to be speaking of one fuel as a bridge fuel, particularly since the United States has 27 percent of the world’s coal reserves. We would be foolish if we did not continue to harvest this abundant source of energy. Unfortunately, there are some in the natural gas industry who advocate gas as a complete replacement for coal. Not only will that result in lower employment in the coal industry, but energy consumers will be the losers.” Natural gas, he notes, is more than twice as expensive as coal per unit of energy.

Utilities also have their doubts about natural gas, because of the prices.

Tri-State Generation and Transmission, the state’s second largest supplier of electricity, uses natural gas sparingly, for peak demands, but has been leery of using natural gas for generation of baseload power, as is done more cheaply by coal-fired power plants

“If we got into natural gas in a big way, we would want to have price certainty,” says Brad Nebergall, Tri-State’s senior vice president of energy management. In his 25 years of experience, natural gas has always been volatile. And, he added, the evidence isn’t in yet on the potential for the shale plays. “How long are they going to last? Nobody can answer that question. We know the reserves are there, but you have to go and drill the wells.”

Tri-State is instead hedging its bets on coal. It has invested in an experiment being launched in conjunction with power plants that seeks to expand the knowledge for carbon capture and sequestration. Matthews, the state geologist, is supervising that work.

Xcel Energy did not respond to requests for interviews other than to note that the amount of gas devoted to home heating has remained flat over the years, because of improved efficiency efforts.
Energy efficiency comes up time and again among people on all sides of this debate. “Moving from one fossil fuel to another is not an answer,” says Chiropolos of Western Resource Advocates. “That begs the question of what the answers are, and we can’t repeat often enough: energy efficiency, conservation and renewables, in that order.”

Energy efficiency also is mentioned often by Peter Dea, president and chief executive of Cirque Resources, a Denver-based gas exploration firm. He sees natural gas having a more prominent future – but not entirely displacing coal.

“I think there’s no doubt that the United States should double its gas use and cut in half its coal use, because that’s a true win-win for anybody sensitive to greenhouse gas emissions and general air quality,” he says.

{pagebreak:Page 3}