Monday, April 11, 2011

How Shale Gas Snuck Up on the Beltway Elites and How Politics Could Disrupt the Success Story

AEI's Steve Hayward has an excellent article on "The Gas Revolution" in the Weekly Standard, here are some key paragraphs:

"One remarkable aspect of the shale gas revolution is that it was not the product of an energy policy edict from Washington, or the result of a bruising political battle to open up public lands and offshore waters for new exploration. Although the Halliburtons of the world are now big in the field, its pioneers were mostly smaller risk-taking entrepreneurs and technological innovators. George P. Mitchell, an independent producer based in Houston, is widely credited as being the prime mover in shale gas, pushing the idea against skeptics. The technology was mainly deployed on existing oil and gas leaseholds or on private land beyond the reach of bureaucrats (for the time being, anyway). That is why shale gas seemed to sneak up unannounced to the media and Beltway elites, even though people inside the gas industry realized several years ago what was rapidly taking place. Mitchell worked the Barnett shale formation near Dallas, but the biggest shale gas “play” is the Marcellus​—​a massive deep shale formation stretching from West Virginia through upstate New York.

Now that shale gas is front-page news, everyone wants a piece of the action. Environmentalists, who have supported natural gas as a “bridge fuel” to kill coal, are starting to turn against gas now that it looks more abundant. Regulators want to regulate it; state legislators want to tax it more. And politicians are eager to “help” the market decide how best to use this newfound bounty, which is music to the gas industry’s ears, as they fear a glut might collapse prices and do to their industry what the collapse in oil prices in 1986 did to the small producers in the oil patch. In other words, the one thing that might disrupt this amazing success story has arrived on the scene: politics."

Steve ends his article with this last sentence: "It would be best if politicians left well enough alone and allowed the marketplace to compete over the uses of natural gas, but politics and energy have always mixed like gin-ethanol and tonic, so don’t count on it."

MP: The chart above displays annual natural gas production in the U.S. back to 1936, and shows that domestic production has set new annual records in each year since 2007.  For the last several years the U.S. has been the world's largest gas producer starting when it surpassed Russia in 2009. 


At 4/11/2011 1:27 PM, Blogger Benjamin Cole said...

Shale gas king George Mitchell deserves about 10 Nobel prixes and a huge statue erected to him in front of the White House, and an even bigger one in front of the Pentagon.

Mitchell is a guy who actually did something for our prosperity and security.

Shake the guy's hand.

At 4/11/2011 4:29 PM, Blogger Michael Hoff said...

Oh yeah. Here in PA, our legislature was salivating over how to get their grubby fingers into the Marcellus Shale money pot. Thankfully, Fast Eddie Rendell is gone. But PA will find a way to screw this up before long.

At 4/11/2011 5:02 PM, Blogger NormanB said...

The Left is appalled that natural gas will take the 'wind' out of their sails and the 'light' from under their hat. Their 'save the world' Rube Goldberg contrapions are losing their raison d'etre and its tough to take. So, Obama mentions natural gas but has no energy behind it. Initeria in action, so to speak. So, do we really, really, really want to end our denpendence on foreign energy. I guess not that badly. Politics or mabe the cult of greenness is more important.

At 4/11/2011 6:10 PM, Blogger Che is dead said...

Politicians aren't the only group of parasites hoping to feed:

Plaintiffs Lawyers Eyeing Marcellus Shale Work‏

At 4/11/2011 8:55 PM, Blogger Ron H. said...

"Politicians aren't the only group of parasites hoping to feed:"

Those two groups are pretty much alike. Politicians are mostly lawyers who for some reason, don't have successful private practices.

At 4/11/2011 11:31 PM, Blogger Che is dead said...

"Those two groups are pretty much alike. Politicians are mostly lawyers ..."

I guess that Shakespeare was right then.

At 4/12/2011 3:18 AM, Blogger Ron H. said...

"I guess that Shakespeare was right then."

Well, that may be a little harsh, but we can end their political careers.

Then again, on second thought...

I don't believe it was Shakespeare, but someone once said that the difference between a lawyer and a catfish, is that one is a scum sucking bottom feeder, and the other is a fish.

At 4/13/2011 1:41 PM, Blogger VangelV said...

If shale gas were so profitable why is Chesapeake talking about transitioning away from shale gas to shale liquids? And why can't the producers make operating profits?

It also helps to get the story right. In the 1970s the US was producing more gas than it could sell. Producers responded by capping wells, reinjecting the gas back into reservoirs to get oil production levels higher, and by flaring a great deal of it off as a useless byproduct. The US has far less natural gas capacity today than it did in the 1970s. Nothing that we see today changes that fact.

One last thing. Didn't you guys learn from the Internet, IT, and Housing bubbles? Why the hell are you falling for the shale hype now?


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