Today is apparently something called Blog Action Day, which this year is focused on climate change. I’m not sure exactly how blogging about climate change is supposed to affect anything, but I’m willing to do my part.
I’ve noticed a number of articles in the mainstream press about the natural gas industry in the past few days. While none of these is directly relevant to my particular focus on coalbed methane, most of them address what I find the most interesting aspect of gas as a fossil fuel: its ambiguous nature as both a source of greenhouse gas emissions and an alternative to other fossil fuels that produce more emissions. This makes understanding the ultimate effects, both economic and environmental, of changes in price and quantity of natural gas very complicated. That’s what I’m going to be exploring in my paper.
There are a lot of factors involved here. One, pointed out by a recent New York Times article and a blog post by one of the article’s authors, is that natural gas itself is composed mainly (80% to 99%) of methane, which is a potent greenhouse gas with a considerably higher Global Warming Potential than carbon dioxide (25 times as high over 100 years). In addition, it is present in the atmosphere for a much shorter time than carbon dioxide. This means that patching up leaks in the natural gas production and distribution system is a cheap and easy way to cut back quickly on emissions and the potential for severe impacts from warming. (The optimal amount and timing of the cutbacks, however, depends on the overall reduction strategy being used.) Since gas is a fuel with substantial market value, moreover, patching leaks makes economic sense as well, and can easily pay for itself. The history of coalbed methane development, with its origins in concerns about the safety of coal miners and ideas about what to do with the gas released by coal mining, shows this as well: during the energy crisis of the 1970s, people began to realize that the gas being vented from mines as a safety hazard could be captured and sold as a profitable sideline to coal mining, which eventually led oil and gas companies to begin drilling directly for it in coal seams with low potential for mining.
One of the major challenges in combating climate change is shifting away from reliance on coal for generating electricity. The US currently gets a little less than half of its electricity from coal-fired power plants. The main reason for this is that coal is really cheap. Unfortunately, it’s also really dirty; burning coal releases both huge amounts of carbon dioxide and smaller but still dangerous amounts of an astonishing range of pollutants with more direct and deleterious effects on human health. Perhaps the most serious of these is sulfur dioxide, one of the main sources of acid rain (remember acid rain?). In one of the major success stories of American environmental protection, sulfur dioxide levels have been drastically reduced by an innovative and very effective cap-and-trade system begun in 1995. (It’s a little surprising that this system doesn’t get mentioned more in the context of efforts to establish a cap-and-trade system for carbon dioxide emissions in the US, since it’s basically the exact same policy and it’s worked really well.) There’s lots of other nasty stuff in coal, though, and efforts to control it have been much less effective. Another New York Times story points to one problem, which is that aggressive attempts to control air pollution from smokestacks by installing scrubbers to trap pollutants have had the unanticipated side effect of the plants dumping the waste from the scrubbers into local waterways, taking advantage of much laxer regulations on water pollution. Because of issues like this, and the looming threat of carbon pricing making coal potentially much more expensive, there has been a trend toward gas-fired power plants and a move away from coal. In some cases this is a matter of designing new plants to run on either fuel, while in others it has been a total switch to gas. The price of gas has been relatively low lately, which has been a factor in this decision-making process, although the effect of an increase in demand for gas on the price is another thing to consider.
The current low prices for gas are an immediate concern for gas producers, however, and a recent story in the Farmington Daily Times points out that a lot of wells in the San Juan Basin have been taken out of production. Seasonal restrictions on gas production on federal lands during the winter to protect deer and elk play a role, but the general economic slowdown and resulting low gas prices are important as well. Note the wide variety of opinions voiced on what will happen to prices in the spring; this points to the considerable amount of uncertainty in these matters even before adding things like climate change legislation into the equation. A switch from coal to gas on a large scale would certainly increase gas prices, but how much? And how would the increase in prices feed back into decisions by power plants on what fuel to burn? These are complicated issues, and I hope this collection of (admittedly rather random) links has illustrated that.