“Unleash market creativity.” “Ingenuity and innovation of the American people.” “Collaboration and cooperation.” These are all terms that tend to be used quite often in policy debates regarding a specific problem or issue America must contend with, and our energy crisis is no exception. Indeed, as regular readers know, they are terms that appear quite often in this very column, as they are key elements of what ACSF is all about.
But as I learned first-hand years ago as a newly-minted lawyer, the most high-sounding and well-meant phrases don’t mean much unless you’re able to define them, and the most effective definitions include real-world examples.
The incredible growth and promise of unconventional natural gas production, which is becoming conventional is a perfect example of what can happen when you “unleash market creativity,” and “collaboration and cooperation” becomes a reality. Such production includes producing gas from shale and from coal beds.
At the recent 2008 annual meeting of the Mid-America Regulatory Conference,
MIT Energy Initiative associate director Melanie Kenderdine, Research Partnership to Security Energy for America (RPSEA) President Michael Ming, and Chris McGill of the American Gas Association shared the astounding results of the research that has been done thus far into unconventional production. The numbers were no doubt eye-openers for the state energy regulators in attendance, and show what can happen when the above phrases are put into action.
Take coal bed methane. As Kenderdine noted, the unique research partnership created to do research and development of what was then a largely theoretical proposition has paid huge dividends. Industry provided a 50 percent match to go with the federal funding of what amounted to a research project that totaled 140 million dollars over ten years. It was a partnership of researchers, academia and industry. The end result? Coal bed methane production now accounts for about 10 percent of our domestic gas production, with an estimated value of more than five billion dollars.
When it comes to shale production, the fact is no one knows just how big the payoff could be from research. The reason is simple: the amount of natural gas that we know can be produced from shale is a number that grows monthly. Thanks to the efforts of Kenderdine, Ming, McGill and others, The Energy Policy Act of 2005 contains a provision that creates a public/private partnership similar to, but larger than, the one that tackled coal bed methane production. Total cost: $50 million a year for ten years.
Is it worth it? As Ming pointed out, about 10 years ago the official government estimate of the natural gas resource afforded by the Barnett shale formation in Texas was zero. Thanks to research and development that has for the most part been funded by industry, production from the Barnett shale is a reality, and the Barnett’s resource potential could be 50 trillion cubic feet or more. And the Barnett is just one formation. That is a pretty big bang for your buck. And there are many such formations in the United States, and exploration and production has started on relatively few others. Shale production, while still in its infancy, is a key reason why our natural gas reserves have shown growth for the past eight years, and natural gas production has increased over 9 percent just in the last year.
These are real world examples of what can happen when resources are brought to bear in a sustainable, logical, collaborative manner. They are proof-positive of the results that can be found when research is conducted as defined by biochemist Albert Szent-Gyorgi: “Research is to see what everybody else has seen, and to think what nobody else has thought.” Kenderdine, a former Department of Energy official, noted that the Department of Energy spends only about 8 percent of its budget on actual research and development of energy sources, and a tiny fraction of its time.
ACSF is dedicated to fostering the environment for education and research. After all, as Carl Sagan noted: “Somewhere, something incredible is waiting to be known.”