NEW YORK — By unlocking decades’ worth of natural-gas deposits deep underground across the United States, drillers have ensured that natural gas will be cheap and plentiful for the foreseeable future. It’s a reversal from a few years ago that is transforming the energy industry.
The sudden abundance of natural gas has been a boon to homeowners who use it for heat, local economies in gas- rich regions, manufacturers that use it to power factories, and companies that rely on it as a raw material for plastic, carpet and other everyday products. But it has upended the ambitious growth plans of companies that produce power from wind, nuclear energy and coal. Those plans were based on the assumption that supplies of natural gas would be tight, and prices high.
Billions of dollars’ worth of plans to build wind farms and nuclear reactors have been delayed or scuttled, including Constellation Energy’s Calvert Cliffs nuclear project in Maryland. The company signaled last week that it was in peril because of higher-than-expected financing costs.
And coal power, already struggling under tighter environmental regulations, is now under even more pressure. Natural gas emits fewer dangerous chemicals and about half as much carbon dioxide as coal.
The new natural-gas discoveries, mostly beneath states in the East, South and Midwest, have kept prices remarkably low, even as demand has begun to come back since the end of the recession.
“We once thought we could face gas shortages and (electricity) brownouts. Now, we are facing an enormous oversupply of natural gas,” said Fadel Gheit, senior oil and gas analyst at Oppenheimer and Co.
The U.S. uses natural gas to produce 21 percent of its electricity. Coal is the dominant fuel, accounting for 48 percent of the electricity mix. By 2015, natural gas is predicted to reach 25 percent, while coal is expected to fall to 44 percent.
Starting in about 2006, after decades of work, natural-gas drillers such as Devon Energy, EOG Resources and XTO Energy, now owned by Exxon Mobil, perfected methods first tried in 1981 that now allow them to cheaply drill down and then horizontally into gas trapped in formations of shale never before thought accessible.
To release the trapped gas, drillers inject a slurry of water, sand and hazardous chemicals deep into the ground to break up rock and create small escape channels, a process known as hydraulic fracturing, or “fracking.” However, there is a fear that fluids or wastewater from fracking could contaminate drinking-water supplies. Congress has asked the Environmental Protection Agency to study the issue.
But in just a few years, a number of shale gas fields across the country are suddenly producing gas, including the Barnett field in Texas, the Fayetteville field in Arkansas, the Haynesville field in Louisiana and the massive Marcellus field that stretches from western New York through Pennsylvania, eastern Ohio and West Virginia.
While these developments are almost certain to boost U.S. gas production for years to come, they will have little effect on imports of foreign oil, at least in the short term. There are proposals to use more natural gas as a transportation fuel, but it is now used mainly to generate electricity, heat homes, and as an industrial feedstock.
A recent study by the Massachusetts Institute of Technology on the future of natural gas found that 80 years’ worth of global natural-gas consumption could be developed profitably with a gas price of $4 or below per 1,000 cubic feet.
Plans for nuclear plants and wind farms were made under the assumption that gas prices would average $7 to $9. At that level, electricity prices would be high enough to make wind and nuclear power look affordable. Now, many of these projects suddenly look too expensive.
Plans for three dozen new nuclear plants were drawn up in the middle of the past decade, and the nuclear industry hailed what it called a renaissance. Lawmakers, aiming to help stave off high electricity prices, authorized an $18.5 billion loan guarantee program to help the nuclear industry begin building new plants after two decades of inactivity. Now, almost all of those plans have been delayed or shelved.
