Golden Rules for a Golden Age of Gas

Carnegie’s Energy and Climate Program hosted the U.S. launch of Golden Rules for a Golden Age of Gas, a special report in the International Energy Agency’s World Energy Outlook series. Carlos Pascual, the State Department’s special envoy and coordinator for international energy affairs, opened the conversation. Fatih Birol, the IEA’s chief economist who oversees the World Energy Outlook, Gina McCarthy of the Environmental Protection Agency, and Eric Pooley of the Environmental Defense Fund discussed the key findings in the report and its projections. Carnegie’s Adnan Vatansever moderated.

The Report

IMGXYZ3769IMGZYXAdvances in technology have led to a surge in unconventional gas supply in North America and many countries are lining up to emulate this success, said Birol. Golden Rules for a Golden Age of Gas provides insight into unconventional gas resources and identifies key environmental and social risks. “The possible impact of the shale gas on the global gas market is immense,” stated Pascual.

• Supply: Golden Rules posits a scenario where total natural gas production grows by 55 percent through 2035 and unconventional gas accounts for nearly two-thirds of that growth, its share in total output rising from today’s 14 percent to 32 percent in 2035, said Birol. In addition, combined unconventional gas output growth from the United States, China, and Australia is expected to surpass that of conventional producers, including those in the Middle East, North Africa, and Russia, he added.
   
• Demand: In the Golden Rules scenario, global natural gas demand growth equals the combined increase from coal, nuclear, and oil resources, resulting in gas overtaking coal as the second most important fuel, said Birol. 80 percent of the growth in gas use is predicted to come from outside the OECD, chiefly from Asia and the Middle East, and growth will be driven largely by the demand for electricity and from industry, he added.

Even though the resources, economics, and technology for unconventional gas are present, the field faces a number of environmental and social challenges, stated Birol. Many of the concerns voiced about shale gas production and extraction are legitimate and the report suggests ways to minimize the impact of shale and unconventional gas production, he added.

The “Golden Rules”

The “Golden Rules” are principles that can allow governments, industry, and other stakeholders to address the challenges associated with unconventional gas. Improperly addressed, these challenges threaten to hold back, and perhaps halt, the unconventional gas revolution, said Birol. They are “golden rules” because their application can ensure operators have a “social license to operate” paving the way for a golden age of gas, he explained. He outlined the rules:

1.  Measure, Disclose, and Engage: The public does not have reliable and up-to-date information about unconventional and shale gas operation. Data on water and air quality should be measured before the start of operations and monitored throughout operations. The type, volume, and effects of the chemicals being used in unconventional gas production ought to be made available. Engagement with communities is important and local communities should feel benefits from the operations.
    
2. Watch Where You Drill: Careful choice of sites can reduce above-ground impacts. It is also important to conduct a survey of geology and seismic activities.
    
3. Isolate Wells and Prevent Leaks: This third rule is crucial because leaks lead to pollution and water contamination, said Birol. Robust rules need to be put on paper for the design and construction of wells and integrity tests of wells should be part of the general performance standard of operations. In addition, appropriate minimum depth limitations should be considered by authorities.
    
4. Treat Water Responsibly: Water is at the heart of shale gas production. Sound management of water resources, reduction of freshwater use, and the need to reuse and recycle water are important.
    
5. Eliminate Venting, Minimize Flaring and Other Emissions: Venting needs to be at zero level and flaring must be minimized. Public authorities may need to consider imposing restrictions on venting and flaring and to minimize emissions.
    
6. Be Ready to Think Big: One has to plan for multiple wells, lots of trucks bringing water to plants, and other upfront investments.
    
7. Ensure a Consistently High Level of Environmental Performance: There is a need for third party assessment through bodies that enjoy public trust, such as universities, academia, and research parties.

Unconventional Gas Challenges

Unconventional gas will play an important role in in energy and geopolitics, said Pascual, and presents potential environmental benefits, such as the switch from oil and coal to gas.

• Regulation and Research: The report provides a forceful case for the need to get regulations in place for unconventional gas development, said Pooley. Pascual and McCarthy gave a detailed outline of the rules and research already being done by U.S. federal and state agencies and public-private partnerships. “We cannot expect the local communities to bear the brunt of creation of cheap energy for all,” said Pooley, adding that there is a need for comprehensive research of the entire value chain of unconventional natural gas.
   
• Drilling of Wells: More than one million new unconventional gas wells would be needed globally by 2035, said Birol. A single well’s lifespan is limited and each individual well represents an environmental challenge, with questions arising regarding truck movement, emissions, use of water and chemicals, waste management, and seismic impact, said Pascual. An environmentally sound set of processes need to be developed for the drilling of wells, he added.
   
• Emissions Challenge: Natural gas does have a role to play in the low-carbon energy economy, but increased use in itself is not sufficient to reach the 2°C goal, said Birol. New technologies, the drive toward energy efficiency, development of commercial markets for clean technology, and the strong power markets need to be incorporated for a sustainable future, said Pascual.
   
• Access to Information: The local communities’ concerns about land and water use and potential for air and water pollution in shale gas production need to be addressed, said Birol. Dialogue with communities is crucial, said Pascual and information regarding the unconventional gas production needs to be available to the public.
   
• Renewable Energy: Cheap abundant natural gas should not lock out renewable energy development, said Pooley. Burning natural gas is not a permanent solution to climate change and the government needs to support fragile industries, he added.