Monday, June 4, 2012

The Economist - Fracking Great

From the Economist: Fracking Great

The fourth of five crucibles outlined in the reading “What Happens Next” examines the role of energy resources in a rapidly expanding global market. Emerging markets are projected to account for 90% of the future increase in demand for energy resources. Already limited supplies will be further constrained, heightening even further the need for alternatives to traditional sources of energy. An added layer of complexity is posed by the increased regulatory and social scrutiny the energy market can expect to receive in the coming decades. While governments in emerging markets tinker with regulations to define the rules of engagement with other nations, protect the environment and craft policy to determine which sources of energy to pursue, the ever expanding interconnectedness of people around the world will also increase the scrutiny these markets receive.

I have been following the rapid development of the Marcellus Shale gas play in Pennsylvania for the last couple of years from a mostly local perspective. Hydraulic fracking—the process of pumping chemical laden water through a network of pipes that run 4000-8000 feet below the surface, in the process cracking shale rock to release natural gas contained within—has become a controversial environmental issue for Pennsylvanians. The Economist’s article, “Fracking Great”, looks at the impact of the burgeoning industry from a global perspective, very much in line with the reading’s fourth crucible (Pricing the Planet).

Gas drilling has for the most part taken off in the US. The questions posed by the article ponder the obstacles facing expansion of the industry worldwide.  Of the forces highlighted by the reading which determine how resources will be used, the Economist article discusses the regulatory and social scrutiny faced by the industry. Factors preventing the expansion of gas exploration include a lack of subsidies in other nations, stricter regulations of pipelines, and the outright banning of fracking. Per the author, environmental protests raise an even tougher obstacle, threatening to “kill the shale-gas industry at birth”.

I have long been and continue to be largely sympathetic of efforts to regulate the shale-gas industry to curb the very real environmental threats of drilling to our state’s aquifers, land, and the health and safety of the residents living around drilling sites. However, I was intrigued by the implied notion in the Economist piece that natural gas can serve as a stop-gap measure until greener, cleaner, renewable energy alternatives catch up with the times. Until then, natural gas may very well be a viable alternative to meet the demand of an expanding, interconnected global market. Regulatory agencies must adapt to emerging needs by promoting sound policies that make use of this resource while promoting incentives for the exploration of greener, alternative fuels. The closing paragraph of the Economist article succinctly sums up this position:

“By itself, switching to gas will not reduce emissions to anything like the levels required to avoid a high risk of serious climate change. This will take much crunchier policies to boost renewable-energy sources and other clean technologies—starting with a strong price on carbon emissions, through a market-based mechanism or, preferably, a carbon tax. Governments are understandably unwilling to take these steps in straitened times. Yet they should plan to do so; and in the coming years cheap gas could help free cash for more investment in low-carbon technologies. Otherwise the bonanza would be squandered.”

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