Natural Gas Offers an Opportunity for Success, Not a Guarantee

December 12th, 2013



Remember that movie “The Jerk”, in which Steve Martin plays a monumental idiot who stumbles into a fortune, and then blows it all on things like a giant stuffed camel and a private nightclub in his basement? Ultimately, Martin’s character is rescued by family members who prudently invested the money he’d occasionally sent them—providing both a happy ending and a life lesson about responsible resource management.

Technological developments like hydraulic fracturing have suddenly given the U.S. access to a fortune in natural gas, which is already providing opportunities for economic growth. And recent studies like those being conducted by Environmental Defense Fund further support the tremendous environmental opportunities presented by natural gas, including climate change mitigation. But opportunity alone does not guarantee success. A certain amount of planning and public support can help ensure we maximize the benefits of this resource, and avoid being… jerks.

As Third Way discussed in a report last year, there is a “sweet spot” for natural gas prices above the $5/mmbtu point, compared to roughly $4 today. This price level could create long-term price stability that in turn attracts long-term investment. It also incents efforts to reduce flaring and leakage during production, transmission, and distribution. Finally, it brings nuclear and renewable electricity closer to economic competitiveness.

The best way to gradually approach this “sweet spot” is to encourage the expansion and diversification of natural gas markets, particularly in the applications where natural gas can provide the greatest benefit. This includes the replacement of coal for thermal processing in a wide variety of industries. It would also include the replacement of petroleum products for transportation vehicles, especially those that present less opportunity for electrification (cargo ships, locomotives, long-haul trucks, etc.). Of course, exporting LNG can also place upward pressure on natural gas prices.

Policy can also be used to improve the environmental performance of existing natural gas systems. For instance, financing to expedite the repair or replacement of leaking gas pipelines could be provided through a federal revolving loan program, an idea that Third Way suggested in the PowerBook and that Senator Ed Markey has promoted in his  Pipeline Revolving Fund and Job Creation Act (S. 1768). And while carbon capture and storage (CCS) is most commonly associated with coal, this pollution control technology could and eventually should be used in conjunction with natural gas-fired power plants to reduce emissions. This should be reflected in federal efforts to develop CCS technology whenever possible.

Natural gas has provided the U.S. with an unexpected tool that it can and should use to help grow our economy and make our energy use cleaner. We should deploy it produce our electricity, supply our industries, and fuel our transportation. But we should continue to set policies that help us use this tool smartly and safely for maximum long-term benefit. And no giant stuffed camels.

 This piece was originally published via National Journal.