Thursday, April 2, 2009

We Need a “Natural Gas Standard” in the U.S.

It is becoming clear that the United States is on the verge of becoming one of the largest natural gas producers in the world. The advent of new exploration techniques and technology has opened up a plethora of new natural gas opportunities (see image below). We are so fixated on oil and our slave-master relationship with foreign countries that we are not taking seriously our enormous supply of natural gas.

We as a nation need to think big. I propose a national conversion to a “natural gas standard.”

Our economy is oil-driven, much of it because of our transportation needs. Buses, cars, trains, utility generation – convert these things to a natural gas standard and we would employ a cleaner, more economical fuel and one that can be 100% home grown. The NAT GAS Act (H.R. 1835), proposed yesterday in Congress, is a great way to start this process.

Being a free market economy, the government cannot specifically dictate this change. But the government needs to recognize the potential of natural gas. Right now, the price of gas is low because of high supply and the knowledge that natural gas production is poised to increase dramatically. There is this huge, barely tapped supply beneath our feet. The government can use market incentives to implement a conversion to a natural gas standard. With increases in demand coupled with the increases in supply, the market price for gas should trend towards one that makes production economically feasible while keeping retail consumption at a reasonable price.

It might be tempting to dismiss the Pickens Plan as self-serving, given T. Boone Pickens’ investment in natural gas and wind technology. Same with CNG NOW or the American Clean Skies Foundation, they are both outgrowths of companies trying to commercialize their products to a wider audience. We dismiss these ideas at our own peril, however. I think there is great validity to these concepts.

What can the federal government do to help the market adopt natural gas? It can create incentives for the conversion of oil and coal uses, such as incentives to convert cars and buses to natural gas or develop incentives (tax credits, carbon trading?) to convert aging coal plants to natural gas. To achieve widespread consumer vehicle use, car makers first must see a market for natural gas cars. The government can set targets and create a “carrot” or “stick” incentive for successful achievement of the goal. There also has to be a retail infrastructure to sell natural gas to consumers. This can be achieved through numerous ways that can make both Republicans and Democrats happy.

There is lots of talk about a green jobs revolution, and I think natural gas should be considered part of it. It’s great to have a long-term vision, but we need a solution now. Forget the notion that biofuels will save us. They use up valuable farm land (and throw off the economics of producing our own food!), consume valuable water to grow and require petroleum to harvest. There is no reason to import food so Midwestern farmers can produce overpriced/subsidized fuel for cars. “Clean coal” would be great if carbon sequestration could be achieved and on an economically feasible basis. Right now, it’s not possible. I’m a great believer in solar, geothermal, wind and other alternative energy, but we are far away from a viable solar car or truck (not just a rechargeable battery operated car) and we need a solution now. Energy success will come from a balanced energy portfolio, largely balanced by alternative energy sources, to help offset resource price spikes as well.

Natural gas is the way forward for reasons political, economic and environmental. The United States can become a cartel of one. We live in a global economy, but I see no reason not to be self-sustaining when it comes to our energy needs. There is no one silver bullet solution, but this is the best we've got.

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