Thursday, January 28, 2010

The State of the Union

I really hate watching the State of the Union Address each year, no matter who is delivering the remarks. I despise the pandering and the constant applause. Now with the Republican response mimicking the style of the main address, it is doubly painful. I mostly tuned out the address last night and read the transcript this morning. It’s funny – I accidentally fiist pulled up President Bush’s 2008 speech, and the section on energy was very close to President Obama’s.

I was disappointed, but not surprised, to see no mention of natural gas in the speech. There was the predictable emphasis on clean energy and pandering (and misguided) nods to biofuels and “clean coal” but no mention of the energy riches below our feet. Truthfully, the president didn’t need to talk about it because it is neither part of his legislative agenda nor his long-term vision. But development of these resources is happening as we speak.

But for all the discussion of investing in clean energy (which I support), we shouldn’t overlook one of the great technological innovations in the energy industry in our generation:  the combination of horizontal drilling and hydraulic fracturing to retrieve natural gas from source rocks. We often overlook the magnitude of this innovation. Until recently, we could only retrieve oil and gas from reservoir rocks, formations that collect the minerals that slowly seep out of source rocks over millions of years. With this new technology, now we can extract resources directly from the source formations. It’s the difference between someone pouring you a small glass of water when you’re thirsty and being able to take the entire pitcher yourself. It’s not an unlimited source, but now we don’t need to wait millions of years for the gas to seep into the reservoir. This is huge.

This is a technological revolution that was developed in the United States and is one that we can readily export around the world. (Chesapeake Energy is already doing this through partnerships with international E&P companies.) It is also one of the few areas of technology that we can actually manufacture in the U.S. While we can become experts in solar and wind technology, ultimately it will be too expensive to mass manufacture solar cells and wind turbines in the U.S. because of our high standard of living. In our lifetimes, it will always be cheaper to manufacture mass produced goods in other countries. But most of the devices associated with shale gas extraction are made cost-effectively in our backyards and can be exported all over the world.

As a nation, we have long aspired to export our democratic form of government to other countries to make them independent and self-sustaining. Outside of “nation building;” however, this is not a realistic task. One of the things holding back many countries is their dependence on other nations for energy supplies. But it is becoming clear is that gas-bearing shale formations exist all over the world. By providing the tools and expertise to tap these resources can help start other nations on a path towards greater energy independence. You start to remove the shackles and watch what happens. I’m not na├»ve enough to suggest that shale gas is the silver bullet, but it has the chance to lead to significant improvements around the world.

In his address last night, President Obama also talked about doubling U.S. exports over the next five years. The U.S. is already a leader in oil and gas technology, and helping develop unconventional resources around the world would be a huge boon for U.S. businesses.  Our companies will develop and export technology, help build infrastructure across the world and participate in the production of gas in other countries. We’re talking about big business and lots of U.S. jobs.  Plus, it also works like traditional exports: we generate money from other nations through the sale of our expertise.

It is unreasonable to believe that we can flip a switch and have a zero carbon, clean energy world overnight (or within decades). We need to march down parallel paths to make the fossil fuel world, on which we will depend for years to come, more efficient and environmentally sound, while simultaneously developing technologies to unlock the next generations of energy. While the government needs to economically support the development of the next generations of energy supply, Washington needs to understand and support the reality of and opportunities for natural gas in tomorrow’s energy supply.

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