Will "Shale Gas" Save the Environment or Wreck It?

ExxonMobil's CEO went before a House energy subcommittee last week to talk about the plan for America's biggest company to become bigger. Exxon is getting into the natural gas business, big time, with its proposed $41 billion acquisition of Texas gas produer XTO Energy, which holds the nation's second largest gas reserves.

Exxon plays a long game, so its entry into the gas world is a strong signal that gas might have a much bigger role in the nation's energy future. Once burned off by oilmen as a nuisance, gas has attained a charmed image as the elixir that could deliver both energy security – take that, OPEC! – and clean energy – take that, King Coal!

Ed Markey, the Massachusetts Democrat who chairs the House Energy and Commerce Committee's energy subcommittee, likely is not on Exxon CEO Rex Tillerson's Christmas card list. Markey has had numerous policy run-ins with Exxon, but at the hearing, he pointed out that the company's proposed merger with XTO signals a "fundamental shift" in America's energy markets. The shift, he explained, is the boom in "shale" gas that has attracted Exxon and other big players in the energy world.

At Markey's hearing, Tillerson said that shale gas and other "unconventional" gas sources are expected to meet most of America's domestic gas demand by 2030.

So, what is shale gas, why is production booming, and why is it unconventional?

First, a word about what natural gas is. "Natural gas" is a clever term for methane, which is the primary ingredient. Like oil, gas is found in sedimentary rock formations that are capped with denser rock trapping the gas. Drilling through the cap rock releases gas under pressure.

U.S. gas demand totaled more than 23 trillion cubic feet in 2008. That's a hard number to wrap one's mind around. Imagine a box 5 miles long, 5 miles wide, and 6 miles high. Fill it up with natural gas and you would have almost enough to meet U.S. demand for one year.

Nearly 90 percent of U.S. gas was produced at home, on shore and offshore in the Gulf of Mexico. The balance came mostly by pipeline from Canada and Mexico, with about 1.5 percent shipped into the U.S. inside gargantuan tankers that hold liquefied gas at a very chilly 259 degrees below zero.

About one-fifth of gas supply is used to keep bedrooms warm and showers hot in America's homes. Commercial and industrial uses – heating office buildings, firing industrial boilers, making chemicals – account for 42 percent of consumption. The balance is burned in power plants to generate electricity. An itty-bitty fraction, about one-tenth of 1 percent, is used to propel motor vehicles.

Unconventional gas is, by definition, harder to find and produce than conventional gas. If conventional gas is the low-hanging fruit, unconventional gas is higher in the tree. With a tall enough ladder, however, the unconventional stuff can be brought to market.

There are three types of unconventional gas, which is responsible for nearly half of U.S. production: coalbed methane, tight sands, and shale. Coalbed methane is associated with coal seams. Tight sands gas is locked into sandstone or limestone formations that are unusually non-porous. Likewise, shale gas is locked into shale rock.

Shale's share of the natural gas resource base has rocketed upward. In 2009, a group of gas experts known as the Potential Gas Committee estimated that shale accounts for one-third of the nation's technically recoverable gas resource base. The committee's re-evaluation of shale gas "plays" accounted for the 44 percent increase in the size of the total resource base from the committee's 2006 report. Large shale gas formations include the Barnett in Texas, the Fayetteville in Arkansas, the Haynesville in Louisiana, and the Marcellus in the Northeast.

Persuading gas to exit a shale formation and enter a pipeline requires a combination of clever drilling and brute force. The gas guys have known about shale for years, but it wasn't practical to produce the stuff until recently. Starting from almost nothing in 1999, shale gas from the Barnett formation beneath Dallas and Fort Worth is now the nation's second largest gas field on an annual basis.

The clever drilling involves horizontal bores that can reach more gas-bearing rock than the vertical kind. The brute force is hydraulic fracturing – or "fracking" in the trade – which involves shoving a mix of water, sand, and chemicals into the formation to loosen up the source rock.

Fracking's impact on water could be a fly in the ointment for the shale gas boom. The Environmental Working Group published a report this month concluding that fracking has been linked to drinking water contamination and property damage in several states, including Pennsylvania, Ohio, Colorado, and Wyoming. The report recommends that fracking be subject to Safe Drinking Water Act safeguards.

At a 2009 hearing of the House energy and mineral resources subcommittee, Albert Appleton, a former director of the New York City water system, warned that production from the Marcellus shale formation could pollute the aquifers supplying the Northeast's mammoth urban centers. He demanded "industrial-strength hazardous materials treatment" for waste fracking materials and disposing of them in wells that would keep the stuff isolated from aquifers. No dumping of waste frack in streams used for water supply, Appleton urged.

Industry and state regulatory officials say current safeguards are good enough. No fracking, no shale gas, the industry warns. The lawyers who wrote the ExxonMobil-XTO merger agreement built in an exit ramp. If Congress passes legislation making fracking "commercially impracticable," the deal is off.

Water, along with the economy, climate policy, and competition from renewables, nukes, and coal, will determine how far the gas boom gets and how fast.