Taking Advantage of America's Natural Gas Windfall

The nation's supply of recoverable natural gas is now at its highest level in history. According to recent estimates from the Potential Gas Committee (PGC), there is now 2,384 trillion cubic feet of recoverable natural gas in the United States. This is an increase of 486 trillion cubic feet, or 26 percent, from the 2010 estimate. The PGC is a nonprofit organization of energy experts hosted by the Colorado School of Mines that has been releasing reports on the nation's natural gas supply for nearly 50 years. Why has the estimate increased so dramatically? As PGC Director John Curtis explains, “Our knowledge of the geological endowment of technically recoverable gas continues to improve with each assessment. Furthermore, new and advanced exploration, well drilling, and completion and stimulation technologies are allowing us increasingly better delineation of and access to domestic gas resources—especially 'unconventional' gas—which, not all that long ago, were considered impractical or uneconomical to pursue.” In other words, it's becoming easier to find, extract, transport, store, and use natural gas than it was just three years ago. As improvements in hydraulic fracturing technology have lowered extraction costs, natural gas prices have dropped. According to data on gas usage and pricing information from the Energy Information Administration, Americans of all income levels collectively saved $357 billion due to reductions in natural gas prices from 2009 to 2012. And that's just the beginning. The challenge now is to exploit the enormous benefits of using natural gas to power our vehicles, generate electricity, manufacture plastics, create the heat needed for industrial processes, and more, in order to transform and energize our economy. Powering our Vehicles About 66,000 Americans are already using compressed natural gas to fuel their cars, according to the Department of Energy. Those drivers can fill their cars at the 605 natural gas stations that charge the equivalent of $1.00 to $1.40 per gallon. Or, even more conveniently, they can top off their tanks at home, once they've installed a natural gas home refueling unit. According to a Reuters report, an Arizona couple who uses a home refueling unit pays the equivalent of $0.65 per gallon. So, instead of spending $160 per month on gasoline for the 1,200 miles they drive their Honda Civic GX, the couple spends just $30 and fuels the car overnight, while they sleep. Obviously, those savings can quickly add up. However, the high initial investment has kept most motorists from driving natural gas vehicles. One obstacle is still the cost of cars that can run on natural gas; they typically cost about $10,000 more than the same vehicle fueled by gasoline. Another obstacle is the cost of installing the home refueling units. The unit used by the Arizona couple is only sold by an Italian company called BRC Fuelmaker and costs about $4,500. Installation adds another $1,500. In the Arizona case, it will take 46 months before the home refueling unit will pay for itself in lower fuel costs. That explains why BRC Fuelmaker has only sold 13,000 units in the U.S. However, several companies are now developing cheaper home refueling systems. Among the powerful entrants to this market are General Electric, Whirlpool, Eaton, and others attracted by the low cost of natural gas and an expected boom in demand for cars that burn it. In addition to the lower fuel costs compared to conventional vehicles, cars that run on natural gas have two advantages over electric cars: It takes less time to fill a fuel tank with natural gas than it does to charge an electric car. Natural gas cars can travel twice as far after refueling as the typical electric car: about 200 miles per tank. That's just the first generation of natural gas cars. Innovative new designs are now being perfected at R&D facilities around the world. Generating Electricity Just as natural gas will replace gasoline in America's trucks and cars, other developments strongly suggest that natural gas will replace coal in fueling the power plants that light our homes and businesses. One factor is a regulatory change: The EPA has proposed new, stricter air-quality standards for sulfur dioxide, particulate matter, nitrogen oxide, and mercury. In terms of all those metrics, natural gas burns far cleaner than coal. If the EPA regulations are enforced after court challenges, a Duke University study published inEnvironmental Science & Technology, estimates that about two-thirds of the nation's coal-fired power plants would become at least as expensive to run as plants powered by natural gas. This would make natural gas-fired plants the logical alternative when utilities add base-load capacity. The Production of Chemicals and Plastics Another potential windfall coming from the abundance of super-cheap natural gas is in the production of industrial chemicals and plastics. Currently, petroleum isn't used just to make fuel; it's also used to make ethylene, propylene, and other building blocks used in the production of a wide range of other chemicals. For example, the world uses 130 million kilograms of ethylene each year. It is an intermediate in the production of a wide range of materials, including chemicals, polymers, and fuels, which are ultimately transformed into films, surfactants, detergents, antifreeze, textiles, and many other products. Today, this industry is entirely dependent on high-priced petroleum. Consequently, there is a powerful incentive to find a way to convert natural gas into ethylene. The problem is that methane, the principal component of natural gas, is inert and requires high temperatures to activate its strong chemical bonds. Then, removing this excess heat is both expensive and wastes a lot of energy. So far, chemists haven't been able to solve the puzzle of how to transform methane into chemical intermediates. However, a scientist in the Netherlands, Tymen Tiemersma, has found a solution to the problem of the excess heat needed to produce ethylene from natural gas. Tiemersma realized that natural gas is also the raw material for syngas, a mixture of carbon monoxide and hydrogen, and the process requires a lot of heat. So he combined the two processes by using a catalyst that makes it possible to convert one substance into another. The production of ethylene generates extreme heat, which is needed for the production of syngas, while the syngas absorbs the heat from the production of ethylene, avoiding the need for this process to be cooled down. Using the new catalyst, Tiemersma is confident that natural gas can be cost-effectively converted into ethylene for the production of chemicals and plastics. Given the importance of being able to exploit a cheap abundant source of energy across the economy the Trends editors have identified the advancement in the domestic exploration and use of natural gas as a “Trends to Watch*.” And, it will have both a short- and long-term impact on our lives, investments, and careers