As Ian Urbina reported:

The agency estimated that there are 482 trillion cubic feet of shale gas in the United States, down from the 2011 estimate of 827 trillion cubic feet — a drop of more than 40 percent. The report also said the Marcellus region, a rock formation under parts of New York, Ohio, Pennsylvania and West Virginia, contained 141 trillion cubic feet of gas. That represents a 66 percent drop from the 410 trillion cubic feet estimate offered in the agency’s last report.

Rather  than hurling accusations about incompetence or malfeasance, Urbina began the piece with a straightforward lead emphasizing the “difficulty and uncertainty in predicting natural gas resources.”  EIA’s history on estimating oil and gas resources includes repeated attempts to get folks to understand that doing those estimates is indeed a highly uncertain exercise — we’re glad to see a reporter educating the public on that front.

The explanation for the downward revision is simple:  “Drilling in the Marcellus accelerated rapidly in 2010 and 2011, so that there is far more information available today than a year ago.” 

Urbina also gets it just right on why an understanding of the resource base matters:

The estimates are important because they underpin policy decisions on energy subsidies and exports. Market analysts look to these estimates in making investment decisions. Historically, they have varied widely based on assumptions about the future of technology, coming regulations on drilling and the long-term price of gas.

The lesson here?  Because estimates vary widely over time, policy-makers must be wary about basing decisions with major implications for fuel use — and usually long-tailed implications — over today’s snapshot of the available resource.

Nonetheless, even these new, lower estimates merely make an incredibly great US energy landscape instead simply really, really great:

The share of natural gas produced by drilling in shale formations is projected to more than double, from 23 percent in 2010 to 49 percent in 2035, the report said. The United States will also become a net exporter of liquefied natural gas by 2016, while natural gas prices are expected to remain low for more than a decade, according to the report.

And that’s still the promise of shale gas, even at the new, lower resource estimates:  low, stable prices for residential and industrial consumers with exports that help our balance of trade.  Oh what a difference a few years can make.  Instead of the clamor to build LNG-importing terminals in the face of volatile and rising domestic prices we saw around 2005, policy-makers in 2012 now have the luxury of weighing the value and extent of an export strategy against the other competing potential uses of this important resource.  That is a much better challenge to have.

First things first.  In a fairly stunning piece, even to jaded DC insiders, former Congressman William Delahunt (D-MA) is reported to be working for the small coastal town of Hull, on Massachusetts Bay “for help in developing a wind energy project.”

The catch?  “While in Congress, he personally earmarked $1.7 million for the same energy project.”  And it gets worse, as “80 percent” of the funds his firm will receive will be “from the pot of money he created through a pair of Energy Department grants in his final term of office, records and interviews show.”

Now most former members of Congress who end up in law and lobbying firms claim they aren’t actually lobbyists but instead are “strategists.”  And the former Congressman released a statement quoted by the NYT saying:  “I have no federal lobbying relationship with any past or current client.”  That may be news to the town of Hull, who’s town manager is quoted a few paragraphs later using a textbook definition of access-lobbying:

“Obviously he’s got connections into the federal government that we don’t have . . . . We’re hoping he can open doors at the federal level that we could never open.”

So the Hull wind energy project will soon join Solyndra as grist for the argument that the federal government should not be providing incentives for clean energy technology deployment because those incentives are inevitably transformed into “crony capitalism.”  But just as Solyndra was evidence of the misuse of an innovative technology loan guarantee program for economic stimulus rather than evidence of a problem with government incentives; so too is the Hull project actually a fair indictment of earmarking rather than a fatal flaw in the concept of deployment incentives.  The solution?  Programs that provide funding only where the merits of various projects can be clearly compared using  objective metrics rather than “awarded” through either the legislative process or via an opaque administrative ”negotiation.”  Reverse auctions — where bidders commit to delivering X units of energy at Y cost to the taxpayer and only the best deals are then funded — are particularly suitable for such an objective process.

The second piece begins with the type of human interest angle that can obscure rather than teach, as (again, Massachusetts) a hilltop homeowner laments that the local utility wouldn’t run a natural gas line out to his place and he must instead rely on expensive home heating oil.  The real story, as we soon learn, is that home heating oil users are spending between double and triple what their natural gas-using counteparts do.  Some are out of luck due to location; others because they can’t afford the cost of conversion — even though savings due to lower monthly bills may pay for the investment in just a few years.

What’s the current federal policy response to this problem?  It is a well-intentioned effort to help low-income homeowners stay warm in the winter through the much-maligned Low Income Heating Assistance Program, or LIHEAP, whereby taxpayers subsidize the heating bills of qualified consumers.  Unfortunately, that neither fixes the problem nor encourages conservation, but instead simply transfers wealth to homeowners (and ultimately heating oil providers) “trapped in a cycle of spending more and more for heat . . . .”

Is there a better way?  For some, it could be the hugely popular state and local program called PACE — Property Assessed Clean Energy Bonds (see www.pacenow.org).  Designed to let homeowners invest in energy efficiency retrofits in an affordable way, at no cost to taxpayers, this program has been literally sweeping the nation during the last few years.  And if it doesn’t include switching from heating oil to natural gas as an eligible activity, it should.  That would be an obvious energy market intervention worth making.  No earmarks required.

First, in “Glut Hits Natural-Gas Prices,” the WSJ reports:

U.S. energy companies are pumping so much natural gas out of the ground that prices are plummeting, and the cheap gas isn’t likely to evaporate anytime soon.

Natural-gas prices fell 5.7% Wednesday to their lowest level in over two years—good news for people who use gas to heat homes and for companies that use it to power factories.

For U.S. energy companies, however, the domestic natural-gas market is looking increasingly out of whack. Despite a 32% drop in prices last year, onshore production rose 10%, and it is expected to rise another 4% this year, according to Barclays Capital. As a result, prices are expected to remain low for at least the next couple years.

Prices may even drop through — or at least near — the old $2 per mBtu floor that hadn’t been hit since 2002.

So what to do with all this gas?  The WSJ provides one answer in their story on utility emissions, “Power Plants Top List of Emissions.”  This is the first time EPA has made detailed emissions information publicly available, and not surprisingly:

Power plants accounted for more than half of the greenhouse-gas emissions by the major emitters on the list, with refineries and chemical facilities also contributing large shares.

So clearly one thing to do with all this gas is use it for power plants while we figure out how to burn coal more cleanly.

Another thing that can be done is referenced in Bloomberg today, who reports that: 

Chrysler Group LLC, the automaker controlled by Fiat SpA, plans to begin selling natural gas- powered pickups in the U.S. this year, said Sergio Marchionne, chief executive officer of both automakers.

Apparently deliveries will begin in the US in 2017 to, appropriately enough, fleet customers.  The reason to start with fleets is obvious and well reported by Bloomberg:

Infrastructure for refueling natural gas vehicles is limited. The International Association for Natural Gas Vehicles says on its website that there were 1,000 stations and 112,000 natural-gas vehicles in the U.S. as of December 2010. The worldwide totals were 12.7 million such vehicles and 18,202 refueling stations, according to the association’s data.

So you start with fleets that can make the investment in refueling infrastructure and can then recapture the investment in lower engine and fuel costs versus diesel and electric hybrid — estimated by Fiat as $3,000 in engine costs alone for natural gas versus $3,300 for diesel and $8,000 for an electric hybrid.

Natural gas for power and natural gas for fleet vehicles where it makes sense.  That’s a pretty sound use of this currently plentiful commodity and a likely recipe for sustainable pricing.

Does hydraulic fracturing to obtain natural gas cause earthquakes?  Yes.

This stark opening was quickly followed by a reasoned explanation of the relationship between fracking and seismic activity, and that technical discussion then succeeded by a recognition of the game-changing fact that is our natural gas bounty:

Yet fracking in America’s massive Marcellus Shale formation could provide a large, domestic source of energy with fewer harmful emissions and half of coal’s carbon output.

The WaPo goes on to recognize the jobs bonanza that is already flowing from the shale production, and makes the unobjectionable recommendation that more study and probably more regulation will be needed. 

The paper also cites the US Geological survey for the proposition that of the 144,000 storage wells of this type in America, only a tiny fraction have been linked to earthquakes.

Unfortunately, the thoughtful analysis that followed the attention-grabbing first line may be lost in future references to the Post.  This is an area where trying to be provocative is probably not a good idea.

Saturday’s WSJ reported on natural gas prices falling through the $3 per million Btu floor at the end of December — for the first time in two years.  More downward price pressure will come from the fact that inventories aren’t being drawn down sufficiently — the Journal reports they are at “their highest ever for this time of year and about 12% above year-ago levels.”

This is a case where ever lower prices may not be good for consumers.  A sustainable price will be needed to keep production levels up, though it is true that, as the WSJ further noted, producers “have shown little desire to curb output.”

At some point, pricing and irrational environmentalism (or simple NIMBYism) will begin to really rain on the gas parade.  Let’s hope that markets and policy-makers can adjust before it’s too late.

EPA Orders Deep Cuts in Emissions:  Rule is Big Win for Health Advocates; Republicans Vow to Continue Fight

Tracy and Solomon report the substance well: 

“The rule would require deep cuts in emissions of mercury, acid gases and soot from coal-fired power plants and is likely to reshape the industry as companies turn off old plants and decide whether to clean up existing ones or switch to cleaner-burning fuels such as natural gas.”

Note well that last bit about fuel switching.  Back when EPA started working on a mercury rule during the Bush 43 Administration, “fuel-switching” was something to be avoided.  At that time, the fear was that utilities would be forced to switch to more expensive natural gas, whose price volatility would wreak havoc with the electricity markets.

Today it’s a different story, and one reason that fears about blackouts in the face of the rule are wildly overblown is because at today’s gas prices, in some places, utilities are directly combusting  cheap natural gas without modifying their coal-fired units at all.  They’re paying a big inefficiency price, but the economics still work, and fuel-switching has become a good thing (except for coal miners).  So an orderly shutdown of dirty old coal plants and a restart of idle gas plants — or a retrofit or new build where there aren’t any idle ones — means this rule is likely to have little negative impact on electricity reliability at all.  As Tracy and Solomon note, the largest grid operator, PJM Interconnection, “said the process would allow it to maintain reliability.”

That is, of course, if natural gas prices stay low and stable, or only rise slowly and steadily over time.  And that leads us to the piece on B7 by Tennille Tracy:  Gas Exports Ignite a Feud:  Energy Firms Promote Exports, but Manufacturers Fear Their Costs Will Climb.

Tracy alerts readers to a very important EIA analysis to be delivered “in a few weeks” as to “whether exports will drain U.S. supplies and inflate domestic prices.”

Stay tuned for that, but of course exports can’t possibly “drain supplies.”  The extent to which prices rise as we connect a North American natural gas market to the global market, however, will have serious implications for both manufacturers (some of whom both consumer electricity and use natural gas as a production input) and your average rate-payer alike.

The so-called “Utility MACT” rule was signed Friday night — as Juliet Eilperin and Steven Mufson reported in Saturday’s WaPo:

The Obama administration finished crafting tough new rules Friday curbing mercury and other poisons emitted by coal-fired utilities . . . culminating more than two decades of work to clean up the nation’s dirtiest power plants.

The signing resulted from last-minute negotiations between the White House and the Environmental Protection Agency over flexibility that would be available to EPA to lengthen compliance periods.  That’s probably a good thing.  Given our abundant natural gas, many utilities can make the economics work to switch from coal to gas.  Where reliability may suffer as a result, deadlines should be extended.

WaPo then reported that the President had to make several environmental concessions to congressional Republicans late Friday night as part of a deal to extend the payroll tax cut.  Senate leaders agreed Friday night on a provision that would accelerate the Keystone XL pipeline permitting decision . . . .

And in return, a congressional rider on the Utility MACT was dropped.  Sounds like a good trade.  But let’s be clear about language here: the decision on Keystone has been ripe for some time.  The State Department EIS is done and has been for months.  What has now happened is that Republicans have countered the President’s move to delay a final decision until after the election.  To call it “accelerating” a permitting decision is just spin.  ”Accelerating” a political decision is more accurate. 

Now this deal is not yet done, as the Sunday shows and Monday papers reported.  Speaker Boehner is once again facing a revolt from his rank-and-file — not over either of the MACT for Keystone deal, but over once again increasing the debt by handing out a tax holiday.  So while the principals have all agreed on a Keystone deal, the vehicle in which is it riding is not yet over the finish line.

And even if the deal holds, it could backfire.  One potential outcome prior to this move was that the pipeline would be rerouted and ultimately approved by a new Republican presidential administration.  Now POTUS can argue that 60 days is too short to discuss a reroute and he can make the decision in February to deny the permit.

And then Congress can, one supposes, seek to overrule that decision — but that will be a steep hill to climb.  Republicans think they win on the politics by forcing cancellation and using it as a campaign issue.   Whether or not that’s a smart political calculation, the real question is where does the Canadian oil end up — in the US or in China?

The battle is playing out in Pennsylvania as the Republican-controlled legislature considers bills that would in their current form sharply limit a community’s right to control where gas companies can operate on private property. Critics say the final bill could vastly weaken local zoning powers and give industry the upper hand in exchange for a new tax, which municipalities badly need.

Local governments argue that drilling is an industrial activity, just like that of a gas station or a cement factory, that should be subject to zoning. Dozens of towns, cities and counties across the country have enacted rules on drilling noise, lighting and the distance from homes and, in some cases, outright bans. In New York State alone, there have been at least 70 such actions.

Companies say the rush to regulate has produced an overly burdensome set of demands that is denting their potential when the economy desperately needs a lift.

Supporters of the Pennsylvania legislation argue that it would hold the industry to higher, more uniform environmental standards in addition to charging them fees.

This question of where to regulate is a critical one.  And many view local governments as only half right:  Yes, energy production is “an industrial activity” — but it’s not “just like . . . a gas station or a cement factory.”  Most commercial industrial activities can be sited in areas appropriate for the specific activity.  Energy production needs to occur where the resource is – whether that’s coal, oil, natural gas – or even wind and solar.  And energy is the lifeblood of the US economy.  Energy produced in one locale is depended on by folks living in many others.   So holding industry to high uniform environmental standards while ensuring that local fears don’t trump regional needs makes regulation of energy production at the highest practicable governmental level the right answer for our nation’s energy security.

1.  Ana Campoy and Stephanie Simon reported on a dispute in Oklahoma over a wind farm that may interfere with oil production.  The Osage Nation owns the mineral rights to nearly 1.5 million acres in Osage County, and has since the early 1900s. The Missouri-based Wind Capital Group has leased land to set up windmills from private parties on that same real estate.  The interesting legal question is whether building a wind farm will impair access to the land needed to develop the mineral rights.  And of course the wind farm side of the dispute is pleading urgency, as financing is “contingent on a government tax credit that is only available until the end of 2012.”

Here’s the problem with that:  Those tax credits are production tax credits that only make wind economical — if at all in the face of cheap natural gas — if they are extended every year, not just once.  And even if they are extended, long-range they are doomed.  In a time of abundant fuel for electricity contrasted with extremely expensive oil, the right answer in this dispute is to shelve the wind project and produce the oil, if that’s what it takes.

2.  Bravo to the EU, and specifically the French, for seeking to ban Iranian oil imports in an “unprecedented step against the world’s third-largest oil exporter over its alleged nuclear-bomb program,” according to reporters Laurence Norman, Max Colchester, and Benoit Faucon.  While it’s great to see the French pushing this, it would be nice to hear US policy-makers lending support.

3.  Sharon Terlep reported on the NHTSA investigation into the fire risk posed by the Chevy Volt after “crash tests caued fires in two instances, a development that could be a serious setback for electric vehicles.”  On one level, this makes sense, but should we really worry about brief fires “within hours or days” after “the agency intentionally damaged the battery compartment and ruptured the coolant line”?  Sounds like a bit more than a crash risk, and more like sabotaging a machine to cause a problem.  We’ll be following this story.

4.  And finally, the WSJ editorial page took another shot at the “green jobs” ideology, pointing out that “the real employment boom is taking place in oil and gas.”  Not surprisingly, our recent explosion in domestic oil and natural gas production has been good for workers.  We’ll end on the good news:

“(O)il and gas production . . . now employs some 440,000 workers, an 80% increase, or 200,000 more jobs, since 2003.  Oil and gas jobs account for more than one in five of all net new private jobs in that period.”

Saturday’s WSJ also noted that forecasts of colder temperatures caused natural gas futures to jump 4.2% to $3.923 per million Btus.  ”Frosty Air Heating Up Gas Futures” quoted Matt Smith at Summit Energy:  ”It’s all about the weather.”    The same article reported that US EIA found underground gas inventory up 92 billion cubic feet, “much higher than the five-year average build for the current period.”  If futures can “jump” to only $3.92 per MBtu, the news is really how astoundingly low natural gas prices will probably stay. . . .

Front page in multiple papers Saturday on White House review of all loan guarantees made by DOE under the stimulus bill.  WaPo headline:  ”White House orders audit of Energy Dept. loans: Move comes amid GOP subpoena threat in Solyndra case.”  The story that won’t die, the “review is a tacit acknowledgment that the loan program, defended by President Obama and his senior advisers for weeks, has raised enough internal concern that an outside assessment is necessary to clear the air and determine its future.”  Good luck clearing the air.  Loan guarantee program future is bleak . . . .

Front page Sunday NYT:   “A New York Village’s Debate Over Drilling Turns Personal”:  ”The debate over horizontal hydraulic fracturing . . . has become increasingly contentious across the Eastern United States, with dozens of communities passing or considering bans.”  No real news here, including the allegation that fracking opponents are also generally “antigrowth fanatics, opposing a once-a-year music festival . . . wind turbines . . .even additional Little League fields. . . . .”

And the most important piece of the weekend, Dan Yergin in Sunday’s WaPo, Outlook section.  In “Oil’s new world order,” Yergin makes the point that the global geopolitical balance of power in the oil economy is shifting.  He finds that a “new world oil map is emerging” . . .”centered not on the Middle East but on the Western Hemisphere.”  But don’t breathe a sigh of relief yet, for since “there is only one world oil market” the U.S. “will still be vulnerable to disruptions . . . .”  Darn.

“As federal stimulus dollars for investment in renewable energy begin to dry up, will the private sector rush in to fill the void?  Maybe not.”

Eilperin and Mufson (let’s call them “E&M”) build an effective case for why it is unlikely — and in doing so provide a strong rationale for questioning the original stimulus spending rationale.  Yet the piece also implies a path forward for policy-makers that makes sense for our global economic competitiveness, our domestic economy, and our energy security.

E&M provide some very useful facts:  “Venture capital investments in what the industry calls “clean tech” companies” were down some 44 percent compared to the same time last year, outpacing the overall 26 percent decline in overall US venture capital investment.

E&M are on target when they write that the future is unlikely to be rosy for VC in electricity-related clean-tech:

“Now, an abundance of cheap natural gas extracted from shale, the death of climate change legislation and fierce competition between existing renewable energy companies have combined to make venture capital investors hesitate even more.”

Fair enough.  These market forces (and lack of federal policy that internalizes some environmental costs for fossil fuels) are the same ones that make new nuclear build such a long shot.  Yet we should be celebrating the fact that we have cheap, clean natural gas available for electricity generation — while focusing our efforts on the area of need.

And what’s that?  Our continued dependence on increasingly expensive oil.  Let’s gear federal policy and private capital toward dealing with that present danger to our economy, rather than trying to make markets for expensive clean tech where good alternatives already exist.