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The Natural Gas Revolution: Critical Questions for a Sustainable Energy Future

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The Natural Gas Revolution: Critical Questions for a Sustainable Energy Future The Natural Gas Revolution: Critical Questions for a Sustainable Energy Future $ Alan J. Krupnick, Raymond J. Kopp, Kristin Hayes, and Skyler Roeshot March 2014 About This report is part of Resources for the Future’s (RFF) Natural Gas Initiative, a collaboration between RFF’s Center for Energy Economics and Policy (CEEP) and RFF’s Center for Climate and Electricity Policy (CCEP). Authors Alan J. Krupnick, RFF Senior Fellow and Director of CEEP Raymond J. Kopp, RFF Senior Fellow and Director of CCEP Kristin Hayes, Assistant Director of CEEP and CCEP, RFF Skyler Roeshot, Research Assistant, RFF Acknowledgements RFF thanks the Goldman Sachs Center for Environmental Markets for its generous support of RFF’s Natural Gas Initiative, including sponsorship of the July 2013 convening that served as the launching point for this report. Thanks to the following individuals for their time and expertise in reviewing the report: Jeff Burleson, Southern Company David Goldwyn, Goldwyn Strategies Jan Mares, Resources for the Future Rod Nelson, Schlumberger Frank O’Sullivan, Massachusetts Institute of Technology Kyung-Ah Park, Goldman Sachs For More Information For questions, contact Kristin Hayes at [email protected]. Resources for the Future (RFF) is an independent, nonpartisan organization that conducts economic research and analysis to help leaders make better decisions and craft smarter policies about natural resources and the environment. RFF is located in Washington, DC, and its research scope comprises programs in nations around the world. © 2014, Resources for the Future Acronyms AEO Annual Energy Outlook GDP gross domestic product API American Petroleum Institute IAM integrated assessment model BAU business as usual IEA International Energy Agency BLM US Bureau of Land Management INGAA Interstate Natural Gas Association of America Btu British thermal units JGCRI Joint Global Change Research CCS carbon capture and storage Institute CNG compressed natural gas JKT Japan, South Korea, and Taiwan DOI US Department of the Interior LNG liquefied natural gas EDF Environmental Defense Fund mcf million cubic feet EIA US Energy Information OECD Organisation for Economic Co- Administration operation and Development EMF Energy Modeling Forum PGC Potential Gas Committee EPA US Environmental Protection Agency ppm parts per million FEEM Fondazione Eni Enrico Mattei RPS renewable portfolio standard FTE full time employee tcf trillion cubic feet GCAM global change assessment model TNC The Nature Conservancy GHG greenhouse gas(es) USGS US Geological Survey Acronyms ..............................................................................................................................................................i Introduction ......................................................................................................................................................... 1 Critical Questions at a Glance ............................................................................................................................. 2 The Expanding Supply of Natural Gas ................................................................................................................ 6 Resource Base ........................................................................................................................................................................6 Supply Elasticities ..................................................................................................................................................................7 Production Cost Uncertainty ...............................................................................................................................................7 Infrastructure .........................................................................................................................................................................8 Demand by Sector ............................................................................................................................................... 9 The Electric Power Sector ....................................................................................................................................................9 The Industrial Sector ............................................................................................................................................................10 The Transportation Sector ..................................................................................................................................................11 Exports ..................................................................................................................................................................................12 Economic Consequences of Increased Natural Gas Production ........................................................................ 13 State and Local Economic Impacts ....................................................................................................................................13 Sector Impacts ......................................................................................................................................................................16 National Economic Impacts ................................................................................................................................................17 Environmental Impacts ...................................................................................................................................... 19 Water Quantity .....................................................................................................................................................................19 Water Quality ........................................................................................................................................................................20 Air Quality .............................................................................................................................................................................20 Habitat ...................................................................................................................................................................................20 Human Health .......................................................................................................................................................................21 Ecosystems and Species ......................................................................................................................................................21 Other Impacts .......................................................................................................................................................................22 Cumulative and Scalar Risks ................................................................................................................................................22 Valuation ................................................................................................................................................................................22 Messaging .............................................................................................................................................................................23 Abundant Gas and Global Climate Protection .................................................................................................. 24 The Natural Gas “Bridge”: Substitution for Other Fuels .................................................................................................24 Fugitive Emissions ................................................................................................................................................................25 Aggressive Emissions Goals ...............................................................................................................................................26 Regulation, Best Practice, and Liability ............................................................................................................. 28 Regulatory Frameworks .......................................................................................................................................................28 Best Practices: Voluntary Industry Behavior ......................................................................................................................30 Liability ..................................................................................................................................................................................31 Comparing Regulations, Liability, and Best Practices .....................................................................................................31 International Markets for Natural Gas ............................................................................................................... 32 Consumption ........................................................................................................................................................................32 Production and Supply ........................................................................................................................................................32 Transportation ......................................................................................................................................................................34
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