Natural Gas Development Upsets Conventional Thinking on America’s Energy Future

02 02, 2012 by The Pelican

Should Louisiana primarily export or import the vast natural gas supplies that have been harvested in just the past few years?

This question was explored at the Louisiana Mid-Continent Oil and Gas Association (LMOGA) annual meeting held in New Orleans last week.

Dr. David Dismukes, associate director and professor at the Louisiana State University (LSU) Center for Energy studies, sees ample room for both. He was one of several speakers who commented on the “unconventional plays” built around the natural gas boom and the Haynesville Shale deposit in particular located in the northwest part of the state.

“As long as we can preserve the policies we have now and facilitate the development of this natural gas, we will have a large enough tent to facilitate these industries,” Dismukes told audience members gathered at the Roosevelt Hotel.

He also said the capital investments that have gone into pipelines, processing and other infrastructure suggest that continued development of natural gas supplies will have continued durability. In addition, Dismukes sees a strong long-term potential for using natural gas with vehicles, but cautions that the sector is still in its earliest stages and requires sustained support and encouragement.

The turnaround in Louisiana, and the country as a whole, is remarkable in light of what leading economic and political figures said just a few years ago, Scott Angelle, secretary of the Louisiana Department of Natural Resources, said during his presentation. In 2003 testimony before Congress, then Federal Reserve Chairman Alan Greenspan declared that there was not enough gas in the U.S. and that the country would need to rely on imports, Angelle informed audience members.

“Think of the generational shift we have experienced,” he observed. “In 2003, the number one economist on the planet said we did not have enough natural gas in America, and seven years later, that’s the snap of a finger, we are talking about seven years where things have changed so dramatically, where instead of importing natural gas we are working and supporting opportunities for exporting natural gas.”

Angelle also acknowledged the ongoing concern some industry officials have about the possibility of suspending the tax exemption for horizontal drilling, but said Gov. Bobby Jindal has made it clear that he would keep the exemption in place. But he did call for policy changes that better accommodate the accelerated pace of natural gas development.

“I don’t think we can build infrastructure quick enough to take advantage of the huge supplies of natural gas,” he said. “Our energy policies are like an aircraft carrier. It takes a long time to change policies. But with our energy policy, we need more of a speedboat mentality, not an aircraft carrier.”

In his talk, Angelle offered up some statistics on natural gas that drove home how strategically vital the Haynesville Shale has become. Out of 19,845 natural gas wells that are active in Louisiana, 1,805 are Haynesville wells, the secretary said. The 1,805 Haynesville are now responsible for 68 percent of production in the state, according to the figures Angelle cited.

The aftermath of the BP oil rig explosion that took place in April 2010 and the subsequent moratorium was another point of discussion throughout the conference. While the regulatory climate in Washington D.C. is always a point of concern, Angelle indicated that rig operators in the Gulf of Mexico had some cause for encouragement.

He noted that Tommy Beaudreau, director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), received a warm welcome from attendees.

“Director Beaudreau would not have come in my mind, if he did not feel comfortable that he was coming to a place where folks would treat him fairly,” Angelle said.

Even with better cooperation out of Washington D.C., LMOGA president Chris John said in an interview he would prefer to see states have oversight of hydraulic fracturing and horizontal drilling rather than the federal Environmental Protection Agency (EPA).

“Each state has its own unique geography and geological formations,” he explained. “Instead of a one size fits all approach from the EPA, we need to let the states and establish the right regulatory environment. Here, I think Louisiana can serve as a model to other of the country because there is a good balance between environmental concerns and energy production.”

The Haynesville Shale has been a success in part because industry officials have been very upfront and transparent about development plans with local residents who are directly effected.

“You have to remember the constituencies are very different in the Marcellus area instead of say the Gulf where the only constituency you have are the companies,” John explained. “But when you are dealing with neighborhoods, police departments, local governments and mom and pop operations they understandably want to know what this means for their lives and their community. With the right approach, I think people can see that they have a stake in land leases that bring in revenue and open up new opportunities. Transparency is the key because it opens the way to some very strong partnerships.”

Still, after the BP incident, the LMOGA membership is very mindful of the high bar that has been set, he added.

“The norm now in industry is to have no incidents,” John said. But just one incident can be catastrophic and shut everything down.”