Others call it a detour, since it is still a fossil fuel and it is undercutting nuclear, wind and solar energy as well as coal. “Bridge to clean future or U-turn to dirty past?” said a headline on the blog of the environmental group Earthjustice. The United States has drilled more oil and gas wells than any other country, and the new wave of supplies has brought a new wave of rigs dotting the countryside and new crisscrossing pipelines.
For environmentalists, the abundance of shale gas poses a political and environmental dilemma. As new gas supplies fuel more and more industrial plants, new constituencies will have stakes in gas production, making it politically harder to impose new regulations. The Environmental Protection Agency is weighing whether to issue additional federal guidelines on various disruptive aspects of shale gas drilling, including the disposal of toxic water used to fracture formations and air pollution from drilling operations. The EPA might also issue rules requiring drilling techniques that would make contamination of water aquifers less likely.
But one thing is clear: Tumbling natural gas prices have changed every calculation and assumption about the energy business.
Perhaps no one benefits more from low natural gas prices than the petrochemical industry, which relies on natural gas as a feedstock and as a source of power. Natural gas, in turn, produces the building blocks for other products, including paints, solvents, plastics, packaging, inks, dyes and lubricants.
And no industry better demonstrates just how much has changed in a short period of time. Chemical-industry employment slid 17 percent from January 2002 through January 2011, according to the Bureau of Labor Statistics.
In October 2005, after Hurricane Katrina pounded Louisiana, the price of natural gas had spiked to $14 per thousand cubic feet. Supplies were scarce even before the storm, and Dow Chemical had temporarily shut down one of its biggest petrochemical plants.
“We say it unequivocally — the U.S. is in a natural gas crisis,” Dow Chemical chief executive Andrew Liveris said in Senate testimony at the time. “The hurricanes have dramatically underscored the problem, but they did not cause it.” Natural gas prices, once $2 per thousand cubic feet, had soared sevenfold. Gas accounted for half of Dow’s costs, he said.
“We simply cannot compete with the rest of the world at these prices,” Liveris added. “We and others are now investing in China and the Middle East, where energy is much cheaper, to our incredulity. Our industry will continue to grow. It’s simply a question of where we will grow.”
Among the deals it made: one with Kuwait and a $20 billion joint venture with Saudi Aramco to build facilities in Saudi Arabia using cheap gas found along with oil there.
Today, Dow Chemical is drawing up plans to construct a plant in Freeport, Tex., and is restarting a plant in St. Charles, La. And year-end nationwide chemical-industry employment has edged up for the first time in a decade, the Bureau of Labor Statistics says.
Methanex chief executive Bruce Aitken said natural gas prices made moving operations to Louisiana attractive.
“The proliferation of shale gas in North America has resulted in a structurally low natural gas price environment, which underpins the very attractive economics for this project,” he told investors in a July 26 conference call.
He said moving the methanol plant from Chile to Louisiana will pay off in less than four years if gas prices stay around $4 per thousand cubic feet. He said the company was considering moving a second plant from Chile to Geismar, La.
CF Industries was also lured by the price and proximity of natural gas in Ascension Parish. Gas makes up about 70 percent of manufacturing costs at its ammonia and urea units. The company said the site is served by five pipelines at prices set at the nearby Henry Hub, which is the nationwide benchmark for spot gas prices.
Foreign companies are also eyeing U.S. natural gas.
In September, a large Egyptian construction company announced that it would build a new nitrogen fertilizer production plant in southeast Iowa to supply customers in the U.S. Corn Belt. Cairo-based Orascom Construction Industries, one of the world’s largest fertilizer makers, said the $1.4 billion plant would be “the first world-scale, natural gas-based fertilizer plant built in the United States in nearly 25 years” and would reduce U.S. dependence on imported fertilizers.
After years of losing manufacturing jobs, most American communities are vying to lure industries.
Orascom chose Wever, Iowa, over Illinois because part of its investment will be funded by a tax-exempt bond. The Iowa Economic Development Authority approved an incentive package that is expected to provide tax relief “in the order of $100 million,” the company said.