American Oil and Gas Reporter - March 2016 - 47

SpecialReport: Gas Industry Strategies
tion projects had been announced or started in the lower-48 as
of April 2015, representing $138 billion in capital investment, and
providing 655,000 permanent new jobs and $266 billion in economic output by 2023. In 2014, EIA projected these new facilities would increase demand for ethane by 50 percent (or
600,000 barrels a day) and propane by a factor of four (nearly
200,000 bbl/d) by the end of 2018.
The most remarkable part of the boom in "re-shoring" and new
petrochemical plant construction is that it represents a complete
reversal from 15 years ago, when petrochemical companies-among
the most price-sensitive of all consumers-were leaving the United States in droves because of perceived shortages and high prices.
Shale gas has changed the dynamics completely for the U.S. petrochemical industry, and every consumer in the United States stands
to benefit from that transformation.
Furthermore, manufacturing is enjoying both significant reshoring and a renaissance that is transforming the "Rust Belt" to
a new era of growth and health. Manufacturing is sensitive to oil
and gas prices also because materials used to make virtually everything utilize petrochemical products as base materials (e.g., plastic), utilize natural gas as fuel for processes (e.g., steel), and consume electricity generated by burning natural gas.
Embracing Natural Gas
In fact, with significant increased use of natural gas for electric generation, a report from Boston Consulting Group estimates
the average U.S. household stands to save $150-$190 annually
on electricity bills over the next decade, not to mention another
$280 a year in savings on finished goods and services, and $230
in home heating by 2025.
Natural gas has all but ended coal's long-standing reign as the
dominant fuel source in U.S. power generation. In April 2015,
for the first time, more electricity was generated from natural gas
than from coal.
The most recent EIA statistics (through November) show that
natural gas-fired generation has exceeded coal-fired generation in
every month since July, and the gap is widening. In November,
natural gas accounted for 101.9 million megawatt-hours of generation versus 87.8 million mw/hr for coal. This is a massive shift
in fuel sourcing compared with 10 years ago, when coal's share
of the electric market was more than double that of natural gas.
The transition to natural gas has been under way for several
years, and was initiated without any government mandates on fuel
switching. Electric utilities are embracing gas for two reasons:
* It can compete head-to-head with coal as the lowest-cost
fuel.
* It reduces emissions significantly. In fact, natural gas
plants emit 45 percent less carbon per energy unit than coal,
and have a much smaller environmental impact.
Moreover, combined-cycle gas plants are relatively simple to

build, with favorable capital and long-term operating costs.
In the Marcellus and Utica region alone, six new gas-fired generation plants are being built in Ohio, eight in Pennsylvania, and
three in West Virginia. The six Ohio plants will provide 78 percent of the state's total power requirements when all that capacity comes on line over the next few years. To put that percentage in context, consider that Ohio has ranked historically among
the four largest coal-consuming states, and coal accounted for more
than 80 percent of statewide generation as recently as 2011.
Environmental Benefits
The move to gas has demonstrated another positive outcome:
The United States is leading the world in curbing carbon dioxide
emissions, as well as emissions of sulfur, mercury, ash and other pollutants. U.S. CO2 emissions declined by more than 800 million tons between 2007 and 2012, to their lowest level in 20 years.
Even though the United States did not ratify the United Nation's Kyoto Protocol, it was the only industrialized nation to meet
2012 targets for CO2 reductions, primarily because of gas
growth in power generation.
Coal displacement is obviously bad news for the coal industry, but the silver lining is that large coal-producing states-including Pennsylvania, West Virginia, Ohio and Wyoming-have significant oil and gas resources, potentially allowing their workforces to transition from coal mining to producing oil and gas.
The simple truth is that there really are no good alternatives to
natural gas in the electric sector. Natural gas is "green" and affordable. Coal is environmentally unacceptable, power companies cannot build nuclear because of enormous construction and regulatory costs (as well as staunch public opposition), and renewable solutions such as wind and solar have serious shortcomings, not the
least of which are high costs and intermittent productivity, which
mean wind and solar farms must be backed up 100 percent of the
time with some other kind of power-generation fuel source.
That takes us right back to needing a natural gas, coal or nuclear plant behind every renewable facility. Duplicating resources
is neither efficient, environmentally protective, nor cost-neutral.
Instead of subsidizing wind and solar-neither of which are efficient or all that environmentally friendly-America's natural gas
resources should provide the foundation of its energy future. Even
if one includes all the compressor stations, pipeline routes and
well locations connected in the supply chain to a gas-fired power plant, the environmental footprint is far smaller than that of a
solar or wind farm. A single natural gas plant can provide the electric output of thousands of acres of wind mills.
In fact, for wind to generate 100 percent of our electricity needs
would require a wind turbine every 900 feet across the continental United States. Additionally, many people question whether the
deaths of nearly 3 million birds and bats each year is a price we
should pay for so-called green renewables.
MARCH 2016 47

American Oil and Gas Reporter - March 2016

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