Shale gas and clean energy policy.

• Author: Tomain, Joseph P.
• Position: The Law and Policy of Hydraulic Fracturing: Addressing the Issues of the Natural Gas Boom

"America needs a new political discourse on energy. This would recognize the emerging reality that the United States has turned around as an energy producer and is on a major upswing. And the impact will be measured not just in energy security and the balance of payments. Energy development also turns out to be an engine for job creation and economic growth--something that would hardly have been considered the last time we were electing a president."

CONTENTS INTRODUCTION I. CLEAN ENERGY TRANSITION II. DEFINING CLEAN ENERGY III. THE POLITICAL ECONOMY OF CLEAN ENERGY IV. NATURAL GAS AND THE ENERGY PORTFOLIO V. ENVIRONMENTAL CHALLENGES VI. RECOMMENDATIONS CONCLUSION INTRODUCTION

A recent report from the International Energy Agency (IEA) makes claims similar to those expressed by Daniel Yergin. Both commentators argue that new fossil fuel discoveries in the United States are having a profound impact on domestic and global energy policies. According to the IEA, "[t]he global energy map is changing" and "is being redrawn by the resurgence in oil and gas production in the United States." (1) Industry observers project that by 2020, the United States will produce more oil than Saudi Arabia and more natural gas than Russia. (2) In addition, the IEA reports that the global energy map is changing as countries retreat from nuclear power and replace it with rapidly growing wind and solar technologies. (3) Other commentators, like Professor Richard Pierce, claim that shale gas addresses all of our major energy problems, (4) while still others treat this natural gas resource as a bridge fuel to the future. (5) Indeed, in his 2012 State of the Union Address, President Obama cited experts who predicted that the natural gas industry will create 600,000 jobs by the end of the decade. (6) As remarkable as these claims are, the United States is not scheduled to be energy independent without a robust clean energy economy, even in the brightest projections. (7)

To be sure, these new finds of natural gas have much to recommend them. First, recent discoveries reveal abundant reserves and, following abundance, consumers enjoy lower natural gas prices. (8) Second, natural gas emits about half of the carbon dioxide released by coal. As a result of these lower prices and less drastic environmental effects, natural gas is beginning to displace coal for electricity generation. (9) Fourth, the increase in domestic production adds jobs to the economy. (10) Fifth, the United States is beginning to reduce imports and increase exports, thus reducing the trade deficit as the United States grows more energy independent. (11) Not only are we less reliant on imports, natural gas can be adopted for use in the transportation sector further reducing our reliance on oil. (12) And, sixth, new discoveries have the effect of smoothing out the price volatility experienced by the natural gas sector for the last two decades. (13)

There is other good news for the U.S. energy economy. In addition to developing our own resources, U.S. energy consumption has been declining in recent years. According to Worldwatch Institute measurements, energy use in 2012 was 7% below the 2007 level and that decline constituted the steepest five-year decrease in approximately sixty years. (14) Additionally, renewable resources, particularly wind, are increasing their share of the country's energy portfolio. Most notably, we are beginning to witness a decline in carbon dioxide emissions as well as reductions in other greenhouse gas emissions such as sulfur dioxide. (15)

But open questions remain. If we look behind the numbers on energy consumption, how much of that declining consumption is attributable to increases in energy efficiency and how much is attributable to a poor economy? If we look more closely at shale gas production, particularly when we consider hydraulic fracturing, what environmental costs are associated with developing this domestic resource? And, from a broader perspective, what role should natural gas, including shale gas, play in the country's clean energy future? Will we continue to favor fossil-fuel incumbents at the expense of new entrants in renewable resources and energy efficiency? (16)

This Article will address these questions by first describing the clean energy transition in Parts I-III. Next, in Part IV, the Article will describe the role of natural gas and shale gas in our contemporary energy picture. Finally, in Part V, the Article will identify some of the costs attributable to shale gas production, including the possibility that our current focus on shale gas will simply result in a new hydrocarbon future at the expense of a vibrant and productive clean energy economy. The Article concludes in Part VI with some recommendations for future shale gas regulation. While acknowledging the reality that shale gas will play an increasingly larger role in our energy portfolio, the Article argues that natural gas should not be considered a clean energy resource.

1. CLEAN ENERGY TRANSITION

   The transition from a fossil fuel economy to a clean energy economy will be socially, economically, and politically transformative. To accomplish that transformation, innovations in policy and regulation, markets and business practices, and technology policy and its implementation will be necessary. In Ending Dirty Energy Policy, I argued that over the last generation, the United States has developed a policy consensus in favor of clean energy. (17) In short, we cannot effectively address climate change nor can we become more energy secure until we transform our energy policy away from fossil fuels to clean energy. Further, a sound business argument can be made for developing a clean energy economy on its own without necessarily tying it to climate-change initiatives. Clearly, clean energy and climate change are complementary policies; nevertheless, the United States should proceed with a clean energy transition now rather than wait for reluctant federal leadership on the climate front.

   Today, it is also the case that public opinion favors a clean energy policy. (18) I further argued that a clean energy consensus is being developed from the bottom-up rather than through top-down leadership at the federal level--despite the clean energy initiatives of the Obama administration. (19) In other words, although federal leadership is lacking, (20) clean energy activities at the state, regional, and local levels--as well as investment activities in the private sector--are pursuing a clean energy agenda. (21) As an aside, we have yet to develop a more complete clean energy politics and that is a matter that needs to be addressed. (22) Now, due to the increasing use of natural gas in general, and shale gas in particular, the timely question is: What role should natural gas play in the clean energy transition? This Article will address that issue.

   It can and has been argued that a transition to clean energy is necessary if the country is to formally address climate change. But the converse is not true--a transition to clean energy is not dependent upon addressing climate change. (23) Instead, a clean energy economy is independently valuable. While the business and economic case for clean energy is sound, (24) barriers to this transition exist. For any regulatory program to gain traction and become implemented in the United States, it is necessary that a proposed program have a policy basis, a proper set of regulatory and legal tools, and political support. (25) As noted, there is ample policy support for a full-scale clean energy policy. (26) Nevertheless, legal and political challenges remain, including the matter of how to treat natural gas.

   The legal challenges reside, first, in a body of law that has served the country well for most of the twentieth century by building a national energy infrastructure and by providing reliable and relatively inexpensive energy to fuel economic growth. Second, and unfortunately, the dominant energy model came with significant costs--it ignored environmental hartos and constrained energy markets. And, third, the traditional model favored particular actors and sustained, through laws and regulations, a narrow industrial structure. Quite simply, large fossil fuel firms dominated, and continue to dominate, (27) our energy economy, thus retarding the development of new energy markets and a more competitive energy economy. Shale gas, then, will most likely have the effect of further strengthening our traditional hydrocarbon economy while threatening the growth of the clean energy sector.

   A clean energy program must also confront multiple political challenges. Here two are highlighted. The political challenges, unsurprisingly, are consistent with and connected to the laws and regulations already in place. Those laws and regulations were shaped by and have given fossil fuel incumbents significant and continuing political power. (28) Even though I argue that clean energy enjoys broad political support, incumbency hinders transition efforts. The first political challenge, then, is to overcome the power and influence of fossil fuel incumbency. Simply put, increased oil and gas production empowers incumbents. Second, although public opinion favors clean energy, public opinion is less supportive of climate change legislation. More problematically, federal legislators show no interest in introducing climate change legislation despite President Obama's recognition of the necessity to "roll back the specter of a warming planet" in his Second Inaugural Address. (29) One danger for clean energy advocates, then, is that the politics of clean energy run the risk of getting entangled in and confused with climate change initiatives, thus impeding the energy transition. (30) Any confusion between clean energy and climate change can be dispelled by making the case that economic growth will accompany a clean energy agenda while the relationship between...