A Shale-Gas Bonanza

Obama’s State Department is pitching the new hydrofracking technology worldwide, and Halliburton is delighted.

The National Journal
18 November 2010
By Coral Davenport

Over the past two years, a controversial new drilling technique has unlocked massive reserves of U.S. natural gas, transforming the prospects for domestic energy production. The State Department has begun promoting the technology abroad, saying that if it were adopted in China, Eastern Europe, and India, it would boost exports, significantly reduce Russian and Middle Eastern influence in those regions, and fight climate change. Still, many environmentalists are unimpressed.

“The reason for doing this is that we think that shale gas can be the kind of game-changer in the global energy market that it has been in the U.S.,” David Goldwyn, the State Department’s coordinator for international energy affairs, told National Journal. “For energy-security reasons, we’re interested in having countries like China and India and Eurasian countries develop their own means so they don’t get it from countries of concern for the U.S.”

The United States was the first and, until very recently, only country to use the aggressive technique called hydrofracking, which combines hydraulic fracturing—essentially, injecting a cocktail of sand and chemicals into the ground—and horizontal drilling. American geologists have known for years that rock formations beneath Louisiana, Pennsylvania, and western New York contained vast domestic stores of shale gas. But without the right technology, it was too expensive to extract, and so the country faced a future of high natural-gas prices and heavy imports from Russia.

Hydrofracking changed all that, offering the prospect of an abundant domestic supply of clean-burning fuel with about half the carbon emissions of coal. The technology also comes with significant risk, however. Environmental groups and people who live in places where hydrofracking has begun say that the process—which is not subject to federal regulation—pollutes water supplies. Efforts are afoot in Congress and at the Environmental Protection Agency to rein in the industry.

The State Department, meanwhile, sees geopolitical opportunities in the prospect of newly accessible natural-gas resources around the world and aims to make the most of them. By promoting new methods of exploration and extraction, it seeks to make other countries less dependent on imported natural gas. In India and China, in particular, the State Department hopes that new discoveries of gas deposits could replace coal and reduce emissions from coal use.

Last November, the United States signed a memorandum of understanding with China, laying the groundwork for U.S. Geological Survey scientists to begin mapping Chinese shale deposits and training Chinese geologists to do the same. In August, the State Department hosted a two-day international conference on shale-gas exploration; representatives from 17 countries and some of the biggest U.S. natural-gas-drilling firms attended.

During President Obama’s visit to India earlier this month, he signed another memorandum of understanding, agreeing to send U.S. geologists to look for Indian shale gas. In the next six months, the State Department will host delegations from Georgia, India, Morocco, and Poland, taking the visitors to hydrofracking sites and sponsoring seminars on how to manage and regulate the industry.

Poland, which today imports about two-thirds of its natural gas from Russia, has already jumped at the opportunity. The government has begun leasing land for shale-gas hydrofracking, and drilling could start before the end of the year—the first project of its kind in Europe. “At the State Department conference, the Polish folks were celebrating the entire time,” said Chris Tucker, a spokesman for Energy in Depth, a consortium of companies involved in shale-gas development.

Interest is likewise high in China, which has had tense relations with the U.S. over its ballooning emissions from coal-burning power plants. Low-carbon natural gas could help China reduce its emissions without coercion from the U.S. or any slowdown in its economic growth.

Against all this enthusiasm, environmentalists point out that despite the low-carbon benefits of natural gas, hydrofracking may have potentially devastating ecological effects—a concern that could sharply escalate if the method is deployed in countries with loose regulatory schemes. State Department officials say that they complement their natural-gas outreach with plenty of education about how to do hydrofracking safely and how to implement regulations. “The countries that we’re engaging are also moving ahead on their own,” Goldwyn said. “We’re trying to intercept that wave and let them know what they need to do as governments.”

For now, the opportunity appears to outweigh the worries. State Department officials and natural-gas-industry leaders say that another benefit to the push, although not its primary aim, will be new markets for the American companies that provide the technology. One likely big winner is Halliburton, which invented hydraulic fracturing. Some in the industry remarked on the irony of that alliance, recalling that the company—still under fire for its role in the BP oil spill—has a notably tense relationship with the Obama administration.

“This is a pragmatic administration that wants to get things done,” said Michael Levi, an energy analyst with the Council on Foreign Relations. “They’re not going to stop just because Halliburton will make a lot of money.”