Free to frack in America
Not everyone is so bullish. America’s shale-gas boom was fuelled by a coincidence of factors: “open access” pipeline regulation, which inspired wildcat exploration; abundant drill-rigs and other infrastructure; and strong property rights, whereby landowners own the rights to minerals beneath their holdings. Few of these conditions exist elsewhere.
Europe has a good pipeline network, which in theory is open to all. Yet the pipes get tied up years in advance. European landowners typically do not own the minerals under their land, so they have little incentive to encourage exploration. Also, Europe is crowded, so its NIMBYs are noisy.
China has a different sort of problem: a shortage of water, of which millions of gallons can be required to frack a single well. The Argentine government’s recent decision to grab control of the country’s largest oil firm, YPF, will scare off the foreign investment its shale industry needs.
Such hurdles will make the pace, and perhaps scale, of America’s boom hard to equal. And even a big increase in supply might not bring down the European gas price much. Unlike the price in America, it is tied to the oil price, thanks to long-term Russian and Norwegian export contracts.
Shale-gas producers also face opposition from greens, who object to the industry’s heavy water usage and a small risk that fracking could lead to contamination of aquifers and even to earthquakes. There is also a risk that large amounts of methane, a powerful greenhouse gas, could escape during shale-gas exploration and production. The IEA estimates that shale-gas production emits 3.5% more than conventional gas, and 12% when it involves venting excess gas. France and Bulgaria have banned fracking; American and Australian anti-frackers are also rallying.
The greens have a case, but they exaggerate it. So long as well-shafts are properly sealed, there is hardly any risk that fracking will poison groundwater. By eliminating venting, methane emissions can be kept to an acceptable minimum. And the risk of earthquakes, which has long been present in conventional oil-and-gas extraction, is modest and mitigated by monitoring. The IEA says such precautions would add 7% to the cost of a shale-gas well—a small price for a healthy industry.
But they would not address the big problem with shale gas and all fossil fuels: the global warming they cause. Without a serious effort to boost renewable energy and other low-carbon technologies, the IEA envisages warming of over 3.5°C. That could be unaffordable.