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3 JUNE 2011 UNCONVENTIONAL NATURAL GAS: A BRIDGE FUEL FOR THE FUTURE OR AN ENVIRONMENTAL HAZARD? BRADY HAYS ASSOCIATE VICE PRESIDENT, B&V WATER U.S. Energy Consumption by Energy Source Hydrocarbon Fuels Still Dominate Portfolio 3 What about CO2 Emissions? U.S. CO2 Emissions from Fossil Fuel Combustion Natural Gas Petroleum Coal Tg CO2 Eq. 2,000 1,500 Relative Contribution by Fuel Type 1,000 Coal-Fired Power Plants 1/3 of U.S. CO2 Emissions 500 0 Residential Commercial Industrial Transportation Electric U.S. Territories Inventory of U.S. Greenhouse Gas Emissions and Sinks: 4 Fossil Fuel Emission Levels Pounds per Billion BTU of Energy Input Pollutant Natural Gas Oil Coal Carbon Dioxide 117,000 164,000 208,000 Carbon Monoxide 40 33 208 Nitrogen Oxides 92 448 457 Sulfur Dioxide 1 1,122 2,591 Particulates 7 84 2,744 Mercury 0.000 0.007 0.016 Source: EIA • Natural Gas Improves Air Emissions: • 50% less GHG than Coal; 30% less GHG than Oil • Acid Rain & Smog: NOx, SOx, PM >99% Reduction • Zero Mercury Emissions 5 Is Natural Gas the Bridge Fuel to Renewable Energy? Surprisingly, America has more gas generation capacity – 450 gigawatts – than it does for coal. However, public regulators generally require utilities to dispatch coal-generated power in preference to gas. For that reason, high-efficiency gas plants are in operation only 36 per cent of the time. By changing the dispatch rule nationally to require that whenever coal and gas plants are competing head-to-head, gas generation must be utilized first, we could quickly reduce coal generation and achieve massive emissions reductions. -- Robert F. Kennedy, Jr., Financial Times, 19 July 2009 6 Nearly 100 GW of Announced Gas for Power Gen over 10 Years MRO 3 GW WECC 28 GW RFC 11 GW SPP 3 GW TRE 13 GW Source: SNL. NPCC 13 GW SERC 21 GW FRCC 6 GW 7 Decarbonization of the US Power Generation Natural Gas Hydro Nuclear 6% 7% 21% 21% 20% 2011 40% 4% IGCC 2035 11% 21% 48% Renewable Coal Source EIA: Depends on robustness and timing of regulation 8 Reducing Imports of Transportation Fuels Source EIA: Reference Case 9 Energy Security: Natural Gas is a US Energy Source 10 Unconventional Gas Reserves 11 Horizontal Drilling and Hydraulic Fracturing Process Animation 12 Environmental Concerns – Water and Air Quality • Poorly cased wells allow gas to escape into underground aquifers; • The shale gas industry uses dangerous chemicals in the fracking process that might contaminate groundwater; • Waste water returning to the surface during production, contaminated with salt and radon, may pollute streams; • The industry’s use of water for fracking depletes a scarce resource; • Inefficient systems lead to excess air pollution 13 Frac Fluid – Transparency is Required Additive Type Main Compound Purpose Iron Control Citric Acid Prevent precipitation Oxygen Scavenger Ammonium Bisulfite Reduce corrosivity pH Adjustment Sodium Carbonate Maintain effectiveness Proppant Silica sand Keep fracture open Scale Inhibitor Ethylene Glycol Reduce deposition Surfactant Isopropanol Increase viscosity pH Adjusting Agent 0.011% KCI 0.06% Breaker 0.01% Gelling Agent 0.056% Water and Sand 99.51% Other Surfactant 0.085% 0.49% Scale Inhibitor 0.043% Acid 0.123% Friction Reducer 0.088% Crosslinker 0.007% Iron Control 0.004% Corrosion Inhibitor 0.002% Biocide 0.001% Source: ALL Consulting based on data from a fracture operation in the Fayetteville Shale, 2008 14 Better Managing Water Resources Current Approach: •5 MGallons of Freshwater / well •2 MGallons of Flowback/Produced Water Hauled for Disposal •1000s of Trucks 100% Recycle Model: •3 MGallons of Freshwater / well •0.2 MGallons of Flowback/Produced Water Hauled for Disposal •100s of Trucks 15 Protecting A Communities Natural Resources • Horizontal Drilling: Maximize industry best practices for Completions to ensure protection of local groundwater supplies and minimize the loss of methane emissions during process • Hydraulic Fracturing: Transparency to disclose frack fluid constituents and MSDS; • Freshwater Supply – Reduce local freshwater resources by 50%; Target >50% by impaired waters such as flowback, municipal wastewater or industrial effluent • Water Reuse & Disposal: Maximize Beneficial reuse of flowback and produced waters brought to surface with adequate treatment to reuse within operation or to Regulated discharge limits. Deepwell injection should be used for concentrated brine and NORMs streams • Water Transport: Minimize truck hauling for supply and disposal of water; Trucks disrupt communities, impact safety and increase air pollution; Maximizing liquid gathering systems to transport water for supply and reuse in co-located right of ways with gas gathering can reduce truck traffic by >50% • Power Generation & Transmission: Minimize the use of inefficient, temporary diesel engines; Maximize the use of efficient natural gas turbines and electric motors; Maximize the use of electrifying fields or available power transmission grids to reduce associated air quality emissions Reduce GHG & Air Emissions by >30% 16 Sustainable Infrastructure for Unconventional Gas 17 Strategies to Maximize & Protect Communities Natural Resources • Natural Gas can lead to significant improvements in Air Quality Emissions compared to current Power & Transport Fuels • Unconventional Natural Gas supplies can improve energy security at economically advantageous prices • Unconventional Natural Gas can bolster local economies with job and business creation/expansion, real estate price increase, and new housing starts • Sustainable Strategies & Infrastructure can be put in place to: • 50%-75% improvement in water recycling • 10%-25% reduction in freshwater consumption • 20%-40% reduction in GHG, NOx, SOx emissions • 25%-50% reduction in truck traffic 18 U.S. Energy Demands There are already nearly 15 million natural gas fuelled vehicles in the world. Natural gas fuelled vehicles are already widely used in some cities such as Washington DC, Kuala Lumpur and New Delhi as a pollution control measure. Now that natural gas tanks for cars have become much smaller, the only obstacle to car drivers also switching to cheap and low emission gas is a lack of infrastructure in the form of refueling stations – admittedly a formidable hurdle. Gas-powered vehicles produce almost no particulates, 60% less volatile organics, 50% less nitrogen oxides and 90% less carbon monoxide, which means less smog, ozone and brown haze. 20 Decarbonization Approach • The dominant fuel in the world fuel mix has gradually shifted from wood to coal to oil over the past 150 years, with gas the latest fuel to grow rapidly. At this rate gas may overtake oil as the dominant fuel by 2020 or 2030. The consequence of this succession is that the carbonhydrogen ratio in the world fuel mix has been falling steadily, because the ratio of carbon to hydrogen atoms is about 10-to-1 in wood, 2-to-1 in coal, 1-to-2 in oil and 1-to-4 in gas. On its current trajectory, the average ratio would reach 90% hydrogen in 2060, having been 90% carbon in 1850. • although increased energy use means that carbon dioxide emissions are rising all the time, the world is nonetheless slowly decarbonizing. A sudden and forced acceleration of this decarbonization is climate change policy. • switching as much power generation from coal to gas as possible, and as much transport fuel from oil to gas as possible, would produce rapid and dramatic reductions in carbon dioxide emissions 21 U.S. Greenhouse Gas Emissions Per Capita and Per Dollar of Gross Domestic Product 170 Real GDP 160 140 130 Population 120 110 100 Emissions per capita 90 80 Emissions per $GDP 70 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 60 1990 Index (1900 = 100) 150 22 Emissions Allocated to Economic Sectors 2,500 Electric Power Industry Transportation Tg CO2 Eq. 2,000 1,500 Industry 1,000 1,000 Agriculture Commercial Residential 500 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 0 Note: Does not include U.S. Territories 23 Global Fuel Mix Outlook Next Five Years Natural Gas Solar and Wind Coal Nuclear 24