Our “Breakout Year” for NGVs in Texas
By Ken Morgan, Director, TCU Energy Institute
Natural gas has a long history as a reliable fuel source for home heating, industrial manufacturing and electrical generation. However, securing long term supplies has always been tied to the discovery and development of conventional “oil and gas reservoirs” that over time became more difficult and expensive to find and often occurred in environmentally or politically sensitive areas throughout the world. For many years, there was very little interest in building “new markets” for the use of natural gas because long-term domestic supplies could not be guaranteed. Also, imported oil was relatively cheap, easy to get and a well developed refining and marketing infrastructure was in place. Everything has changed over the last few years with the dramatic discover of the Barnett Shale in 2002-03.
In no time at all, the excitement of shale-gas exploration spilled out from the Barnett to the Fayetteville, Eagleford, Haynesville and Marcellus shales to just name a few. By 2008, the industry was teeming with small to medium sized companies sitting on vast amounts of “unconventional shale-gas” throughout the country and all jockeying for position in what became a rather stagnant natural gas market and a sagging economy. Throughout 2009 and 2010, the focus on natural gas began to build across the country as even Congress began promoting cleaner energy sources in a more serious way. Americans, now more than ever, want to go “greener”, reduce spending on imports, create more domestic jobs, and do something to reduce the national debt.
A big shot-in-the-arm for the domestic natural gas business took place when a well-kept secret broke loose in 2010. A really, really big company, that had been away for long time investing in foreign oil markets, made its way back into the domestic market for natural gas in this country as ExxonMobile announced it was seeking to purchase XTO for a mere $41 billion! This was soon followed by Total (a French company) investing 2.5 billion with Chesapeake. In 2010, Quicksilver Resources “partnered” with ENI (Italy), Shell bought East Resources, Chevron acquired Atlas Energy and the list goes on. Just recently CNOOC (China) worked out a buy-in deal with Chesapeake Energy to drill the Niobrara Shale in Colorado.
It is now obvious that global energy companies believe in unconventional shale-gas and potential markets in the U.S. This can be good news for the country and good news for the natural gas business. Let’s not kid ourselves, their “investment” is a clear signal that the “majors,” and other countries, want in on what will be a growing industry…domestic natural gas. Imagine that, the major oil and gas companies are actually returning to the U.S. after more than 40 years of focusing on foreign exploration. While independents still control the playing field, there is a real chance now that, with some added resources from the majors thrown in, the natural gas industry and the country may benefit in a big way. Together, the independents and majors want to develop new and expanded markets for the tremendous supplies of natural gas stored in shales throughout the country. These markets will include using more natural gas as a base fuel for electrical production, as a back-up fuel for wind and solar and now even more attention for CNG and LNG as a transportation fuel. Just check out the commitments being announced by AT&T, Waste Management, UPS and taxi companies as they switch to NGVs (Natural Gas Vehicles). Also take note of widespread diesel to natural gas conversions being implemented for city and school system buses throughout Texas and the nation. There is now considerable talk about natural gas as a fuel source for hydrogen fuel cells.
However, the lack of good refueling infrastructure is a big factor for why Texas which ranks far behind Oklahoma, Utah, Louisiana and California. To move things along in Texas, our Metroplex NGV Consortium (http://www.cngconnect.org/ ) teamed up with the Greater Houston NGV Alliance http://etuo.uh.edu/ngva/ ) and ANGA (America’s Natural Gas Alliance http://www.anga.us/ ) to host two separate NGV display events in Austin (December, 2010 and March, 2011) for legislators and staffers. This led to drafting SB 20, the Natural Gas (NGV) Bill supporting the development of “The Texas Clean Transportation Triangle” (TCTT) –- Dallas-Fort Worth to Austin-San Antonio to Houston. By the end of May 2011, the bill passed through both the Senate and the House and was signed by the Governor in July 2011. Essentially, the TCTT legislation allocates a portion (20%) of the Texas Emissions Reduction Plan (TERP) to support the conversion of heavy-duty fleet vehicles to NGVs and the development of new natural gas infrastructure within the Texas Triangle throughout 2012-13.
The benefits of the Texas Clean Transportation Triangle include:
• Promotion of energy independence with a domestically abundant and secure fuel source, enhancing national security by reducing our dependence on foreign sources of energy.
• Delivering fuel cost savings for adopters and overall direct and indirect economic benefits and environmental advantages.
• Potential for emission reductions in non-attainment areas based on rising standards.
The question now is, will Texas, which leads the way in tapping into these gas-rich shales, now make the commitment to lead the way in developing the infrastructure needed to make a significant difference in natural gas transportation markets in our state. The Natural Gas Bill, SB 20, could be just what is needed to encourage investors and entrepreneurs to make 2012-13 the “breakout year” for NGVs in Texas.