Daily Archives: March 3, 2010

At ARPA-E, listening to Jim Woolsey talk about the possible important role of natural gas in any effort for both “energy independence” and climate change mitigation in the U.S.

It reminds me of a personal opinion I’ve been sharing with peers for a while now:  That Oil & Gas need a divorce.

Historically, in the U.S. it’s been a single industry.  “Oil&Gas”, practically all one word.  You put a hole in the ground, and sometimes one comes out, sometimes the other comes out, so many large producers do a bit of both.  You can see how a marriage of convenience, at the very least, would be natural for the group.  Represented by the same industry servicers: Trade associations, lobbyists, PR efforts, organizations, research, etc. 

But the universe of oil and gas producers is not monolithic.  To use the parlance of Wall Street, there are “oily” producers and “gassy” producers.  The “oily” ones have been larger and have largely driven the industry’s public positioning over the past few decades.  Which works for the overall group when priorities are in alignment.

But energy independence and climate change are creating a serious divergence of interests.  Oil is an imported commodity in large part, natural gas is domestic and seemingly abundant.  Natural gas fired generation, and transportation, has a very different carbon emissions profile than coal, or oil, the two incumbent fuels in each category respectively.

The problem is that the “oily” part is still driving the overall “Oil&Gas” community’s positioning and perception.  So in climate change legislation that’s been proposed, coal gets significant incentives to go “clean”, but natural gas fired generation gets relatively little support.  There’s significant opportunity in the U.S. for natural gas fueled transportation, but other alternative fuels get more support.  Switching home heating and appliances to natural gas from oil or even coal-fired electricity would make a significant emissions and efficiency impact, but the incentives have been underwhelming to date. 

Longtime readers will know I’m an “all of the above” proponent — we need a robust mix of clean and cleaner energy sources if we’re to make any kind of impact on our energy challenges.  Certainly, in my mind, natural gas has a very important role to play, as the most available already-scaled solution representing at least some improvement on the incumbent oil and coal fuels.  The natural gas industry, in my opinion, actually stands to gain significantly from many of the climate change policy ideas being thrown around in DC.  Some experts have described it as the best “bridge solution” to carry us through to an eventual low-carbon energy system.  But right now, the natural gas industry seems to be getting tarred by the same brush being applied to the oil industry.  And the “gassy” players seem to increasingly recognize that as a problem.

There are now some efforts out there to provide a voice specifically for the natural gas industry.  I expect to see even more such shifts going forward.