Francesca McCaffrey | MIT Energy Initiative

Leaders from the energy industry, government, and the scientific community will gather to discuss the world’s most pressing energy challenges at the annual MIT Energy Club Conference, to be held February 27-28 on the MIT campus. Developed and organized entirely by MIT students, the conference is this year celebrating its 10th anniversary. 

Christopher Knittel, MIT’s William Barton Rogers Professor of Energy and a Professor of Applied Economics at the Sloan School, gave MITEI a preview of the panel he’ll be moderating on the opening day of the upcoming MIT Energy Conference.  Called “Unconventional resources: successes and challenges,” Knittel will be focusing on the future of shale gas development in the U.S. and globally.  

Here, Knittel shares some brief advance insight about the future of shale gas development.

Q: Does Shale Gas really provide the largest share of US Natural Gas Production?

Knittel:  According to the EIA, 40% of US natural gas production, in 2012, came from shale resources. Over 60% of our natural gas comes from shale basins and what is known as tight reservoirs, which typically uses the same drilling techniques as shale natural gas.

Q: Why has shale gas experienced such a boom in the US?

Knittel: The short answer is that there has been a tremendous amount of technological progress in the ability to extract natural gas (and oil) trapped in shale and tight formations. Geologists have known for years that hydrocarbons were trapped in shale basins, but not until the development of horizontal drilling, along with hydraulic fracturing techniques have energy companies been able to economically recover these hydrocarbons. 

Q: In a recent MIT News interview, you discussed how a central tenet of the EPA’s forthcoming Clean Power Plan involves shifting states from coal to natural gas. What role do you see federal regulation playing in the future of shale gas in the US?

Knittel: There are a number of important roles for federal regulation. First, if left alone the market will not lead to enough shifting away from coal to natural gas. This is because a number of "externalities"—social costs associated with burning fossil fuels that are unpaid by consumers and firms in these markets—that exist in fossil fuel markets. This is the role that policy makers must take in these markets. Ideally, we would have a set of pollution taxes, not just a carbon tax, but also taxes on particulate matter, mercury, etc. Because these types of policies tend to be politically infeasible, politics drive us to policies like the Clean Power Plan. 

Q: Will the advent of shale gas have an impact on the development of alternative energy sources?

Knittel: Anything that lowers the prices of fossil fuels will slow down the development of alternative energy sources. This is true not just for natural gas, but also for oil. Lower natural gas prices make solar and wind technologies more expensive on a relative basis. Similarly, the drop in oil prices will make it more difficult for alternative fuel vehicles to compete in the market place. In the more long term, these lower fossil fuel prices will reduce R&D into these alternative technologies. 

Q: What are some of the key political and environmental issues that shale gas producers face?

Knittel: In the US - Any drilling activity has environmental risks. Hydraulic fracturing is no different. In addition, the added step of pumping millions of gallons of water down into the well creates a new set of environmental risks. Furthermore, natural gas leaks, known as fugitive emissions, are a much more potent greenhouse gas compared to carbon dioxide. It is important for the Federal EPA and state-level EPA to assure that best business practices are used in drilling for natural gas and that these practices, as well as fugitive emissions, are adequately monitored. 

Q: Do you expect shale gas to truly be a “bridge” fuel, used only as a temporary solution while renewable energy technologies improve, or do you think that shale gas will hold a lasting spot in our energy ecosystem?

Knittel: This will depend on policy. Policy makers must create a set of incentives that will move markets away from natural gas and into renewable technologies. Absent these, natural gas may push coal out of the market and remain the main fuel source in electricity markets. 

Professor Knittel will continue the discussion on shale gas development with panelists Paul Sheng, Director at McKinsey & Co, Jan Erik Johansson, Principal Consultant at TCS, and Helen Currie, Senior Economist at ConocoPhillips, on Friday, February 27 at 2pm. Afternoon lectures on Friday will be held at the Marriott.

To attend Professor Knittel’s panel, or to view the rest of the conference agenda and reserve your ticket, visit the MIT Energy Club Conference website by clicking here.