The Potentials and Problems of Expanding Use of Shale Gas in the Continental U. S

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VI. Policy Recommendation

The final policy recommendation regarding shale gas expansion in the United States is that the federal government on the national level should apply the policy to not encourage nor discourage shale gas expansion, because even though the outcome of the cost-benefit analysis of shale gas expansion on the national level is negative right now, it can be positive in some regions and may on national level turn positive in the near future with technological advancement or rising energy price. So the federal government on the national level should allow companies in the private sector to decide for themselves whether to start their shale gas projects based on the companies’ own profitability given the current cost and energy price. The federal government should also allow the local governments to decide shale gas policies for their own regions based on their regional cost-benefit analysis on whether in this specific region the economic benefits of shale gas outweigh the environmental costs and high investment cost.

This would allow for more environmentally-conscious policy-making as well. One recommendation is implementation of a region-by-region system of best management practices pertaining to fracturing. This could include standards for the efficiency of the process, such as mandating the recycling of water in repeated fractures of a single well, or setting standards for technology that prevents methane from escaping as much as possible. Additionally, until more comprehensive public health research and long-term studies are conducted, fracking should not be expanded in populated areas, where the risks are highest. For the same reason, until more research about induced seismic risk and seismic risk to infrastructure is conducted, placing injection wells in areas with high seismic risk is also ill-advised.

Regarding companies in the shale gas business, both the federal and local governments should still apply the reasonable earning tax and carbon tax, and ask the companies to fulfill their obligations in paying for the pollution, forest disruption, road disruption, and the casualties caused by the companies’ business, so the companies can profit responsibly and the governments can ensure the greatest utility for the whole society.

VII. Limitations and Next Steps

Although we have striven to be as comprehensive and detailed as possible in both the research and cost-benefit analysis, limitations nonetheless exist that prevent complete accuracy. These limitations exist within the research behind the environmental, economic, and social costs and benefits that we examined, and also within the cost-benefit analysis that aggregates this research. While limitations are unavoidable, various next steps can be taken to compensate for them, on both the fundamental research and analysis sides.

Cost-Benefit Analysis

Within the cost-benefit analysis model, several variables are lacking, particularly the environmental costs associated with fracking. However, it is difficult to monetize an event such as the increased likelihood of a disastrous earthquake. The difficulty of monetization certainly does not reduce the magnitude of the cost, but because the cost-benefit analysis is a framework that requires quantifiable variables, crucial variables are omitted from the analysis as a result.

Another limitation is the implicit assumption of static progress in the model. The projections of the future, along with the data taken from organizations such as the EIA, all take present trends and extrapolate them several years into the future. This assumes no technological breakthroughs or innovations for the foreseeable future. Although it is difficult to anticipate breakthroughs, Dr. Crabtree of Argonne National Laboratory argues that historical predictions are nonetheless too conservative and offers an alternative framework for considering the future of energy [132]. His thesis is to first assume breakthroughs in the future and then to decide what kind of society is desired in that future. Having decided upon the ideal, the next step is to avidly pursue the breakthroughs that will allow for the creation of such a future society. Therefore, in accordance with Dr. Crabtree’s framework, a possible next step would be to examine the costs and benefits of shale gas extraction, but not merely as objective costs and benefits. Instead, they should be examined specifically in terms of challenges preventing and benefits furthering the achievement of an ideal future society.

Research Availability and Quality

Because the technology for increased shale gas extraction is very recent, having occurred only roughly in the last fifteen years, there is a dearth of information about fracking-related statistics. For instance, because the industry is so young, it is difficult for environmental agencies predict the growth of the industry and also the associated environmental damage. Uncertain or widely-varying data reports not only make cost-benefit analysis difficult, but also render regulation and future policy decisions much more problematic.

One area lacking research is infrastructure affected by fracking. Currently, research on infrastructure mainly comes from private organizations, such as academic institutions (MIT, UMichigan) and private organizations (INGAA). Even so, these reports only provide a limited scope of the landscape of infrastructure development. The lack of existing research on this topic hinders the accuracy of estimating the amount of money needed to invest in infrastructure, as well as the cost for producing gas. Without an estimate in the cost of producing natural gas, it is more difficult to compare the cost with its substitutes – oil and goal.

Therefore, given the above limitations, the government should perform the following in-depth analyses. Firstly, the government should increase funding to support a detailed analysis of increasing interdependencies of growing supply of natural gas and power generation infrastructures. This kind of study can investigate on the scenario where increasing production and consumption of natural gas would exhaust the infrastructure system, such as the problem of pipelines bottlenecks, exhaustion of processing facilities, and the saturation of storage capacities. Secondly, the government should set up a federally administered website to keep track of the development of shale gas-specific infrastructure, such as the number of shale gas wells, cost of operating storage facilities, and the cost of using of underground water in the process of hydraulic fracturing. These analyses are essential in understanding current usage as well as developing a comprehensive plan for infrastructure development in the United States.

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