Clean Electricity Bill Could Be A Bonanza For Shale Barons

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A senator from New Mexico has proposed a bill that could change the face of Texas electric generation. And it has another interesting side-effect: It could reinvigorate a shale gas play depressed by tanking prices.

U.S. Senator Jeff Bingaman, chair of the Senate Energy and Natural Resources Committee, envisions a doubling of clean energy by 2035. That includes wind, solar, geothermal, landfill gas plants, and, interestingly, coal-fired plants that use a carbon capture and sequestration system, and certain natural gas-fired plants.

Under this regime, electricity retailers would be required to purchase a certain amount of electricity from one of these sources. Generators, on the other hand, receive credits for the amount of low- or no-carbon energy they produce. Some will have a surplus to sell. A utility with a bunch of unscrubbed coal-fired plants would probably need to buy them. Over time, the percentage of clean energy retailers must buy gets bigger and bigger, acting as a sort of market incentive for generators to build cleaner power plants. It works a bit like the EPA's Cross-State Air Pollution Rule, currently stayed by a federal appeals court.

According to a U.S. Energy Information analysis of the bill, the amount of coal-powered electricity we use would decline 41 percent by 2035. Renewable energy, however, would increase exponentially. And our use of natural gas for electricity would rise 53 percent in a little over two decades. That's a number that must make shale gas producers like Chesapeake Energy salivate.

Since the shale boom launched from North Texas' Barnett glutted the market, prices lately have been hovering at around $2.50 per million British Thermal Units or less, down from the 2008 high of $13. It's caused the play in this part of the state to slow, mostly because drilling in dense (and densely regulated) urban areas just isn't worth the headache when your product is going for a song.

But if natural gas use soars the way EIA predicts, that would spur the demand the industry craves, and we might see gas prices approaching heyday levels. Of course, in terms of air quality, a gas rush might have mixed results. It may burn cleaner than coal, but a drilling rig's diesel generator may 24 hours a day. The jury apparently is still out on whether methane leaks from pipelines and compressors offset any advantages to shale gas.

And, before we crown shale gas the "game-changer," it might help to have a clear idea of exactly how much gas we can actually get at.The EIA recently revised downward the amount of "unproved reserves" in the United States by half in a single stroke.

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