Just awesome.

The term that I use,  discovery, is a misnomer for a number of reasons. Natural gas has been known to exist in the shales for years. And the techniques used to extract the gas, horizontal drilling and hydraulic fracking, are also part of the standard set of tools used in the oil and gas industry.

However, no one in the industry believed these tools could be used to extract unconventional gas from the shales until recently. George Mitchell, a old-school wildcatter from Texas, with tenacity and entrepreneurial drive, made unconventional gas production from the Barnett Shale in Texas a reality. (See video on how hydro-fracking and horizontal drilling made this possible)

The “discovery” shook the natural gas community because it dramatically increased the amount of recoverable gas in the US. PCG numbers for US recoverable gas resources in 2009, following a reassessment that incorporated the advances in shale production techniques, increased +43% to 2,082 TCF of gas from its 2006 figures. This increase can help natural gas to bridge the gap between today’s “dirty” generating technologies to cleaner and renewable sources that will be used in the future.

One of the largest potential shale plays is the Marcellus Shale — actually three shales stacked vertically, Marcellus, Devonian, and Utica Shale —  is located in the Appalachian area in Upstate New York, Pennsylvania, and Ohio.

… and that’s when the course ceased to be solely an academic exercise.

In my neighborhood in Ithaca, NY, more and more “no fracking” signs have been appearing in front of homes and in community buildings to protest the development of shale gas in the region. Ithaca is no stranger to protests. Ithaca is a small progressive town, similar in many respects to Berkeley CA, that lies in the picturesque farmlands of upstate NY. For nearly ten years, though not continuously, I’ve found upstate NY to be my home. So, I was naturally appalled by the realization of just how close the drilling was to be.

Below is  map of of the counties surrounding Ithaca with an overlay of lands  (brown) where surface rights have been granted for natural gas exploration. (Map from Marcellus Accountability Project, Tompkins County) 69% of the land in Groton county, 55% on Caroline, and 42% in Lansing have been leased already. Aside from a few natural preserves, most of the lands, especially those farther away from Ithaca, are already poised to be exploited for the precious resources below ground.

From a economic perspective, it’s may be difficult to argue against developing shale in Upstate New York. These areas have been devoid of major economic activity for sometime, and attempts to stimulate economic development, such as outsourcing IT jobs to upstate NY, haven’t gained much traction even in progressive towns with links to the city like Ithaca. In face of the deep pockets of oil and gas companies, the consciences of any reasonable landowner is no match.

There are, of course, health and environmental risks. I am leagues away from being a fervent member of the Sierra Club, but I do have reservations about the known (and unknown) risks of drilling. Where will toxic fracking fluids go after they’ve past their useful lives? Propylene-lined lagoons can leak and mobile storage in tanks can as well. Will the underground aquifers still be safe for drinking? Producers seem to think so. But what about the second and third order effects that have yet to be discovered. Will there still be a place for the region’s organic and sustainable agriculture?

It’s hard to imagine that the picturesque rural horizon of upstate NY, marked by freely flowing grassy hills undulating along the skyline, will soon be replaced by uniform tracts of land having gas wellheads optimally placed 40 acres apart with the occasional red flares tinting the sky.

Upstate New York Today…

Upstate NY tomorrow? (See here for more pictures of shale gas fields)…

Indeed, cap-and-trade schemes today have their set of problems. It’s difficult to ascertain whether a CDM project has actually contributed to reducing levels of CO2 given phase lags and complexity of the environment system, or whether the project would have been possible without the help of CDM-generated funds, the concept of additionality. Furthermore, the number of fraudulent CDM projects is increasing. Regulating projects can be an unwieldy task given the number of projects across the globe.

Shapiro raises many valid points, the aforementioned, with which I agree. However, his implied comparison of cap-and-trade to its alternative, a carbon tax, is somewhat naïve and idealistic. He takes uncritically the effectiveness of a carbon tax in reducing CO2 impacts and subtly dismisses the momentum that the former has gained across the globe. This in my opinion doesn’t productively advance the dialogue on the goal with which he’s after — solving the world’s CO2 problems.

Surely a carbon-tax on all emitters would transparently create a cost for the environmental externalities of carbon emissions. However, I tend to share the position that it burdens industries that not economically able to adopt change quickly as others. More importantly, such a system removes the incentives for innovation. Competitiveness amongst firms fuels the creativity and innovation that drives disruptive technological and business model innovations. It’s a reality of the capitalist and profit-driven society that should be embraced.

Given the direction the world is heading in with regards to carbon trade, it would be difficult and perhaps foolish to row against the tides of change. More energy should be directed towards improving the regulatory structure around CDMs and adding proper governance to monitor improvements to CO2 reduction. Mandating domestic regulation of CDMs and markets might create and extend the rhetoric of “buy American” to funding domestic CDM projects and measuring impact on a country level vice global.