WEBVTT 00:00:00.000 --> 00:00:02.520 The following content is provided under a Creative 00:00:02.520 --> 00:00:03.970 Commons license. 00:00:03.970 --> 00:00:06.360 Your support will help MIT OpenCourseWare 00:00:06.360 --> 00:00:10.660 continue to offer high-quality educational resources for free. 00:00:10.660 --> 00:00:13.320 To make a donation or view additional materials 00:00:13.320 --> 00:00:17.190 from hundreds of MIT courses, visit MIT OpenCourseWare 00:00:17.190 --> 00:00:18.370 at ocw.mit.edu. 00:00:24.928 --> 00:00:26.470 RICHARD SCHMALENSEE: For those of you 00:00:26.470 --> 00:00:28.870 who don't read The Times back to front every day, 00:00:28.870 --> 00:00:31.960 there was a terrific section that 00:00:31.960 --> 00:00:35.230 relates to today's lecture. 00:00:35.230 --> 00:00:37.990 It didn't give me nice cases as Don's did, 00:00:37.990 --> 00:00:44.230 but the headline captures a lot of what goes on in the section, 00:00:44.230 --> 00:00:46.090 and a lot of what we'll talk about today. 00:00:46.090 --> 00:00:48.470 The headline is, "Fuel to burn-- 00:00:48.470 --> 00:00:50.260 now what?" 00:00:50.260 --> 00:00:53.710 So I'm going to talk about shale and its implications, 00:00:53.710 --> 00:00:56.260 and what it's done to the energy universe 00:00:56.260 --> 00:00:58.370 in the last couple of years. 00:00:58.370 --> 00:01:01.390 But first, I've got some unfinished business 00:01:01.390 --> 00:01:04.330 from last time, a couple of questions I didn't answer. 00:01:04.330 --> 00:01:06.400 Prosper asked whether anybody was still 00:01:06.400 --> 00:01:10.630 making coal gas in the old-fashioned, manufactured 00:01:10.630 --> 00:01:14.590 gas, town gas, heat it and use the results style. 00:01:14.590 --> 00:01:16.370 And I couldn't find anybody. 00:01:16.370 --> 00:01:17.380 I looked around. 00:01:17.380 --> 00:01:19.810 I did the usual kind of web crawling. 00:01:19.810 --> 00:01:24.940 But what I did find is a lot of people that have made and are 00:01:24.940 --> 00:01:28.410 making gas from wood. 00:01:28.410 --> 00:01:31.530 This is a reactor being sold by a company 00:01:31.530 --> 00:01:35.400 in South Africa that's sold it to a number of locations-- 00:01:35.400 --> 00:01:39.280 wood pellets to make gas, sometimes for a vehicle, 00:01:39.280 --> 00:01:46.050 sometimes for use in gas mains. 00:01:46.050 --> 00:01:47.970 And this one, this is from Wikipedia, 00:01:47.970 --> 00:01:50.130 but I couldn't resist it-- this is a North Korean 00:01:50.130 --> 00:01:53.730 wood-powered truck. 00:01:53.730 --> 00:01:56.340 But if you browse around, there are 00:01:56.340 --> 00:02:00.360 a lot of examples during World War II where 00:02:00.360 --> 00:02:03.510 these reactors were put on cars that were then converted 00:02:03.510 --> 00:02:06.300 to run on wood because you couldn't get gasoline 00:02:06.300 --> 00:02:08.400 in continental Europe in World War II. 00:02:08.400 --> 00:02:10.050 So it's not a novel technology. 00:02:10.050 --> 00:02:13.930 It's not your first-choice technology for vehicles, 00:02:13.930 --> 00:02:16.950 but in places that have a lot of wood and not much else, 00:02:16.950 --> 00:02:20.850 it apparently is an interesting and used technology. 00:02:20.850 --> 00:02:22.470 There are plenty of vendors. 00:02:22.470 --> 00:02:23.920 There plenty of examples. 00:02:23.920 --> 00:02:26.370 So wood gasification-- but I couldn't find anybody 00:02:26.370 --> 00:02:29.290 who's doing coal commercially. 00:02:29.290 --> 00:02:33.060 So that's unfinished item one. 00:02:33.060 --> 00:02:37.260 Unfinished item two was CO2 emissions. [? Siddhartha ?] 00:02:37.260 --> 00:02:42.900 asked about how fossil fuels compare, and I kind of mumbled, 00:02:42.900 --> 00:02:44.160 you will recall. 00:02:44.160 --> 00:02:47.280 It turns out if you think about it a little bit 00:02:47.280 --> 00:02:50.430 beyond the mumble stage, it's not a simple question. 00:02:50.430 --> 00:02:54.120 You can do emissions per BTU. 00:02:54.120 --> 00:02:55.260 You burn the stuff. 00:02:55.260 --> 00:02:58.080 What do you get per BTU? 00:02:58.080 --> 00:03:00.090 And that's the carbon-hydrogen mix 00:03:00.090 --> 00:03:03.520 in the fuel, which varies slightly. 00:03:03.520 --> 00:03:10.260 So you see coal has about 75% more emissions per BTU 00:03:10.260 --> 00:03:11.520 than natural gas. 00:03:11.520 --> 00:03:16.830 And petroleum-based fuels are somewhere in between. 00:03:16.830 --> 00:03:20.550 But of course, you don't buy fuels for BTUs. 00:03:20.550 --> 00:03:24.870 You buy fuels for some purpose, some energy service. 00:03:24.870 --> 00:03:27.150 You will recall, we don't actually, most of us, 00:03:27.150 --> 00:03:29.310 live for BTUs alone. 00:03:29.310 --> 00:03:31.860 So home heating-- that would be a good comparison, 00:03:31.860 --> 00:03:33.570 but suppose you want to do electricity. 00:03:33.570 --> 00:03:37.170 Well, then you have to think about how efficiently you 00:03:37.170 --> 00:03:39.420 can use them in electricity. 00:03:39.420 --> 00:03:44.340 You'll note that a gas combined cycle plant is 00:03:44.340 --> 00:03:49.320 more efficient than a traditional coal/steam turbine 00:03:49.320 --> 00:03:50.700 plant. 00:03:50.700 --> 00:03:53.910 So that means in terms of per kilowatt hour, 00:03:53.910 --> 00:03:58.060 the advantage to gas over coal grows. 00:03:58.060 --> 00:04:00.550 And you think about gas-powered automobiles 00:04:00.550 --> 00:04:03.280 versus gasoline-powered automobiles-- again, 00:04:03.280 --> 00:04:06.070 there's a difference in engine efficiency. 00:04:06.070 --> 00:04:11.140 But even that, you've got to think about the emissions 00:04:11.140 --> 00:04:14.230 in producing it if you want to do this kind of comparison. 00:04:14.230 --> 00:04:16.959 And I haven't really seen a good study 00:04:16.959 --> 00:04:19.839 that lets you get to that third level-- 00:04:19.839 --> 00:04:21.980 so good question. 00:04:21.980 --> 00:04:26.440 Easy answer here, somewhat easier answer, somewhat harder 00:04:26.440 --> 00:04:27.280 answer here. 00:04:27.280 --> 00:04:30.190 Can't answer that. 00:04:30.190 --> 00:04:32.620 Any questions or comments on either of these first two 00:04:32.620 --> 00:04:33.120 topics? 00:04:35.940 --> 00:04:40.450 OK, let me go to shale. 00:04:40.450 --> 00:04:45.460 So the new technology that really has changed-- 00:04:45.460 --> 00:04:47.910 but it isn't a new technology. 00:04:47.910 --> 00:04:49.850 So let me be a little bit clear about that. 00:04:49.850 --> 00:04:55.120 But this is horizontal drilling and hydraulic cracking, 00:04:55.120 --> 00:04:56.960 called fracking. 00:04:56.960 --> 00:05:00.860 So there are sort of two pieces to it. 00:05:00.860 --> 00:05:05.270 One is the ability to drill deep into shale. 00:05:05.270 --> 00:05:10.540 This little example shows shale 7,000 feet deep, 00:05:10.540 --> 00:05:12.280 in this case, the Marcellus. 00:05:12.280 --> 00:05:16.390 I think this is from the PennEnvironment thing. 00:05:16.390 --> 00:05:19.690 And to do horizontal drilling-- horizontal drilling is not that 00:05:19.690 --> 00:05:22.660 new, but it's relatively new-- 00:05:22.660 --> 00:05:28.870 and then to put down fluid, which I'll talk about in a bit, 00:05:28.870 --> 00:05:33.220 under pressure to make cracks in the shale, which 00:05:33.220 --> 00:05:40.900 permits gas and/or oil to come back into the pipe. 00:05:40.900 --> 00:05:47.410 Fracking, if you just drill down and crack horizontally, 00:05:47.410 --> 00:05:49.450 has been done for a long time. 00:05:49.450 --> 00:05:50.920 Horizontal drilling has been done 00:05:50.920 --> 00:05:52.450 for a relatively long time. 00:05:52.450 --> 00:05:57.550 Putting the two pieces together has had a revolutionary impact. 00:05:57.550 --> 00:05:59.350 I caution you, "The Times" repeats 00:05:59.350 --> 00:06:02.410 what the president said in his State of the Union message, 00:06:02.410 --> 00:06:06.850 which is, DOE started all of this in the '80s. 00:06:06.850 --> 00:06:09.460 This drives people in the industry crazy. 00:06:09.460 --> 00:06:12.460 They say, DOE invested a few dollars in the '80s, 00:06:12.460 --> 00:06:15.880 and then a whole bunch of little US companies 00:06:15.880 --> 00:06:19.900 have invested a lot since then to actually make this work. 00:06:19.900 --> 00:06:24.920 So big firms like Exxon did not have this technology. 00:06:24.920 --> 00:06:27.470 They're busy buying small firms. 00:06:27.470 --> 00:06:30.340 Does this sound like a familiar story from Don's discussion? 00:06:30.340 --> 00:06:34.510 I mean, little guys experimented and experimented and got it 00:06:34.510 --> 00:06:36.140 to work. 00:06:36.140 --> 00:06:38.170 So most of this fluid-- 00:06:38.170 --> 00:06:41.680 and we'll come back to this-- is water and sand, 00:06:41.680 --> 00:06:44.030 but there's other stuff. 00:06:44.030 --> 00:06:47.980 And what other stuff varies from producer to producer, 00:06:47.980 --> 00:06:51.050 and is the source of a good deal of controversy. 00:06:51.050 --> 00:06:52.720 But it's mostly water and sand. 00:06:52.720 --> 00:06:57.250 And what this does is it makes it economical to extract gas 00:06:57.250 --> 00:07:04.250 and oil from 7,000, 10,000-foot underground shale deposits. 00:07:04.250 --> 00:07:08.750 Now, it's not just that it's possible-- it's cheap. 00:07:08.750 --> 00:07:11.810 And cheap is the story. 00:07:11.810 --> 00:07:14.960 Now, there's shale around the world. 00:07:14.960 --> 00:07:19.430 This is what one installation looks like. 00:07:19.430 --> 00:07:22.130 This would be called the "pad." 00:07:22.130 --> 00:07:26.120 And what normally happens is you drill multiple wells 00:07:26.120 --> 00:07:27.950 from a single pad. 00:07:27.950 --> 00:07:29.990 So they might go underground this direction, 00:07:29.990 --> 00:07:31.670 and this direction, and whatever. 00:07:31.670 --> 00:07:36.170 So you cover an area with multiple wells from a pad. 00:07:36.170 --> 00:07:40.220 When you pump the water down under pressure, it comes back-- 00:07:40.220 --> 00:07:41.420 there's a shock. 00:07:41.420 --> 00:07:44.900 And it comes back not only with the stuff you put down, 00:07:44.900 --> 00:07:47.210 but with stuff it picks up-- 00:07:47.210 --> 00:07:50.330 various underground minerals, and chemicals, and occasionally 00:07:50.330 --> 00:07:52.940 something's radioactive or something's toxic. 00:07:52.940 --> 00:07:56.240 It is then typically, I assume, piped-- 00:07:56.240 --> 00:07:57.440 although I don't see pipes. 00:07:57.440 --> 00:08:04.160 It's piped to a holding pond, and from there it's 00:08:04.160 --> 00:08:08.540 interesting-- in this picture, it's being trucked away. 00:08:08.540 --> 00:08:13.600 Sorry, the water is stored in a pit or a pond, 00:08:13.600 --> 00:08:16.210 and then taken to a treatment plant. 00:08:16.210 --> 00:08:19.330 What's often done with it instead 00:08:19.330 --> 00:08:23.320 is it's injected underground in a deep well. 00:08:23.320 --> 00:08:29.430 So the water either gets treated out of this pond 00:08:29.430 --> 00:08:32.549 or it gets, either here or someplace else, 00:08:32.549 --> 00:08:34.890 dumped back into something that'll hold it 00:08:34.890 --> 00:08:38.909 underground, some formation where you might otherwise 00:08:38.909 --> 00:08:41.070 store CO2, for instance. 00:08:41.070 --> 00:08:43.549 But those are the two possibilities. 00:08:43.549 --> 00:08:49.710 So questions about the basic story here, the basic process? 00:08:52.120 --> 00:08:52.620 Yeah. 00:08:52.620 --> 00:08:54.203 AUDIENCE: It [? prevents ?] the ground 00:08:54.203 --> 00:08:56.238 after you start to [INAUDIBLE]. 00:08:56.238 --> 00:08:58.530 RICHARD SCHMALENSEE: Well, the gas has come up with it, 00:08:58.530 --> 00:09:00.990 so you're basically taking the gas off, 00:09:00.990 --> 00:09:03.900 and then you take the water. 00:09:03.900 --> 00:09:08.090 Yeah, no, this is not full of commercially recoverable gas. 00:09:08.090 --> 00:09:08.780 Yeah, Jacob. 00:09:08.780 --> 00:09:10.447 AUDIENCE: What kind chemicals and fluids 00:09:10.447 --> 00:09:12.000 do you typically pump? 00:09:12.000 --> 00:09:16.320 RICHARD SCHMALENSEE: Well, usually a surfactant 00:09:16.320 --> 00:09:19.020 of some sort to reduce surface tension, to make 00:09:19.020 --> 00:09:23.330 it more easily penetrate. 00:09:23.330 --> 00:09:28.610 In some cases, people have put benzene and various petroleum 00:09:28.610 --> 00:09:30.050 products down. 00:09:30.050 --> 00:09:32.420 This causes a lot of distress, as you 00:09:32.420 --> 00:09:37.880 could imagine, but usually-- 00:09:37.880 --> 00:09:42.680 usually-- some surfactant and other stuff. 00:09:42.680 --> 00:09:46.310 For the little guys, this has been sort of a secret sauce. 00:09:46.310 --> 00:09:49.820 It's mostly water and sand. 00:09:49.820 --> 00:09:53.030 And I'm not going to tell you what the rest is, haha. 00:09:53.030 --> 00:09:59.300 Well, what's missing here is this might be an aquifer, 00:09:59.300 --> 00:10:01.460 so there might be groundwater issues. 00:10:01.460 --> 00:10:03.170 And we're going to talk about this-- 00:10:03.170 --> 00:10:06.740 usually not coming up from 7,000 feet down. 00:10:06.740 --> 00:10:08.700 The aquifers are higher. 00:10:08.700 --> 00:10:11.780 But if the well's integrity is breached, 00:10:11.780 --> 00:10:14.120 stuff can come out from the well. 00:10:14.120 --> 00:10:16.370 And that happens. 00:10:16.370 --> 00:10:19.660 OK, anything else? 00:10:19.660 --> 00:10:23.450 All right, so that's the picture. 00:10:23.450 --> 00:10:28.210 So this process now makes it economical to extract 00:10:28.210 --> 00:10:30.310 oil and natural gas from shale. 00:10:30.310 --> 00:10:32.410 Where is the shale? 00:10:32.410 --> 00:10:35.830 The key thing is this gray bar. 00:10:35.830 --> 00:10:41.710 The height is the amount of shale gas recoverable. 00:10:41.710 --> 00:10:47.230 The black is coalbed methane, which is also doable. 00:10:47.230 --> 00:10:50.050 But the new thing is the gray bar. 00:10:50.050 --> 00:10:53.800 And you will notice we have a lot of it. 00:10:53.800 --> 00:10:58.000 There's not that much in the Middle East, some, presumably, 00:10:58.000 --> 00:10:59.950 in Africa, but little exploration, 00:10:59.950 --> 00:11:03.980 some in Latin America, a lot of it over here in Asia-Pacific, 00:11:03.980 --> 00:11:05.870 which is mostly China. 00:11:05.870 --> 00:11:08.920 So China appears to have a lot of shale. 00:11:08.920 --> 00:11:10.340 We got really lucky. 00:11:10.340 --> 00:11:14.200 We have enormous amounts of shale from which 00:11:14.200 --> 00:11:16.930 this stuff is recoverable. 00:11:16.930 --> 00:11:20.320 Australia often refers to itself as "The Lucky Country." 00:11:20.320 --> 00:11:22.570 In this one we got lucky. 00:11:22.570 --> 00:11:28.120 Europe-- this, I believe, is OECD Europe, 00:11:28.120 --> 00:11:37.480 and that is mostly Poland, which is starting to work on it. 00:11:37.480 --> 00:11:39.760 So where is it in the US? 00:11:39.760 --> 00:11:43.570 Well, the good news and the bad news is, a lot of it 00:11:43.570 --> 00:11:47.350 is near where demand is, as opposed to, say, wind 00:11:47.350 --> 00:11:50.590 or solar that tend to be in the desert or in the high plains. 00:11:54.400 --> 00:11:57.700 A big play here is the Marcellus, 00:11:57.700 --> 00:12:02.260 and that's New York, and Pennsylvania, and Ohio, 00:12:02.260 --> 00:12:05.110 and in this Eastern region. 00:12:05.110 --> 00:12:06.730 That's enormous. 00:12:06.730 --> 00:12:10.570 That's just an enormous amount of recoverable gas. 00:12:10.570 --> 00:12:12.610 The other play that people talk about, 00:12:12.610 --> 00:12:14.860 other plays that people talk about, 00:12:14.860 --> 00:12:17.950 are the Bakken up here, mostly in North Dakota. 00:12:20.470 --> 00:12:23.860 The Bakken has a lot of oil that is 00:12:23.860 --> 00:12:27.940 being recovered using this same technique, as well as gas. 00:12:27.940 --> 00:12:30.370 There are not a lot of pipelines out of North Dakota, 00:12:30.370 --> 00:12:35.320 and as we will see, that's a problem, but oil you can move. 00:12:35.320 --> 00:12:36.440 Oil's valuable enough. 00:12:36.440 --> 00:12:38.950 You can find a way to move it. 00:12:38.950 --> 00:12:44.000 The other places are the Barnett, the Barnett shale, 00:12:44.000 --> 00:12:46.600 a lot of which is-- oh, yeah, there are a lot of people 00:12:46.600 --> 00:12:49.910 up here in the Marcellus. 00:12:49.910 --> 00:12:50.840 Some of this is rural. 00:12:50.840 --> 00:12:52.610 Some of it's near urban areas. 00:12:52.610 --> 00:12:54.890 You read that PennEnvironment document. 00:12:54.890 --> 00:12:58.370 They talk a lot about schools, libraries, and stuff. 00:12:58.370 --> 00:12:59.810 Down here in Texas, a lot of it's 00:12:59.810 --> 00:13:02.150 not near anything, which is all good. 00:13:02.150 --> 00:13:06.680 And in the Bakken, a lot of it's not near anything. 00:13:06.680 --> 00:13:09.560 I think the Eagle Ford supposedly has a lot of oil. 00:13:09.560 --> 00:13:12.770 But people have been doing various kinds of fracking 00:13:12.770 --> 00:13:15.050 in Texas, not necessarily horizontal, 00:13:15.050 --> 00:13:20.510 but vertical and experimental, for a long time. 00:13:20.510 --> 00:13:23.930 Nobody's drilled for anything in the East 00:13:23.930 --> 00:13:26.660 since the first Pennsylvania oil field went dry 00:13:26.660 --> 00:13:28.280 in the 19th century. 00:13:31.130 --> 00:13:33.440 Well, I'll say a little more. 00:13:33.440 --> 00:13:36.530 As you see, there are plays elsewhere, 00:13:36.530 --> 00:13:40.370 in Arkansas, for instance, there's some action. 00:13:40.370 --> 00:13:44.390 But this is the Marcellus, is what people talk about a lot. 00:13:44.390 --> 00:13:49.370 The Bakken there's a lot of action, and then down in Texas, 00:13:49.370 --> 00:13:51.840 with a little bit elsewhere, little bit in California. 00:13:51.840 --> 00:13:55.400 Colorado-- again, people have been doing this in Colorado 00:13:55.400 --> 00:13:55.940 for a while. 00:13:55.940 --> 00:13:57.950 The reserves are smaller. 00:13:57.950 --> 00:14:01.820 And I don't know much about most of the others. 00:14:01.820 --> 00:14:05.690 Comments or reactions about this? 00:14:05.690 --> 00:14:11.390 OK, so what's all this done? 00:14:11.390 --> 00:14:15.200 Well, it's created a boom. 00:14:15.200 --> 00:14:18.500 This is a map of wells in Pennsylvania 00:14:18.500 --> 00:14:24.950 through the end of 2010. 00:14:24.950 --> 00:14:26.660 You see their trajectory-- 00:14:26.660 --> 00:14:33.170 27 wells drilled in 2010, then 161, then 785, then 1445, 00:14:33.170 --> 00:14:37.730 and 3,000 wells in the ground producing by April of 2011, 00:14:37.730 --> 00:14:42.515 with rapid permitting going on, concentrated in a few areas. 00:14:45.410 --> 00:14:48.980 Similar story elsewhere-- the Pennsylvania folks 00:14:48.980 --> 00:14:51.770 just happened to have provided a convenient map. 00:14:51.770 --> 00:14:57.065 So you have a drilling boom to get at this resource. 00:14:59.840 --> 00:15:01.070 What's it done? 00:15:01.070 --> 00:15:03.860 Well, it's depressed gas prices. 00:15:03.860 --> 00:15:08.120 You may recall last time, this is a Henry Hub price. 00:15:08.120 --> 00:15:10.860 Last time, this graph cut off about here. 00:15:10.860 --> 00:15:15.740 This is the result. This is the rest of it. 00:15:15.740 --> 00:15:23.630 We're down in the neighborhood of $2 per million BTUs, where 00:15:23.630 --> 00:15:28.394 the normal price was tending to be around 10, 00:15:28.394 --> 00:15:32.400 eight, 10, was what people thought was sort of normal. 00:15:32.400 --> 00:15:34.460 And again, if you go back to the Pennsylvania 00:15:34.460 --> 00:15:39.440 figure, the drilling, this is all since-- 00:15:39.440 --> 00:15:42.050 it just began in 2007. 00:15:42.050 --> 00:15:45.980 There is no pre-2007 drilling in Pennsylvania, 00:15:45.980 --> 00:15:51.800 and there are more than 3,000 wells, probably 4,000 by now, 00:15:51.800 --> 00:15:52.620 producing. 00:15:52.620 --> 00:15:56.660 So this has come on very fast, very big, 00:15:56.660 --> 00:15:59.720 and in parts of the country where people live. 00:15:59.720 --> 00:16:03.170 And it's depressed the natural gas price. 00:16:03.170 --> 00:16:07.310 To go to a question that we discussed last time, 00:16:07.310 --> 00:16:10.970 this is arguably old business, but just to do an oil-- 00:16:10.970 --> 00:16:16.490 oh, yeah, people in the business say what happened, 00:16:16.490 --> 00:16:19.460 the reason we're at $2, is a lot of people got very excited. 00:16:19.460 --> 00:16:21.620 This happens in businesses like this-- 00:16:21.620 --> 00:16:22.940 everybody drills a well. 00:16:22.940 --> 00:16:26.420 All of a sudden, oh, my god, we've drilled too many wells. 00:16:26.420 --> 00:16:28.670 It's not profitable, most people say, 00:16:28.670 --> 00:16:34.130 to get at this gas at $2 a million cubic BTU, but at $4 00:16:34.130 --> 00:16:36.680 it is, and at $6 it is. 00:16:36.680 --> 00:16:38.450 Somewhere in the four to six range 00:16:38.450 --> 00:16:41.780 is where people look for a long-run equilibrium. 00:16:41.780 --> 00:16:44.780 Drilling will slow down for gas alone. 00:16:44.780 --> 00:16:47.350 Demand will pull the price up, blah, blah, blah. 00:16:47.350 --> 00:16:50.600 So they look at the four to six range, as opposed 00:16:50.600 --> 00:16:53.240 to the eight to 10 to higher range, 00:16:53.240 --> 00:16:55.340 as a place where gas will settle down. 00:16:55.340 --> 00:16:58.850 And there is a lot of it. 00:16:58.850 --> 00:17:01.280 There's controversy about how much there is. 00:17:01.280 --> 00:17:04.700 So one thing it did was to depress the gas price. 00:17:04.700 --> 00:17:07.890 It drove an interesting wedge between gas and oil. 00:17:07.890 --> 00:17:11.540 So this is another one of these comparisons. 00:17:11.540 --> 00:17:18.650 If you just look at dollars per BTU, which I caution 00:17:18.650 --> 00:17:21.200 is kind of a crude measure, because not all BTUs 00:17:21.200 --> 00:17:22.819 are created equal. 00:17:22.819 --> 00:17:24.589 Gasoline is better for automobiles 00:17:24.589 --> 00:17:27.230 because you can have a higher energy density and a longer 00:17:27.230 --> 00:17:31.160 range, and so forth, and it's easier to transport per BTU. 00:17:31.160 --> 00:17:33.470 So oil has a variety of advantages, 00:17:33.470 --> 00:17:38.240 but if you just look at BTUs, then the conversion factor 00:17:38.240 --> 00:17:42.810 is apparently 5.825, which references tend to agree on. 00:17:42.810 --> 00:17:46.490 So that means if gas is $2 a million BTUs, 00:17:46.490 --> 00:17:51.830 that translates into $11.65 a barrel of oil. 00:17:51.830 --> 00:18:00.550 But when gas hit $2 recently over here, oil was over $100. 00:18:00.550 --> 00:18:04.810 So that says in BTU terms, the difference right 00:18:04.810 --> 00:18:07.910 now is enormous. 00:18:07.910 --> 00:18:13.130 If you can find a way to use the gas BTUs and not oil BTUs, 00:18:13.130 --> 00:18:16.692 it makes a big difference. 00:18:16.692 --> 00:18:18.650 And it makes a difference in a lot of settings. 00:18:18.650 --> 00:18:19.483 I have a colleague-- 00:18:19.483 --> 00:18:21.830 I haven't seen the paper, but he says 00:18:21.830 --> 00:18:25.070 it's straightforward that a natural gas 00:18:25.070 --> 00:18:28.970 car dominates an electric car. 00:18:28.970 --> 00:18:31.580 An all electric car, you've got to have an expensive battery, 00:18:31.580 --> 00:18:34.550 it has limited range, dadada, you've got to plug it. 00:18:34.550 --> 00:18:36.740 And natural gas, you need a tank. 00:18:36.740 --> 00:18:38.490 Engine is trivial to modify. 00:18:38.490 --> 00:18:42.200 It doesn't cost much more, and the range is also limited, 00:18:42.200 --> 00:18:43.830 but it's about the same. 00:18:43.830 --> 00:18:47.330 So why would you buy an electric car when you can buy a gas car? 00:18:47.330 --> 00:18:48.140 Well, we'll see. 00:18:48.140 --> 00:18:49.710 They're not subsidized yet. 00:18:49.710 --> 00:18:50.210 We'll see. 00:18:50.210 --> 00:18:51.920 But anyway, this is a big deal. 00:18:51.920 --> 00:18:55.100 Again, historically, there are gaps between oil and gas. 00:18:55.100 --> 00:18:58.250 They don't track precisely because as I mentioned 00:18:58.250 --> 00:19:02.030 last time, you don't really have electric utilities substituting 00:19:02.030 --> 00:19:05.390 every five minutes between oil and gas. 00:19:05.390 --> 00:19:09.650 But this is pretty much unheard of. 00:19:09.650 --> 00:19:14.480 That difference in price per BTU is unheard of. 00:19:14.480 --> 00:19:18.280 And it's opened in the last couple of years. 00:19:18.280 --> 00:19:19.620 So that has implications. 00:19:19.620 --> 00:19:24.780 And again, "The Times" talks about this without the picture. 00:19:24.780 --> 00:19:27.075 The other thing it does is look at this. 00:19:27.075 --> 00:19:33.510 This is the Energy Information Administration's Annual Energy 00:19:33.510 --> 00:19:36.270 Outlook Early Release, which came out 00:19:36.270 --> 00:19:39.180 either January or February. 00:19:39.180 --> 00:19:43.800 It says this is their projection for future production 00:19:43.800 --> 00:19:45.430 of natural gas. 00:19:45.430 --> 00:19:48.750 This brown thing on the top is shale. 00:19:48.750 --> 00:19:50.250 I mean, look at it-- there's nothing 00:19:50.250 --> 00:19:58.020 going on here until about 2006, 2007, and then it explodes. 00:19:58.020 --> 00:20:03.180 And by 2035, it accounts for almost half 00:20:03.180 --> 00:20:05.280 of total US production. 00:20:05.280 --> 00:20:13.860 Previous work sort of focused on these, just plain old gas, gas 00:20:13.860 --> 00:20:16.260 that you get with oil, coalbed methane-- 00:20:16.260 --> 00:20:22.230 steady decline, increase in demand, lots of imports. 00:20:22.230 --> 00:20:25.440 Tight gas, which is related, is going up, 00:20:25.440 --> 00:20:30.430 but shale gas is projected to explode. 00:20:30.430 --> 00:20:33.870 I happened to look because I was updating last year's lecture, 00:20:33.870 --> 00:20:36.240 and I had a graph like this last year. 00:20:36.240 --> 00:20:40.440 The graph last year showed-- 00:20:40.440 --> 00:20:47.520 this was, again, circa last March or April-- 00:20:47.520 --> 00:20:51.240 it showed the US being a net importer of natural gas 00:20:51.240 --> 00:20:54.060 through 2035. 00:20:54.060 --> 00:20:55.920 Again, this was a year ago. 00:20:55.920 --> 00:20:59.070 It projected big increases in shale, but not 00:20:59.070 --> 00:21:00.960 enough to offset demand, and said 00:21:00.960 --> 00:21:03.660 we would be an importer through 2035. 00:21:03.660 --> 00:21:06.060 The current projection a year later 00:21:06.060 --> 00:21:10.290 is we'll be a net exporter of liquefied gas by 2016. 00:21:10.290 --> 00:21:12.780 We'll be a net exporter overall-- 00:21:12.780 --> 00:21:16.450 pipeline and liquefied-- by 2021. 00:21:16.450 --> 00:21:18.660 That's in a year. 00:21:18.660 --> 00:21:22.680 That's unheard of, just to be clear. 00:21:22.680 --> 00:21:26.410 That's a dramatic, dramatic change. 00:21:26.410 --> 00:21:28.780 I think when I taught this two years ago, 00:21:28.780 --> 00:21:30.690 I'm not sure we mentioned shale. 00:21:30.690 --> 00:21:35.280 Anyway, the other thing is it has had an impact also on oil. 00:21:35.280 --> 00:21:38.850 If you look at oil, US production of oil, 00:21:38.850 --> 00:21:40.920 as we discussed early in the semester, 00:21:40.920 --> 00:21:44.130 has been in long-term decline. 00:21:44.130 --> 00:21:49.830 in large part because of shale and related developments, 00:21:49.830 --> 00:21:55.080 they now project a pretty steady increase in US production. 00:21:55.080 --> 00:21:56.927 And this is not, oh, my god, we've 00:21:56.927 --> 00:21:59.010 authorized deepwater drilling or oh, my god, we're 00:21:59.010 --> 00:22:04.650 drilling the National Wildlife Refuge on the North Slope. 00:22:04.650 --> 00:22:06.420 This is under current policy. 00:22:06.420 --> 00:22:10.920 This is under current policy we will produce lots more oil. 00:22:15.120 --> 00:22:22.990 OK, what's good about this? 00:22:22.990 --> 00:22:25.810 What are the benefits? 00:22:25.810 --> 00:22:28.608 We'll come to cost in a minute, but is this a good thing? 00:22:28.608 --> 00:22:29.650 Why is this a good thing? 00:22:29.650 --> 00:22:30.434 Maxwell. 00:22:30.434 --> 00:22:31.482 AUDIENCE: [INAUDIBLE] 00:22:31.482 --> 00:22:33.190 RICHARD SCHMALENSEE: It'll get us energy. 00:22:33.190 --> 00:22:35.200 It'll move us toward energy independence 00:22:35.200 --> 00:22:38.140 if we use the natural gas in transportation, 00:22:38.140 --> 00:22:40.450 energy security, rather. 00:22:40.450 --> 00:22:45.010 It'll affect our balance of payments regardless. 00:22:45.010 --> 00:22:48.370 But since most of our gas imports are from Canada-- 00:22:48.370 --> 00:22:51.250 I know they're shaky up there-- but to the extent 00:22:51.250 --> 00:22:54.610 we use it in transportation, you really get some energy security 00:22:54.610 --> 00:22:55.870 benefits. 00:22:55.870 --> 00:22:57.760 And let me just expand on that a little bit, 00:22:57.760 --> 00:22:59.500 because I know other people want to talk. 00:22:59.500 --> 00:23:03.520 One of the interesting things in here that I hadn't focused on-- 00:23:03.520 --> 00:23:05.590 in "The Times," rather-- 00:23:05.590 --> 00:23:08.350 they talk about the garbage truck market. 00:23:08.350 --> 00:23:11.020 Garbage trucks are perfect for this. 00:23:11.020 --> 00:23:12.880 They're centrally fueled. 00:23:12.880 --> 00:23:15.250 They're in use for a few hours a day. 00:23:15.250 --> 00:23:17.350 It's perfect. 00:23:17.350 --> 00:23:20.350 And given the price difference, the fuel price difference, 00:23:20.350 --> 00:23:22.900 they said something like half of garbage trucks sold now 00:23:22.900 --> 00:23:24.550 are natural gas compatible. 00:23:24.550 --> 00:23:28.090 A third of buses sold now are natural gas compatible. 00:23:28.090 --> 00:23:32.110 So you do expect a reasonable amount of use 00:23:32.110 --> 00:23:33.940 in transportation. 00:23:33.940 --> 00:23:36.400 That'll reduce our imports, improve the trade balance, 00:23:36.400 --> 00:23:37.610 and improve energy security. 00:23:37.610 --> 00:23:38.920 Anything else? 00:23:38.920 --> 00:23:39.870 Yeah. 00:23:39.870 --> 00:23:41.458 AUDIENCE: Reduction in emissions. 00:23:41.458 --> 00:23:43.750 RICHARD SCHMALENSEE: Reduction in emissions, we'll get. 00:23:43.750 --> 00:23:47.230 I want to come back to that later because that's an issue. 00:23:47.230 --> 00:23:49.750 You expect it to reduce CO2 emissions as we 00:23:49.750 --> 00:23:52.300 move from coal to natural gas. 00:23:52.300 --> 00:23:53.800 There's some controversy there and I 00:23:53.800 --> 00:23:54.760 want to come back to that. 00:23:54.760 --> 00:23:55.260 Jessica. 00:23:55.260 --> 00:23:57.056 AUDIENCE: [INAUDIBLE] resource, but you 00:23:57.056 --> 00:23:59.348 have mostly infrastructure layout [INAUDIBLE] so you're 00:23:59.348 --> 00:24:02.642 taking [INAUDIBLE] or it's easier, 00:24:02.642 --> 00:24:07.222 there's less of a barrier to entrance [INAUDIBLE].. 00:24:07.222 --> 00:24:08.680 RICHARD SCHMALENSEE: You don't have 00:24:08.680 --> 00:24:11.350 too much of a chicken/egg problem 00:24:11.350 --> 00:24:14.230 because you do have the pipeline infrastructure in place-- 00:24:14.230 --> 00:24:16.450 not everywhere, and we'll see that in a second. 00:24:19.517 --> 00:24:21.100 You do have to put in, if you're going 00:24:21.100 --> 00:24:22.600 to do it in transportation, you have 00:24:22.600 --> 00:24:26.800 to put in refueling stations. 00:24:26.800 --> 00:24:30.460 "The Times" argues that to do it effectively and trucking-- 00:24:30.460 --> 00:24:32.380 forgetting about garbage trucks and so forth 00:24:32.380 --> 00:24:34.600 that you can pretty much do now-- 00:24:34.600 --> 00:24:37.030 to do it for interstate trucking you need, they said, 00:24:37.030 --> 00:24:40.720 2,800 fueling stations on the major truck routes. 00:24:40.720 --> 00:24:42.970 And people are building them. 00:24:42.970 --> 00:24:43.797 David. 00:24:43.797 --> 00:24:45.288 AUDIENCE: [INAUDIBLE]. 00:24:49.052 --> 00:24:51.010 RICHARD SCHMALENSEE: You expect the US industry 00:24:51.010 --> 00:24:55.600 to be more competitive because costs have come down. 00:24:55.600 --> 00:24:59.650 There's the other interesting thing that we tend to forget, 00:24:59.650 --> 00:25:03.760 because we think of natural gas, particularly in this class, as 00:25:03.760 --> 00:25:05.020 mostly an energy source. 00:25:05.020 --> 00:25:08.620 But it's a feedstock for a variety of chemical processes. 00:25:08.620 --> 00:25:13.540 And so a bunch of the industries that use that as a feedstock-- 00:25:13.540 --> 00:25:15.940 plastics, importantly, but others-- 00:25:15.940 --> 00:25:18.160 are moving back to the US because it's so much 00:25:18.160 --> 00:25:20.300 cheaper here than elsewhere. 00:25:20.300 --> 00:25:23.980 So you're getting natural gas based manufacturing moving 00:25:23.980 --> 00:25:26.440 back, not only because energy costs are 00:25:26.440 --> 00:25:31.450 down but because feedstock costs are down. 00:25:31.450 --> 00:25:32.950 Anything else? 00:25:32.950 --> 00:25:33.650 Ryan. 00:25:33.650 --> 00:25:35.290 AUDIENCE: [INAUDIBLE] American jobs. 00:25:35.290 --> 00:25:36.490 RICHARD SCHMALENSEE: Jobs-- 00:25:36.490 --> 00:25:37.750 I've got a great graphic on that, 00:25:37.750 --> 00:25:38.690 that I'll show you in a minute. 00:25:38.690 --> 00:25:40.420 But that's normally the first thing-- 00:25:40.420 --> 00:25:42.760 in Congress it's the first thing they say-- 00:25:42.760 --> 00:25:45.310 this is jobs. 00:25:45.310 --> 00:25:53.830 OK, I think we have most of the benefits, but not all. 00:25:53.830 --> 00:25:55.330 Anything else anybody can think of? 00:25:58.540 --> 00:25:59.890 Oh, sorry, yes, Kirsten. 00:25:59.890 --> 00:26:01.598 AUDIENCE: [INAUDIBLE] continue to explore 00:26:01.598 --> 00:26:04.340 [INAUDIBLE] increases, so in the future [INAUDIBLE] prices 00:26:04.340 --> 00:26:06.257 to be less volatile [INAUDIBLE] in the ground? 00:26:06.257 --> 00:26:08.215 RICHARD SCHMALENSEE: It might be less volatile. 00:26:08.215 --> 00:26:09.010 I think so. 00:26:09.010 --> 00:26:11.560 But you still have this short-run inelastic demand, 00:26:11.560 --> 00:26:13.390 inelastic supply issue. 00:26:13.390 --> 00:26:16.750 And a really cold winter or really warm winter 00:26:16.750 --> 00:26:18.140 can have an impact. 00:26:18.140 --> 00:26:20.980 They do store gas, not just in the big tanks 00:26:20.980 --> 00:26:23.860 you see when you drive south along the waterfront. 00:26:23.860 --> 00:26:25.780 But it's stored in underground caverns 00:26:25.780 --> 00:26:27.040 and has been for a long time. 00:26:27.040 --> 00:26:31.150 So you would hope that the volatility will go down 00:26:31.150 --> 00:26:33.440 because we're a little bit out of the world market. 00:26:33.440 --> 00:26:35.080 Yeah, didn't have that. 00:26:35.080 --> 00:26:36.470 Anything else? 00:26:36.470 --> 00:26:36.970 Yeah. 00:26:36.970 --> 00:26:39.053 AUDIENCE: Would that mean money for the government 00:26:39.053 --> 00:26:41.550 in terms of royalties? 00:26:41.550 --> 00:26:44.610 RICHARD SCHMALENSEE: It might if it comes from federal lands. 00:26:44.610 --> 00:26:47.100 Suppose it comes from private lands. 00:26:47.100 --> 00:26:50.490 I have friends who inherited an otherwise useless ranch 00:26:50.490 --> 00:26:55.380 in Texas and were told there's natural gas under your land. 00:26:55.380 --> 00:26:57.600 We'd like to drill. 00:26:57.600 --> 00:27:01.860 They like that, because they weren't going to live there. 00:27:01.860 --> 00:27:03.390 In fact, nobody was living there. 00:27:03.390 --> 00:27:06.300 And they're happy to cash that check 00:27:06.300 --> 00:27:07.530 when it comes in every month. 00:27:07.530 --> 00:27:10.095 So it's money for the government in revenues, 00:27:10.095 --> 00:27:11.220 depending on the royalties. 00:27:11.220 --> 00:27:15.500 It could be money from landowners. 00:27:15.500 --> 00:27:18.110 And that's everything except something 00:27:18.110 --> 00:27:22.580 that we haven't talked about and you might not 00:27:22.580 --> 00:27:25.340 pick up until we've talked about electricity. 00:27:25.340 --> 00:27:32.060 And that is one of the issues of bringing in wind 00:27:32.060 --> 00:27:38.510 and solar is they vary and they vary unpredictably. 00:27:38.510 --> 00:27:41.810 So you need resources that can respond to that. 00:27:41.810 --> 00:27:43.160 I mean, storage would be swell. 00:27:43.160 --> 00:27:44.420 Storage is the Holy Grail. 00:27:44.420 --> 00:27:47.210 We don't have storage economically. 00:27:47.210 --> 00:27:50.990 So what you tend to use is you tend to use gas turbines. 00:27:50.990 --> 00:27:54.200 And gas turbines, if you recall from-- not combined cycle, 00:27:54.200 --> 00:27:56.000 but old gas turbines-- 00:27:56.000 --> 00:27:58.620 and on an earlier slide I had the efficiency of those. 00:27:58.620 --> 00:28:01.430 And it's not high, but they're quick. 00:28:01.430 --> 00:28:05.840 Well, this reduces the running cost of the devices 00:28:05.840 --> 00:28:08.840 you will use to use more wind and solar, 00:28:08.840 --> 00:28:10.700 and thus makes it easier to integrate 00:28:10.700 --> 00:28:12.260 wind and solar into the system. 00:28:12.260 --> 00:28:13.280 Jacob, you had a point? 00:28:13.280 --> 00:28:15.947 AUDIENCE: Yeah, I was just going to say I hope you're going down 00:28:15.947 --> 00:28:18.335 the path of it provides baseload power for [INAUDIBLE] 00:28:18.335 --> 00:28:20.210 RICHARD SCHMALENSEE: It can provide baseload. 00:28:20.210 --> 00:28:22.460 It provides, as we were saying, lower emissions 00:28:22.460 --> 00:28:26.180 baseload power, particularly the combined cycle stuff. 00:28:26.180 --> 00:28:28.831 AUDIENCE: [INAUDIBLE] used to turn on and off really 00:28:28.831 --> 00:28:30.535 quickly when the power demand spikes. 00:28:30.535 --> 00:28:32.660 RICHARD SCHMALENSEE: And you use the combined cycle 00:28:32.660 --> 00:28:34.250 stuff for baseload. 00:28:34.250 --> 00:28:38.150 You may or may not remember the brief discussion 00:28:38.150 --> 00:28:39.530 of combined cycle. 00:28:39.530 --> 00:28:41.580 We'll probably come back to it. 00:28:41.580 --> 00:28:45.830 But when we talked about Hexion, I 00:28:45.830 --> 00:28:53.330 mentioned there were two sorts of technologies. 00:28:53.330 --> 00:28:55.280 And the combined cycle technology 00:28:55.280 --> 00:28:58.988 is a generating technology, not unrelated to what 00:28:58.988 --> 00:29:01.280 was going on in Hexion, but it's generating technology. 00:29:01.280 --> 00:29:03.830 You use natural gas or oil or whatever, but typically 00:29:03.830 --> 00:29:06.530 natural gas, to run a gas turbine. 00:29:06.530 --> 00:29:08.420 The exhaust from the gas turbine is hot. 00:29:08.420 --> 00:29:11.030 You use the exhaust from the gas turbine 00:29:11.030 --> 00:29:14.240 to heat water to make steam and you run a steam turbine-- 00:29:14.240 --> 00:29:16.160 hence combined cycle. 00:29:16.160 --> 00:29:20.180 You can get a lot of efficiency because you're not putting out 00:29:20.180 --> 00:29:21.500 a high temperature exhaust. 00:29:21.500 --> 00:29:22.820 You're not wasting that heat. 00:29:22.820 --> 00:29:23.990 You use it. 00:29:23.990 --> 00:29:27.000 And you can use it effectively in a steam turbine. 00:29:27.000 --> 00:29:28.930 So that's effective. 00:29:28.930 --> 00:29:33.560 So the other thing we didn't talk about 00:29:33.560 --> 00:29:40.580 and that's because you don't own homes, but if you own a home, 00:29:40.580 --> 00:29:42.890 you'll have lower heating costs. 00:29:42.890 --> 00:29:46.310 That bill that comes around in the winter will be lower. 00:29:46.310 --> 00:29:48.560 This is a good thing. 00:29:48.560 --> 00:29:50.720 I just managed to persuade my condo 00:29:50.720 --> 00:29:53.510 to convert to gas from oil. 00:29:53.510 --> 00:29:55.470 And electricity will be cheaper. 00:29:55.470 --> 00:30:00.980 So for those of us who pay these bills, that's a good thing. 00:30:00.980 --> 00:30:06.830 We'll reduce gas and probably oil imports. 00:30:06.830 --> 00:30:09.440 It will reduce it because there's more production 00:30:09.440 --> 00:30:14.180 but also because you'll be substituting gas for oil. 00:30:18.350 --> 00:30:21.380 US manufacturing-- people get very excited about a rebirth 00:30:21.380 --> 00:30:23.023 of US manufacturing, some of which 00:30:23.023 --> 00:30:24.440 is driven by energy, some of which 00:30:24.440 --> 00:30:28.130 is driven by feedstock prices. 00:30:28.130 --> 00:30:31.100 Easier to integrate wind and solar, money 00:30:31.100 --> 00:30:34.610 for people in rural Texas for ranches they 00:30:34.610 --> 00:30:37.985 had no intention of living on. 00:30:37.985 --> 00:30:39.110 We're going to talk about-- 00:30:39.110 --> 00:30:40.880 I didn't underline "some," but I probably 00:30:40.880 --> 00:30:42.130 should have underlined "some." 00:30:44.720 --> 00:30:46.910 Fewer neighbors in rural Texas than, 00:30:46.910 --> 00:30:49.580 say, in urban Pennsylvania-- 00:30:49.580 --> 00:30:50.340 that's an issue. 00:30:50.340 --> 00:30:54.570 And of course, jobs. 00:30:54.570 --> 00:30:56.630 These are pictures of North Dakota. 00:30:56.630 --> 00:31:03.020 And this is oil production in North Dakota. 00:31:03.020 --> 00:31:05.720 North Dakota is now the number four oil-producing state 00:31:05.720 --> 00:31:11.760 in the country from pretty far down the league table. 00:31:11.760 --> 00:31:15.830 And for the last three years, I don't know what the early 2012 00:31:15.830 --> 00:31:17.580 numbers are, but for the last three years, 00:31:17.580 --> 00:31:20.780 it's had the lowest unemployment rate in the country. 00:31:20.780 --> 00:31:24.880 So if you're from North Dakota, this is fabulous stuff. 00:31:24.880 --> 00:31:27.070 All of a sudden the land is worth something. 00:31:27.070 --> 00:31:28.820 All of a sudden there are a lot of jobs. 00:31:28.820 --> 00:31:30.945 And if you're running a restaurant, all of a sudden 00:31:30.945 --> 00:31:33.070 there are people who come in. 00:31:33.070 --> 00:31:34.540 This is oil production. 00:31:34.540 --> 00:31:35.860 This is gas production. 00:31:35.860 --> 00:31:39.160 And this is an interesting graph for a number of reasons. 00:31:39.160 --> 00:31:40.660 You see what you would expect, which 00:31:40.660 --> 00:31:44.560 is natural gas production goes way up. 00:31:44.560 --> 00:31:47.050 But there aren't pipelines. 00:31:47.050 --> 00:31:50.570 And this is the percentage flared. 00:31:50.570 --> 00:31:55.280 So "not marketed" means "flared." 00:31:55.280 --> 00:31:57.940 They're burning it. 00:31:57.940 --> 00:32:04.660 So they're burning, depending on the month, up to 40%, 00:32:04.660 --> 00:32:08.740 typically above 30% of the gas produced. 00:32:08.740 --> 00:32:10.720 The money is in the oil. 00:32:10.720 --> 00:32:14.650 They don't have enough pipeline capacity to get the gas out 00:32:14.650 --> 00:32:18.008 so they burn it, which is a shame. 00:32:18.008 --> 00:32:19.300 Somebody will build a pipeline. 00:32:19.300 --> 00:32:22.890 That's money being burned. 00:32:22.890 --> 00:32:25.405 OK, comments? 00:32:31.520 --> 00:32:32.395 But there are issues. 00:32:36.110 --> 00:32:39.340 You can find, and I was going to try 00:32:39.340 --> 00:32:42.700 to do it but my earlier attempts to link YouTube videos didn't 00:32:42.700 --> 00:32:43.220 work well. 00:32:43.220 --> 00:32:47.800 But you can go to go to YouTube, and most videos on fracking 00:32:47.800 --> 00:32:50.260 look like this. 00:32:50.260 --> 00:32:54.250 Somebody pours water, lights a match, foomp. 00:32:57.100 --> 00:33:02.020 And earthquakes-- there was some recent press coverage 00:33:02.020 --> 00:33:04.010 of fracking-related earthquakes. 00:33:04.010 --> 00:33:10.150 So this is not a completely benign technology. 00:33:10.150 --> 00:33:11.548 I mean, neither were railroads. 00:33:11.548 --> 00:33:13.090 Neither were coal-fired power plants. 00:33:13.090 --> 00:33:19.500 Neither are automobiles, but it has issues. 00:33:19.500 --> 00:33:21.180 Some of the issues-- 00:33:21.180 --> 00:33:23.700 they mostly come from these features. 00:33:28.170 --> 00:33:31.080 Some of the fluids contain toxics, 00:33:31.080 --> 00:33:33.160 some of the stuff that's pumped down-- and again, 00:33:33.160 --> 00:33:36.685 it varies from player to player-- 00:33:36.685 --> 00:33:37.185 is toxic. 00:33:39.780 --> 00:33:43.290 The water that comes up is at least 00:33:43.290 --> 00:33:47.190 as bad as the stuff that went down, often quite a bit worse. 00:33:47.190 --> 00:33:51.300 It's got whatever junk it picked up 00:33:51.300 --> 00:33:55.950 traveling through thousands of feet of rock. 00:33:55.950 --> 00:33:58.620 The wells go through aquifers often. 00:33:58.620 --> 00:33:59.670 You drill down. 00:33:59.670 --> 00:34:01.740 You're drilling down through an aquifer. 00:34:01.740 --> 00:34:03.210 That's somebody's groundwater. 00:34:03.210 --> 00:34:05.850 That's the well water that's burning. 00:34:08.960 --> 00:34:11.389 Methane has its own toxicities. 00:34:11.389 --> 00:34:16.070 It is flammable, per that picture. 00:34:16.070 --> 00:34:18.650 And it is a greenhouse gas. 00:34:18.650 --> 00:34:23.179 So the question that Philip raised of lower emissions 00:34:23.179 --> 00:34:28.295 gets to be a little complicated, because methane leaks. 00:34:31.670 --> 00:34:34.969 So these are the main issues. 00:34:34.969 --> 00:34:39.019 Let me just walk through some of the environmental problems. 00:34:42.880 --> 00:34:46.300 First is groundwater contamination-- 00:34:46.300 --> 00:34:51.920 not that big a deal in Texas, big deal in Pennsylvania. 00:34:51.920 --> 00:34:53.925 They actually have water in Pennsylvania. 00:34:56.600 --> 00:35:00.380 The best evidence I know says that the problem comes 00:35:00.380 --> 00:35:03.530 from the well bore, from going down-- 00:35:03.530 --> 00:35:09.290 that it's very hard for the gas to leak up 00:35:09.290 --> 00:35:13.190 through 7,000 feet of rock into the groundwater. 00:35:13.190 --> 00:35:14.570 But in any case, there are plenty 00:35:14.570 --> 00:35:19.130 of examples where groundwater has been contaminated. 00:35:19.130 --> 00:35:20.990 There's also this issue of wastewater, 00:35:20.990 --> 00:35:22.955 the stuff that's coming back. 00:35:22.955 --> 00:35:26.300 It's got all kinds of junk in it. 00:35:26.300 --> 00:35:33.140 If you don't inject it safely, if the holding pond leaks, 00:35:33.140 --> 00:35:35.660 if the treatment isn't adequate, you 00:35:35.660 --> 00:35:38.330 can have that as a source of contamination. 00:35:41.370 --> 00:35:44.280 There is nearby pollution. 00:35:44.280 --> 00:35:45.300 There's all this junk. 00:35:45.300 --> 00:35:47.550 You're running an industrial operation-- again, 00:35:47.550 --> 00:35:50.070 not necessarily so terrible in Texas. 00:35:50.070 --> 00:35:51.030 Do I have a picture? 00:35:51.030 --> 00:35:52.230 No, I don't? 00:35:52.230 --> 00:35:58.690 Not so terrible in some places, but the methane will be out. 00:35:58.690 --> 00:36:00.070 That's not nice stuff. 00:36:00.070 --> 00:36:04.180 Various other toxic things come out-- 00:36:04.180 --> 00:36:06.160 volatiles in the groundwater. 00:36:06.160 --> 00:36:09.078 You get dust, and noise, and a lot of traffic, 00:36:09.078 --> 00:36:10.120 a lot of vehicle traffic. 00:36:10.120 --> 00:36:13.510 You truck the gas out typically, and find a pipeline. 00:36:13.510 --> 00:36:15.880 You don't build a pipeline to every well site. 00:36:15.880 --> 00:36:20.670 So it's noisy, and messy, and dirty. 00:36:20.670 --> 00:36:21.580 Does that matter? 00:36:21.580 --> 00:36:24.300 Well, in Pennsylvania and New York, 00:36:24.300 --> 00:36:27.870 there tend to be a lot of people around. 00:36:27.870 --> 00:36:32.120 In North Dakota and Texas, not so many. 00:36:32.120 --> 00:36:34.820 So whether these things are important or not depends on A, 00:36:34.820 --> 00:36:39.740 what the well does, and B, what damages it inflicts. 00:36:39.740 --> 00:36:44.510 I mean, my friends' ranch, there's nobody for miles. 00:36:44.510 --> 00:36:48.590 So yeah, there's dust, and dirt, and traffic, and junk, 00:36:48.590 --> 00:36:52.190 but it's polluting the sagebrush. 00:36:52.190 --> 00:36:56.145 In that PennEnvironment thing, there are schools, hospitals 00:36:56.145 --> 00:36:56.645 nearby. 00:37:00.580 --> 00:37:05.650 Methane leakage-- let me talk about methane leakage. 00:37:05.650 --> 00:37:09.580 There was just a piece in "Nature" 00:37:09.580 --> 00:37:12.410 about methane leakage from one field 00:37:12.410 --> 00:37:15.880 that folks managed to measure well. 00:37:15.880 --> 00:37:18.220 And it was like-- 00:37:18.220 --> 00:37:23.450 not to make up a number-- like 6% of total production leaked. 00:37:23.450 --> 00:37:27.240 Well, methane is a greenhouse gas. 00:37:27.240 --> 00:37:29.580 We talked about that earlier. 00:37:29.580 --> 00:37:32.040 It has a relatively short half life, 00:37:32.040 --> 00:37:35.210 order of magnitude 10 years-- 00:37:35.210 --> 00:37:37.940 quicker than carbon dioxide to come out of the atmosphere, 00:37:37.940 --> 00:37:39.420 but while it's in the atmosphere, 00:37:39.420 --> 00:37:45.770 it's potent, more potent than carbon dioxide per unit 00:37:45.770 --> 00:37:48.690 of mass, or maybe per mole, one way or the other. 00:37:48.690 --> 00:37:52.010 In any case, this is sort of a serious issue. 00:37:52.010 --> 00:37:56.300 If you're going to produce this stuff at scale for a while, 00:37:56.300 --> 00:37:58.550 and dump a lot of methane in the atmosphere, 00:37:58.550 --> 00:38:01.220 you're going to have climate implications. 00:38:01.220 --> 00:38:05.180 There was a study that said producing and using 00:38:05.180 --> 00:38:09.830 natural gas via fracking is worse for the climate than coal 00:38:09.830 --> 00:38:13.400 on a lifecycle basis. 00:38:13.400 --> 00:38:17.630 That study was pretty badly flawed 00:38:17.630 --> 00:38:23.030 because it assumed very inefficient coal plants, 00:38:23.030 --> 00:38:24.890 but if the methane leakage is high enough, 00:38:24.890 --> 00:38:26.810 that could be right. 00:38:26.810 --> 00:38:30.625 And if you use the right measure of climate damage, which 00:38:30.625 --> 00:38:32.750 I think he used the wrong measure of climate damage 00:38:32.750 --> 00:38:33.450 as well. 00:38:33.450 --> 00:38:35.300 But that's a serious issue. 00:38:40.230 --> 00:38:45.780 Earthquakes-- "Another Fracking Earthquake," 00:38:45.780 --> 00:38:46.740 from that t-shirt-- 00:38:46.740 --> 00:38:49.410 great t-shirt. 00:38:49.410 --> 00:38:52.200 Again this year there were discussions 00:38:52.200 --> 00:38:56.760 of earthquakes in northeastern Ohio, 00:38:56.760 --> 00:39:01.200 thought to be associated with basically dumping 00:39:01.200 --> 00:39:03.810 all that water deep underground, kind 00:39:03.810 --> 00:39:08.700 of lubricating the formations. 00:39:08.700 --> 00:39:13.350 An Ohio regulatory authority, with a lot of consultation 00:39:13.350 --> 00:39:17.760 with geologists, has verified, they think, 00:39:17.760 --> 00:39:21.630 that in fact, the fracking was the cause of small earthquakes. 00:39:21.630 --> 00:39:25.890 But small earthquakes are earthquakes-- 00:39:25.890 --> 00:39:27.910 magnitude 3 kind of earthquake, for those 00:39:27.910 --> 00:39:29.160 who follow that sort of thing. 00:39:32.070 --> 00:39:34.350 In Ohio, they've responded by saying 00:39:34.350 --> 00:39:35.790 it doesn't always do this. 00:39:35.790 --> 00:39:37.950 It does it when it's injected in certain ways 00:39:37.950 --> 00:39:39.960 into certain formations. 00:39:39.960 --> 00:39:43.260 And they have a set of regulations for Ohio 00:39:43.260 --> 00:39:48.660 that they think will deal with this. 00:39:48.660 --> 00:39:51.030 But it's an issue-- 00:39:51.030 --> 00:39:54.600 earthquakes, not everybody's favorite. 00:39:54.600 --> 00:39:58.040 How many people have been through an earthquake? 00:39:58.040 --> 00:40:00.030 Oh, yeah, from California? 00:40:00.030 --> 00:40:01.040 Where? 00:40:01.040 --> 00:40:02.510 All over. 00:40:02.510 --> 00:40:03.635 AUDIENCE: Last summer here. 00:40:03.635 --> 00:40:05.927 RICHARD SCHMALENSEE: Yeah, there was a little one here. 00:40:05.927 --> 00:40:07.330 OK, that's true, that's true. 00:40:07.330 --> 00:40:10.100 That doesn't count. 00:40:10.100 --> 00:40:14.510 If it's not magnitude 5 at least, it doesn't count. 00:40:14.510 --> 00:40:15.590 It's a weird feeling. 00:40:15.590 --> 00:40:20.630 And in Ohio it doesn't happen, but it does now. 00:40:20.630 --> 00:40:21.530 It does now. 00:40:24.440 --> 00:40:28.910 And this one is actually very interesting if, as I hope 00:40:28.910 --> 00:40:32.480 you did you looked at the Jacoby et al. article. 00:40:32.480 --> 00:40:39.170 Their argument is if you look down the road, 00:40:39.170 --> 00:40:42.260 and you're serious about climate, 00:40:42.260 --> 00:40:46.130 you will recall from our difficult negotiations 00:40:46.130 --> 00:40:49.520 the world's going to need big reductions. 00:40:49.520 --> 00:40:52.130 And you can't get the big reductions 00:40:52.130 --> 00:40:55.340 unless you can figure out some magical way 00:40:55.340 --> 00:40:56.925 to do transportation. 00:40:56.925 --> 00:40:59.300 But you're not going to get the big reductions unless you 00:40:59.300 --> 00:41:02.240 get the carbon emissions from the electric power sector way 00:41:02.240 --> 00:41:03.710 down. 00:41:03.710 --> 00:41:05.600 Natural gas doesn't do that for you. 00:41:05.600 --> 00:41:08.300 It gets it down, but not way down. 00:41:08.300 --> 00:41:12.350 But if natural gas is cheap, then you 00:41:12.350 --> 00:41:14.180 don't build a nuclear plant, and you 00:41:14.180 --> 00:41:15.890 don't fool around with nuclear technology 00:41:15.890 --> 00:41:19.670 because it's so noncompetitive. 00:41:19.670 --> 00:41:25.430 And wind and solar require bigger subsidies to compete. 00:41:25.430 --> 00:41:29.840 And so the argument is it's quite possible that cheap shale 00:41:29.840 --> 00:41:36.110 gas will slow the development of very low-carbon technologies, 00:41:36.110 --> 00:41:39.110 and thus be a bridge to nowhere. 00:41:39.110 --> 00:41:42.770 We will easily lower the carbon content of the electric power 00:41:42.770 --> 00:41:46.190 system, and heating, and other things. 00:41:46.190 --> 00:41:49.490 But after a while, we won't be able to go any farther, 00:41:49.490 --> 00:41:51.680 because we won't have the technologies we need, 00:41:51.680 --> 00:41:55.040 because they will have been non-competitive all along, 00:41:55.040 --> 00:41:58.710 and been very expensive in subsidy terms. 00:41:58.710 --> 00:42:01.160 And so this could easily be a bridge to nowhere 00:42:01.160 --> 00:42:06.850 that stops progress on climate after a while. 00:42:06.850 --> 00:42:10.000 That's why it's a complicated question. 00:42:10.000 --> 00:42:13.600 Short term, yeah, unless you get a lot of leakage, 00:42:13.600 --> 00:42:17.140 but the long-term question's really hard. 00:42:17.140 --> 00:42:19.980 What's it mean for wind, solar, nuclear, 00:42:19.980 --> 00:42:23.230 or other carbon-free technologies? 00:42:23.230 --> 00:42:27.260 The European Union, I learned on Monday, 00:42:27.260 --> 00:42:31.270 has a formal plan to have zero carbon dioxide 00:42:31.270 --> 00:42:37.360 emissions from its electric power sector by 2050-- 00:42:37.360 --> 00:42:39.180 zero. 00:42:39.180 --> 00:42:43.540 And as the presenter said, we in Europe do a lot of talking. 00:42:43.540 --> 00:42:45.930 But if you do a projection of what 00:42:45.930 --> 00:42:49.560 it takes to get 80% of reduction in greenhouse gas 00:42:49.560 --> 00:42:53.250 emissions, boy, you better be pretty low carbon. 00:42:53.250 --> 00:42:55.583 And natural gas won't get you there no matter 00:42:55.583 --> 00:42:56.250 how cheap it is. 00:43:00.600 --> 00:43:01.920 What's the policy [INAUDIBLE]? 00:43:01.920 --> 00:43:03.570 Questions on any of this? 00:43:03.570 --> 00:43:04.800 Yeah, Max. 00:43:04.800 --> 00:43:09.980 AUDIENCE: [INAUDIBLE] wind, solar, nuclear 00:43:09.980 --> 00:43:12.740 are fairly not competitive right now, [INAUDIBLE] 00:43:12.740 --> 00:43:14.100 still develop the technology. 00:43:14.100 --> 00:43:18.520 So why would we keep developing [INAUDIBLE] 00:43:18.520 --> 00:43:22.900 RICHARD SCHMALENSEE: Well, wind and solar 00:43:22.900 --> 00:43:26.650 are being driven by subsidies, and those subsidies 00:43:26.650 --> 00:43:31.040 get to be more expensive as the alternative gets to be cheaper. 00:43:31.040 --> 00:43:35.920 So the argument is yeah, you could, 00:43:35.920 --> 00:43:39.640 but if you were starting a wind turbine business, 00:43:39.640 --> 00:43:43.480 you'd have to be really sure of the subsidies or pretty sure 00:43:43.480 --> 00:43:46.840 that you can get the cost down so you won't need them. 00:43:46.840 --> 00:43:50.740 The lower the cost of gas is, the harder that second 00:43:50.740 --> 00:43:52.510 is to be sure of. 00:43:52.510 --> 00:43:56.000 And the lower the cost of gas is, in a way, 00:43:56.000 --> 00:43:59.290 the first gets shaky because it becomes hard politically 00:43:59.290 --> 00:44:02.200 to justify subsidizing wind and solar 00:44:02.200 --> 00:44:04.712 when we're moving into gas and emissions are going down 00:44:04.712 --> 00:44:05.545 and we're all swell. 00:44:08.620 --> 00:44:11.755 Nuclear, I think, is going to be hit the hardest. 00:44:15.400 --> 00:44:18.130 Well, we may talk about nuclear. 00:44:18.130 --> 00:44:20.380 And we'll hear about nuclear from some of your papers. 00:44:20.380 --> 00:44:22.690 So I'm looking forward to learning. 00:44:22.690 --> 00:44:26.260 But I think what people do tend to say 00:44:26.260 --> 00:44:29.410 is with gas at these prices, even forget $2 00:44:29.410 --> 00:44:34.580 but $4, boy, is a nuclear plant out of the money. 00:44:34.580 --> 00:44:37.090 And if you don't build them, it's 00:44:37.090 --> 00:44:40.540 hard to really prove out the technology. 00:44:40.540 --> 00:44:42.220 There's all these fabulous designs 00:44:42.220 --> 00:44:45.460 for intrinsically safe, small-scale nuclear plants, 00:44:45.460 --> 00:44:48.710 but unless we build them, we're not going to know. 00:44:48.710 --> 00:44:51.980 And building them gets to be a more expensive proposition. 00:44:51.980 --> 00:44:54.040 So it's hard to do that nuclear stuff, 00:44:54.040 --> 00:44:56.200 because you really need to do it at scale. 00:44:56.200 --> 00:44:59.410 That means somebody's got to bear the commercial risk, 00:44:59.410 --> 00:45:02.510 and the commercial risk gets bigger with cheap gas. 00:45:02.510 --> 00:45:04.990 So I think that's the basic issue. 00:45:04.990 --> 00:45:07.790 I mean, the government could say, look, 00:45:07.790 --> 00:45:11.500 I think this is so important we're going to keep doing it. 00:45:11.500 --> 00:45:13.390 The Europeans might. 00:45:13.390 --> 00:45:16.580 I worry about us, and we'll see about the Europeans. 00:45:16.580 --> 00:45:18.207 We'll see about the Europeans. 00:45:18.207 --> 00:45:18.790 Anything else? 00:45:18.790 --> 00:45:19.690 Yeah. 00:45:19.690 --> 00:45:23.660 AUDIENCE: Does it matter also, though, if, in a few years, 00:45:23.660 --> 00:45:27.010 we'll have some sort of carbon tax or something like that? 00:45:27.010 --> 00:45:29.080 Because then you would start arguing 00:45:29.080 --> 00:45:32.767 that whatever emits carbon will become less competitive. 00:45:32.767 --> 00:45:33.850 RICHARD SCHMALENSEE: Yeah. 00:45:33.850 --> 00:45:36.430 I mean, with a serious carbon tax-- 00:45:36.430 --> 00:45:45.330 again, cheap shale, cheap gas, the advantage 00:45:45.330 --> 00:45:49.470 of renewables over gas-fired power 00:45:49.470 --> 00:45:52.980 goes down with the price of gas, given any carbon tax. 00:45:52.980 --> 00:45:56.940 You're right, the carbon tax widens the gap. 00:45:56.940 --> 00:45:59.850 Cheap gas narrows it, so you need a bigger carbon tax 00:45:59.850 --> 00:46:02.802 to have the same differential. 00:46:06.960 --> 00:46:12.032 I mean, we all say, of course, we're 00:46:12.032 --> 00:46:13.740 going to have a carbon tax at some point. 00:46:13.740 --> 00:46:15.532 We have to have a carbon tax at some point. 00:46:19.150 --> 00:46:22.870 I know people who have been saying that for 20 years. 00:46:22.870 --> 00:46:27.550 So I would love to be young enough 00:46:27.550 --> 00:46:30.320 to have the feeling that of course it'll happen soon. 00:46:30.320 --> 00:46:32.920 But I've watched it not happen for so long. 00:46:32.920 --> 00:46:37.720 And I've watched the Republican Party harden against climate 00:46:37.720 --> 00:46:41.830 so firmly that we'll see. 00:46:41.830 --> 00:46:46.330 It may take-- those of us in the area 00:46:46.330 --> 00:46:49.720 speculate from time to time that it's going to take something 00:46:49.720 --> 00:46:51.700 like an ozone hole. 00:46:51.700 --> 00:46:53.890 You recall or you may not recall. 00:46:53.890 --> 00:46:55.600 What led to the Montreal Protocol 00:46:55.600 --> 00:46:57.100 wasn't all the brilliant chemical 00:46:57.100 --> 00:47:01.270 work done, a lot of it here at MIT that won a Nobel Prize. 00:47:01.270 --> 00:47:05.530 It was the opening of the ozone hole over the Antarctic, such 00:47:05.530 --> 00:47:06.970 an image. 00:47:06.970 --> 00:47:09.035 There's a hole in the ozone? 00:47:09.035 --> 00:47:11.410 Most of us didn't know there was ozone to have a hole in. 00:47:11.410 --> 00:47:13.870 But there's a hole in the ozone, and it's 00:47:13.870 --> 00:47:17.583 letting in all these harmful rays, and it's getting bigger. 00:47:17.583 --> 00:47:18.625 That was pretty dramatic. 00:47:21.430 --> 00:47:24.610 Having the Arctic be ice-free maybe-- maybe 00:47:24.610 --> 00:47:28.000 that'll be dramatic, but we don't see that. 00:47:28.000 --> 00:47:30.790 Ozone hole, you go out, and you get a suntan, 00:47:30.790 --> 00:47:32.500 and your risk of skin cancer goes up. 00:47:32.500 --> 00:47:35.073 Well, that kind of comes home. 00:47:35.073 --> 00:47:36.490 There aren't any more polar bears? 00:47:36.490 --> 00:47:38.740 Well, that's too bad, but I can go to the zoo. 00:47:38.740 --> 00:47:42.900 So I don't know what on the climate side-- 00:47:42.900 --> 00:47:44.920 I love polar bears. 00:47:44.920 --> 00:47:47.470 Please don't quote me. 00:47:47.470 --> 00:47:52.240 They're "charismatic megafauna," as the phrase goes. 00:47:52.240 --> 00:47:54.100 It may well take something like that. 00:47:54.100 --> 00:47:58.140 Anyway, anything else before I go to the policy arena? 00:47:58.140 --> 00:47:58.875 Yeah. 00:47:58.875 --> 00:48:01.725 AUDIENCE: Are the big players large companies 00:48:01.725 --> 00:48:03.922 or small [INAUDIBLE]? 00:48:03.922 --> 00:48:05.880 RICHARD SCHMALENSEE: In terms of this industry? 00:48:05.880 --> 00:48:07.860 AUDIENCE: Yeah, like Chevron [INAUDIBLE] 00:48:07.860 --> 00:48:09.443 RICHARD SCHMALENSEE: The big companies 00:48:09.443 --> 00:48:11.590 have bought small companies to get the technology. 00:48:11.590 --> 00:48:13.620 So the people who were big gas producers 00:48:13.620 --> 00:48:14.670 are big gas producers. 00:48:14.670 --> 00:48:17.180 Again, there are still small players. 00:48:17.180 --> 00:48:18.430 There are still small players. 00:48:18.430 --> 00:48:24.300 AUDIENCE: [INAUDIBLE] direct a little R&D money that way. 00:48:24.300 --> 00:48:27.010 RICHARD SCHMALENSEE: I don't know. 00:48:27.010 --> 00:48:28.365 I don't have the sense-- 00:48:34.490 --> 00:48:36.770 I could be wrong, but I don't have the-- 00:48:36.770 --> 00:48:39.020 and we do sort of see these folks 00:48:39.020 --> 00:48:42.230 when they come to the Energy Initiative to fund research. 00:48:42.230 --> 00:48:44.330 So we get some sense of what at least some of them 00:48:44.330 --> 00:48:45.500 are interested in. 00:48:45.500 --> 00:48:49.490 I hear a lot more interest in finding 00:48:49.490 --> 00:48:52.550 technologies than extraction technologies, 00:48:52.550 --> 00:48:58.010 3D seismic underground mapping, improvements there, 00:48:58.010 --> 00:48:59.375 rather than better drilling. 00:49:03.080 --> 00:49:06.950 It's a young technology, but it seems surprisingly mature. 00:49:06.950 --> 00:49:09.320 Nobody says, "If only we could do this." 00:49:09.320 --> 00:49:10.910 The one issue that people talk about, 00:49:10.910 --> 00:49:14.360 and "The Times" mentions it a little bit, is the technology 00:49:14.360 --> 00:49:19.610 was aimed at gas and it's not yet tuned for oil. 00:49:19.610 --> 00:49:21.260 And there are places where there's oil, 00:49:21.260 --> 00:49:23.468 but they're getting a ton of oil out of North Dakota, 00:49:23.468 --> 00:49:25.370 so it's not too badly tuned. 00:49:25.370 --> 00:49:29.750 So this particular technology doesn't 00:49:29.750 --> 00:49:32.278 seem to be a huge R&D target. 00:49:32.278 --> 00:49:33.320 At least that's my sense. 00:49:36.140 --> 00:49:37.100 It's very deep shale. 00:49:37.100 --> 00:49:41.860 The stuff that would help you figure out where the gas is 00:49:41.860 --> 00:49:43.940 seems to be higher on their wish list 00:49:43.940 --> 00:49:45.740 than techniques to get it out. 00:49:45.740 --> 00:49:48.050 If they can find it, they can go down 10,000 feet, 00:49:48.050 --> 00:49:50.240 drill sideways, break the shale, and get the gas 00:49:50.240 --> 00:49:51.830 out, which is pretty amazing. 00:49:55.910 --> 00:50:01.900 The policy arena-- so the PennEnvironment report 00:50:01.900 --> 00:50:03.550 is pretty good on this. 00:50:03.550 --> 00:50:06.850 It's a bit of an advocacy piece, but it's pretty good. 00:50:06.850 --> 00:50:14.590 You would normally think that the air stuff would be EPA, 00:50:14.590 --> 00:50:17.350 the air pollution issues I talked about. 00:50:17.350 --> 00:50:19.510 There is a Safe Drinking Water Act 00:50:19.510 --> 00:50:21.140 that you would think would cover stuff 00:50:21.140 --> 00:50:22.390 that would affect the aquifer. 00:50:22.390 --> 00:50:25.990 And indeed, it does in a lot of areas. 00:50:25.990 --> 00:50:33.110 But there are exemptions to a lot of federal legislation, 00:50:33.110 --> 00:50:36.640 put in place quietly in the middle of the night, 00:50:36.640 --> 00:50:39.650 that means there's relatively little EPA can do. 00:50:39.650 --> 00:50:41.840 It can set some standards for local air emissions. 00:50:41.840 --> 00:50:43.910 And it's doing that for methane emissions. 00:50:43.910 --> 00:50:47.690 It will probably have regs on methane leakage. 00:50:47.690 --> 00:50:52.640 But the water side is pretty limited by law. 00:50:52.640 --> 00:50:56.150 I mean, it covers a lot of stuff that pollutes aquifers. 00:50:56.150 --> 00:50:57.560 It can't get at this. 00:51:01.690 --> 00:51:03.070 And even if it set the standards, 00:51:03.070 --> 00:51:05.170 the enforcement would be at the state level. 00:51:05.170 --> 00:51:11.740 And if you think about it, this is not easy enforcement. 00:51:11.740 --> 00:51:15.280 I showed you 2,400 wells in Pennsylvania-- lots 00:51:15.280 --> 00:51:17.153 more coming. 00:51:17.153 --> 00:51:19.570 How many inspectors do you think the State of Pennsylvania 00:51:19.570 --> 00:51:22.210 has to inspect natural gas wells? 00:51:22.210 --> 00:51:24.760 Well, they haven't had any natural gas 00:51:24.760 --> 00:51:26.290 drilling in Pennsylvania or drilling 00:51:26.290 --> 00:51:28.390 for anything in Pennsylvania. 00:51:28.390 --> 00:51:32.500 So they probably started out with, let's say zero. 00:51:32.500 --> 00:51:36.010 And maybe they have a few if their budget's been generous. 00:51:36.010 --> 00:51:38.320 So enforcement is a state issue. 00:51:38.320 --> 00:51:42.880 The rules about the fluids are state issues. 00:51:42.880 --> 00:51:46.270 EPA can't control that. 00:51:46.270 --> 00:51:49.750 Rules for that well, the bore, how well it's 00:51:49.750 --> 00:51:52.540 sealed, how thick the concrete is, what, kind of concrete 00:51:52.540 --> 00:51:56.440 all of the stuff that gets you down below the aquifer and that 00:51:56.440 --> 00:52:00.160 has to be inspected-- that's the state. 00:52:00.160 --> 00:52:07.020 The experience and attitudes vary enormously among states. 00:52:07.020 --> 00:52:11.130 New York, as I'll mention in more detail, has a moratorium. 00:52:11.130 --> 00:52:13.500 You cannot do this in the State of New York-- 00:52:13.500 --> 00:52:16.780 full stop, done. 00:52:16.780 --> 00:52:20.770 Pennsylvania is letting people drill. 00:52:20.770 --> 00:52:22.630 Does Pennsylvania have expertise? 00:52:22.630 --> 00:52:24.430 Does Pennsylvania have an adequate budget? 00:52:24.430 --> 00:52:26.710 Does Pennsylvania have adequate laws? 00:52:26.710 --> 00:52:28.660 The PennEnvironment report suggests not. 00:52:28.660 --> 00:52:29.800 Others may disagree. 00:52:29.800 --> 00:52:31.720 I don't know enough to have a view. 00:52:34.270 --> 00:52:38.350 Texas does oil and gas. 00:52:38.350 --> 00:52:40.450 They've been drilling and fracking in Texas 00:52:40.450 --> 00:52:43.000 for a long time-- not at this scale. 00:52:43.000 --> 00:52:49.727 And Texas also has a lot of rural areas, where it's dusty, 00:52:49.727 --> 00:52:51.310 and it's dirty, and it's I don't care. 00:52:51.310 --> 00:52:52.570 Nobody lives here. 00:52:52.570 --> 00:52:53.410 It's a job. 00:52:53.410 --> 00:52:54.160 There are jobs. 00:52:54.160 --> 00:52:54.827 That's fabulous. 00:52:58.060 --> 00:53:00.100 Some states are revving up. 00:53:00.100 --> 00:53:03.100 There's a lot of industry interest. 00:53:03.100 --> 00:53:05.470 Texas is now requiring fluid disclosure. 00:53:05.470 --> 00:53:06.640 I think others are. 00:53:10.040 --> 00:53:13.560 There's an interesting industry split. 00:53:13.560 --> 00:53:18.170 The small guys oppose regulation. 00:53:18.170 --> 00:53:21.840 The small guys say, I don't want to tell you what my fluid is. 00:53:21.840 --> 00:53:23.210 I don't want to be inspected. 00:53:23.210 --> 00:53:24.110 I'm doing a good job. 00:53:24.110 --> 00:53:24.735 Leave me alone. 00:53:24.735 --> 00:53:27.690 I'm just a little guy. 00:53:27.690 --> 00:53:30.570 You talk to people from Exxon, and people from Exxon, 00:53:30.570 --> 00:53:35.910 and Chevron, and those guys say, we need regulation. 00:53:35.910 --> 00:53:37.625 This is anti-stereotype, and it's worth 00:53:37.625 --> 00:53:39.000 thinking about because we'll come 00:53:39.000 --> 00:53:41.850 to public policy in a little while. 00:53:41.850 --> 00:53:43.990 They want regulation. 00:53:43.990 --> 00:53:46.167 Why do they want regulation? 00:53:46.167 --> 00:53:48.750 They don't want to see a lot of those videos of drinking water 00:53:48.750 --> 00:53:51.000 burning. 00:53:51.000 --> 00:53:53.670 They don't want a lot of states to do what New York has done 00:53:53.670 --> 00:53:57.160 and say, you can't drill here. 00:53:57.160 --> 00:54:02.790 So the big guys think, OK, it adds $1 or $2 00:54:02.790 --> 00:54:07.270 per million cubic feet, to control methane emissions, 00:54:07.270 --> 00:54:11.680 to inspect the wellbore, to limit the fracking fluids, 00:54:11.680 --> 00:54:17.700 to disclose everything. $1 is nothing to the big guys. 00:54:17.700 --> 00:54:19.740 $1 might be something to the little guys. 00:54:19.740 --> 00:54:22.450 The big guys are afraid of a backlash. 00:54:22.450 --> 00:54:25.330 The big guys are afraid, and you hear them say this 00:54:25.330 --> 00:54:26.890 after about two drinks. 00:54:26.890 --> 00:54:30.190 This industry could go to the way of nuclear power. 00:54:30.190 --> 00:54:32.680 The public could be so fed up with earthquakes, 00:54:32.680 --> 00:54:36.400 and groundwater pollution, and burning water coming out 00:54:36.400 --> 00:54:40.400 of faucets, that we get shut down. 00:54:40.400 --> 00:54:45.200 And the country that could have all this abundant, relatively 00:54:45.200 --> 00:54:48.300 clean energy won't get it. 00:54:48.300 --> 00:54:53.940 So the big guys are in favor of sensible regulation. 00:54:53.940 --> 00:54:57.260 There's a lot of industry best-practice activity. 00:54:57.260 --> 00:55:01.130 There's a lot of work by the big guys with the states 00:55:01.130 --> 00:55:04.150 to avoid a backlash. 00:55:04.150 --> 00:55:07.810 Please impose reasonable costs on this industry 00:55:07.810 --> 00:55:09.085 we will still be cheap. 00:55:11.720 --> 00:55:15.240 Don't shut it down. 00:55:15.240 --> 00:55:17.930 An awful lot in the environment community 00:55:17.930 --> 00:55:21.840 think state regulation can't work. 00:55:21.840 --> 00:55:24.690 Pennsylvania's going to regulate natural gas drilling? 00:55:24.690 --> 00:55:27.310 They haven't seen a well for 100 years. 00:55:27.310 --> 00:55:28.620 What? 00:55:28.620 --> 00:55:33.335 So they say it's hard to enforce. 00:55:33.335 --> 00:55:35.710 You're going to inspect every well as it's being drilled. 00:55:35.710 --> 00:55:37.627 You've got to monitor the quality of concrete. 00:55:37.627 --> 00:55:39.360 This is a serious enforcement problem. 00:55:39.360 --> 00:55:41.130 They're all over the landscape. 00:55:41.130 --> 00:55:43.820 You can't do it. 00:55:43.820 --> 00:55:46.970 Yes, in principle, regulation might make this safe, 00:55:46.970 --> 00:55:49.980 and so forth, and clean, but you can't do it. 00:55:49.980 --> 00:55:52.210 So you should just kill it. 00:55:52.210 --> 00:55:54.770 Just kill it. 00:55:54.770 --> 00:55:58.070 Again, if you Google fracking on-- 00:55:58.070 --> 00:56:03.800 if you look at Google Images and call for fracking, 00:56:03.800 --> 00:56:07.520 you will get posters and rallies galore-- 00:56:07.520 --> 00:56:09.020 ban it, ban it, ban it. 00:56:09.020 --> 00:56:11.790 Stop fracking in Ohio. 00:56:11.790 --> 00:56:14.330 Where else do you see a lot of-- 00:56:14.330 --> 00:56:15.800 it's banned in New York. 00:56:15.800 --> 00:56:17.450 It's banned in France. 00:56:17.450 --> 00:56:20.750 It's banned in at least one German state. 00:56:20.750 --> 00:56:23.480 And there are debates in lots of other places 00:56:23.480 --> 00:56:26.810 that say basically, it's a moratorium. 00:56:26.810 --> 00:56:32.300 If you can prove it's clean and safe, we'll let it go on. 00:56:32.300 --> 00:56:36.110 In North Dakota, it's jobs. 00:56:36.110 --> 00:56:39.980 In Texas, it's we know this and nobody lives out there 00:56:39.980 --> 00:56:41.060 on those ranches anyway. 00:56:41.060 --> 00:56:43.730 In New York, this is New York. 00:56:43.730 --> 00:56:45.110 People live here. 00:56:45.110 --> 00:56:46.870 Pennsylvania, people live here. 00:56:46.870 --> 00:56:47.493 Yeah, Jessica. 00:56:47.493 --> 00:56:50.160 AUDIENCE: How long could they go using the natural gas reserves? 00:56:50.160 --> 00:56:51.500 [INAUDIBLE] 00:56:51.500 --> 00:56:53.948 RICHARD SCHMALENSEE: The ones we have now, the shale gas? 00:56:53.948 --> 00:56:55.580 AUDIENCE: Mm-hmm. 00:56:55.580 --> 00:56:57.740 RICHARD SCHMALENSEE: Hard to know-- 00:56:57.740 --> 00:57:01.460 what we're getting are estimates of probably recoverable 00:57:01.460 --> 00:57:02.390 reserves. 00:57:02.390 --> 00:57:05.000 Proved reserves are much lower, but estimates 00:57:05.000 --> 00:57:06.750 are hundreds of years. 00:57:06.750 --> 00:57:11.010 It's just a lot of gas at low cost. 00:57:11.010 --> 00:57:19.880 So what that thought leads to, and the fact that it's cheap 00:57:19.880 --> 00:57:24.190 leads to, it may be impossible to kill 00:57:24.190 --> 00:57:29.590 because the economic benefits are so large that politically 00:57:29.590 --> 00:57:32.110 it may be hard to kill. 00:57:32.110 --> 00:57:34.150 But suppose everybody in Pennsylvania 00:57:34.150 --> 00:57:37.450 has their water burn when it comes out of the. 00:57:37.450 --> 00:57:42.650 Tap will New York drop its moratorium? 00:57:42.650 --> 00:57:44.390 Probably not. 00:57:44.390 --> 00:57:46.590 Will Ohio impose a moratorium? 00:57:46.590 --> 00:57:48.780 Probably. 00:57:48.780 --> 00:57:53.610 So if you can't make it safe-- 00:57:53.610 --> 00:57:54.860 what's a little burning water? 00:57:54.860 --> 00:57:55.652 I mean it's things. 00:57:55.652 --> 00:58:01.610 But anyway, think about the stuff we breathe every day. 00:58:01.610 --> 00:58:02.720 But that's dramatic. 00:58:02.720 --> 00:58:06.240 That's a YouTube video. 00:58:06.240 --> 00:58:11.400 The PennEnvironment report has sort of a balanced proposal. 00:58:11.400 --> 00:58:14.620 It talks about there's another part 00:58:14.620 --> 00:58:16.550 of the environmental community. 00:58:16.550 --> 00:58:19.480 It clearly couldn't be killed in Pennsylvania. 00:58:19.480 --> 00:58:22.613 It's 3,000 producing wells and 10 a day being permitted. 00:58:22.613 --> 00:58:23.530 What, are you kidding? 00:58:23.530 --> 00:58:24.572 We're going to kill this? 00:58:24.572 --> 00:58:26.560 I don't think so, not now. 00:58:26.560 --> 00:58:28.810 So they say what you need to do is eliminate 00:58:28.810 --> 00:58:30.640 these federal exemptions so EPA can 00:58:30.640 --> 00:58:34.630 play a role for groundwater. 00:58:34.630 --> 00:58:37.780 And they have a number of very specific suggestions, which 00:58:37.780 --> 00:58:40.510 I don't want to go in, for tightening regulation 00:58:40.510 --> 00:58:42.670 in Pennsylvania, like not letting this stuff happen 00:58:42.670 --> 00:58:46.570 near a school or near a hospital just because there is increased 00:58:46.570 --> 00:58:49.540 local pollution, no matter what you do, 00:58:49.540 --> 00:58:54.310 and giving the agency some money to enforce. 00:58:54.310 --> 00:58:56.410 It's easy to write rules. 00:58:56.410 --> 00:58:58.000 Enforcement takes people. 00:59:00.650 --> 00:59:03.160 And then finally, that lovely interview with Fred 00:59:03.160 --> 00:59:07.290 Krupp from the Environmental Defense Fund. 00:59:07.290 --> 00:59:10.140 As we'll talk about later, the Environmental Defense Fund 00:59:10.140 --> 00:59:13.860 has played a very interesting role historically 00:59:13.860 --> 00:59:17.970 in making environmental policy in this country, 00:59:17.970 --> 00:59:20.430 to the extent possible, economically sensible. 00:59:23.490 --> 00:59:29.130 And Krupp argues you can't do anything in Washington, 00:59:29.130 --> 00:59:33.030 so to say the EPA should play a role-- 00:59:33.030 --> 00:59:37.400 of course, it should, but you can't get that passed. 00:59:37.400 --> 00:59:39.470 You can't get sensible legislation 00:59:39.470 --> 00:59:40.580 passed in Washington. 00:59:40.580 --> 00:59:45.410 You can't get those loopholes closed, at least not now . 00:59:45.410 --> 00:59:47.210 And you probably shouldn't kill it 00:59:47.210 --> 00:59:50.930 because the benefits are so large. 00:59:50.930 --> 00:59:54.080 I think underlying that is a realist saying, 00:59:54.080 --> 00:59:57.500 you probably can't kill it because the economic benefits 00:59:57.500 --> 00:59:59.610 are so large for so many people. 00:59:59.610 --> 01:00:03.930 So there really isn't any choice but to work with the states. 01:00:03.930 --> 01:00:05.870 Encourage the states to talk to each other. 01:00:05.870 --> 01:00:11.120 Encourage the big producers to work with industry. 01:00:11.120 --> 01:00:14.630 So that's sort of the policy environment, I think. 01:00:14.630 --> 01:00:15.440 Reactions? 01:00:15.440 --> 01:00:17.300 Comments? 01:00:17.300 --> 01:00:19.400 Anything? 01:00:19.400 --> 01:00:20.960 OK, let me throw the floor open. 01:00:20.960 --> 01:00:23.540 Suppose we were lucky enough or unfortunate enough 01:00:23.540 --> 01:00:27.640 to have shale in Massachusetts. 01:00:27.640 --> 01:00:28.660 You're an MIT students. 01:00:28.660 --> 01:00:31.000 You can march on the State House. 01:00:31.000 --> 01:00:33.220 You can get TV time. 01:00:33.220 --> 01:00:36.450 You can make noise. 01:00:36.450 --> 01:00:38.380 What do you do? 01:00:38.380 --> 01:00:40.780 Drill, baby, drill-- we need the jobs. 01:00:40.780 --> 01:00:42.460 We need the benefits. 01:00:42.460 --> 01:00:43.678 Let's be real. 01:00:43.678 --> 01:00:44.470 Let's make it hard. 01:00:44.470 --> 01:00:46.210 It's not under Boston. 01:00:46.210 --> 01:00:47.232 That would be too easy. 01:00:47.232 --> 01:00:48.940 They're never going to drill under Paris. 01:00:48.940 --> 01:00:50.773 But suppose the shale is in the western part 01:00:50.773 --> 01:00:54.280 of the state, which has been chronically depressed. 01:00:54.280 --> 01:00:56.830 Suppose that's where the shale is, 01:00:56.830 --> 01:00:58.848 the western part, not the Berkshires, kind 01:00:58.848 --> 01:00:59.890 of central Massachusetts. 01:00:59.890 --> 01:01:04.450 Pittsfield, has anybody been to Pittsfield? 01:01:04.450 --> 01:01:06.250 You've been to Pittsfield, all right. 01:01:06.250 --> 01:01:07.388 Are you from Pittsfield? 01:01:07.388 --> 01:01:08.680 AUDIENCE: It's near Tanglewood. 01:01:08.680 --> 01:01:10.472 RICHARD SCHMALENSEE: It is near Tanglewood. 01:01:10.472 --> 01:01:11.290 Tanglewood is nice. 01:01:11.290 --> 01:01:14.020 Pittsfield, well, MASS MoCA, but otherwise 01:01:14.020 --> 01:01:17.410 been depressed for a long time. 01:01:17.410 --> 01:01:19.930 We've got shale in Pittsfield, in the central part 01:01:19.930 --> 01:01:23.740 of Massachusetts where there are no jobs, 01:01:23.740 --> 01:01:26.140 and you're going to march on the State House. 01:01:26.140 --> 01:01:29.472 Alex, was that your hand I saw? 01:01:29.472 --> 01:01:31.014 AUDIENCE: I was going to say, I think 01:01:31.014 --> 01:01:34.460 if there is a way to do it safely, if they can figure out 01:01:34.460 --> 01:01:37.514 how to do it so your faucet isn't burning, 01:01:37.514 --> 01:01:39.410 then I think it would be [INAUDIBLE].. 01:01:39.410 --> 01:01:41.484 But otherwise, I don't think it's worth 01:01:41.484 --> 01:01:42.780 it if you're causing more problems to all the people 01:01:42.780 --> 01:01:43.770 who live there. 01:01:43.770 --> 01:01:46.760 Because there are a lot of people in [INAUDIBLE].. 01:01:46.760 --> 01:01:48.650 RICHARD SCHMALENSEE: Even in Pittsfield. 01:01:48.650 --> 01:01:51.320 So would you advocate a moratorium 01:01:51.320 --> 01:01:53.680 until we know for sure how to do it safely? 01:01:53.680 --> 01:01:57.355 AUDIENCE: I'd advocate for regulations. 01:01:57.355 --> 01:01:59.730 RICHARD SCHMALENSEE: Are we sure we know how to regulate? 01:01:59.730 --> 01:02:00.570 AUDIENCE: No. 01:02:00.570 --> 01:02:02.280 RICHARD SCHMALENSEE: No. 01:02:02.280 --> 01:02:04.890 OK, but you would say at the very least, 01:02:04.890 --> 01:02:06.840 the state ought to acquire some expertise. 01:02:06.840 --> 01:02:08.450 We ought to have a legal framework. 01:02:08.450 --> 01:02:09.992 I mean, nobody's drilled for anything 01:02:09.992 --> 01:02:12.960 but water in Massachusetts ever, so we 01:02:12.960 --> 01:02:16.170 don't have anybody who knows about deep wells 01:02:16.170 --> 01:02:19.110 or groundwater conta-- well, we know about groundwater 01:02:19.110 --> 01:02:20.160 contamination. 01:02:20.160 --> 01:02:21.930 OK, anybody else? 01:02:25.080 --> 01:02:25.860 Arianna. 01:02:25.860 --> 01:02:29.610 AUDIENCE: My parents have a house in upstate [INAUDIBLE] 01:02:29.610 --> 01:02:31.170 New York. 01:02:31.170 --> 01:02:33.610 And a couple of years ago, actually, our town 01:02:33.610 --> 01:02:37.770 exploded the anti-fracking [INAUDIBLE].. 01:02:37.770 --> 01:02:43.150 We were on literally everyone's yard. 01:02:43.150 --> 01:02:45.630 And I think that even though there 01:02:45.630 --> 01:02:50.970 are a lot of large-scale benefits, in the end, 01:02:50.970 --> 01:02:52.600 I think it's great to do in Texas 01:02:52.600 --> 01:02:54.900 and places where people don't really live. 01:02:54.900 --> 01:02:59.820 But there is a large segment of not in my backyard. 01:02:59.820 --> 01:03:05.670 And we like our house, and primary residence 01:03:05.670 --> 01:03:06.780 in New York City. 01:03:06.780 --> 01:03:08.880 Part of it, I know, is that it's nicer and clean. 01:03:08.880 --> 01:03:14.070 The air is clean, and getting to spend some time with nature, 01:03:14.070 --> 01:03:14.570 I guess. 01:03:16.903 --> 01:03:19.320 RICHARD SCHMALENSEE: I hope you have some nature up there. 01:03:19.320 --> 01:03:19.820 Yeah 01:03:19.820 --> 01:03:21.930 AUDIENCE: Lots of trees. 01:03:21.930 --> 01:03:27.540 But the idea it's great if energy prices fall, but I 01:03:27.540 --> 01:03:30.690 don't want it at my expense. 01:03:30.690 --> 01:03:32.460 RICHARD SCHMALENSEE: So you'd advocate, 01:03:32.460 --> 01:03:35.070 if we can translate to western Massachusetts, which isn't 01:03:35.070 --> 01:03:37.680 that dissimilar, you'd say, no. 01:03:37.680 --> 01:03:38.263 No, thank you. 01:03:38.263 --> 01:03:39.680 They're doing it in Texas, they're 01:03:39.680 --> 01:03:40.920 doing it in North Dakota. 01:03:40.920 --> 01:03:43.503 The people in Pennsylvania may or may not have made a mistake, 01:03:43.503 --> 01:03:45.240 but we're not going to do it, full stop. 01:03:45.240 --> 01:03:47.070 OK. 01:03:47.070 --> 01:03:50.140 AUDIENCE: I would also say, why would-- 01:03:50.140 --> 01:03:55.200 if you're [INAUDIBLE] or whoever has a significant population 01:03:55.200 --> 01:03:57.210 and has no experience with it, why 01:03:57.210 --> 01:04:01.200 be in a hurry to go ahead and drill everything and not 01:04:01.200 --> 01:04:05.190 just wait to see some sort of regulations? 01:04:05.190 --> 01:04:09.000 I mean, to have a clear framework 01:04:09.000 --> 01:04:11.370 of what you should regulate, and how you should do it, 01:04:11.370 --> 01:04:14.310 and what are the consequences, and all that. 01:04:14.310 --> 01:04:19.140 So like North Dakota and Texas have a smaller, lower 01:04:19.140 --> 01:04:20.220 population density. 01:04:20.220 --> 01:04:22.860 Figure out the hard stuff, and then 01:04:22.860 --> 01:04:25.890 figure out if you want to do it or not in a few years when you 01:04:25.890 --> 01:04:28.050 know what the consequences are. 01:04:28.050 --> 01:04:28.500 RICHARD SCHMALENSEE: Of course, we 01:04:28.500 --> 01:04:30.480 may not be happy with a regime that would make 01:04:30.480 --> 01:04:32.610 them unhappy in North Dakota. 01:04:32.610 --> 01:04:35.100 Because they're desperate for jobs and we're 01:04:35.100 --> 01:04:36.000 not that desperate. 01:04:36.000 --> 01:04:38.670 So they might be willing to deal with that 01:04:38.670 --> 01:04:42.000 to accept environmental harms that we wouldn't like. 01:04:42.000 --> 01:04:44.370 So you wouldn't just want to follow them, necessarily. 01:04:44.370 --> 01:04:46.230 Julian. 01:04:46.230 --> 01:04:49.260 AUDIENCE: So I'm going to agree with Alex 01:04:49.260 --> 01:04:50.820 for the most part, in that regulation 01:04:50.820 --> 01:04:52.800 is needed to some extent. 01:04:52.800 --> 01:04:55.710 It is needed to keep things safe. 01:04:55.710 --> 01:04:57.840 But realistically, you're going to have 01:04:57.840 --> 01:05:02.400 to work very, very hard to keep people's hands off of money 01:05:02.400 --> 01:05:04.530 sitting underground. 01:05:04.530 --> 01:05:06.300 I'm from Santa Barbara, and-- 01:05:07.090 --> 01:05:09.590 RICHARD SCHMALENSEE: You can see the oil out there, can you? 01:05:09.590 --> 01:05:14.640 AUDIENCE: You can see 13 oil rigs from my house. 01:05:14.640 --> 01:05:20.850 And there is a very, very, very strong environmental movement. 01:05:20.850 --> 01:05:25.920 It's California, blue Democrat as hard as you can go, 01:05:25.920 --> 01:05:27.000 pretty much. 01:05:27.000 --> 01:05:28.290 RICHARD SCHMALENSEE: You do have some Republicans 01:05:28.290 --> 01:05:28.998 in Santa Barbara. 01:05:28.998 --> 01:05:32.280 AUDIENCE: We do, but it is quite blue. 01:05:32.280 --> 01:05:34.290 It is quite, quite blue. 01:05:34.290 --> 01:05:36.400 And still people drill for oil. 01:05:36.400 --> 01:05:40.500 You can see the oil rigs out there. 01:05:40.500 --> 01:05:42.760 There are even pumps on land and whatnot. 01:05:42.760 --> 01:05:45.360 And it's kind of a tough argument 01:05:45.360 --> 01:05:47.160 to go against it economically. 01:05:47.160 --> 01:05:50.670 I mean, when you can say that OK, these people might have 01:05:50.670 --> 01:05:56.667 some bad health effects from fracking and whatnot, 01:05:56.667 --> 01:05:58.500 but if they can't afford health care anyway, 01:05:58.500 --> 01:06:05.017 then what's the difference, really? 01:06:05.017 --> 01:06:07.350 RICHARD SCHMALENSEE: Well, we have universal health care 01:06:07.350 --> 01:06:09.940 in Massachusetts, to a pretty good approximation. 01:06:09.940 --> 01:06:11.100 So we're OK here. 01:06:11.100 --> 01:06:13.650 So we may as well just drill because everybody 01:06:13.650 --> 01:06:15.750 can get health care? 01:06:15.750 --> 01:06:22.770 AUDIENCE: Well-- like if someone can't afford something, 01:06:22.770 --> 01:06:23.970 the economic benefits-- 01:06:23.970 --> 01:06:27.327 I mean, not necessarily in Massachusetts exclusively, 01:06:27.327 --> 01:06:29.160 but let's say in another state which doesn't 01:06:29.160 --> 01:06:30.450 have universal health care. 01:06:30.450 --> 01:06:32.130 RICHARD SCHMALENSEE: Let's say. 01:06:32.130 --> 01:06:33.090 AUDIENCE: That argument could be-- 01:06:33.090 --> 01:06:34.840 RICHARD SCHMALENSEE: Connecticut or western Connecticut, 01:06:34.840 --> 01:06:35.820 Rhode Island, yeah. 01:06:35.820 --> 01:06:40.670 AUDIENCE: I mean, there are economic benefits, which can 01:06:40.670 --> 01:06:44.670 in turn have other benefits. 01:06:44.670 --> 01:06:48.100 And yes, there should definitely be regulation, 01:06:48.100 --> 01:06:51.900 but the argument to say, no, we should absolutely not 01:06:51.900 --> 01:06:53.850 touch this stuff that's under the ground 01:06:53.850 --> 01:06:57.270 is going to be extremely, extremely hard, especially when 01:06:57.270 --> 01:07:02.790 you go against probably all the lobbyists from X 01:07:02.790 --> 01:07:06.403 different firms which are for this measure. 01:07:06.403 --> 01:07:08.820 RICHARD SCHMALENSEE: And all the mayors of depressed towns 01:07:08.820 --> 01:07:10.290 who say, we need jobs. 01:07:10.290 --> 01:07:12.060 We need jobs. 01:07:12.060 --> 01:07:14.323 [INAUDIBLE],, you're going to agree or disagree? 01:07:14.323 --> 01:07:15.531 AUDIENCE: Disagree, actually. 01:07:15.531 --> 01:07:18.080 Because when we had the climate negotiations, 01:07:18.080 --> 01:07:19.860 we were talking about how urgent it 01:07:19.860 --> 01:07:21.844 is to start taking action to reduce 01:07:21.844 --> 01:07:23.828 the CO2 emissions [INAUDIBLE]. 01:07:26.810 --> 01:07:29.500 So if you start using this method, 01:07:29.500 --> 01:07:32.132 and many studies shows that it might 01:07:32.132 --> 01:07:34.810 have very bad effects on the environment, and in 10 years 01:07:34.810 --> 01:07:39.160 we will see what are the bad effects that this method had, 01:07:39.160 --> 01:07:41.920 it's going to be like 2022 and then 01:07:41.920 --> 01:07:46.210 we start discussing again how to reduce greenhouse emissions. 01:07:46.210 --> 01:07:49.450 I think it's going to be too late by then. 01:07:49.450 --> 01:07:51.340 RICHARD SCHMALENSEE: So you'd say no. 01:07:51.340 --> 01:07:54.732 AUDIENCE: We don't have room for any more mistakes anywhere. 01:07:54.732 --> 01:07:57.190 RICHARD SCHMALENSEE: Or let them make the mistakes in North 01:07:57.190 --> 01:07:59.807 Dakota and not nationwide. 01:07:59.807 --> 01:08:00.640 [INTERPOSING VOICES] 01:08:00.640 --> 01:08:01.330 AUDIENCE: --everyone. 01:08:01.330 --> 01:08:02.630 RICHARD SCHMALENSEE: Nobody in here is from North Dakota, 01:08:02.630 --> 01:08:03.400 as I recall. 01:08:03.400 --> 01:08:04.780 I can insult North Dakota. 01:08:04.780 --> 01:08:05.837 Get out of town. 01:08:05.837 --> 01:08:07.120 David. 01:08:07.120 --> 01:08:09.940 AUDIENCE: I think from an environmental perspective, 01:08:09.940 --> 01:08:13.630 even if you didn't know it's 100% clean 01:08:13.630 --> 01:08:16.430 and no methane, no water caught on fire, 01:08:16.430 --> 01:08:18.880 it's still a terrible thing for carbon emissions. 01:08:18.880 --> 01:08:21.609 Because your actions for decreasing your heating bill 01:08:21.609 --> 01:08:24.069 or insulating your house so it's more efficient 01:08:24.069 --> 01:08:25.899 and so you don't need as much heat, 01:08:25.899 --> 01:08:28.131 or using cheap natural gas but then 01:08:28.131 --> 01:08:30.729 to continue having a really inefficient house 01:08:30.729 --> 01:08:33.160 and leaking heat everywhere. 01:08:33.160 --> 01:08:36.040 RICHARD SCHMALENSEE: So you're troubled by the bridge 01:08:36.040 --> 01:08:37.359 to nowhere argument. 01:08:37.359 --> 01:08:40.000 And you'd say, unless we actually can fit this 01:08:40.000 --> 01:08:41.290 into a climate policy-- 01:08:41.290 --> 01:08:44.350 which it could be if it were part of a carbon tax, 01:08:44.350 --> 01:08:46.731 use this for a while, get off it-- 01:08:46.731 --> 01:08:48.189 would you be comfortable with that? 01:08:48.189 --> 01:08:49.819 Or you just say no. 01:08:49.819 --> 01:08:52.609 AUDIENCE: I say environmentally that's-- 01:08:52.609 --> 01:08:53.109 yeah. 01:08:53.109 --> 01:08:54.309 Or you could use-- 01:08:54.309 --> 01:08:57.029 if the costs are so low, you can have a very high carbon tax, 01:08:57.029 --> 01:08:59.965 and use that money to perhaps support solar or nuclear 01:08:59.965 --> 01:09:00.590 or whatever. 01:09:00.590 --> 01:09:05.050 But I think economically, you can't make that argument. 01:09:05.050 --> 01:09:09.460 You have to give people jobs and environmental arguments 01:09:09.460 --> 01:09:10.960 are going to get legislation passed. 01:09:10.960 --> 01:09:11.529 RICHARD SCHMALENSEE: So you're saying 01:09:11.529 --> 01:09:13.750 you'd march on the State House, and you'd say, 01:09:13.750 --> 01:09:17.745 "Only with a carbon tax," and you'd count on losing. 01:09:17.745 --> 01:09:18.370 AUDIENCE: Yeah. 01:09:18.370 --> 01:09:19.740 RICHARD SCHMALENSEE: OK. 01:09:19.740 --> 01:09:21.279 No, no, I mean, hey-- 01:09:21.279 --> 01:09:22.450 you fight the good fight. 01:09:22.450 --> 01:09:26.740 AUDIENCE: Jobs are not going to part of the environment. 01:09:26.740 --> 01:09:29.979 RICHARD SCHMALENSEE: Yeah, you've actually been patient. 01:09:29.979 --> 01:09:32.500 AUDIENCE: So I would say that this 01:09:32.500 --> 01:09:35.050 is an opportunity for Massachusetts 01:09:35.050 --> 01:09:38.529 to help take the lead a relatively new industry. 01:09:38.529 --> 01:09:41.538 And I don't think that people will pass that up. 01:09:41.538 --> 01:09:43.330 RICHARD SCHMALENSEE: So you think no matter 01:09:43.330 --> 01:09:45.609 what we say in here, and what you guys 01:09:45.609 --> 01:09:48.100 do when you march on the capitol, we're going to drill. 01:09:48.100 --> 01:09:49.189 AUDIENCE: Yeah. 01:09:49.189 --> 01:09:50.564 RICHARD SCHMALENSEE: But New York 01:09:50.564 --> 01:09:54.010 didn't, maybe because of all those signs in Arianna's town. 01:09:54.010 --> 01:09:57.970 Maybe Arianna's town shut down New York. 01:09:57.970 --> 01:10:00.700 And there are a lot of people in upstate New York who need jobs. 01:10:00.700 --> 01:10:02.410 There are a lot of depressed towns up there. 01:10:02.410 --> 01:10:03.993 There are a lot of landowners up there 01:10:03.993 --> 01:10:05.950 who would love to lease for drilling. 01:10:05.950 --> 01:10:09.140 But they managed to shut it down. 01:10:09.140 --> 01:10:10.780 We're going to talk about that. 01:10:10.780 --> 01:10:11.877 But you want to go one. 01:10:11.877 --> 01:10:14.460 AUDIENCE: Well, yeah, I was just saying I'm from South Dakota, 01:10:14.460 --> 01:10:17.680 so I'm kind of jealous. 01:10:17.680 --> 01:10:19.590 [INAUDIBLE] if you look at that map, 01:10:19.590 --> 01:10:22.720 basically, took a huge loop right around South Dakota. 01:10:22.720 --> 01:10:24.340 RICHARD SCHMALENSEE: Yeah. 01:10:24.340 --> 01:10:27.820 Well, my guess is there are people from some South Dakota 01:10:27.820 --> 01:10:29.630 towns who are now living in North Dakota. 01:10:32.320 --> 01:10:34.570 North Dakota was going to change the name of its state 01:10:34.570 --> 01:10:38.448 to "Dakota" to avoid the "North" for a while, but Matthew. 01:10:38.448 --> 01:10:40.240 AUDIENCE: I just think the economic benefit 01:10:40.240 --> 01:10:42.340 is too big to pass up. 01:10:42.340 --> 01:10:45.375 And if it was a serious environmental concern, 01:10:45.375 --> 01:10:46.500 it'll become more apparent. 01:10:46.500 --> 01:10:49.028 It'll be accelerated to regulation 01:10:49.028 --> 01:10:52.158 if we allow it to happen more here. 01:10:52.158 --> 01:10:54.450 RICHARD SCHMALENSEE: So you think it's going to happen. 01:10:54.450 --> 01:10:57.282 We're going to see environmental concerns. 01:10:57.282 --> 01:10:58.740 What the big guys are worried about 01:10:58.740 --> 01:11:04.020 is weak regulation, leads to environmental disasters, 01:11:04.020 --> 01:11:07.140 leads to a nationwide moratorium. 01:11:07.140 --> 01:11:10.080 Whatever happened in New York could happen nationwide, maybe. 01:11:10.080 --> 01:11:13.740 Maybe not in North Dakota, but that's their concern. 01:11:13.740 --> 01:11:16.325 And you're saying we should run that. 01:11:16.325 --> 01:11:16.950 AUDIENCE: Yeah. 01:11:16.950 --> 01:11:19.114 I mean, I think if they realize the economic benefit 01:11:19.114 --> 01:11:20.140 in the beginning, they're not going 01:11:20.140 --> 01:11:22.182 to solve it immediate-- like, altogether, they're 01:11:22.182 --> 01:11:24.863 going to provide some regulation. 01:11:24.863 --> 01:11:26.280 RICHARD SCHMALENSEE: Well, there's 01:11:26.280 --> 01:11:27.760 a lot of work doing regulation. 01:11:27.760 --> 01:11:30.420 Again, it varies state to state, but OK. 01:11:30.420 --> 01:11:32.190 Yeah. 01:11:32.190 --> 01:11:35.670 AUDIENCE: I think there's a two-part argument for doing it, 01:11:35.670 --> 01:11:40.530 but doing it on a limited scale, versus like you said, 01:11:40.530 --> 01:11:45.510 there's kind of an oversupply of gas at the moment. 01:11:45.510 --> 01:11:47.410 And the technology being relatively new, 01:11:47.410 --> 01:11:48.910 it's relatively expensive, so you're 01:11:48.910 --> 01:11:51.330 buying high and selling low. 01:11:51.330 --> 01:11:53.520 But it is important to start getting 01:11:53.520 --> 01:11:57.330 some kind of understanding of the drilling process. 01:11:57.330 --> 01:11:59.650 Because from what I understand, the effects 01:11:59.650 --> 01:12:01.650 are different from place to place because what's 01:12:01.650 --> 01:12:03.245 in the shale is different. 01:12:03.245 --> 01:12:03.870 So what works-- 01:12:03.870 --> 01:12:04.680 RICHARD SCHMALENSEE: And what's on the way 01:12:04.680 --> 01:12:05.595 down, and the differences. 01:12:05.595 --> 01:12:07.140 AUDIENCE: --in the Dakotas is different from what 01:12:07.140 --> 01:12:08.970 maybe works in Massachusetts, but it's 01:12:08.970 --> 01:12:10.610 different compositions. 01:12:10.610 --> 01:12:14.780 So I would argue for doing a limited roll-out. 01:12:14.780 --> 01:12:16.700 You don't do it five miles from town, 01:12:16.700 --> 01:12:18.270 you do it 40 miles from town. 01:12:18.270 --> 01:12:20.060 And you don't authorize 3,000 wells, 01:12:20.060 --> 01:12:23.920 you authorize 30 and see what happens. 01:12:23.920 --> 01:12:26.090 Hopefully, if there is an earthquake. 01:12:26.090 --> 01:12:28.825 You can figure out what's going on before people freak out 01:12:28.825 --> 01:12:30.158 and shut down the whole state. 01:12:30.158 --> 01:12:31.950 RICHARD SCHMALENSEE: So that's interesting. 01:12:31.950 --> 01:12:33.762 And I hadn't heard that proposal before, 01:12:33.762 --> 01:12:35.220 which is what makes it interesting. 01:12:35.220 --> 01:12:37.650 So you'd say, we're Massachusetts. 01:12:37.650 --> 01:12:39.120 We haven't done this before. 01:12:39.120 --> 01:12:41.910 We're going to hire some people with expertise, 01:12:41.910 --> 01:12:45.310 but the ones in Texas who know what they're doing 01:12:45.310 --> 01:12:46.830 are mostly staying in Texas. 01:12:46.830 --> 01:12:51.570 So we can't effectively regulate 300 wells. 01:12:51.570 --> 01:12:56.220 Let's authorize 30, and let's watch them closely, and see 01:12:56.220 --> 01:12:57.060 what we can learn. 01:12:57.060 --> 01:12:57.810 AUDIENCE: Yeah. 01:12:57.810 --> 01:12:59.880 And once the market stabilizes, then you 01:12:59.880 --> 01:13:01.080 can start pumping more. 01:13:01.080 --> 01:13:02.820 And then you'll have a nice boom, 01:13:02.820 --> 01:13:04.830 hopefully using cheaper technology that's 01:13:04.830 --> 01:13:08.630 more developed and at a higher price. 01:13:08.630 --> 01:13:10.007 RICHARD SCHMALENSEE: Interesting. 01:13:10.007 --> 01:13:11.090 Yeah, I hadn't heard that. 01:13:11.090 --> 01:13:11.690 OK. 01:13:11.690 --> 01:13:13.460 Marie, you had a-- 01:13:13.460 --> 01:13:15.140 AUDIENCE: Yeah, I just wanted to mention 01:13:15.140 --> 01:13:18.434 that I think there has been some somewhat successful regulation 01:13:18.434 --> 01:13:22.574 on this, as in Lebanon, Texas, is going to make [INAUDIBLE] 01:13:22.574 --> 01:13:25.990 long time, a lot of regulation around this area. 01:13:25.990 --> 01:13:28.280 And the Barnett Shale is actually 01:13:28.280 --> 01:13:30.425 right over the Dallas/Fort Worth Metroplex, 01:13:30.425 --> 01:13:33.950 so it is really in an urban location, 01:13:33.950 --> 01:13:35.872 and they're drilling all around that. 01:13:35.872 --> 01:13:38.810 And it's just a place where it has been well regulated, 01:13:38.810 --> 01:13:41.090 and [INAUDIBLE] follow their example. 01:13:41.090 --> 01:13:43.700 RICHARD SCHMALENSEE: Yeah, I mean, Texas, for instance, 01:13:43.700 --> 01:13:45.750 in the Bipartisan Policy Center thing, 01:13:45.750 --> 01:13:48.860 seems to have been the first state to basically require 01:13:48.860 --> 01:13:52.160 disclosure of fracking fluids, which 01:13:52.160 --> 01:13:54.770 is sort of a first natural step, I think. 01:13:54.770 --> 01:13:57.180 And then you limit things that can go down. 01:13:57.180 --> 01:13:59.515 So maybe we can copy Texas, but they 01:13:59.515 --> 01:14:00.890 have been drilling in the Barnett 01:14:00.890 --> 01:14:04.430 for a while with different technologies. 01:14:04.430 --> 01:14:06.982 OK, and we will all wear hats. 01:14:06.982 --> 01:14:07.690 That'll be great. 01:14:07.690 --> 01:14:09.100 Sam. 01:14:09.100 --> 01:14:11.690 AUDIENCE: First, as far as Massachusetts, 01:14:11.690 --> 01:14:14.600 I think if you're trying to sell that proposal, 01:14:14.600 --> 01:14:18.700 you might have a hard time selling it to Massachusettsians 01:14:18.700 --> 01:14:21.590 copying Texas, just from like association, 01:14:21.590 --> 01:14:24.530 people of Massachusetts aren't huge fans of Texas. 01:14:24.530 --> 01:14:25.040 I think-- 01:14:25.040 --> 01:14:26.420 RICHARD SCHMALENSEE: You didn't like Rick Perry's campaign? 01:14:26.420 --> 01:14:26.920 Never mind. 01:14:29.303 --> 01:14:31.220 AUDIENCE: But I did think politically it would 01:14:31.220 --> 01:14:32.180 be hard to sell. 01:14:32.180 --> 01:14:34.590 Just in Massachusetts, people are pretty environmentally 01:14:34.590 --> 01:14:35.090 conscious. 01:14:35.090 --> 01:14:38.390 And I think all it would take is, like, one anecdote of oh, 01:14:38.390 --> 01:14:40.640 my cousin in Ohio, he had an earthquake 01:14:40.640 --> 01:14:43.243 or his water is on fire-- 01:14:43.243 --> 01:14:44.660 RICHARD SCHMALENSEE: So you think. 01:14:44.660 --> 01:14:47.642 AUDIENCE: We like to overreact. 01:14:47.642 --> 01:14:49.850 RICHARD SCHMALENSEE: The political system overreacts. 01:14:49.850 --> 01:14:54.200 So your view is, even though Arianna's community 01:14:54.200 --> 01:14:56.420 managed to shut down the State of New York-- 01:14:56.420 --> 01:14:59.390 it's a pretty blue state, but probably less environmentally 01:14:59.390 --> 01:15:01.580 conscious than this one-- 01:15:01.580 --> 01:15:03.240 it would be tough to do here. 01:15:03.240 --> 01:15:04.940 So what would you advocate instead, 01:15:04.940 --> 01:15:07.958 when you march on the State Capitol? 01:15:07.958 --> 01:15:10.250 AUDIENCE: Take the money and invest in green technology 01:15:10.250 --> 01:15:10.750 instead. 01:15:10.750 --> 01:15:14.860 I think the path to nowhere argument is pretty good, 01:15:14.860 --> 01:15:15.360 as well. 01:15:15.360 --> 01:15:16.250 RICHARD SCHMALENSEE: It's pretty interesting. 01:15:16.250 --> 01:15:16.830 Yeah. 01:15:16.830 --> 01:15:19.748 What about the "go slow" approach? 01:15:19.748 --> 01:15:21.290 AUDIENCE: I think once you start down 01:15:21.290 --> 01:15:23.082 that, it's going to be pretty hard to stop. 01:15:23.082 --> 01:15:25.340 I mean, once you start putting in a few, 01:15:25.340 --> 01:15:27.987 it is going to produce cheap energy, but it doesn't really-- 01:15:27.987 --> 01:15:28.820 [INTERPOSING VOICES] 01:15:28.820 --> 01:15:30.800 RICHARD SCHMALENSEE: And jobs, and jobs. 01:15:30.800 --> 01:15:33.560 We'll put them in Pittsfield or someplace like Pittsfield. 01:15:33.560 --> 01:15:35.250 Yeah, Max. 01:15:35.250 --> 01:15:37.970 AUDIENCE: I think the biggest [INAUDIBLE] of this 01:15:37.970 --> 01:15:41.120 is [INAUDIBLE] take a lot of transparency 01:15:41.120 --> 01:15:45.060 in the industry, the argument that the chemicals are 01:15:45.060 --> 01:15:48.140 proprietary, so [INAUDIBLE] nobody really 01:15:48.140 --> 01:15:50.780 has a good way of measuring how much methane exactly is being 01:15:50.780 --> 01:15:52.018 released in the environment. 01:15:52.018 --> 01:15:53.560 And so we know the economic benefits, 01:15:53.560 --> 01:15:55.018 but we don't know the environmental 01:15:55.018 --> 01:15:56.572 [? measurements ?] of it. 01:15:56.572 --> 01:15:58.530 And that's the biggest problem with regulating. 01:15:58.530 --> 01:16:01.330 Even if you did a few small wells 01:16:01.330 --> 01:16:03.760 before you moved into the large scale, [INAUDIBLE] 01:16:03.760 --> 01:16:06.560 regulating them, just because of those loopholes and the fact 01:16:06.560 --> 01:16:08.860 that there's no real metric for how much damage 01:16:08.860 --> 01:16:10.180 it's actually doing. 01:16:10.180 --> 01:16:12.532 RICHARD SCHMALENSEE: There are techniques-- 01:16:12.532 --> 01:16:13.990 not great techniques, but there are 01:16:13.990 --> 01:16:17.320 techniques-- that can measure methane emissions, methane 01:16:17.320 --> 01:16:18.400 leakage. 01:16:18.400 --> 01:16:21.390 It isn't trivial. 01:16:21.390 --> 01:16:23.190 That piece in "Nature" talked about how 01:16:23.190 --> 01:16:25.500 they managed to measure methane emissions 01:16:25.500 --> 01:16:29.040 from one area, methane leakage. 01:16:29.040 --> 01:16:30.720 But it's naturally tricky, because it 01:16:30.720 --> 01:16:34.830 comes from lots of different places and is dispersed. 01:16:34.830 --> 01:16:39.290 You can, however, talk about ceiling requirements 01:16:39.290 --> 01:16:40.760 and how joints are done. 01:16:40.760 --> 01:16:42.590 You could put in things. 01:16:42.590 --> 01:16:44.690 It may be hard to measure what happens, 01:16:44.690 --> 01:16:47.210 but you could put in place regulation that 01:16:47.210 --> 01:16:49.340 will reduce it, whether it'll reduce it 01:16:49.340 --> 01:16:50.870 enough, blah, blah, blah. 01:16:50.870 --> 01:16:55.660 So you're saying-- so where would you go when you march? 01:16:55.660 --> 01:16:58.160 AUDIENCE: I would advocate for it because [INAUDIBLE] there, 01:16:58.160 --> 01:17:00.680 but demand transparency from the firms that 01:17:00.680 --> 01:17:03.877 are doing it to kind of [INAUDIBLE] and having them 01:17:03.877 --> 01:17:06.210 [INAUDIBLE] or at least come up with some sort of metric 01:17:06.210 --> 01:17:10.075 to [INAUDIBLE] how much damage they're actually doing. 01:17:10.075 --> 01:17:11.450 RICHARD SCHMALENSEE: Yeah, so you 01:17:11.450 --> 01:17:14.030 might work on the development of measurement methods 01:17:14.030 --> 01:17:17.390 for methane, for instance, and require them to implement them, 01:17:17.390 --> 01:17:18.690 and so on, and so forth. 01:17:18.690 --> 01:17:19.470 Yeah. 01:17:19.470 --> 01:17:21.470 AUDIENCE: Given how afraid some of the companies 01:17:21.470 --> 01:17:23.900 are of backlash, especially if you invite the bigger ones, 01:17:23.900 --> 01:17:27.030 perhaps it isn't as slippery a slope [INAUDIBLE].. 01:17:27.030 --> 01:17:29.900 And if you build 30 and they do well, 01:17:29.900 --> 01:17:33.500 and regulation starts loosening, almost immediately 01:17:33.500 --> 01:17:35.868 if anything does go wrong, that's 01:17:35.868 --> 01:17:37.160 the whole thing gets shut down. 01:17:37.160 --> 01:17:39.030 The companies are quite incentivized, 01:17:39.030 --> 01:17:40.680 in a similar way to nuclear companies, 01:17:40.680 --> 01:17:43.437 to keep a completely white sheet. 01:17:43.437 --> 01:17:45.020 RICHARD SCHMALENSEE: The big guys are. 01:17:45.020 --> 01:17:45.920 AUDIENCE: Precisely, and so-- 01:17:45.920 --> 01:17:48.110 RICHARD SCHMALENSEE: The little guys are the potential trouble 01:17:48.110 --> 01:17:48.610 spots. 01:17:48.610 --> 01:17:51.800 AUDIENCE: And so if you have 30, given 01:17:51.800 --> 01:17:54.470 that you have some data from the big guys in other states, 01:17:54.470 --> 01:17:56.840 it would make sense if you have 30 test cases, 01:17:56.840 --> 01:17:59.030 and then for the future cases to be 01:17:59.030 --> 01:18:02.210 from those people that have at least some prior history. 01:18:02.210 --> 01:18:04.043 RICHARD SCHMALENSEE: Oh, that's interesting. 01:18:04.043 --> 01:18:07.250 So you'd look at their regulatory history elsewhere, 01:18:07.250 --> 01:18:10.190 and you would try, in Massachusetts, 01:18:10.190 --> 01:18:12.967 not to let people who have bad records drill. 01:18:12.967 --> 01:18:15.050 AUDIENCE: And then you have the comparative issues 01:18:15.050 --> 01:18:17.150 between what they do in Massachusetts versus North 01:18:17.150 --> 01:18:20.358 Dakota [INAUDIBLE]. 01:18:20.358 --> 01:18:22.400 AUDIENCE: Just from an environmental perspective, 01:18:22.400 --> 01:18:24.840 isn't it better to drill in Massachusetts, 01:18:24.840 --> 01:18:27.860 in the sense that it's going to be happening [INAUDIBLE],, 01:18:27.860 --> 01:18:30.710 so you could argue that it happened in Massachusetts, 01:18:30.710 --> 01:18:32.850 and the type of population that you have 01:18:32.850 --> 01:18:34.940 and the quality of engineers, you're 01:18:34.940 --> 01:18:38.520 going to set industry best practices in Massachusetts, 01:18:38.520 --> 01:18:42.510 which are going to be copied in North Dakota, then. 01:18:42.510 --> 01:18:43.860 RICHARD SCHMALENSEE: Maybe. 01:18:43.860 --> 01:18:47.010 The counter-argument is that because of our population 01:18:47.010 --> 01:18:50.910 density, the potential for damage 01:18:50.910 --> 01:18:53.715 is higher, potential for environmental damage. 01:18:53.715 --> 01:18:54.590 AUDIENCE: [INAUDIBLE] 01:18:54.590 --> 01:18:55.840 RICHARD SCHMALENSEE: Yeah, no. 01:18:55.840 --> 01:18:57.960 So you're saying you'd do it here, 01:18:57.960 --> 01:19:01.590 but you would allocate state resources, 01:19:01.590 --> 01:19:03.990 and of course you'd beg for federal resources, 01:19:03.990 --> 01:19:08.770 to improve best practices, to improve measurement methods. 01:19:08.770 --> 01:19:11.430 One of the things that the Secretary of Energy Advisory 01:19:11.430 --> 01:19:15.300 Board, the SEAB report that's cited in a couple of places, 01:19:15.300 --> 01:19:17.070 stressed-- 01:19:17.070 --> 01:19:20.430 they said the government is lousy at this. 01:19:20.430 --> 01:19:23.790 The big guys in the industry are able to develop and improve 01:19:23.790 --> 01:19:25.320 best practices. 01:19:25.320 --> 01:19:27.820 They need to be encouraged to do it. 01:19:27.820 --> 01:19:30.340 The problem is once you come up with a best practice, 01:19:30.340 --> 01:19:32.820 it becomes a compulsory practice, and so forth. 01:19:32.820 --> 01:19:34.230 But that's another issue. 01:19:34.230 --> 01:19:36.820 OK, I think we're out of time. 01:19:36.820 --> 01:19:38.040 Have a great long weekend. 01:19:38.040 --> 01:19:41.510 We will do electricity next week.