Shale Gas Projects Could Revive U.S. Economy

Natural gas has the potential to reignite the U.S. economy as oil and gas companies from ConocoPhillips (NYSE:COP) to Exxon Mobil (NYSE:XOM) divert billions of dollars into domestic shale gas projects.

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“We believe so strongly in natural gas that it’s a major portion of our portfolio,” Conoco CEO James J. Mulva told an audience at the Detroit Economic Club in September. His company is investing $2 billion in gas just in 2011, up from $500 million two years ago.

The potential for U.S. shale gas last month spurred Kinder Morgan (NYSE:KMI) to acquire a rival pipeline operator, El Paso Corp., for $21.1 billion. Shale gas is also the driving force behind the proposed $4.4 billion purchase of Brigham Exploration Co. (NASDAQ:BEXP) by Norway’s Statoil ASA (NYSE:STO).

The availability of inexpensive and cleaner domestic gas has some electric utilities replacing their coal-burning capacity with gas-fired units, while energy-intensive manufacturers of chemicals, plastics, and steel are beginning to bring home operations that they once exported, as input costs become cheaper.

“We believe natural gas must be part of any discussion on strengthening our country’s long-term economic health,” said Mulva in Detroit. “It should also be part of any discussion on improving energy security, protecting the environment, and, yes, creating jobs.”

Shale production in the U.S. has increased from practically nothing in 2000 to more than 13 billion cubic feet per day, or about 30% of the country’s natural-gas supply. Even environmental scientists are taking note. And that proportion is heading toward 50% in coming years. In 2009, the U.S. passed Russia to become the world’s largest producer of natural gas.

“This thing is a potential game-changer,” said Fred Krupp, president of the New York-based Environmental Defense Fund. An Energy Department advisory pane on which Krupp sits estimated in August that more than 200,000 jobs, both directly and indirectly, “have been created over the last several years by the development of domestic production of shale gas.”

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Not only does natural gas burn cleaner than coal, emitting less in the way of greenhouse gases, and avoiding the mercury and other pollutants in coal, it also makes for decently paid work at a time when the national unemployment rate is 9.1%. And we know that there are immense, deeply buried shale formations containing copious reserves of natural gas right here in the United States.

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