Thursday, July 24, 2008

Expect Drilling, hope for Wind

Politics and Western New York’s natural gas and wind energy future

When Al Gore called last week for a crash program of developing wind energy, among those who stood up and saluted was billionaire oil driller T. Boone Pickens. Pickens has already invested over $2 billion in a large wind-turbine farm on the arid plains of Texas, and pledges much further work on bringing investors together to help him install thousands more turbines—at about $1 million apiece—throughout the Plains states.

In a followup interview on Meet the Press, Gore was clear that he differs with Pickens on one issue: Gore thinks that the United States should lead the leap toward electric cars, while Pickens sees wind-generated power for electricity and natural gas for cars.
Here on the windy shore of Lake Erie, adjacent to very large reservoirs of natural gas, we have a peculiar window on the national choice—whether to pump billions of public and private dollars into further erecting lakeshore and hilltop wind turbines, or similar amounts into pulling more natural gas out of the Southern Tier.
The good news: We’re slightly ahead of the game.
What we have, what it’ll take
In 2001, County Executive Joel Giambra quietly hired engineers from Ecology and Environment, Inc., a national consulting firm based locally, to assess the potential of generating electricity with wind turbines at the old Bethlehem Steel site.
A few years later, the Steel Winds project was a reality, and Giambra had another Little Red Hen moment—because every politician from miles around was there to cut the ribbon on America’s first urban wind farm. Despite an early equipment glitch, Steel Winds pumps out power whenever there’s enough wind, which is most of the time.
But the Steel Winds project is tiny. It is eight turbines, on the way to becoming, perhaps, 20—a great and highly worthy start, but so far, enough to supply fewer than 10,000 homes in a county of 300,000 households.
Al Gore and T. Boone Pickens want tens of thousands of such wind turbines to sprout up in every suitable place in this country— and the experts say that there’s almost no limit to what they can produce.
Experts think highly of the wind-generating potential of the Great Lakes shoreline, and of the Great Lakes shallows, too. At a June conference in windy Kingston, Ontario, on the north shore of Lake Ontario, the world association of wind-power advocates was hosted by the government of Ontario.
There’s very serious interest in wind up north. Existing coal-fired plants are due to come offline in 2013. Nuclear plants (Ontario quietly relies on them) won’t come online until 2018. Ontario officials estimated that by 2013—five years from now, half the way to Al Gore’s proposed 2018 deadline for full replacement of existing fossil-fuel-fired plants with renewables—they could build a big offshore Lake Ontario wind turbine farm that would generate 750 megawatts.
According to Moody’s Investors Service, which analyzed the rising cost of atomic power in Canada, the cost of wind compares favorably. A new nuclear plant would cost more than $7,000 per kilowatt of capacity, or $5.3 billion for every 750 megawatts. A consultant to Ontario prices offshore wind development around $3,800 per kilowatt, or $2.9 billion for 750 megawatts of offshore wind capacity.
The numbers would seem to work. Other considerations seem to work too: Building a few thousand wind-turbines could lead to hiring a few thousand metal-savvy factory workers, like the ones who are getting laid off at North American automobile plants. Wind turbines don’t require constant supplies of mined uranium. Nor do they produce toxic cesium, plutonium, or other deadly radioactive byproducts that have half-lives of hundreds to thousands of years.
Some folks expect to see wind developing quickly, no matter who is elected president—because in an environment of high oil prices, investors will drive the change. Next week in San Francisco, there will be an investor (speculator?) conference sponsored by a couple of dozen consultants, banks, law firms, and possibly even the government-owned power producers who want to get in.
The reality for New York: Wind is real
There was actually a meeting here in Buffalo, in May, at which Larry Flowers of the National Renewable Energy Laboratory reviewed the costs and benefits of wind energy in a very thorough state-by-state analysis.
Flowers estimated that if the US relies on wind power for 20 pecent of its energy needs by 2030, there would be a significant benefit to the Great Lakes states. New York, Pennsylvania, Ohio, Michigan, Indiana, Illinois, and Wisconsin would see over 182,000 new jobs in the one- to two-year construction phase, and 29,000 new long-term jobs in the 20-year operational phase. There would be a total economic benefit of $79 billion—assuming that more of the turbines, the towers, and those insanely long blades are manufactured here. (Flowers’ presentation is available at
There are, however, other realities. First, the companies that manufacture turbines, towers, and blades aren’t here yet. Ontario, where employers don’t have to foot the bill for employee healthcare costs all alone, is chasing them, and will probably have a leg up on New York State—just as they’ve had in landing new Toyota and Honda plants—if only for that reason. Second, while New York State and the other Great Lakes states have good wind resources, and while New York State has a self-imposed requirement to get to 24 percent renewable energy sources by 2013, there is a huge infrastructure issue: transmission lines. While Ontario will have a unified, government-coordinated approach, expect a patchwork approach here.
Meanwhile, Southern Tier gas
T. Boone Pickens is a billionaire who knows how to make money from drilling for gas and oil. As local news consumers know (and anybody who grew up south of Hamburg also knows), there’s a whole lot of natural gas underground in Western New York and northern Pennsylvania. One can read the real estate ads and spot properties for sale with existing gas wells, which are tidy little structures that sit quietly in many a Chautauqua, Cattaraugus, and Allegheny County backyard.
Now, however, there is the Marcellus Formation. It is a geological mother-lode of natural gas resources. It is a stratum of shale whose natural gas reserves were estimated by geologists Gary Lash of SUNY at Fredonia and Terry Engelder of Pennsylvania State University to be up to 516 trillion cubic feet. Of that total volume, an estimated 50 trillion cubic feet could be recoverable, two years worth of national natural gas consumption.
Fifty trillion cubic feet of natural gas is worth at least $1 trillion. Drilling the Marcellus Formation for this bonanza will cost more than the drilling that occurs today; new techniques will have to be used. But the high price of this commodity makes the new drilling technology financially feasible.
The convenional reserves known today to be present around Buffalo total about 250 billion cubic feet. According to the New York State Department of Environmental Conservation, last year 41.29 billion cubic feet of natural gas were produced from the Black River Formation, an area of limestone and dolomite wells throughout southern and central New York State. These figures pale in comparison to the capacity of the Marcellus Formation.
While the region is well equipped with pipelines for transport, the drilling infrastructure will cost investors upwards of hundreds of millions of dollars. Companies are already lined up to make the investment. National Fuel, along with a partner, intends to drill 18 wells in the Marcellus Formation by the end of this year. Such pricey ventures were previously excessive, but given the rising price of natural gas—a residential price of $14.30 per 1000 cubic feet in March 2008, up from $12.92 the month before—gas recovery from shale is now a viable financial strategy.
Gas producers are read y to go. They’re already planning to go. The national strategy that Al Gore wants will depend on presidential and congressional will. Meanwhile, though, expect that Western New York’s experience—small-scale wind production and a big ramp-up in natural gas production—will be typical.
Research assistance by Kate LaMancuso gratefully acknowledged.

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