Photograph by Joel Sartore, National Geographic

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Natural gas drilling rigs dot the landscape in Wyoming, one of several states contributing to a boom in natural gas production that will create a lasting impact on the U.S. economy, according to the government's new annual energy outlook.

Photograph by Joel Sartore, National Geographic

Natural Gas Nation: EIA Sees U.S. Future Shaped By Fracking

The U.S. government energy outlook sees broad impact of new oil and gas abundance. Renewable energy captures a small future share without policy or technological change.

Truck stops will need restyled fuel pumps. New factories, and some old ones, will whir to life. Ports will send new tankers onto the open seas, heralding the return of the United States to the top of the global energy scene.

All these changes already are in motion, according to the new U.S. government annual energy outlook, a document that paints the clearest picture yet of the transformation being wrought by the natural gas boom.

The U.S. Energy Information Administration (EIA) on Wednesday released projections that affirmed the trend already tracked by numerous private forecasters and the International Energy Agency: The growth of U.S. energy production, particularly oil and natural gas, will far outstrip the rise in demand, slashing imports and moderating prices for consumers. But in table after table of numbers, the government's energy analysts detail for the first time the widespread impact of the new abundance—especially the changes due to natural gas from hydraulic fracturing, or fracking.

EIA anticipates the production boom from Texas to Pennsylvania will ripple through every segment of the economy. But the projections, based entirely on U.S. government policy now in place and assuming no technological breakthroughs, see more evolution than revolution in the nation's energy future-an outlook still deeply dependent upon fossil energy. (See related story: "U.S. to Overtake Saudi Arabia, Russia as World's Top Energy Producer")

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Trucking Inroads

EIA projects that the use of natural gas as a fuel for vehicles will rise nearly 12 percent per year through 2040, more than double the agency's outlook last year. That increase will be almost entirely due to some segments of the trucking industry changing their fueling habits, and buying new rigs equipped to run on liquefied natural gas (LNG). (See related story: "Trading Oil for Natural Gas in the Truck Lane")

Big freight haulers will be willing to fork out extra cash for this capital investment, EIA's analysts reckon, for one reason: They'll make the money back and save in the long run, as the price of LNG will remain 40 percent below the price of petroleum diesel fuel for the next three decades. That price spread, perhaps more than any other numbers in the outlook, conveys just how durable the fracking boom appears to be in the eyes of the analysts. By 2040, EIA projects that the use of natural gas in heavy-duty vehicles will be displacing 700,000 million barrels of petroleum diesel fuel a day.

But the picture painted by the government analysts is far from the vision of a natural gas superhighway touted by tycoon T. Boone Pickens and other advocates. From providing less than 1 percent of the energy used in U.S. transportation today, the EIA projects the share fueled by LNG and compressed natural gas (used in many city buses today) will reach only about 4 percent by 2040, based on current policy and technology. Some trucking companies may be able to work out the logistics of having adequate LNG fueling stations for their fleets. But average drivers will not.

"If you took 20 top scientists and put them in a room and said, 'Design the ideal fuel for light-duty vehicles, those men and women would invent gasoline, and maybe diesel fuel, because the energy density you can get in a tank for a relatively small car is tremendous," said Adam Sieminski, who took over this summer as EIA administrator after a career in energy forecasting, most recently as chief energy economist for Deutsche Bank. "What really holds natural gas back is the infrastructure to refuel, and how much energy you can put into a vehicle is limited."

Industrial Renewal

U.S. manufacturing output will increase by an average 2 percent per year over three decades, according to the EIA outlook. That's 20 percent more rapidly than the analysts projected a year ago, and it's due to the extended outlook for low-priced natural gas due to the shale-drilling boom.

Numerous petrochemical companies—Dow, Formosa Plastics, Shell, Chevron Phillips, Westlake Chemicals, and Nova Chemicals, to name a few—have announced plans to build, reopen, or expand North American production. That's because they now anticipate long-term access to low-priced natural gas, which they use as a feedstock to make thousands of plastic, adhesive, and polyester products. It's an astounding turnaround for the industry, which as recently as 2004 closed down 70 U.S. facilities as uneconomic due to high-priced natural gas.

Now, between the ramp-up in petrochemical plants and an anticipated increase in production by the energy-hungry metals, the EIA's outlook for the U.S. economy is "fairly positive in the industrial sector of the economy," Siemenski said.

But this gravy train will have its limits. After 2025, the EIA sees other nations developing and installing newer and more energy-efficient facilities that compete effectively with U.S. chemical plants and limit their output.

Export Battle

It already is clear that the chemical industry understands well the risks of this global competition for resources. That's why it is expected to be a major player in an upcoming battle in Washington over another one of EIA's projections: The rapid U.S. move into exports of natural gas. EIA projects exports of natural gas will rise to 1.6 trillion cubic feet by 2027, almost double the agency's projection of a year ago. (See related story: "With U.S. Natural Gas Booming, a Move to Send It Overseas")

Exporting natural gas by ship is no easy matter. It must be super-chilled to (-260°F/ -162.2°C) at "liquefaction" plants, shrinking it to 1/600th of its original size to be shipped in specialized insulated tankers with bubble-like domes. The facilities cost billions of dollars to build and require government approval.

So far, U.S. regulators have proposed nine LNG export projects, with at least seven other sites being surveyed as possible liquefaction sites. EIA's projection counts only the one project that has received approval, Sabine Pass in Louisiana, which is expected to begin operations in 2015.

But the chemical industry has raised concerns about sending its natural gas fuel and plastics feedstock overseas. "We're all for exporting natural gas," said Dow Chemical Chief Executive Andrew Liveris at the energy industry's big annual IHS Ceraweek conference in Houston earlier this year. "We just want to see it exported in solid form instead of liquid form."  Oregon Democrat Ron Wyden, incoming chairman of the Senate Energy Committee, is expected to take up the issue of limiting LNG exports, having expressed concern that exports of natural gas could raise the price of the fuel for U.S. consumers.

Charles Ebinger, director of the foreign policy and energy security initiative at the Brookings Institution, spearheaded a study earlier this year that concluded that LNG exports would be a net benefit to the U.S. economy, findings he said were echoed in an economic analysis released this week by the U.S. Department of Energy. But he anticipated a political battle: "There are people on the Hill who will fight this fight, saying we shouldn't be exporting our national patrimony."

No Revolution

But just as natural gas is not expected to unseat oil in fueling vehicles, neither is it projected to displace coal in firing U.S. electricity—at least with current policy in place. The share of electricity produced by natural gas is expected to be 30 percent by 2040, with coal at 37 percent, and nuclear at 18 percent—not too different from their shares today. Non-hydroelectric renewable energy such as solar and wind is on track to grow from just 5 percent to 11 percent of all U.S. electricity by 2040. (See related interactive: The Global Electricity Mix)

EIA's outlook contains some good news for the climate: Over the next three decades, U.S. carbon dioxide emissions are on track to remain 5 percent below their 2005 level. Even though the number of miles traveled on U.S. highways is projected to climb—40 percent for cars and 90 percent for trucks by 2040—the amount of energy used for transportation will stay flat, due to a massive shift to more far more fuel-efficient vehicles.

But the EIA projection should give pause to anyone seeking a wholesale U.S. energy transformation. The analysis sees little uptick in all-electric vehicles; even by 2040, EVs will account for less than one percent of cars sold, assuming today's policies. Advanced biofuels languish.

Wind and solar energy grow strongly, but never enough to take more than a bite out of fossil-fuel energy, which EIA projects will continue to feed 78 percent of all U.S. energy demand 28 years from now, barely down from 82 percent today.

Without new climate policy or a leap in technology, the EIA sees an energy future being shaped by the rush of new oil and natural gas.

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.