With all this natural gas, who needs oil?

It's home-grown, plentiful, and touted as the best way to wean the US off Mideast oil. But there are limits to how far the US can tilt toward a natural gas economy. 

Cover Story

Bob Mann leans against his wife's 2006 Volkswagen Jetta in his tool-packed garage. The mechanic and inventor has just converted the car, which is the color of a ripe crab apple, to run on natural gas. He shakes his head.

"It's a no-brainer. We could jump-start the economy overnight, put 100,000 people to work – easy – and help the environment," says Mr. Mann, a former Volkswagen technician who's as comfortable talking about global energy solutions as he is around a socket wrench.

From his suburban home in a wooded neighborhood once known for its shipbuilding prowess, Mann is crafting automotive gadgets for a future that many believe could help solve the nation's long-intractable energy woes – one fueled mostly by natural gas. During the past five years, Mann has converted more than 10 cars to run on compressed natural gas, in addition to gasoline, using a device he invented, the "CNG Fogger," which boosts the vehicles' mileage. Commuters in the Boston area have snapped up his cars from Craigs­list as have CNG enthusiasts as far away as Wisconsin. Mann has also built a CNG race car and wants to design another to compete in the Indianapolis 500.

His big dream, though, is to create an affordable CNG home fueling station so that anyone who has access to a natural gas line for cooking or heating can also fill up a car, just as he and his wife do. Instead of paying $4 a gallon at the pump, it costs them 60 cents for the equivalent amount of natural gas.

"My wife loves it – she's already saving $180 a month," he says. "What I don't understand is what we are doing sending billions of dollars overseas to buy oil when we've got a 100-year supply of natural gas right under our feet?"

Neither do many others. Natural gas has suddenly become almost everyone's favorite chassis for building an energy independent future. Many people on both sides of the drilling divide view the current abundance of the low-cost fuel as a "global game changer" – an energy source that will help wean the United States off Mideast oil, alter the nation's foreign policy, spur jobs and boost the economy, and reduce greenhouse gases.

President Obama has pledged to "take every possible action to safely develop this energy." Mitt Romney calls the domestic gas "a godsend." Energy tycoon T. Boone Pickens, an early natural gas booster, contends it's "obvious" that Washington should enact policies to encourage natural gas production and use throughout the economy.

"Do we have to take advantage of this?" asks Mr. Pickens, with his characteristic Texas Panhandle pragmatism. "Well, if you don't, you're going to go down in history as the biggest fools that ever came to town."

Almost since the birth of the Industrial Age, Americans have fixated at one time or another on different answers to the country's energy needs. Oil has always been the constant, but the splitting of the atom led to talk of a nuclear-powered economy. Coal, because of its abundance, was once a king. In the 1970s, a roster of renewables – solar, geothermal, wind, waves – inspired visions of a post-Mideast, self-sufficient utopia.

Now along comes natural gas, oil's quiet fossil fuel sibling. Like many energy sources, it holds both promise and peril. America does harbor large supplies of the fuel, which would help it break free of the vicissitudes of Arab sheikhdoms.

Yet extracting it from shale is causing new environmental concerns, and the historic volatility of domestic supplies evokes old issues of reliability.

Which leaves one fundamental question: How far can America really tilt toward a natural gas economy?

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No one disputes the prevalence of natural gas in America's basement. For evidence look no further than an Erector Set of pipes and docks and storage tanks in the marshes of Sabine Pass, La., on the edge of the Gulf Coast. There, Houston-based company Cheniere Energy Inc., which opened the facility four years ago to import natural gas amid an impending shortage, is now spending billions to transform it into an export site.

In fact, as recently as five years ago, oil and gas executives thought the nation's accessible natural gas reserves were almost played out. The industry was proposing building 47 import terminals to bring liquefied natural gas into the US. Five were actually constructed. Now most of them sit underutilized.

In March natural gas imports hit a 20-year low while domestic production hit a 20-year high. The US is now the largest producer of natural gas in the world.

The dramatic turnaround in supply is a product of technological advances and high oil prices. Hydraulic fracturing, the controversial drilling technique, has made it possible to access trillions of cubic feet of natural gas locked in shale formations deep beneath vast swaths of the country. High oil prices have made it economical to extract.

The US Department of Energy estimates that 482 trillion cubic feet of natural gas exists in the US. At the current rate of consumption, that's a 90-year supply.

"In a very short period of time, it has completely transformed the outlook for energy in the United States," says Mary Barcella, a natural gas expert at IHS Cambridge Energy Research Associates, a consulting firm in Cambridge, Mass.

Natural gas already plays a major role in the American economy. It's the primary way more than half of Americans heat their homes and cook their food. It's also used to generate one-third of the nation's electricity and is a major component in the chemical and manufacturing industries. Almost daily, its footprint is expanding because of the sudden surfeit of supply and low prices.

Just consider the nation's highways.

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Ralph Nastro likes to boast that in his new truck he can now "drive and barbecue" at the same time. Just a month ago, Suburban Disposal Inc., a big New Jersey waste and recycling firm, assigned him its first roll-off garbage truck powered by CNG.

While filling up at the new CNG pump at a Gulf station at Newark Airport, he says other truckers have ribbed him about his green Peterbilt cab with the flowers painted on it. But he likes it. "It's cleaner burning. There's no smell. You don't get the diesel on you. It's nice," says the New Jersey garbage collector. "And I'm contributing to the environment, so why not?"

Transportation may be the key frontier natural gas will have to conquer if it is going to dramatically change America's energy future. Traditionally, changing people's driving habits – convincing them of the virtues of alternative-fuel vehicles – is not an easy task. Just look at how many electric vehicles are on the road today, after years of promised "revolutions."

Yet natural gas vehicles are catching on, particularly in the one area where alternative-fuel experimentation usually starts – trucks and commercial fleets. Last year, almost 40 percent of the trash-hauling trucks and 25 percent of the transit buses purchased in the US were fueled by natural gas, according to NGVAmerica, a trade group in Washington. During the past few years, billions of dollars have been invested in infrastructure such as wells, pipelines, and natural gas fueling stations, to support them.

On car lots, the new Honda Civic Natural Gas Vehicle, now available in 38 states, is selling briskly. Chrysler has sped up development of CNG medium- and light-duty trucks; the bifuel vehicles will be available later this year. General Motors will be offering NGV trucks in 2012 as well.

Still, no one should necessarily rush out and trade in their conventional Malibu or Mountaineer just yet. Overall, 112,000 natural gas vehicles now ply US roadways, which represents less than 1 percent of the country's total vehicle fleet. One problem remains setting up the network of fueling depots that can support a growing fleet of CNG vehicles.

Currently, only 1,100 natural gas fueling stations exist like the one at Newark's Airport Plaza where Mr. Nastro was gassing up. About half of those are public. The rest are operated by trucking companies and other large fleet operators. Compare that with the estimated 150,000 gasoline stations that dot intersections in almost every town in America.

There's also the hard reality of history. In the 1990s, many large fleet operators invested millions of dollars and shifted to natural gas because of its lower price and environmental advantages. Then came hurricanes Rita and Katrina, which knocked out some vital natural gas pipelines. Soon afterward, analysts raised fears that domestic natural gas supplies were being depleted. Prices soared. Many fleet operators shifted back to diesel.

Still, advocates believe the shale gas revolution has fundamentally changed the energy landscape. This time, they argue, using domestic gas for transportation is a viable and stable option. "It's not just the abundance of the shale gas; it's the geographic diversity," says Kathryn Clay of America's National Gas Alliance in Washington. "With new parts of the country becoming players, we're not going to suffer from bottlenecks in the interstate pipelines."

Such arguments are convincing more gasoline station owners to consider adding natural gas to their fuel mix. Clean Energy, the nation's largest natural gas supplier to the transportation sector, is in the process of building 150 liquefied natural gas stations at 250-mile intervals along highways from Los Angeles to New York. The goal is to encourage long-haul truckers to shift from diesel to the cheaper, cleaner fuel.

"There's only one fuel that can move an 18-wheeler next to diesel, and that's natural gas," says James Harger, Clean Energy's chief marketing officer.

Suburban Disposal's savings have been significant. The trash-hauling company operates 110 trucks, seven of which now run on CNG. It is ordering four more. The vehicles cost $1.50 less a gallon to operate than their diesel counterparts. "Our trucks use about 40 gallons a day, so you do the math," says Suburban Disposal's Kerry Roselle. "Every day, it's quite a bit of savings."

Many consumers are switching to natural gas to save money in heating their homes as well. Some 70 million Americans now use the fuel – up from 40 million in 1970. That's more than half the homes in the US.

Yet there is a limit to how far the penetration can go, since not everyone lives near a gas line, and the cost of replacing a furnace or converting an existing boiler can be prohibitive.

Utilities, always eager to use the cheapest fuel to spin their power plant turbines, have been making a more dramatic shift. In just the past three years, the amount of electricity generated by natural gas has jumped from 23 percent to 35 percent. Cambridge Energy Research Associates believes it could double in the next 20 years.

"This is a tremendous opportunity for the nation that we should be poised to take advantage of in a safe, responsible manner," says Ralph Izzo, the chairman and chief executive officer of Public Service Enterprise Group, New Jersey's largest utility, which recently began using more natural gas than coal to fuel its power plants. "We'd be crazy if we took that to the extreme and said, 'Let's leave that precious resource in the ground and continue to rely upon politically unstable nations for our future energy needs.' "

All this demand for natural gas is spurring a drilling boom from North Dakota to northern Pennsylvania. But it's also causing new environmental woes, such as the explosive gases coming out of Sherry Vargson's faucet.

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Daryl Miller stands on the Wyalusing Rocks Overlook, in northern Pennsylvania's rumpled Bradford County, and points to the Susquehanna River and thousands of acres of farmland and forest before him. "Every 3,000 feet west of us there's a well pad that encompasses anywhere from 640 to 1,000 acres of real estate that makes up a drilling unit," says Mr. Miller, a Bradford County commissioner.

Pennsylvania's land has always been oil and methane rich. It's where the world's commercial oil industry was born in 1859, when Col. Edwin Drake bored a well near Oil Creek in Titusville. That sparked the nation's first oil boom, which lasted in Pennsylvania until the beginning of the 20th century. Then the drilling rigs moved south and west to richer fields.

But in the mid-2000s, oil and gas companies, armed with new technology, started eyeing gas reserves entombed in shale. This included the Marcellus formation, one of the nation's largest shale deposits, a vast bed that stretches across Appalachia and into northern Pennsylvania.

To extract the gas, companies use a combination of directional drilling and hydraulic fracturing, also called "fracking." They drill down vertically until they hit the shale layer. Then the bit moves horizontally to follow the bed of gas-bearing rock. A "perforation gun" is fed through the bored hole, which uses small projectiles to puncture holes in the casing that lines the well. Millions of gallons of chemically treated water and sand are then injected under high pressure to fracture the shale and release the gas for pumping to the surface.

In the past few years, companies have turned Bradford County into something of a pincushion, drilling more than 1,000 natural gas wells. That, in turn, has brought jobs and flourishing commerce. Local businesses are thriving. The area's restaurants and hotels are full. Almost overnight, the county's property-tax base has increased by more than $35 million.

At Sugar Branch Farms in the town of Columbia Cross Roads, royalties from four wells have allowed the Van Blarcom family to invest in a new dairy barn and milking parlor.

"The most visible thing we deal with day to day is the local economy," says Rich Van Blarcom, who runs the 500-cow farm with his father and brother-in-law. "Everybody who wants to work has a job. As an employee, that's good. As an employer, it's not necessarily good. We have a hard time finding good employees, and we especially have a hard time finding mechanics to work on our equipment."

Other problems have surfaced in Bradford County as well, from traffic jams in the usually tranquil county seat of Towanda to dust and deteriorating roads caused by the heavy trucks that rumble between drilling sites. Property values have soared, but so, too, have rents. Then, there are the handful of wells that went wrong.

The Vargson place in Granville Summit (pop. 940) is just a few miles from the Van Blarcom farm. In 2008, Chesapeake Energy, after signing an agreement with the family, drilled a well a few hundred feet from their barn. For the first year, everything was fine. The machines on the pad wicked thousands of cubic feet of natural gas from the earth. The Vargsons received royalty checks of more than a $1,000 a month. Then in June 2010, according to Ms. Vargson, a maintenance crew came to work on the well.

"Whatever that crew did, afterward our water changed – there was a lot of pressure and air that hadn't been there before," she says. "It was strong enough that it would knock a cup right out of your hand."

Chesapeake sent a crew to check the water wellhead. "In three to five seconds, every bell and whistle on that meter started going off," she says.

The company began providing the Vargsons with bottled drinking water, contacted Pennsylvania's Department of Environmental Protection, and started what they call a "comprehensive investigation." When it was done, they "found no issues with the integrity of any Chesapeake gas wells in the area of the Vargsons," according to a statement from Matt Sheppard, Chesapeake's senior director of corporate development. The company also says the methane in the well water is "significantly different" from the methane coming from the gas well.

Their investigation did turn up two abandoned "historic gas wells" on property near the Vargson farm. Chesapeake believes they are a possible source for the methane in the Vargsons' water supply.

Methane has long been a problem in northern Pennsylvania because of the geological formation and its history of oil and gas exploration. Brian Oram of B.F. Environmental Consultants, a Dallas, Pa.-based firm, says that even before the Marcellus Shale drilling began more than half of Pennsylvania's private wells didn't meet federal drinking-water standards. Of those, 3 to 5 percent had significant problems with methane.

"Methane's been a hidden secret in north Pennsylvania for a long time," says Mr. Oram. "But I also don't want to suggest that someone's methane levels may not have changed because of drilling."

Today the Vargsons' drinking well is so laced with methane that when Ms. Vargson turns on the faucet in her kitchen and lights a match, it catches fire. The contaminated water forced the family to sell its herd of 60 dairy cows and take jobs off the farm. And the royalty checks steadily decreased after the first few months. Vargson says the last few have been about $70 each.

She remains convinced that wherever the methane in her water is coming from, it wouldn't be there if the well on her property hadn't been drilled. "I still believe we need to become less dependent on foreign oil and that we need to find ways to use other resources," she says. "If they would only extract this gas safely, I'd get on their bandwagon. But knowing they can do this safely and aren't, that's my biggest holdback."

For the promised natural gas revolution to transform the nation's economy, advocates say such environmental problems will have to be overcome. And it isn't just the occasional faucet contaminated with some volatile organic compound. There are also the unanticipated consequences, like a series of small earthquakes that recently rattled the Youngstown, Ohio, area. The state determined their cause was a hydraulic fracturing wastewater well improperly sited on a fault line. It has issued new regulations to prevent similar tremors.

While gas companies defend their techniques as environmentally sound, some industry officials admit they could do more to allay public concerns. From the start, they believe they should have addressed the causes of the methane in the wells in northeast Pennsylvania and other states.

"We should have stepped up and said, 'It doesn't have to do with fracturing, but it has to do with well integrity, and let me show you why and how it can be addressed,' " says Mark Boling, a lawyer with Southwestern Energy, a Houston-based oil and gas firm active in Pennsylvania.

Along with the environmental concerns, there's concern about whether natural gas's economic benefits will last. Local opposition to fracking could leave vast tracts of the shale gas undeveloped. New York State has already deemed its major watersheds off limits to drilling and put strict limits on where fracking can be done. Several towns have banned it all together.

In Pennsylvania, which just passed a statewide law regulating the practice, several towns have gone to court to block the statute primarily because it takes away local officials' authority to decide where drilling can take place.

There's also the mercurial law of supply and demand. Natural gas prices are notoriously volatile. The warm winter and generous supplies of natural gas from the current drilling boom have plunged prices to a 20-year low. That has made tapping the shale less profitable. The pace of drilling in Pennsylvania has already slowed, with rigs moving to more oil-rich fields. Will the jobs now vanish? If drilling slows too much, will prices spike again?

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How far the US will pivot toward a natural gas economy will depend not just on economic forces and environmental factors. It will also hinge on Washington.

Ardent supporters of the fuel, like Pickens, believe that natural gas could help the US achieve oil independence from the Middle East within 10 years. He estimates that 15 percent of every barrel of oil America consumes is used by 18-wheelers moving goods around the country. Switching those vehicles alone to natural gas, he says, could go a long way to reducing Mideast imports.

Yet Pickens and others consider natural gas just one part of the solution. They see it as a "bridge fuel." The idea is to use domestic natural gas supplies to keep the nation running until wind, solar, and other sustainable energy sources become more economical. To spur the transition, supporters are pushing the Natural Gas Act, which would provide tax incentives to energy producers as well as buyers of NGVs.

Yet many environmental groups oppose a wholesale shift to the fuel, both because of the inherent risks with fracking under ground and what it could mean for the air overhead. While methane, the primary component of natural gas, burns between 20 and 55 percent cleaner than oil and coal, when released unburned into the atmosphere as a result of leaks, its volatility makes it a potentially bigger contributor to global warming than carbon dioxide, a leading cause of climate change.

"Very small leaks at the point of production, along the pipeline system, or at the local distribution system, can undo all of the greenhouse-gas benefit that you think you're getting when you switch to natural gas," says Mark Brownstein of the Environmental Defense Fund (EDF).

Others worry that a tilt too far toward natural gas could undermine the development of solar and wind power, leaving the nation again dependent on a fossil fuel that will eventually run out.

"If we want a future in which our energy is safe and secure and sustainable, we shouldn't be investing in fuel sources that are dirty and dangerous," says Michael Brune, executive director of the Sierra Club.

There is a middle ground in this debate. EDF, for one, is working with gas companies like Southwestern Energy to develop better research and technology to avoid fracking problems and methane leakage. It's also pushing the development of wind and solar alternatives.

Many agree that the nation's energy future is best made up of a menu of options. "We would all prefer to have wind and solar, but we can't build wind and solar at scale competitively, unless we want to subsidize them heavily," says Charles Ebinger, the director of the energy security initiative at the Brookings Institution in Washington. "Natural gas can be developed and utilized in huge quantities and can be used in just about every sector of the economy."

Back in his garage in Massachusetts, Mann wants to do his part to solve the nation's energy woes, by encouraging the fuel's use under hoods. He's going ahead with his design for a natural gas home-fueling station. He also wants to get federal certification so he can begin manufacturing conversion kits. He has an inventor friend in Utah who is shipping 25 kits a day and did a million dollars in sales last year.

"It just makes so much sense," says a plaid-shirted Mann. "The stuff is already out there. We might as well use it."

• Alexandra Marks, a former Monitor staff writer who covered energy issues, lives in New York.