Domestic natural gas production was largely stagnant from the mid-1970s until about 2005. Planning had been under way by the early 2000s to construct about 40 liquefied natural gas import terminals along the U.S. coasts to meet anticipated rising demand.

However, beginning in the late 1990s, advances linking horizontal drilling techniques with hydraulic fracturing allowed drilling to proceed in shale and other formations at much lower cost. The result was a slow, steady increase in unconventional gas production. As the technology improved and spread, domestic shale gas output began to increase rapidly, such that by 2008 commentators began to routinely speak of a shale gas “boom.” Today, shale gas accounts for about 30% of total U.S. natural gas production—up from only 4% in 2005— helping to make the United States the largest producer of natural gas in the world by 2009. Within a decade, the question of how much more dependent the country would become on natural gas imports had been replaced by how much the U.S. gas supply will affect the economics and geopolitics of energy around the globe.

Although the long-term outcome of the shale gas revolution is far from decided, significant shifts are already apparent in U.S. power markets. In that context, low-price natural gas has had the greatest impact to date on generation by coal power plants. Since 2008, coal’s share of annual generation has declined from 48% to 36% as of August 2012. This switch from coal to natural gas, combined with growth of renewable energy generation, has led to a reduction of carbon dioxide emissions in the U.S. power sector of about 300 million tons—equivalent to 13% of total power sector emissions in 2008.

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The Joint Institute for Strategic Energy Analysis (JISEA) designed this study to address four related key questions, which are a subset from the wider dialogue on natural gas: 1. What are the life cycle greenhouse gas (GHG) emissions associated with shale gas compared to conventional natural gas and other fuels used to generate electricity? 2. What are the existing legal and regulatory frameworks governing unconventional gas development at federal, state, and local levels, and how are they changing in response to the rapid industry growth and public concerns? 3. How are natural gas production companies changing their water-related practices? 4. How might demand for natural gas in the electric sector respond to a variety of policy and technology developments over the next 20 to 40 years?

Key finding included the legal and regulatory frameworks governing shale gas development are changing in response to public concerns and rapid industry changes, particularly in areas that have limited experience with oil and gas development. All of the states examined in this study have updated their regulatory frameworks to address the opportunities and challenges associated with increasing unconventional natural gas production.