Southern Company’s Purchase of Shale Producer Epitomizes Shift in Industry

Production of mineral oil in UsedomOne of the country’s biggest utility owners, Southern Company, which houses its executive offices in Alabama, is following the growing trend and getting into the shale business. According to Fortune magazine, the company announced last week that they are buying AGL Resources, one of the country’s biggest natural-gas distributors.

The deal is reportedly worth $12 billion, but AGL will only receive $8 billion in cash as $4 billion will go towards paying off the company’s existing debt. After it’s all said and done, Southern Company will be the second largest U.S. utility company, with more than 9 million customers, and have access to AGL’s natural gas pipeline.

The move is just another sign of the decline in coal usage, which still provides 39% of the electricity in the United States despite decreasing in use every year.

It also highlights the increased value in shale over recent years. According to the Energy Information Administration (EIA), shale gas production is expected to increase to 13.6 trillion cubic feet and account for 50% of all U.S. natural gas production by the year 2035. Some estimates suggest there are still more than 360 trillion cubic feet of natural gas underground to be obtained.

The coal industry has been especially hurt by recent legislation, such as the Clean Power Plan, aimed at reducing the prevalence of one of the dirtier natural resources. With so many coal plants being vacated, some companies are trying to utilize them in unique ways. For example, Google recently announced its plans to open a new data center in an old coal plant in rural Alabama.

The coal industry is not the only one suffering from the growth of shale production. The slump in oil prices is also a result of shale cutting into their market share, according to Steve LeVine, an energy expert for the global news outlet

“Oil prices continue to swing wildly, but they are subject to a hard fact — the incessant flow of US shale oil,” LeVine wrote for Quartz. “According to a leading energy research firm, [the price of oil] is likely to dip only slightly this year before rising again by next summer.”

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