Soaring natural gas production has already cut the share of oil consumption met by imports to 47% last year from 60% in 2005.
Can America escape the energy trap? Must our lives and security be forever held hostage to the vagaries of political power in the Middle East oil states? The answers to these questions are yes, and no. Thanks to American technology and enterprise, we can achieve a degree of energy security that once seemed hopeless—but only if we can sort out our priorities.
The good news is that the United States is at the center of a global energy revolution. Our development of innovative shale-gas technology offers the prospect of a huge bonanza of natural gas (and some oil as well). It’s the most positive event in the country’s energy outlook in 50 years. Let’s celebrate the achievement before looking at what needs to be done to bring it to fruition.
Our geologists have long been aware that gas (and oil) lies hidden in the country’s shale beds and under the ocean, but we had no chance to extract it until American entrepreneurial energy inspired companies to gamble on new technologies. In a phrase, technology has trumped geology. Advances in computer-processing power yielded seismic mapping and three-dimensional imaging, enabling geologists to “see” through the thick layers of rock and salt obscuring the reservoirs thousands of feet below the surface. And new drilling technologies allow us to penetrate thousands of feet of rock, turn a corner, and continue drilling horizontally for several thousand more feet to reach millions of cubic feet of gas.
It’s trapped in the shale, but it can be released by the process known as hydraulic fracturing, or “fracking.” Millions of gallons of water, sand and chemicals are blasted in at high pressure. Fissures open up, and gas and oil seeps out.
The process of finding and producing hydrocarbons from this shale has taken off with such velocity that it has already significantly altered government and corporate energy expectations. The production costs of shale gas are about one-half to one-third the costs associated with new conventional gas wells in North America. The result is a glut of new supply and plummeting prices.
This kind of seismic shift in the energy landscape is rare. It could bring us back to the time when the U.S. and its neighbors in the hemisphere were self-sufficient and even a major world source of energy. Energy companies have become exporters, as the U.S. has surpassed Russia as the world’s leading gas producer.
So what’s the snag—and how serious is it? Continue reading
T. Boone Pickens is on a crusade to wean America off its addiction to foreign oil. The famed oilman and corporate takeover artist has been crisscrossing the country pushing the Pickens Plan, which proposes converting heavy vehicles to run on abundant and domestically available natural gas.
The plan is not uncontroversial, particularly amongst some in the green community who note that it is based on controversial extraction techniques and that Pickens, an oil and gas investor, stands to profit handsomely if it is enacted. But the plan, which inspired a bill in the U.S. Congress called the Nat Gas Act, also has influential supporters in Washington and at The New York Times. We caught up with Pickens a couple of weeks ago. The interview was condensed and edited for clarity. Continue reading
- Canada is increasing oil production rapidly:
One of the largest positive forces driving Canada’s economy is oil production and a recent oil production forecast from an analyst at CIBC World Markets captures show just how much oil production could increase. This latest forecast of Alberta oil sands production of 4.1 million barrels per day by 2020 is higher than the forecast made by the Canadian Association of Petroleum Producers (CAPP) that expected a more modest increase of 1.4 million barrels per day, reaching a total of 3 million barrels per day by 2020. But, just using the CAPP forecast, industry and government analysts expect Canadian oil production to bump up against current pipeline capacity by 2015 or 2016.
- Canada is building new pipeline infrastructure, for example:
Enbridge is planning to spend C$3.2 billion ($3.15 billion) on pipeline expansions, mostly to get oil from Alberta and North Dakota to refineries in the U.S. Midwest and in Eastern Canada. East coast refineries are currently fed by foreign oil , which are more expensive than U.S. benchmark prices. According to Stephen Wuori, the head of Enbridge’s liquids pipeline business, “Refineries in Ontario and Quebec are paying premiums of $20 per barrel or more to obtain crude oil from the foreign sources they are currently largely dependent on. Access to Canadian and U.S. Bakken production will help level the playing field for these refineries, protecting their long term viability and safeguarding jobs.” The expansions are expected to be completed in 2014
API’s President and CEO Jack Gerard told reporters yesterday that the states have demonstrated competency, efficiency and expertise in regulating hydraulic fracturing in oil and natural gas development, raising a fundamental question about the need for the Bureau of Land Management’s own proposed regulations:
“The shale revolution is changing the face of American energy development. It’s boosting domestic oil and natural gas production, putting hundreds of thousands of people to work, and delivering added billions in revenue to state and federal government. It’s also strengthening our nation’s energy security and reducing our trade deficit. But it could do even more.
“How much more will depend in part on government regulations – and, in particular, on BLM’s newly proposed hydraulic fracturing rules. Unfortunately, the rules are headed in the wrong direction. They would create superfluous, costly requirements, threatening jobs, revenue and energy production while providing little or no environmental or safety benefit.
The new rules will also require additional testing of oil and gas well construction and require the industry to have a management plan for the water used in the process.
“This proposed rule will strengthen the requirements for hydraulic fracturing performed on federal and Indian lands in order to build public confidence and protect the health of American communities, while ensuring continued access to the important resources that make up our energy economy,” the Interior Department said in a statement.
This new rule follows another new rule requiring drillers to ensure that all natural gas taken from the well is captured. You can read about that rule here.
Some environmentalists were unhappy with the rules: Continue reading
But in a nod to industry concerns that the rules were being enacted too quickly, the Environmental Protection Agency said companies can burn the pollutants at the well head until the start of 2015, when enough equipment is expected to be available to capture the pollution.
The administration said the regulations are part of President Obama’s promise to develop the nation’s oil and gas resources in a manner that protects the environment and the public health.
“The standards are practice, flexible, affordable and achievable,” Gina McCarthy, an assistant administrator for EPA’s Office of Air and Radiation, said on a conference call with reporters.
Read more here.
The executive order creates a new working group made of representatives from at least 13 government agencies, including the Department of Defense, the Department of Energy and the Environmental Protection Agency, among others.
Its main task? Keep the various federal entities all on the same page when it comes to developing new policies and regulations surrounding shale gas.
Read more here.
So much natural gas is being produced that soon there may be nowhere left to put the country’s swelling surplus. After years of explosive growth, natural gas producers are retrenching.
The underground salt caverns, depleted oil fields and aquifers that store natural gas are rapidly filling up after a balmy winter depressed demand for home heating.
The glut has benefited businesses and homeowners that use natural gas. But with natural gas prices at a 10-year low — and falling — companies that produce the fuel are becoming victims of their drilling successes. Their stock prices are falling in anticipation of declining profits and scaled-back growth plans. Continue reading