*UPDATE* The President’s Big Shout Out to Shale
According to most geologists, shale has been a natural geological feature of the earth’s outermost crust for about two billion years now, give or take a couple hundred million. But would you believe it? In all that time, the word "shale" had never been mentioned in a State of the Union address...
UPDATE (Jan. 26, 10:26am ET): A document on the White House website (found here) entitled “Blueprint for an America Built to Last” reiterates the President’s support for natural gas development and the hundreds of thousands of jobs it will create. It is indeed telling (and little wonder) that developing natural gas from shale plays so prominently in a plan to create jobs while also reducing environmental impacts.
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According to most geologists, shale has been a natural geological feature of the earth’s outermost crust for about two billion years now, give or take a couple hundred million. But would you believe it? In all that time, the word “shale” had never been mentioned in a State of the Union address delivered by an American president (in fairness, the office of U.S. president hasn’t been around quite that long).
Well, it had to happen eventually. And last night, that two-billion-year-long-no-mention streak finally came to an end, with President Obama devoting a significant segment of his nationally (and internationally) televised address to touting the promise and potential of developing America’s enormous natural gas resources — particularly those in “shale rock” — as the foundation for an energy policy that’s “cleaner, cheaper, and full of new jobs.” From the speech:
“We have a supply of natural gas that can last America nearly 100 years,” the President stated, “And my administration will take every possible action to safely develop this energy. Experts believe this will support more than 600,000 jobs by the end of the decade.” The President went on to say that expanded natural gas development will “create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy.”
But unlike the numerous throwaway lines in all too many political speeches and presidential statements, the president’s words about natural gas were clearly a major component of his address, and news outlets from across the country took notice. Below is a snapshot of what major media had to say about the speech, specifically the president’s endorsement of the responsible development of natural gas from shale:
- Reuters, “Obama backs shale gas drilling”
President Barack Obama on Tuesday pledged support for the U.S. shale gas boom, but said government must focus on safe development of the energy resource.
In his State of the Union address, Obama called for government to develop a roadmap for responsible shale gas production and said his administration would move forward with “common-sense” new rules to make sure drillers protect the public.
“America will develop this resource without putting the health and safety of our citizens at risk,” Obama said.
- UPI, “Obama heralds domestic natural gas”
Obama, in his State of the Union address Tuesday, said natural gas was one of the foundations for U.S. energy security. He said there’s enough natural gas in the country to meet domestic demand for 100 years but companies working to exploit those reserves must do so responsibly.
- Washington Post,”In State of the Union Address, Obama says he will push forward with fracking”
In his State of the Union address Tuesday night, Obama spoke optimistically about the bounty of unconventional natural gas under the eastern United States. “We have a supply of natural gas that can last America nearly 100 years,” Obama said, “and my administration will take every possible action to safely develop this energy.” This is good news, pretty much no matter where you land on the political spectrum.
- Bloomberg, “Obama Pushes Natural-Gas Fracking to Create 600,000 Jobs”
President Barack Obama pushed drilling for gas in shale rock and support for cleaner energy sources to boost the economy in his final State of the Union address before facing U.S. voters in November.
Hydraulic fracturing, the process of injecting water, sand and chemicals underground to free gas trapped in rock, could create more than 600,000 jobs by the end of the decade, Obama said yesterday. The process, called fracking, is among a list of energy policies Obama said would fuel economic growth.
“We have a supply of natural gas that can last America nearly 100 years, and my administration will take every possible action to safely develop this energy,” Obama said.
- POLITICO, “Obama steals GOP’s ‘all of the above’ energy slogan”
Obama also highlighted the economic potential from tapping into the nation’s natural gas supplies, citing independent reports showing the industry could support about 600,000 jobs over the next decade…”This country needs an all-out, all-of-the-above strategy that develops every available source of American energy — a strategy that’s cleaner, cheaper and full of new jobs,” Obama said to rousing applause from Republicans in the House chamber.
Cleaner. Cheaper. More affordable. And insanely abundant. At a time when most folks on Capitol Hill today can’t even agree on what they disagree on, responsible development of American energy resources represents that rarest of ideas in Washington that appear to make sense to just about everyone across the political continuum. Heck, even Sen. Bob Casey (D-Pa.), previously (and currently?) a critic of Marcellus development in his state, told reporters after the speech that he “was glad for the focus on natural gas. It’s a big benefit to Pennsylvania. We’ve got a great natural resource with lots of jobs.”
And he wasn’t the only one talking shale last night. Click around below to see what other folks had to say:
Virginia “Gigi” Lazenby, Chairman, Independent Petroleum Association of America (IPAA):
“Our industry, made up of mostly very small- and medium-sized businesses, applauds the president for his stated commitment to expanding the responsible development of job-creating American oil and natural gas. As the president made clear this evening, job creation and the restoration of the American dream is a shared goal that exceeds political boundaries. As the president underscored, our nation continues to increase its domestic oil and gas production, creating thousands of well-paying, private sector jobs, providing much-needed relief and savings for struggling consumers and stimulating an otherwise anemic economy.”
Jack Gerard, President and CEO, American Petroleum Institute:
“The administration has an opportunity to turn energy policy in a direction that could provide huge benefits to our economy. And if the President is sincere in this, our industry will work very hard with him to make it happen.” (NOTE: Gerard also added, “If the President is serious about creating more jobs and more energy, allow America’s oil and natural gas companies to produce more of our energy at home, and we’ll put people to work and deliver more revenue to the government. That’s what the American people want.”)
Statement from America’s Natural Gas Alliance (ANGA):
“Tonight’s speech builds on the White House report earlier this month documenting the broad impact that natural gas production can have on investment and job creation across leading sectors of our economy. A range of U.S. industries and their workers are more competitive today thanks to our nation’s vast, affordable natural gas supplies. Along with these opportunities come lower energy costs for consumers and cleaner air.”
Kathryn Klaber, President, Marcellus Shale Coalition:
“We are encouraged that President Obama recognizes the tremendous energy security, environmental, and economic benefits associated with job-creating American shale gas development fueled overwhelmingly through private investment on privately-owned lands. And while presidents of both parties have made a clarion call for more American energy over the past four decades, it is our genuine hope that President Obama’s remarks tonight are reflected in his Administration’s policies that are rooted in sound science and move forward with an aim of leveraging our nation’s abundant natural gas resources on behalf of consumers, families, and small businesses. American natural gas will continue to make our nation stronger and more secure.”
Dave McCurdy, President and CEO, American Gas Association:
“If there was ever a fuel in the right place at the right time, it is natural gas in 2012 and beyond. We’re glad to see the President acknowledge the many benefits natural gas provides for our energy future, not just in the State of the Union Address but also in his latest jobs report…By continuing to increase the use of natural gas, we can make progress on our national priorities of helping to improve our economy, reduce environmental impacts and secure our nation’s energy future.”
Brad Gill, Executive Director, Independent Oil and Gas Association of New York (IOGA of NY):
“In his State of the Union Address Tuesday, President Obama spoke of the important role domestic oil and natural gas will have in securing the nation’s energy future and economic recovery. Using newer technologies to harvest homegrown energy is a vital component in job creation and commerce by powering businesses and ‘factories that are cleaner and cheaper’… The President’s energy policy acknowledges the 600,000 jobs that natural gas production will help create over the next decade. His messages must be heard and considered in New York as the state moves toward allowing safe natural gas development in the Southern Tier.”
Dan Fitzsimmons, President, Joint Landowners Coalition of New York (JLCNY):
“In tonight’s SOTU address, President Obama affirmed that we don’t have to choose between our economy and the environment in developing shale gas. The president committed the Administration to taking ‘every possible action to safely develop this energy.’ The landowners of NY state stand ready to support this call to action.”
Shale Is Truly a Bipartisan Issue
A new report from the Bipartisan Policy Center's Energy Project -- co-chaired by former Senators Byron Dorgan (D-ND) and Trent Lott (R-MS) -- reveals what many of us have known for some time: the development of natural gas from shale is a boon for job creation and is generating enormous benefits for consumers in the form of lower energy costs.
A new report from the Bipartisan Policy Center’s Energy Project — co-chaired by former Senators Byron Dorgan (D-ND) and Trent Lott (R-MS) — reveals what many of us have known for some time: the development of natural gas from shale is a boon for job creation and is generating enormous benefits for consumers in the form of lower energy costs.
At EID we’re always happy to discuss how developing oil and natural gas from shale is good for the economy and energy security. But in this case, we’ll let BPC do most of the talking. From the BPC release:
- “New domestic natural gas supplies,” said Co-Chairs Dorgan and Lott, “could have a transformative effect on U.S. energy policy, our economy and our energy security…It is critical that this resource be developed responsibly so that we can gain these benefits.” (BPC release; Jan. 19, 2012)
- “Long-term lower prices for natural gas, should they continue, can bring appreciable economic benefits to many average residential electricity consumers, to key gas-intensive industries, and to the broader economy,” according to Dorgan and Lott. (BPC release; Jan. 19, 2012)
- “The BPC report finds that natural gas supply could support as much as 100 years of domestic gas demand at present levels of consumption. Natural gas extraction from shale formations has exhibited rapid growth, and currently comprises approximately one quarter of total U.S. natural gas production.” (BPC release; Jan. 19, 2012)
- “The report also shows that employment in oil and natural gas extraction and support services is up 11 percent since October 2008 (pre-recession) according to the Bureau of Labor Statistics.” (BPC release; Jan. 19, 2012)
- Dorgan and Lott: “Shale oil and gas development is helping to alter America’s energy equation, boosting domestic production, and in the case of oil, reducing imports.” (BPC release; Jan. 19, 2012)
- “Industry has issued its own standards and best practices, and states have been adapting or updating regulations and participating in a voluntary program for review of state regulatory processes.” (BPC release; Jan. 19, 2012)
- “Lower natural gas prices could reduce costs for integrating intermittent renewable power generation, and offer an opportunity for co-location of natural gas and renewable facilities.” (BPC release; Jan. 19, 2012)
The full report expands on these benefits in greater detail, but it’s absolutely worth highlighting what the BPC Energy Project offers as its opening statement about the assessment:
The outlook for North America’s natural gas supply has improved dramatically in recent years as horizontal drilling and hydraulic fracturing technologies have made it possible to commercially develop tight and shale gas reserves. These shale gas basins are located in diverse geographical areas, including Arkansas, Colorado, Ohio, Oklahoma, Pennsylvania, New York, West Virginia, Texas and Louisiana. Effective and responsible development and use of these newly accessible resources provide an enormous opportunity for the United States and has the potential to fundamentally improve our nation’s economic and energy security.
It’s worth noting, too, that the members of BPC’s Energy Project represent a diverse set of interests and backgrounds. Membership includes President Obama’s former National Security Adviser (General James Jones, USMC (Ret.)), former EPA administrator William Reilly, and representatives from companies and organizations like Booz Allen Hamiltion, the Arkansas Public Service Commission, BNSF Railway Company, the International Brotherhood of Electrical Workers (IBEW), and the American Council on Renewable Energy. Also represented: Ralph Cavanaugh, the Energy Program Director for none other than Natural Resources Defense Council (NRDC).
It is by now an impossible-to-deny fact that the responsible development of American energy resources from shale is an extraordinary generator of U.S. jobs, a reality confirmed once again last week in a report that pegged the current number of jobs tied to shale exploration at more than 600,000.
To their credit, even opponents of development are starting to acknowledge shale as a job creator, though they usually try to explain it away by suggesting that the only new jobs being created are ones in the hotel, restaurant and general services industries. Of course, they’re too polite (or craven) to put it in these terms, but the implication is clear: To them, those jobs aren’t “real.” And perhaps we’re even being a bit too polite in characterizing their views in that way.
Needless to say, we don’t happen to view the issue the same way they do. The way we see it, those jobs are real — and they’re making a difference in local communities at a time when it’s needed most. But the same way we reject the notion that hotel and restaurant jobs are second-class jobs, we also know that lots of other jobs, in lots of other industries, are being created as well. This week, a report authored by PricewaterhouseCoopers provides additional facts, figures and data in support of that contention — and if you haven’t seen it yet, it’s definitely worth a read.
The study, organized with input and assistance from the National Association of Manufacturers, took a long, hard look at how the development of the nation’s shale resources relates to American economic growth through 2025. What they found was impressive, and serves as a very important reminder of the very important opportunities that responsible development can make and is making possible.
The study found shale gas development has the potential to revive our economy by increasing energy affordability, resulting in significant cost savings for businesses while also stimulating significant demand growth for manufacturing — potentially creating more than one million new jobs through 2025. With the United States suffering from an 8.6 percent unemployment rate, the creation of a million new jobs would be welcome relief.
The study also highlights the fact that developing our nation’s shale resources will continue to provide an abundance of supply that keeps prices low for consumers. These low prices also help manufacturers, who rely heavily on a stable supply of affordable energy (and feedstock material) in order to compete with folks all around the world. According to the study, the lower feedstock and energy costs would save U.S. manufacturers a staggering $11.6 billion per year. This is money that can instead be invested in new facilities and, most importantly, new jobs.
Of course, these are only the long-term benefits. The study also examined short-term impacts that are already being realized throughout the nation. Specifically, the study mentions:
- Dow Chemical plans to build a new ethylene unit on the Gulf Coast by 2017; will restart another dormant unit in 2012 and will construct a new propykene unit in Texas by 2015. Feedstock for all will include supply contracts from the Marcellus and Eagle Ford Shales.
- Formosa Plastics intends to spend $1.5 billion on an 800,000 mt per year ethylene plant and downstream assets in Texas by 2015 partly due to the availability of shale gas feedstock.
- Bayer Corporation is in discussions to build an ethane cracker plant in the Marcellus Shale basin.
- Westlake Chemical will expand ethylene capacity in Loisiana by the end of 20q12 and again in 2014 and may also expand in Kentucky to use expected lower cost American feedstock.
- Nucor is building a $750 million direct-reduced iron facility in Louisiana after securing a natural gas supply agreement that is expected to include nearby shale resources.
- Vallourec is spending $650 million on a new plant in Ohio to supply steel pip for companies extracting shale gas.
- U.S. Steel invested $95 million in an Ohio plant to help meet demand from shale gas extraction activities.
These are only a handful of examples. Other examples abound in communities where shale development is currently taking place. Ohio, as referenced above, is currently experiencing a resurgence in its steel industry, the likes of which has not been seen in decades, returning once idle plants and mills to bustling centers of commerce and employment.
The study comes in the wake of (and, in effect, confirms) a report from earlier this year by the American Chemistry Council (ACC), which examined the benefits accruing to the petrochemical industry as a result of shale development. ACC found that the development of natural gas could create 400,00 new jobs, generate $132.4 billion in new U.S. economic growth, and generate $43.9 billion in tax revenues for state, federal and local governments.
Reviewing recent experience and forward looking independent economic studies such as these reveals a clear trend: The safe and responsible development of the nation’s shale resources is not only providing new life to the manufacturing sector, but is also providing hope and much-needed jobs to American workers, along with spurring significant economic growth in communities throughout the country. And for an economy that continues to struggle, the bright spot of oil and gas development is shining clearer than ever before.
The ‘Age of Shale’ and America’s Energy Future
With billions of dollars in new investments and global interest soaring, the shale revolution is here to stay.
Shh…don’t tell the New York Times, but it looks like America’s energy renaissance in shale — which has been fueling economic recovery from North Dakota to Texas and Louisiana to Pennsylvania — is going to last for a long, long time.
As the Wall Street Journal reports, in a story aptly stating that the “Age of Shale” has arrived:
Shale discoveries have reinvigorated U.S. oil and gas production that just half a dozen years ago was widely seen as in terminal decline. Today, there is a glut of cheap natural gas, and domestic oil production is rising for the first time in decades. Shale development is even spreading to other countries, such as Poland and Argentina.
The shale boom has already minted a half-dozen new billionaires comparable to the riches brought by the Internet.
“You certainly have to record the discovery and the exploitation of resources from both oil and gas shales as one of the great wealth creators in American history,” said Ralph Eads, vice-chairman of investment bank Jefferies & Co., which has advised on more than $75 billion worth of shale deals over the last three years. “It looks to be the economic equivalent to any of the big technology innovations.”
Recent market developments further highlight this trend. Kinder Morgan Inc. announced this past weekend that it would be buying El Paso Corporation in a deal worth approximately $38 billion. The acquisition will ultimately create the fourth-largest energy company in North America.
What prompted that enormous deal? El Paso owns the largest natural gas pipeline system in North America, with more than 43,000 miles of gas pipelines. As Reuters points out, the deal combines “the two largest natural gas pipeline operators in North America in a huge bet on the fast-growing market for that fuel.”
More from Reuters:
Despite weak natural gas prices, production of the fuel has been rising as energy companies pile into shale fields — underground formations rich in oil and gas. In the Eagle Ford Shale in South Texas, where there are scant pipelines, companies are having to rely on trucks and are building rail terminals to handle the vast field’s output.
El Paso already owned the largest natural gas pipeline system in North America, with more than 43,000 miles of pipe. The combined company would own 67,000 miles of natural gas pipe and another 13,000 miles of pipelines to move refined products and other fuels.
“We believe that natural gas is going to play an increasingly integral role in North America,” Kinder Morgan Chief Executive Richard Kinder said in a statement. “We are delighted to be able to significantly expand our natural gas transportation footprint at a time when it seems likely thatdomestic natural gas supply and demand will grow at attractive rates for years to come.”
And this is only one of stories out this week about the growing shale revolution. Statoil ASA has also announced that it is purchasing Brigham Exploration to get a piece of the mighty Bakken Shale in North Dakota. The purchase makes Statoil one of the top 10 holders of Bakken acreage, and shows how shale development is attracting massive amounts of direct investment in American energy development.
Less than a decade ago, few would have predicted that these massive investments would take place. But through the expanded use of proven technologies like hydraulic fracturing and horizontal drilling, the United States has completely transformed its position in the global economy, not only with respect to energy security, but also with the capacity for job creation and economic growth.
In Pennsylvania, the development of the Marcellus shale has led to a rebirth of manufacturing, especially the steel industry. A study from Penn State shows that Pennsylvanians saved more than $630 million on their utility bills thanks to shale gas production, and the oil and gas industry in the Keystone State has helped create nearly 50,000 jobs in 2011. In Texas, the Eagle Ford shale is not only creating much-needed jobs, but is also putting the state’s finances on a stronger footing: In November, more than $1 billion will be added to the state’s rainy day fund, revenue that is mostly generated from oil and gas production. And thanks to the development of the Haynesville shale in northern Louisiana, Shreveport-Bossier is now the ninth fastest growing metropolitan area in the entire country. In Ohio, developers are only just beginning to invest billions of dollars into local economies to tap the resources of the Utica Shale.
By 2017 the United States could be the largest oil producer in the world — thanks mostly to shale oil development in places like the Bakken and the Eagle Ford — and shale gas is already allowing countries in Europe to think about disentangling themselves from the Russians.
America’s energy future is perhaps brighter than it has ever been, a status that owes itself to the continued and responsible development of domestic shale resources.
NPR: Shale Development a Huge Boon to U.S. Manufacturing
Today, National Public Radio’s Morning Edition highlighted the remarkable impact that responsible shale development is having on American manufacturing, filing a short piece focusing on Marcellus development in Pennsylvania. The program highlighted how hydraulic fracturing is stimulating significant job growth for the manufacturing sector due to affordable and stable supplies of clean-burning natural gas — which is helping to create thousands of jobs during these challenging economic times. Here are several key excerpts from the story:
Energy production is stimulating growth along the supply chain. You can’t drill without steel; you can’t weld without workers. Whether an oil and gas producing state or not, domestic energy production is creating jobs in a wide array of manufacturing sectors.
- “A natural gas drilling boom in Pennsylvania is helping the economies of Rust Belt cities long accustomed to bad news. Drilling requires steel — lots of it — and that has manufacturers expanding and hiring new workers.” Gas Drilling Boom Brings New Life To Steel Industry”
- Around the region, you can find many stories of businesses doing well because of the drilling boom — especially in Pennsylvania. … Doug Matthews is the senior vice president of tubular operations at U.S. Steel — his division makes the pipes and tubes the gas drilling industry uses. U.S. Steel is based in Pittsburgh and is still a big driver for the local economy. When it does well, so do its contractors, like Chapman Corp. in Washington, Pa.
- Crews there are building a large new fabrication shop, as many engineering and construction firms are laying people off. “The $6 million investment that we’re putting into our new fabrication facility shows our confidence that the Marcellus Shale play is here to stay,” says Rich Tomsic, vice president for sales and marketing. That almost certainly will lead to more jobs in the region. It already has at a time much of the rest of the country is suffering.
- Pennsylvania’s Department of Labor and Industry collects specific data on how many people have been hired because of the natural-gas drilling boom. Hiring for “core-related industries” has spiked from 5,501 in 2008 to 11,913 this year. “This is almost 117 percent growth,” says Sue Mukherjee, director of the agency’s Center for Workforce Information and Analysis.
And the American people are catching on! A poll released today by the American Consumer Institute Center for Citizen Research (ACI) noted that 80% of Americans support increased energy development to create jobs. Natural gas is no exception.
- “These results show strong consumer support for expanding domestic energy production as a means to accomplish several important policy goals – achieving lower energy costs, reducing the nation’s dependence on foreign energy sources and creating jobs,” ACI Release, 10/13/11.
With the American economy currently on the ropes, natural gas development continues to be a light at the end of the tunnel (or well hole) for thousands of Americans trying to provide for themselves and their families. American innovation created hydraulic fracturing; American determination has enabled it to prosper and will continue to provide for our growing, energy-consuming nation.
- “Responsibly developing this vital, God-given shale gas resource would put thousands of Marylanders back to work, improve people’s living standards, generate billions of dollars in government revenues, help to balance county and state budgets and produce more American energy for all Americans.” Baltimore Sun Op-Ed, 10/12/11.
Before increasing our reliance on foreign fuels and “our so-called friends in the Middle East” (CBS-21’s RJ Harris, 10/10/11), let’s look to the great domestic energy potential—right beneath our feet.
Highlights From Yesterday’s US Senate Shale Gas Hearing
US Sen. Jeff Bingaman (D-NM), Energy & Natural Resources Committee Chairman
- “In recent years, a number of factors have raised the prominence of natural gas as a resource. Technologies such as horizontal drilling and hydraulic fracturing have led to more domestic natural gas production and led to a reassessment of the U.S. technically recoverable resources. The international focus on reducing greenhouse gas emissions has favored the lower carbon intensity of natural gas for power generation.” (Testimony, 10/4/11)
US Sen. Lisa Murkowski (R-AK), Energy & Natural Resources Committee Ranking Member
- “Natural gas is clean-burning and abundant; it’s well understood and scalable; and it’s clearly in our best interest to take steps to ensure that we maintain a stable and affordable supply into the future by encouraging its safe and responsible development. … We’ve witnessed game-changing technological innovations that have unlocked tremendous volumes of previously inaccessible natural gas. These resources are already benefitting our nation by further diversifying our energy supplies, growing our economy, and creating thousands upon thousands of well-paying American jobs. … Greater use of natural gas would move our nation in the right direction in terms of energy security, economic growth, and environmental protection.” (Testimony, 10/4/11)
- Wide variations in geology among shale gas formations mean that what works best in the Northeast might not make sense in Texas, Murkowski said. The U.S. shouldn’t “try to apply a one-size-fits-all” approach to shale gas extraction. (Houston Chronicle, 10/4/11)
- “Responsibly developing all our resources is of paramount importance to us,” Murkowski said. “These resources are already benefiting our nation by diversifying our energy jobs,” she added. “America should allow for this kind of ingenuity in the private sector.” (AOL Energy, 10/5/11)
US Sen. and Fmr. Gov. John Hoeven (R-ND), Energy & Natural Resources Committee
- “We need to [regulated hydraulic fracturing] it in a way that empowers the state and empowers the industry to move forward, versus falling back to the EPA stepping in and saying, ‘Everybody needs to do it this way.’” (Politico, 10/4/11)
Dr. Daniel Yergin, IHS Cambridge Energy Research Associates
- “Almost overnight, in energy terms, shale gas has become a major and critical national resource. … Today shale gas accounts for about 30 percent of total US natural gas production, and this is expected to rise dramatically in the foreseeable future. Natural gas itself is one of the backbones of our economy, providing about a quarter of the country’s total energy. … Shale gas—the unconventional natural gas revolution—has been called the biggest energy innovation of the past few decades.” (Testimony, 10/4/11)
- Industry officials have resisted calls for federal regulation of shale gas drilling and hydraulic fracturing, insisting that states are better poised to keep an eye on that work. The advisory committee members testifying today echoed that view. “There’s a gap in perceptions,” Yergin said. “There’s this view that oil and gas activities are not regulated. But we were all impressed by the quality and experience of the states in regulating oil and gas.” (Houston Chronicle, 10/4/11)
- Testifying before the Senate Committee on Energy and Natural Resources, subcommittee member Daniel Yergin, consultant and author, said, “We were all impressed with the states’ regulation of oil and gas.” Yergin added that the strength of state regulation of the industry was “not well recognized” by the general public. (Platts, 10/4/11)
- Yergin emphasized that fracking has been happening already for decades and in that time states have taken the lead in regulation. “I come out very impressed by the extent and seriousness of the states,” he said. The problem with regulating from the federal government: there is a danger, he said “of a superstructure on top of a superstructure.” (AOL Energy, 10/5/11)
Dr. Stephen Holditch, Petroleum Engineering Department Head, Texas A&M University
- I have been working on…hydraulic fracturing since 1970. … The United States has a real opportunity to develop it’s unconventional gas reservoirs to dramatically improve the energy security in the United States. The U.S. can use the abundance of Natural Gas to generate electricity and for motor fuel, which should reduce oil imports. … Horizontal drilling and hydraulic fracturing are currently being used in South Texas, West Texas, the Bakken Formation in Wyoming and North Dakota, and most recently in Ohio to increase oil production in the United States. Oil production in the Lower 48 states has increased during the past year for the first time in decades. (Testimony, 10/4/11)
- If you read recent news articles on hydraulic fracturing, the process is often described as pumping in a mixture of water and toxic chemicals under high pressure. This description is far from the truth. Most fracture treatment fluids consist of 99.5% percent pure water and sand. About 0.5% of the fluid is made up of gelling agents, surfactants, and biocides. Virtually all of these chemicals can be found in a typical home. Gelling agents are typically guar gum, which is used in many food products to viscosify the product. A surfactant is just soap, like Dawn dishwashing fluid. Biocides are use to kill bacteria, like the Clorox we use in our homes. … The concentration of these ‘chemicals’ is very minute and does not pose a danger to fresh water aquifers. … Current drilling and hydraulic fracturing activity does not adversely affect shallow drinking water aquifers. I have been working in hydraulic fracturing for 40+ years and there is absolutely no evidence hydraulic fractures can grow from miles below the surface to the fresh water aquifers. (Testimony, 10/4/11)
- Stephen A. Holditch…said the chemicals used in “fracking” generally make up less than 1 percent of the fracture fluids and that the process does not adversely affect shallow drinking water aquifers. Holditch said there was “absolutely no evidence hydraulic fractures can grow from miles below the surface to the fresh water aquifers.” (The Oklahoman, 10/5/11)
- “There is nothing broken with the [regulatory] system,” subcommittee member Stephen Holditch, the head of the petroleum engineering department at Texas A&M, said. (Platts, 10/4/11)
- As Dr. Stephen Holditch…said a the opening of his testimony: “shale gas is for real.” “The US has a real opportunity to develop its unconventional gas resources,” Holditch said. … Holditch said that one of the biggest concerns of the environmental community, that of chemicals in fracking water, was completely overblown. (AOL Energy, 10/5/11)
Dr. Mark Zoback, Department of Geophysics Professor, Stanford University
- I believe that utilization of domestic shale gas and…domestic shale oil, resources are extremely important to our nation. I personally believe that there is no question that they can be developed in a manner (utilizing horizontal drilling and multi-stage hydraulic fracturing) that protects the environment and minimizes impact on nearby communities. … It is unfortunate, however, that the concern about the safety of shale gas development has focused almost entirely on hydraulic fracturing. As Dr. Holditch testified, the chemicals used in hydraulic fracturing fluids are relatively benign, steps are being taken to make them even safer, and our committee recommends full disclosure of the composition of hydraulic fracturing fluids. … Drilling multiple wells from a single pad…not only greatly improves the efficiency of drilling and fracturing operations, it minimizes land-use, lowers the overall impact of drilling operations on local communities and makes regional planning easier to lessen the cumulative impact of shale gas development activities in a given area. (Testimony, 10/4/11)
- The process of fracturing shale rock to free trapped natural gas thousands of feet below the ground should not be the primary concern, the panel’s experts told the Senate Energy and Natural Resources Committee. “Hydraulic fracturing has sort of become a bumper sticker for everything we have to watch out for,” said Mark D. Zoback, a Stanford University professor of geophysics who has been studying hydraulic fracturing for 30 years. (The Oklahoman, 10/5/11)
- “Hydraulic fracturing has become a bumper sticker,” allowing some groups to object to gas extraction from shales. (Platts, 10/4/11)
Kathleen McGinty, Fmr. PA DEP sec. and White House CEQ chair to President Clinton
- Shale gas resources are abundant in the United States. Shale gas has already generated significant economic opportunity, substantially changed the equation with respect to energy security, and has begun to reshape electricity markets in a way that offers air quality benefits. This point with respect to the robustness of the resource, while perhaps evident, bears stating. Even until quite recently questions were presented as to whether shale wells might produce in a robust manner initially, but then decline rapidly, or alternatively, if they would have staying power. Experience to date in the field shows a very strong pattern of production. … Much attention has also been trained on the fear that fracturing can and has contaminated drinking water. … Yet, fracturing per se seems not to be the culprit. … We found that the initiative “FracFocus” (www.fracfocus.org) is very effective in the collection and presentation of fracturing fluid data–painstakingly reported on a well by well basis. FracFocus has come together in a remarkable way and in short order. (Testimony, 10/4/11)
- “There was nothing that led us to the glaring conclusion that there was [a regulatory] actor missing from the scene. … The states are doing a good job.” (Politico, 10/4/11)
- Kathleen McGinty, a private consultant who once served as secretary of environmental protection in Pennsylvania, said “frack fluids per se are very unlikely to contaminate drinking water.” (The Oklahoman, 10/5/11)
- Witnesses also warned that federal regulation could unduly burden the already heavily state-regulated fracking industry and could potentially slow the economic growth of the industry. “The issues in each state are different,” said witness Kathleen McGinty. “Geologic differences make a world of difference in terms of ensuring water and air safety issues.” (AOL Energy, 10/5/11)
NOTE: A webcast of yesterday’s hearing is available here.
The Amazing Energy Future that the Federal Government Wants to Prevent
Shale oil development in places like North Dakota means ‘OPEC’s days are numbered,’ but federal regulators pursue alternative future with potentially devastating results.
In 2004, North Dakota was the ninth largest oil producing state in the country, producing less than half as much oil per year as the state of New Mexico. In 2010, a mere six years later, North Dakota had climbed to the fourth largest, surpassing energy rich Oklahoma and Louisiana. What happened?
Two words: shale oil. The Bakken formation in the western part of the state, which the U.S. Geological Survey predicted in 1995 had only 151 million barrels of oil, turned out to be one of the largest onshore oil fields ever discovered in the United States — in 2008 the USGS famously revised its estimate upward by an amazing 25-fold, projecting that the Bakken could hold more than four billion barrels of oil.
This incredible story was told in detail this weekend in the Wall Street Journal‘s weekend interview, ” How North Dakota Became Saudi Arabia,” which focused on Harold Hamm, the oil man credited with discovering the massive energy potential in the Bakken:
[S]ince 2005 America truly has been in the midst of a revolution in oil and natural gas, which is the nation’s fastest-growing manufacturing sector. No one is more responsible for that resurgence than Mr. Hamm. He was the original discoverer of the gigantic and prolific Bakken oil fields of Montana and North Dakota that have already helped move the U.S. into third place among world oil producers.
How much oil does Bakken have? The official estimate of the U.S. Geological Survey a few years ago was between four and five billion barrels. Mr. Hamm disagrees: “No way. We estimate that the entire field, fully developed, in Bakken is 24 billion barrels.”
Of course, none of this would have been possible were it not for horizontal drilling and hydraulic fracturing, both of which are needed to unlock the vast deposits of oil and natural gas in shale deposits across the country.
Yet even with this amazing success story, the America’s ability to reduce its reliance on OPEC is far from written in stone, and indeed seems to be under attack by federal regulators whose actions could undermine this renaissance just as its getting started. As the WSJ further explains:
[Hamm's] only beef these days is with Washington. Mr. Hamm was invited to the White House for a “giving summit” with wealthy Americans who have pledged to donate at least half their wealth to charity. (He’s given tens of millions of dollars already to schools like Oklahoma State and for diabetes research.) “Bill Gates, Warren Buffett, they were all there,” he recalls.
When it was Mr. Hamm’s turn to talk briefly with President Obama, “I told him of the revolution in the oil and gas industry and how we have the capacity to produce enough oil to enable America to replace OPEC. I wanted to make sure he knew about this.”
The president’s reaction? “He turned to me and said, ‘Oil and gas will be important for the next few years. But we need to go on to green and alternative energy. [Energy] Secretary [Steven] Chu has assured me that within five years, we can have a battery developed that will make a car with the equivalent of 130 miles per gallon.’” Mr. Hamm holds his head in his hands and says, “Even if you believed that, why would you want to stop oil and gas development? It was pretty disappointing.”
Washington keeps “sticking a regulatory boot at our necks and then turns around and asks: ‘Why aren’t you creating more jobs,’” he says. He roils at the Interior Department delays of months and sometimes years to get permits for drilling. “These delays kill projects,” he says. Even the Securities and Exchange Commission is now tightening the screws on the oil industry, requiring companies like Continental to report their production and federal royalties on thousands of individual leases under the Sarbanes-Oxley accounting rules. “I could go to jail because a local operator misreported the production in the field,” he says.
The impact of the “regulatory boot” and federal delays have a greater cost than hamstringing America’s capacity to produce energy. They also undermine the type of job creation and economic growth that a struggling economy so desperately needs:
Mr. Hamm believes that if Mr. Obama truly wants more job creation, he should study North Dakota, the state with the lowest unemployment rate in the nation at 3.5%. He swears that number is overstated: “We can’t find any unemployed people up there. The state has 18,000 unfilled jobs,” Mr. Hamm insists. “And these are jobs that pay $60,000 to $80,000 a year.” The economy is expanding so fast that North Dakota has a housing shortage. Thanks to the oil boom—Continental pays more than $50 million in state taxes a year—the state has a budget surplus and is considering ending income and property taxes.
Less reliance on OPEC. More high-paying jobs. Budget surpluses. Lower tax burdens for everyone. These are undeniable benefits of responsible oil and gas production — particularly in states with significant shale resources such as Pennsylvania (Marcellus shale), Texas (Eagle Ford shale), Louisiana (Haynesville shale), and now Ohio (Utica shale) — that the federal government should be encouraging. Instead, members of Congress are pushing for the Environmental Protection Agency to ban hydraulic fracturing, thereby cutting off at the knees America’s energy revolution. The President, meanwhile, is threatening to curb domestic oil and gas production through higher taxes.
Instead of trying to shut down North Dakota’s model of more American energy production, more jobs, and more public revenue, maybe the federal government should be taking lessons from it.
Rising Tide: Study Shows Natural Gas Pushes U.S. Trade and Manufacturing Growth
A recent study by the American Chemistry Council confirms a fact of which many Americans are increasingly well aware. The development of the nation’s enormous natural gas supplies would lead to an economic resurgence that could revive entire regional economies- the likes of which the nation has not seen in decades. The study, “Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs and U.S. Manufacturing”, finds that responsibly developing this resource would create a “tremendous opportunity to strengthen U.S. manufacturing, boost economic output and create jobs.”
Specifically taking a look at expected investments in the petrochemical industry (and related industries) as a result of onshore exploration, the study found the development of natural gas could in itself create 400,000 jobs, generate $132.4 billion in new U.S. economic output and send nearly $43.9 billion to state, federal and local governments in the form of new tax revenue. Given the limited scope of the study, it’s fair to assume that the longer-term benefits to the economy from continued development of our nation’s massive shale resource base would be significantly larger.
The study reached its findings by examining how a 25 percent increase in available domestic ethane supplies would impact the U.S. economy — using current trends and expected investments developed in collaboration with many key industry partners. The study found:
- 17,000 new high-paying, knowledge intensive jobs, would be created directly in the U.S. chemical industry
- 395,000 total jobs would be created including approximately 85,000 jobs in the U.S. manufacturing sector, a critical and beleaguered part of the U.S. economy
- These include nearly 230,000 jobs providing $14.2 billion in payroll from needed capital investments by the chemical sector. Most of these opportunities would be in the construction industry whose unemployment rate hasn’t sunk below 10% since the beginning of the recession
- A $43.9 billion increase in additional federal, state and local government revenues over a 10 year period
- Increased U.S. economic output by $132.4 billion
The study also highlighted current investments generated due to the development of natural gas, and natural gas liquids, from shale. It showed that major U.S. petrochemical manufacturers are already realizing economic benefits from production of this valuable resource and are re-investing these benefits in areas of the country that have been hit hardest by the ongoing recession.
The discovery, and development, of shale formations throughout the United States has led to a more abundant supply of natural gas that, among other things, has significantly lowered the price of natural gas, ethane, and other commodities needed by the petrochemical sector. The industry uses these supplies as raw material or “feedstock” to make thousands of every-day products used by Americans including items ranging from pharmaceuticals to fertilizers. The study found,
“[A]ccess to vast, new supplies of natural gas from previously untapped shale deposits is one of the most exciting domestic energy developments of the past 50 years” that will “create a competitive advantage for U.S. based petrochemical manufacturers leading to greater U.S. investments”.
Examples of this success can already be seen as U.S. exports of basic chemicals and plastics were up 28% in 2010 due primarily to an increase in affordable ethane supplies from shale deposits. This fueled a trade surplus of $16.4 billion in chemicals and plastics exports from the United States. This is already leading several companies to make significant investments in places like the Marcellus Shale where this resource is being developed safely in abundant quantities. For example, a recent San Jose Mercury News article , highlights Shell’s plans to build a world-class ethane processing facility in one of the “rust belt” states of Pennsylvania, West Virginia or Ohio. The plant would help process natural gas liquids into commodities to be exported and sold on the global market. This project alone is expected to create more than 17,000 jobs, up to $16 billion in private investment and billions in tax revenue. There is also this recent news report from NBC’s central West Virginia affiliate WMOY which provides a succinct summary corroborating this study’s finding that “Areas in western Pennsylvania, New York and/or West Virginia could become the next petrochemical hub of the United States.”
The study and both these examples provide credence to the study’s findings that “big industry may be coming back to the northeast United States”. Of course, continued responsible development of our nation’s natural gas resources could provide similar opportunities to other areas of the nation as well. This limited, and conservative, study proves that by focusing on just one sector of the U.S. economy.
Road Trip! College Profs. From Coast-to-Coast Confirm HF’s Clear Record
While nearly 2,600 miles separates Stanford University and eastern Ohio’s Marietta College, professors from both institutions are doing their respective parts to ensure that the public understands that hydraulic fracturing is safe, well-regulated and a critical technology to strengthening America’s energy security.
Mark Zoback, a Stanford University professor of geophysics who served on the Dept. of Energy’s shale gas panel, tells the university’s paper that “unnecessary suspicion and paranoia” surrounds this tightly-regulated process:
“According to the Energy Information Agency, natural gas deposits, both in the United States and the world, are absolutely enormous. … To me, enhanced utilization of shale gas resources provides an opportunity to transition to clean and renewable sources over the next few decades while helping to meet current and growing global energy needs.”
Zoback adds this about the hydraulic fracturing process:
“Hydraulic fracturing fluid is mainly water, with small amounts of thickening agent added – usually guar, the same thickening agent used in making ice cream. There is also some biocide, to kill bacteria in the water, as well as a little bit of a friction reducer. Fracturing fluids have not contaminated any water supply and with that much distance to an aquifer, it is very unlikely they could.”
And in the Buckeye State, Marietta College professor Bob Chase recently spoke with local residents about the hydraulic fracturing process. Chase, who chairs the college’s petroleum engineering and geology department, emphasized the natural gas industry’s long and clear safety record and host of measures taken to protect groundwater, reports WTAP-TV:
“The wells that we’re drilling today have at least two strings of pipe or casing and both string are cemented through the freshwater aquifer. So in other words its gives you 4 barriers of protection, 4 layers of protection against any contamination…Should we shut down the whole industry because there’s a 1 in 25,000 risk of something happening? You tell me.”
Maybe they live on different sides of the country, but these professors agree on one thing — hydraulic fracturing is a secure, safely regulated, and environmentally proven technology that is integral to America’s long-term energy outlook. Without it, we let over 100 years of energy potential remain untapped beneath our feet. As Reuters columnist Christopher Swann writes this week: hydraulic fracturing “is here to stay.”
