For Natural Gas in the Northeast, First You Need the Pipe
Northeastern states are suffering from a “natural gas trap,” The New York Times reported last week -- one in which residents are forced to weather not only the winter chills, but also the wildly unpredictable market for natural gas supplies. Electricity prices are rising, and to The Times, the blame for that rests squarely on the region’s “extreme reliance on natural gas.” But if we dig a little deeper into the Times’ report, we find a pretty important fact: the need for additional infrastructure, including “the inadequacy of existing pipelines,” is actually the biggest problem.
Northeastern states are suffering from a “natural gas trap,” The New York Times reported last week — one in which residents are forced to weather not only the winter chills, but also the wildly unpredictable market for natural gas supplies. Electricity prices are rising, and to The Times, the blame for that rests squarely on the region’s “extreme reliance on natural gas.”
Of course, we know low natural gas prices have allowed folks across the country to spend less of their hard earned money (billions of dollars, in fact) on heating and electricity. Heck, even President Obama, in his recent State of the Union address, said that we’re producing abundant supplies of clean natural gas, and “nearly everyone’s energy bill is lower because of it.”
Why is the Northeast so different, then?
If we dig a little deeper into the Times’ report, we find a pretty important fact: the need for additional infrastructure, including “the inadequacy of existing pipelines,” is actually the bigger problem. The much bigger problem.
It sounds so darn simple, but it’s worth explaining: To get natural gas to market, we have to build pipelines. And in order to build those pipelines, companies must gain approval from several different regulatory authorities. The most notable of these is the Federal Energy Regulatory Commission (FERC), which requires a very public process that solicits comments from all interested parties. During these comment periods, the commission considers a range of issues, including potential environmental impacts.
It’s also worth noting that the industry is proposing – right now – to build pipelines with literally billions of cubic feet per day of new natural gas capacity. Some of these have gained FERC approval, but others have fallen victim to delays, which in turn postpone construction of the infrastructure necessary to deliver natural gas to consumers.
What causes these delays is really a variety of factors, ranging from all-too-common bureaucracy and institutional stasis within regulatory agencies, to the always challenging task of raising the capital required to finance the projects. But pipeline companies are also met with opposition, typically led by well-funded environmental groups, to literally every project they propose.
Often times, this opposition goes beyond simple NIMBYism and manifests itself in courtrooms, with groups like Earthjustice bringing lawsuits on behalf of a coterie of activists to stop construction. Part of the FERC approval process also includes public comment periods, during which environmental groups flood submission boxes with form letters and assertions of future impacts, regardless of whether those theoretical damages are even plausible.
Indeed, the same groups that have led the charge to stop shale development are also trying to block the pipelines necessary to get that fuel to Northeast families. Their reasoning? If they can’t stop companies from producing natural gas, maybe they can at least prevent them from actually selling it to consumers who want to buy it.
For example, the Northeast Supply Link, proposed by Transcontinental Gas Pipeline Co., would bring natural gas to Pennsylvania, New York, and New Jersey. It has a capacity of 250 million cubic feet (MMCF) per day. But in 2011, as reported by a local newspaper, the Sierra Club did its level best to stop the project:
“Many area residents in attendance as well as a representative from the Sierra Club’s New Jersey Chapter said they are skeptical that there is sufficient demand for natural gas, especially in a weak economy, to warrant construction of the proposed pipeline.” (emphasis added)
Although the project was eventually approved by FERC, this example is instructive. A major environmental organization suggested there was not sufficient natural gas demand in the region to warrant construction of a pipeline. But we know demand has been increasing in the Northeast; in fact, increasing demand is what prompted the latest New York Times report. Right?
Here are some more:
- The MARC I Pipeline, which would be built by the Central New York Oil and Gas Company, has a stated capacity of 550 MMCF per day. It was also approved by FERC, but not before being challenged by Earthjustice and other environmental groups.
- The Northeast Upgrade Project, with approximately 630 MMCF per day of capacity, is facing efforts by environmental groups to get a federal court to halt construction. Perhaps bowing to those special interests, U.S. Sen. Bob Casey (D-Pa.) is also trying to force a reroute.
- During a hearing last fall about the Constitution Pipeline (capacity: approximately 640 MMCF per day), one local opponent went so far as to suggest the project would destroy the United States:
“Kristina Turechek of Oneonta, N.Y., told the panel approval would consign portions of America to a ‘third-world nation’ and turn the nation backward. Other opponents yelled, cursed or called for the arrest of gas industry executives.”
- Spectra Energy is also in the process right now of constructing a $1.2 billion pipeline (capacity: 800 MMCF/d) that, once finished (Nov. 2013 is the current target), will help feed growing demand in New York City and elsewhere across the metro region. Estimates suggest the pipeline would help save customers more than $650 million per year in energy costs. Amazingly, the project has even earned the full-throated support of the League of Conservation Voters, in addition to picking up Mayor Bloomberg’s endorsement and the support of a dozens of other local civic and labor leaders. Playing to type, and right on cue, the Sierra Club, Food & Water Watch and others of that ilk continue to file lawsuits (all to this point have failed) aimed at stopping construction from moving forward.
These are, of course, only a snapshot of projects and the efforts to oppose their construction. Once in operation (if they are not tangled up in lawsuits), these pipelines alone would increase the region’s capacity by nearly 2.9 billion cubic feet (BCF) per day. To put that in perspective, in 2009, the two large natural gas distribution companies that serve New York City delivered a combined average of about 1.3 BCF per day to the city’s customers.
FERC also maintains a list of major pipelines awaiting approval, and demand is large enough in the Northeast that companies are constantly making new plans to grow regional infrastructure.
This is not to say that environmental groups are necessarily the biggest contributor to the region’s energy woes. To be sure, a diverse energy mix is important, much like the wisdom we gained from our parents that we should not “put all of our eggs in one basket.” The Times report indicates that the same mentality should be adopted by the Northeast.
Nor is it the case that utilities are uninterested in having a diversity of supply, either. Remember, New York has been delaying a decision about whether to allow responsible shale development for four years. A report for New York City, meanwhile, found that “Marcellus Shale gas production will have a significant effect on pipeline flows across the United States and in the Northeast.” Delaying shale development, by extension, places even more unnecessary constraints on the supplies of energy that consumers demand.
Who’s also leading the fight against diverse energy supplies? The same folks who have avoided culpability in delaying, opposing, or even blocking progress throughout the region.
To wit: Riverkeeper, an environmental organization in New York, wrote in the New York Times in 2010 that the state should shut down the Indian Point nuclear plant and replace it with a natural gas-fired plant. Ironically, Riverkeeper is also leading the charge to oppose responsible natural gas development in New York, and has even dispatched people across the country to try to undermine the safety record of hydraulic fracturing. As you probably could have guessed, Riverkeeper has also voiced opposition to natural gas pipelines.
Nationwide, natural gas and nuclear power generate approximately 50 percent of our electricity. But with environmental groups trying to take both of those off the table (along with coal, which generates the bulk of the remaining electricity), how can we possibly expect to meet growing energy demand?
Regardless of the source of the delay, areas such as the Northeast that need new pipelines are not getting them. That’s not because natural gas is a flawed energy option, and it’s certainly not due to a lack of interest in building pipelines. Companies are continuing to explore options for additional capacity – all the while dealing with irrational activist opposition. And given the fluctuating regulatory framework in New York, the barrier of uncertainty also casts an enormous shadow over future investment.
To understand the effect, we need to understand the causes. Unfortunately, The Times chose not to examine the latter, even though that story is clearly worth telling.
New Duke Study Confirms Shale’s Water Efficiency
A new study released by Duke University this month finds that on a per-unit basis, the development of natural gas from shale formations actually produces less wastewater than so-called “conventional” wells. That’s certainly good news, especially considering the fact that the U.S. EPA, numerous experts, and many public officials (including President Obama himself) have all stressed the need to increase production of natural gas in the United States.
A new study released by Duke University this month finds that on a per-unit basis, the development of natural gas from shale formations actually produces less wastewater than so-called “conventional” wells. That’s certainly good news, especially considering the fact that the U.S. EPA, numerous experts, and many public officials (including President Obama himself) have all stressed the need to increase production of natural gas in the United States.
From the report (subs. req’d):
“For the Marcellus shale, by far the largest shale gas resource in the US, we quantify gas and wastewater production using data from 2,189 wells located throughout Pennsylvania. Contrary to current perceptions, Marcellus wells produce significantly less wastewater per unit gas recovered (~35%) compared to conventional natural gas wells.” (emphasis added, p. 2)
One of the most common talking points used by the other side is that hydraulic fracturing requires too much water, and that treating or disposing of wastewater poses too many risks to justify continued development. But as we can see, the technological advancements that have allowed us to access oil and natural gas trapped in shale and other tight reservoirs across the country have also come with increased efficiencies. That means more energy with less impact, which is good news for consumers and the environment.
Of course, the study also highlights a potential concern, albeit one that is being addressed far more comprehensively than the authors care to admit: the total volume of produced water coming from shale wells.
As development has increased in the Marcellus, a lot of other things have increased too: jobs, economic opportunity, and even the quality of the air folks are breathing. And, as one would expect, development has also brought with it an increased need to process and even recycle wastewater. The authors state that growing volumes of wastewater are “challenging industry to identify and develop alternative disposal methods” beyond underground injection.
Luckily, that’s a challenge the industry has met head on – and well before this Duke/Kent State study was ever released. Last summer’s headline said it all: “Marcellus flowback recycling reaches 90 percent in SWPA [Southwest Pennsylvania].” Last spring, the Pittsburgh Post-Gazette similarly observed: “Gas drillers recycling more water, using fewer chemicals.”
Of course, the researchers point out the difference between flowback (which comes out of a well after the fracturing process) and produced water, or brine, which is produced from the well over time. But the researchers also opined that “most estimates focus on flowback and do not specifically consider drilling and brine wastewater…likely underestimating the total wastewater volume generated.”
But as the Pittsburgh Business Times reported back in August: “About 65 percent of brine from this region [Southwest Pennsylvania] was reused.” PBT even has a handy searchable tool of state data that includes drilling fluid, produced fluid, flowback, and many other categories of wastewater. Also worth mentioning is that, back in 2010, then-Governor of Pennsylvania Ed Rendell (D) said: “The technology in treating [produced] water is improving rapidly,” a reflection of real-world industry advancements in the Marcellus.
Unfortunately, the decision to leave out these details leaves readers with the impression that the industry is essentially unaware of the issues related to wastewater treatment, reuse, and disposal. In that respect, the researchers make a pretty significant error of omission, although the good news is that reality paints a much more reassuring picture than what was portrayed in the report. (Be sure also to check out LearnAboutShale.org for more facts about water usage, disposal, and recycling.)
But hey, if you are willing to cite the Howarth study as credible science – as the researchers for this study do (p. 3) – then you’re probably going to make at least a few errors when discussing responsible development. Thankfully, though, on the most important point – shale’s relative efficiency when it comes to water usage – these guys (despite their best intentions) appear to have gotten it right.
*UPDATE II* NYT’s “Drive” to Deprive Readers of Facts
In the latest installment of the New York Times' "Drilling Down" series, reporter Ian Urbina doubles down on his pre-conceived narrative that oil and natural gas development (particularly from shale) is inherently dangerous.
UPDATE II (6:18pm ET, 5/16/2012): Though it’s still unclear if this presentation was the source for Mr. Urbina’s claim about oil field worker fatalities, there’s another important detail that should be called to attention: the data referenced in the presentation comes from the Bureau of Labor Statistics and includes both onshore and offshore fatalities. Yet the “Drilling Down” series — of which Mr. Urbina’s latest story is a part — is about shale development, which of course is not inclusive of offshore development. Assuming this presentation is the source (and there’s plenty of reason to think that it is) then it appears Mr. Urbina either (a) was a bit careless in his fact checking and data collection, or (b) combined statistics from two separate forms of production in order to inflate the apparent risk associated with shale development.
UPDATE (5:27pm ET, 5/16/2012): In Mr. Urbina’s story, he notes: “Nearly a third of the 648 deaths of oil field workers from 2003 through 2008 were in highway crashes…” He goes on to say those numbers were “analyzed by the federal Centers for Disease Control and Prevention.” But it looks as if the numbers for this claim — as well as the one about oil and gas having a fatality rate “seven times” the national average — may have come from this presentation. The numbers and date ranges are nearly identical to what appears in Mr. Urbina’s story. The only problem: the document says up front (emphasis added): “The information in this presentation has not been reviewed by NIOSH or CDC and does not represent any federal government position or policy.” If Mr. Urbina did in fact use this presentation — which was, to be fair, given by employees at CDC’s National Institute for Occupational Safety and Health — then why did he say it had been reviewed by the CDC when it clearly had not? Was it to make it seem like the data was officially issued by the government, and thus give more credibility to his story? Or was it a simple error on his part?
—Original post, May 16, 2012—
In the latest installment of the New York Times‘ “Drilling Down” series, reporter Ian Urbina doubles down on his pre-conceived narrative that oil and natural gas development (particularly from shale) is inherently dangerous.
Facts and data points do appear in print, but their spatiality and lack of context lead readers down a dangerous – and completely disproven – line of thinking: namely, that oil and gas workers and truck drivers who play such a vital role in the process all have an abnormally high risk of being injured, even fatally. At the very least, readers of Mr. Urbina’s most recent attack would be forgiven for thinking – despite evidence showing otherwise – that the industry is dangerous and poorly regulated.
What follows is a summary of the more egregious errors that Mr. Urbina cleverly slipped past his editor in his latest piece:
NYT: “But the jobs are also hazardous, with fatality rates that are seven times the national average across all industries. Nearly a third of the 648 deaths of oil field workers from 2003 through 2008 were in highway crashes, according to the most recent data analyzed by the federal Centers for Disease Control and Prevention. By contrast, highway crashes caused roughly a fifth of workplace fatalities across all industries in 2010.”
FACT: The source of Mr. Urbina’s “seven times the national average” claim regarding fatality rates is unclear, a detail that is itself unsurprising given his problematic history with sources. Nonetheless, according to the Bureau of Labor Statistics, the oil and gas industry is not even ranked in the top 25 for highest rates of injuries and illnesses across all industries. In fact, the average national injury incidence rate is three times higher than the rate for oil and gas extraction. For fatalities specifically, BLS data show that the fatality rate for oil and gas extraction is lower than that for aircraft pilots, chauffeurs, fishing, and farming, among many others.
And, according to the Centers for Disease Control – the same source Urbina cites in his story – the highway transportation fatality rate for oil and gas extraction is lower than general truck transportation, logging, and waste management. Even limousine services have higher highway fatality rates than those for oil and gas.
It’s also worth noting that the industry has been and still is making incredible progress in reducing truck traffic. For example, a single 18-mile-long water pipeline in Pennsylvania has removed more than 2,000 truck trips from local roadways. And thanks to advancements in recycling – including on-site technologies – the amount of water needed to be hauled to and from the well site has been reduced considerably, which of course translates to substantially less truck traffic.
If the industry were unsafe, the data would surely reflect it. Unless, of course, you’re not using data, in which case you can claim whatever you want.
NYT: “Few workers are unionized, meaning they are less able to complain about safety problems without fear of being fired.”
FACT: Once again, there’s no data to support Mr. Urbina’s claim. Instead, this appears to be a specious talking point that was added merely to advance a pre-conceived narrative about the industry – specifically, that it’s somehow hostile to organized labor (don’t tell that to these guys). And as mentioned: BLS tracks workplace injury statistics. So if the alleged “safety problems” that Mr. Urbina references were real, then it would be reflected in those stats. Unfortunately for The Times, the data simply do not support Mr. Urbina’s opinions.
NYT: “An analysis by The New York Times of more than 50,000 inspection reports indicates that as the number of drilling rigs rose by more than 22 percent in 2011 from the prior year, the number of inspections at such work sites fell by 12 percent.”
FACT: The only way this information would be relevant is if the number of incidents at drilling sites rose by roughly the same rate (12 percent) as the decline in inspections. Having both sets of data would allow the reader to put this information into the proper perspective. But Urbina doesn’t provide it. Instead, he cites two pieces of data that seem to suggest a problem – more rigs and fewer inspections – without providing even basic context to let the reader know if the information is (a) valid, (b) connected in any way, or (c) indicative of an actual issue.
What Mr. Urbina is suggesting is that all drilling sites are exactly the same, and thus there should be a one-to-one connection between drilling rigs and inspections. If the number of rigs increases while inspections decrease, Urbina reasons, then that gap represents some sort of danger quotient that will facilitate higher than normal injuries.
This is laughably absurd.
For example: vertical and horizontal wells typically have different permitting requirements, and thus different types and levels of inspections. In addition, there are different techniques and requirements for each target formation in different states. In Louisiana, for example, there are different fee structures based upon well depth and production levels. In Pennsylvania, there are different fees for vertical and horizontal wells, and New York’s Environmental Assessment Form – which is required for all well owners – requests information about each well’s proximity to other regulated areas, such as wetlands or other bodies of water. This information is not just taken down for fun; it’s used as part of the regulatory process, which includes permitting and inspections.
Needless to say, inspections and compliance can vary considerably between two wells in the same state, not to mention the differences between wells operating in different parts of the country. What Mr. Urbina is suggesting, however, is that these differences are not merely unimportant, but that they don’t even exist.
The irony here is that all of this information could have been gathered by simply navigating a search engine. Of course, knowing what to type into the search box would have required at least a basic understanding of the industry and the regulatory structure under which it falls, something one would think would be a prerequisite for reporting on it.
But on that, specific to this, one would be thinking incorrectly.
Poll: Americans Support Hydraulic Fracturing by More than 2-1 Margin
Americans consistently support more domestic energy development, and they also highly value a clean and well-protected environment. So it's of little surprise that a new poll released today shows that 57 percent of Americans support the use of hydraulic fracturing. Only 22 percent oppose the process, which means nationwide support outstrips opposition by a more than two-to-one margin.
Americans consistently support more domestic energy development, and they also highly value a clean and well-protected environment. So it’s of little surprise that a new poll released today shows that 57 percent of Americans support the use of hydraulic fracturing. Only 22 percent oppose the process, which means nationwide support outstrips opposition by a more than two-to-one margin.
The specific question asked:
“A process known as hydraulic fracturing, sometimes called fracking, is used to drill for oil and natural gas in shale oil reserves. Do you favor or oppose the use of fracking to produce more oil and natural gas in this country?”
The poll fits nicely with other recent surveys conducted that have found strong support for developing natural gas from shale. A survey by Harris Interactive, for example, found that despite “intense negative media focus,” 66 percent of Americans believe that the economic benefits of natural gas far outweigh any concerns about environmental impacts. A poll in October of last year found that 80 percent of Marylanders support natural gas production. In New York, more voters support hydraulic fracturing than oppose it, and in Pennsylvania, voters say — by a significant margin — that the economic benefits of drilling outstrip any perceived environmental impacts.
Nationwide, Americans strongly support more energy development and believe consumers will ultimately benefit.
Shale Boosts U.S. Economy from Coast to Coast
We all know that responsible oil and natural gas production has been an economic boon to regions across the country, and as the Wall Street Journal highlights this week, the economic growth emanating from developing natural gas from shale is not limited solely to those areas lucky enough to have the formations underneath them.
We all know that responsible oil and natural gas production has been an economic boon to regions across the country, from communities throughout Pennsylvania benefiting from Marcellus Shale development to the rapidly expanding housing business in south Texas. And, of course, North Dakota boasts the lowest unemployment rate in the country, thanks in large part to the development of the Bakken Shale.
But the story doesn’t end there. Indeed, as the Wall Street Journal highlights this week, the economic growth emanating from developing natural gas from shale is not limited solely to those areas lucky enough to have the formations underneath them:
The economic benefits of rising energy production are spreading far beyond the traditional oil patch, to Ohio and Pennsylvania, Nebraska and New York, North Carolina and Idaho. Truck drivers from pretty much anywhere can find work related to the surging energy business. Private-equity firms completed $24.8 billion of energy deals of all types last year, up from $8.5 billion in 2010, according to data tracker Preqin. Manufacturing plants are returning to the U.S. to take advantage of cheap natural gas, spurring major investments in petrochemical and steel production in the Gulf Coast and Midwest.
Landowners in huge swaths of the country where shale is found are raking in money for leasing their mineral rights. Consumers throughout the U.S. are paying lower bills for heating and electricity because of cheap natural gas. Even the U.S. balance of payments with other countries is improving because of the new energy economy.
“This is probably the biggest stimulus we have going,” says Michael Lynch, president of Strategic Energy & Economic Research, a consultant based in Amherst, Mass. Some $145 billion will be spent drilling and completing U.S. wells this year, up from $13 billion in 2000, estimates Spears & Associates Inc., an oil-field market research firm.
The growth in energy exploration and production is due to the widespread use of horizontal drilling and hydraulic fracturing, or fracking. Horizontal drilling allows energy companies to extract gas and oil up to a mile away from the actual well. Meanwhile, fracking—which involves pumping millions of gallons of water, sand and chemicals to break open dense rocks and release hydrocarbons—has enabled the industry to tap into energy-rich shale formations once overlooked by petroleum geologists.
In Nancy County, Nebraska — a largely agricultural county west of Omaha — demand has picked up so much for the area’s sand deposits that a local company has expanded its workforce by nearly ten-fold. As a member of the county board of supervisors described the situation, “This deal here is like winning the lottery.” Similarly, in western Wisconsin, the number of sand mines has increased substantially, creating over 1,000 jobs in just the past four months.
Of course, as the Journal also highlights, areas that have a long history of oil and natural gas development are also reaping significant benefits. (Houston became the first major metropolitan area to regain all of the jobs it lost during the recession, thanks to increased exploration for oil and natural gas in shale.) But these benefits extend beyond job creation and (enormous) economic growth:
Beyond simply adding jobs, communities from Pennsylvania and Ohio to Colorado and Texas that are home to this energy boom are experiencing a new emotion: optimism. Jeff Dahl, chief executive of MTR Gaming Group Inc., which operates a casino and resort in Wheeling, W.Va., says he is seeing consumer confidence rising as landowners get leasing bonuses of thousands of dollars and companies compete for workers.
“People are beginning to believe this is a game changer for the region,” says Mr. Dahl. The result is more spending on dining out and entertainment.
Of course, this economic revival is also paving the way to increased energy security, as domestic output of oil and natural gas reach new highs and reliance on OPEC becomes less necessary. Turns out we’re producing so much that energy prices are falling, which means consumers pay less for utility bills and manufacturers can invest more in the United States … all of which, in turn, means more capital to invest in U.S. businesses and the ability to create even more U.S. jobs.
Shale Continues to Drive U.S. Manufacturing Renaissance
By now we all know that the development of American energy resources from shale remains a major economic engine for our country, responsible for hundreds of thousands of jobs across the nation. But another important (and under-told) benefit of the "shale revolution" is its role in resuscitating America's previously declining manufacturing base...
By now we all know that the development of American energy resources from shale remains a major economic engine for our country, responsible for hundreds of thousands of jobs across the nation. But another important (and under-told) benefit of the “shale revolution” is its role in resuscitating America’s previously declining manufacturing base.
Last month, a report from PricewaterhouseCoopers highlighted how affordable, domestic supplies of natural gas will save U.S. manufacturers more than $11 billion per year over the next decade, in addition to creating a million new jobs during that same period. This affordable energy supply is also projected to increase disposable income for each household in the United States by as much as $2,000 per year.
So it should be no surprise, although still worth highlighting, that a new report from the White House shows how domestic manufacturing, after years of stagnation and decline, is finally on the rebound. From that report:
The manufacturing sector has recovered faster than the rest of the economy, supporting growth and job creation. Over the past two years, the economy has added 334,000 manufacturing jobs — the strongest two-year period of manufacturing job growth since the late 1990s. Manufacturing production has surged 5.7% on an annualized basis since its low in June of 2009, the fastest pace of growth of production in a decade.
And what, according to the White House, is driving that recovery?
A boom in natural gas production has supported manufacturing: The surge in domestic natural gas production can lower energy costs, reduce pollution and drive investment in the industries that supply equipment the natural gas sector and those that use natural gas as an input to production, like the chemical industry. Recent data from the Energy Information Administration indicate that by the end of 2011 natural gas extraction increased by over 24% since 2006.
Later in the report, under the heading “America’s Natural Resource Boom,” the White House report describes how expanded natural gas production, particularly from shale, has “led to rapidly growing domestic production and relatively low domestic prices for households and downstream industrial users.”
The Washington Post echoed the good news about America’s energy-led manufacturing rebirth in an editorial that ran yesterday:
The White House briefing paper that accompanied the “insourcing” event attributes much of the rebound in manufacturing to the boom in domestic natural gas production, made possible by new “fracking” technologies. The federal government didn’t do much specifically to promote fracking. Yet the process has dramatically cut the price of gas, a key industrial input, and led to spinoff employment in related industries. The White House notes that more of such development, appropriately regulated, could have “substantial” benefits to the U.S. economy. Even in a polarized Washington, everyone should be able to agree on that.
Candidly, we’re not all that interested in the specific politics of the matter, but it’s worth noting the Post’s observation that the federal government “didn’t do much” to promote developing natural gas from shale — and yet, voila!, here we are. Opponents of shale have for years labored under the delusion that the EPA should be in charge of directly regulating the process of hydraulic fracturing, calling for heavy-handed federal control on the misguided assumption that only such a system will guarantee the broadest possible benefits.
But as this White House report makes clear, shale development and hydraulic fracturing (which has been tightly regulated by the states for decades) is creating jobs and revitalizing one of America’s proudest and most critical industries. And as ANGA points out, the natural gas production at the center of this manufacturing renaissance is being done in a “safe and responsible manner,” thereby removing any need to choose between a strong economy and a clean environment.
With these facts clearly established, the question for critics is: Why should we jeopardize this bright spot in an otherwise troubled economy — facilitated by responsible, state-based rules and regulations — with a one-size-fits-all, Washington-centered regulatory regime?
Another “Peak” Performance
It’d be easy to analogize the small group of analysts who continue to believe the world is imminently running out of oil and natural gas to the stranded Imperial Japanese soldiers who, upon being discovered in the jungles of Guam and Indonesia in the 1970s, refused to accept that the second World War had decades earlier come to a close.
It’d be easy to analogize the small group of analysts who continue to believe the world is imminently running out of oil and natural gas to the stranded Imperial Japanese soldiers who, upon being discovered in the jungles of Guam and Indonesia in the 1970s, refused to accept that the second World War had decades earlier come to a close.
Easy – but not entirely accurate. One of the key differences between these two groups is that the media actually take seriously the serial skepticism of the first, often parroting with QED-certainty the notion that America has only “three percent” of the world’s oil, for example, notwithstanding a growing and increasingly definitive body of evidence indicative of an American resource base of enormous, potentially even singular proportions.
But if you take a closer look at the arguments that undergird the peak-oil philosophy, you find an interesting and under-reported aspect that lies at its core: In most cases, these folks don’t actually argue that the world is physically short on oil and natural gas. They argue that these resources, even if they do in fact exist, can’t be produced economically over the long-term. Of course, whether the energy isn’t there or is — and just can’t be developed under a reasonable cost scenario – the skeptics often arrive at the same conclusions: we’re running out of the stuff, they say — at least the “easy” stuff — and thus need to restructure our entire economy in anticipation of that crash.
Thanks to the emergence of “tight” oil and natural gas reserves as an important source of U.S. fossil energy, though, the peak energy community finds itself today back on the defensive side of the ball. Plainly put, these guys simply weren’t prepared (in truth, were any of us?) for what would become possible virtually overnight, with plays such as the Haynesville going from a daily yield of precisely zero BCF in 2007 to more than 5.5 BCF a day today. In 2005, Pennsylvania produced less than 0.5 BCF a day despite drilling 3,600 new wells. In 2011, only 2,800 new wells were drilled – and only about half of them were actually brought online. And despite all that, the state produced more than 3.0 BCF a day of natural gas in 2011. Six times the volume of 2005, with 23 percent fewer wells drilled – all thanks to the Marcellus.
Of course, you won’t find any of this data in the article that appeared this week on Slate.com. The thesis of that piece, written by peak-oil exponent Chris Nelder – co-author of an entire book on all the great investment opportunities that will exist someday soon in a world without oil — is that projections of abundance associated with the development of natural gas from shale are overblown. In support of that position, he borrows heavily from the playbook of peak-oil analyst Arthur Berman, someone well known within the industry prior to this year, but whose status got a major boost this summer after The New York Times ran his research (and his quotes) on its front-page.
If you’ve never seen Mr. Berman present on this subject before, you don’t know what you’re missing. We had the privilege to sit right alongside him in a forum on shale organized last April by Cornell’s law school – and as this video will confirm (start at hour three), he’s very good at what he does. After his piece hit in the Times, we also had a chance to chat with him on the phone. He’s a good guy, and a smart guy. We think he’s wrong about shale. But the good news is: we won’t have to wait but two or three years to figure out who’s right.
As far as Berman’s argument goes, it tends to look a little like this: Data collected from the Barnett over the past 15 years suggests that not all shale wells are created equal; that some produce well-below their expected ultimate recovery (EUR) rates; and that optimistic projections about shale’s future contributions to U.S. energy supply will never be realized, in part because of the clash between low natural gas prices and high drilling and completion costs, and in part because the wells themselves, he argues, tend to peter-out after the first few years of production. Paradoxically, Mr. Berman appears to argue both that new shale wells won’t be productive, and that natural gas prices will remain at their historic lows. How both can be true, we’re not entirely certain of.
Unfortunately for the peak-oil crowd, these arguments tend to unravel pretty quickly when the scope of inquiry is broadened out to account for the performance of other shale plays (which isn’t to pay short shrift to the Barnett, which, at 5.0 BCF a day, is currently averaging more natural gas per month than at any point in its history). Notable in his Slate.com article, Nelder flatly ignores the volumes currently being produced in the Haynesville and Marcellus regions – suggesting that these plays aren’t sufficiently “mature,” and thus shouldn’t be included in his analysis.
But Art Berman hasn’t ignored the Haynesville. And to his credit, he’s been good enough to admit that his initial assessments of the play weren’t quite right, sort of. In April 2009, Berman wrote that it was “difficult to imagine that the Haynesville Shale can become commercial.” Only two months later, in June, Berman had changed his tune, saying that “I now think that the Haynesville Shale reserve estimates that I presented previously were too low.” Still, in a 2010 article, Berman suggested the Haynesville numbers were “disappointing.” In March 2011, the Haynesville became the top-producing onshore natural gas field in the United States, and now stands among the top five producing fields in the entire world. What a disappointment.
Despite holding firm to a less-than-sanguine view on the potential abundance of natural gas from shale, Nedler writes in his piece this week that “I am not anti-gas; neither is Berman.” And on that, we take a man at his word. Indeed, Berman wrote an entire post this summer laying out the reasons he supports the continued deployment of hydraulic fracturing.
But hey, it certainly didn’t escape our notice that this year’s annual conference of ASPO-USA (the trade association for peak-oil enthusiasts) in November hosted a panel discussion — moderated by Berman himself — featuring a who’s who line-up of anti-shale activists, including NRDC’s Amy Mall, Rob Jackson from Duke, and Tony Ingraffea and Bob Howarth from Cornell. ASPO member Roger Bezdek also presented at that conference; we had the pleasure of debating him in Miami back in Dec. 2010 (note: December in Miami > December in Washington). Peak oil guys like to say they’re not “anti-gas” – but Bezdek’s presentation, found on page 52 of this document, certainly seems to suggest otherwise, wouldn’t you say?!
Here’s the thing: There’s nothing wrong with being a contrarian. Nothing wrong, or nefarious, or illegitimate, with offering up an alternative view on what the history might hold for shale. But there’s a big difference between forecasting that something won’t happen and actively working to ensure it doesn’t.
For those who continue to advance the view that natural gas from shale won’t pan-out as planned, professional reputations are at stake. To “win” this particular argument, peak energy proponents need the geology to turn out bad (that is, for oil and natural gas not to exist), or for the oil and natural gas that does exist to remain right where it is in the ground.
If these folks were confident of the first outcome, they wouldn’t need to involve themselves in the second. But they’re not. Which may be why you’re starting to see folks like Art Berman, a climate change skeptic, appear alongside environmentalist activists committed to stopping the development of shale wherever it’s being considered. At first glance, it would appear an unlikely association. But though the philosophies may differ, the end-goal of both groups is the same. To environmentalists, abundant natural gas from shale is a threat to renewables. And for the peakers, it’s a threat to the credibility of their prognostications. It’s really as simple as that.
So: Will the experts’ projections on shale end up translating into the type of real-world abundance that could help our country create thousands of family-supporting jobs, generate billions in taxpayer revenue, and deliver significant annual cost-savings to consumers? We hope it does, but we don’t know. Some in the peak energy community, it can be assumed, hope it doesn’t. But they don’t know either. If the point of the Slate article is to confirm this uncertainty, mission accomplished. But weren’t we all aware of that before the piece even ran?
Organization committed to stopping hydraulic fracturing suggests real jobs created by real economic activity do not exist.
It’s one thing for groups opposed to the development of American energy resources from shale to suggest that the massive economic stimulus currently being made possible as a result of these activities is overstated – notwithstanding the fact that their own jobs as professional activists depend on these activities continuing. But it’s a completely different thing to suggest that these jobs simply do not exist. Given all we continue to see in communities across the country where responsible shale development is taking place, it’s a statement that would make even Jean-Paul Sartre blush.
Unfortunately, that’s exactly what Food & Water Watch — which is a non-profit organization that accepts tax-deductible donations — has suggested with its latest report, which takes aim in particular at a recent study projecting massive economic growth for the state of New York if shale development is allowed to move forward. The broader implication, though, is that all economic models are all fundamentally flawed, so any projection of economic gain from energy development activity is, according to FWW, “dubious.”
Before we get to the many problems in FWW’s report, we thought it would be important to point out from the get-go the irony of Food & Water Watch accusing others of inflating data. This is the same organization, as you might remember, that inflated its own participation rates for an anti-hydraulic fracturing call-to-action, apparently in an effort to make its fundraising emails more appealing.
As to the report, our job here at EID is to read through the document so you don’t have to. What follows is a sampling of the questionable claims made by FWW, accompanied by a healthy dose of reality.
Food & Water Watch: “Local, state and federal policymakers should look to actual employment data, not dubious economic forecasts.” (p. 2 )
EID: As it turns out, the oil and gas industry – particularly those companies active in shale – has a very strong record when it comes to creating jobs, and an equally strong standing with respect to “actual employment data.” For example, a Financial Times article that was published the same day FWW released its analysis has the headline: “Oil shale boom boosts US jobs market.” Perhaps that was published too late to make it into the qualifying footnotes of FWW’s report.
But that’s far from the whole story. A study from IHS Global Insight found that in 2010, America’s independent oil and gas producers supported nearly 400,000 direct jobs nationwide, all while generating around $263 billion in gross economic output.
At the state level, the jobs numbers are also significant. In Louisiana, the oil and gas industry supports more than 310,000 jobs in the state, driven not only by offshore production by also the Haynesville Shale, the nation’s largest producing shale gas field. Production in the Barnett Shale in north Texas has created more than 119,000 jobs throughout the state. According to the Pennsylvania Department of Labor & Industry, the Marcellus Shale supports 214,000 jobs across the Commonwealth. In fact, the unemployment rates for Tioga (7.6 percent), Bradford (6.4 percent), and Susquehanna (8.1 percent) counties — three of the most significant areas in terms of Marcellus production — are all lower than the statewide unemployment rate for Pennsylvania. It’s also worth pointing out that the average salary for workers in the industry is roughly 64% higher than the statewide average for Pennsylvania. Even those working in ancillary industries make about 35% more than the Pennsylvania average income.
As for the job creation potential in New York, the state’s Department of Environmental Conservation (DEC) has estimated that as many as 53,000 new jobs could be created from the development of the state’s portion of the Marcellus Shale.
Food & Water Watch: Alleges that “fracking fluid migration underground” are among the “environmental and public health risks” of hydraulic fracturing and shale development. (p. 3 )
EID: This is contradicted directly by state regulators from across the country – including the head of the New York DEC – and President Obama’s own EPA Administrator Lisa Jackson has confirmed that the process has not contaminated ground water. The reality is that hydraulic fracturing has been used more than 1.2 million times over the past 60 years, not just for oil and natural gas, but for water wells, geothermal wells, and even by EPA as a clean-up tool at Superfund sites. It should be noted, though, that FWW’s source for this claim is none other than the New York Times series attacking the industry, a series that has been almost universally panned, not only by two notable Democratic governors but also by the Times’ own public editor.
Food & Water Watch: “[D]irect jobs are not created when royalty and lease payments are made.” (p. 5 ) FWW uses this baseless claim to conclude that “$2.02 billion of the $2.95 billion in in-state spending consisted of landowner payments and taxes. This leaves $930 million in in-state spending toward direct job creation.” (p. 6 )
EID: The billions of dollars injected into the economy each year in the form of royalty and lease payments associated with oil and natural gas development don’t play a role in creating jobs? That would probably come as news to the thousands of folks, many in unrelated industries, whose jobs can be directly tied back to royalty payments in Texas, as detailed in this study commissioned by the Fort Worth Chamber of Commerce last summer. But beyond that, there’s also an interesting sleight of hand here. FWW asserts that royalties and lease payments don’t create jobs, but then claims that “landowner payments and taxes” don’t create jobs either. But taxes are not lease payments; taxes are collected by the government. Without notice, FWW seamlessly broadens its interpretation of what constitutes royalties and lease payments to include taxes, then uses that dubious definition to undermine the economic impacts of shale development. But doesn’t tax collection require staff (i.e. jobs) too, ranging from tax attorneys and paralegals to auditors and other administrative staff? Is FWW suggesting these jobs don’t exist either?
Food & Water Watch: “Food & Water Watch conservatively assumed that at least half of the gas industry jobs would be filled by out-of-state workers if New York is opened up to shale gas development.” (p. 8 )
EID: FWW believes that if a company is not headquartered in a particular state, then most of the workers will also come from out of state. This is completely unsupported by the data. Of the thousands of new hires made by the industry in neighboring Pennsylvania, an overwhelming majority of the workers (71%) are from Pennsylvania. The industry has also spent more than $411 million over just the past three years to fund the repaving and improvement of local roads, as well as to enhance the state’s transportation infrastructure. This activity also requires workers, which means jobs in Pennsylvania for Pennsylvanians. Replicating this success in New York would bring similar benefits to the Empire State, particularly to areas that have experienced economic malaise for decades.
Food & Water Watch: “[A]n employment multiplier of 1.92 better estimates the potential total jobs across industries created by shale gas development in New York in 2015.” In the very next paragraph, FWW says the number of jobs created with that multiplier is “less than 1 percent of projected private sector employment in 2018 in the state of New York, which is projected to be 8,6975,730.” (p. 2)
EID: It’s ironic that FWW would criticize others for not understanding how to use a multiplier and then turn around and, in the very next paragraph, misuse a multiplier. As FWW says, the 1.92 multiplier is an assessment of the overall economic impact in 2015, yet the group suggests that the multiplier can easily be applied to 2018 as well, regardless of constantly changing economic realities. FWW takes an abstract employment figure (materialized without the use of “dubious” economic models), multiplies it by a number that they do not understand, and then divides the result by a broader employment figure for a completely different year.
Food & Water Watch: “[T]he oil and gas extraction industry has one of the largest employment multipliers of any industry”. (p. 9)
EID: We agree, and this is why there are thousands upon thousands of people across the country who have jobs, thanks to the responsible development of shale oil and gas resources. Look no further than North Dakota – which boasts the lowest unemployment rate in the nation (3.5%) and a budget surplus that could allow the state to eliminate its property tax – to see just how powerful an economic engine the oil and gas industry can be.
Food & Water Watch: “[J]ob creation in health and human services, presumably due to shale gas industry accidents, is included.” (p. 4)
EID: For a subtle jab, this gets a “nice try.” But as it turns out, everyone needs dentists, physicians and optometrists, even those who are in peak physical condition. Moreover, FWW may want to examine the available data. According to the Bureau of Labor Statistics, the incidence rate for injuries and illnesses among all industries is 3.8 per 100 workers. The oil and gas industry is less than a third of that, with a rate of only 1.2 per 100 workers.
- EID Blog: “Desperation through Exaggeration”
- IHS Global Insight: The Economic Contribution of the Onshore Oil and Natural Gas Producers to the U.S. Economy
- NBC News: “Jobs Boom Brings Thousands to Small North Dakota Town”
- Fort Worth Chamber of Commerce: The Impact of the Barnett Shale on Business Activity in the Surrounding Region and Texas
Another day, another misrepresentation of natural gas in the New York Times.
As you know, we’ve spent considerable time debunking articles in the New York Times that question the benefits and safety of natural gas production, particularly as it relates to hydraulic fracturing. Unfortunately, the folks at the Times still haven’t gotten the message.
This week, Paul Krugman used one of his weekly columns to extol the future of solar power, but not before baselessly demonizing shale gas development.
Speaking of propaganda: Before I get to solar, let’s talk briefly about hydraulic fracturing, a k a fracking.
Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.
First and foremost, let’s give Mr. Krugman some credit. He does refer to hydraulic fracturing as an “impressive technology,” which it most certainly is. Unfortunately for Mr. Krugman and his readers, though, it’s all downhill from there.
Regarding the “toxic (and radioactive) wastewater that contaminates drinking water,” Krugman is blatantly misstating the facts or, at best, ignoring a key feature of areas where shale gas production is taking place: naturally occurring radioactive material, or NORM, which can be found on the surface or deep underground.
Claims about radiation have been made before (by, naturally, the New York Times), but both the Pennsylvania Department of Environmental Protection (DEP) and the U.S. Geological Survey have found that this is largely a natural phenomenon, not the result of some nefarious gas industry activity, and any radiation is at or below background levels that are no threat to human health. An examination by a water utility in western Pennsylvania also found no radioactive contaminants in the local water supply.
In fact, earlier this year the New York Department of Environmental Conservation (DEC) made the following conclusion about NORM in its assessment of future hydraulic fracturing in the state: “Based upon currently available information it is anticipated that flowback water would not contain levels of NORM of significance,” adding that this “does not present a risk to workers because the external radiation levels are very low.”
Krugman then asserts, notwithstanding the facts, that there is “reason to suspect” that hydraulic fracturing has contaminated groundwater. The reality, though, is that hydraulic fracturing has been used more than 1.2 million times and there has not been a single confirmed case of groundwater contamination. If Krugman thinks otherwise, then his argument is not only with state regulators from across the country, but also with President Obama’s own administrator of the Environmental Protection Agency, Lisa Jackson, who has testified that she is “not aware of any proven case where the fracking process itself has affected water.”
As for the “major damage” that Krugman cites, this claim is, like all the others in this op-ed, misstating reality. Again, the situation in Pennsylvania is instructive, as companies in that state over the past three years have invested more than $400 million in local and state roads. This type of commitment not only guarantees that impacts are minimized, but also that problems can be fixed with paid-for repairs.
And what does Krugman believe is the best alternative to clean, affordable, and reliable natural gas? Solar power, which is currently far more expensive (and significantly less reliable) than natural gas. Krugman says that its price is declining, but his argument that “we’re just a few years from the point” when electricity from solar becomes cost competitive contradicts well-regarded data from the Energy Information Administration (EIA). The EIA’s levelized cost of electricity generation shows that solar is between $211 and $312 per megawatt hour. Combined cycle natural gas generation, however, is between $62 and $65 per megawatt hour, while conventional coal generation is listed at $95 per megawatt hour.
Krugman argues that the current price disparity is due to fossil fuels not being “priced” correctly, which is another way of lamenting the fact that there is no price on carbon. If we had a carbon tax or cap and trade regime, Krugman believes, “it’s likely that we would already have passed [the] tipping point” of price parity between solar and conventional power sources.
But here’s the kicker: EIA’s data actually incorporates a de facto price on carbon by artificially inflating the costs of GHG-intensive technologies (as a carbon tax or cap and trade regime would do). The assumptions in EIA’s data include this important nugget:
Although currently there is no Federal legislation in place that restricts greenhouse gas (GHG) emissions, regulators and the investment community have continued to push energy companies to invest in technologies that are less GHG-intensive. The trend is captured in the AEO2011 Reference case through a 3-percentage-point increase in the cost of capital when evaluating investments in new coal-fired power plants, new coal-to-liquids (CTL), and coal and biomass-to-liquids (CBTL) plants without carbon capture and storage (CCS).
Natural gas is easily the most affordable electricity option, but even Krugman’s attempt to suggest that solar would be cost competitive with coal if we “priced coal-fired power right” doesn’t come close to representing what objective data shows. And as Robert Bryce points out in his own debunking of Krugman’s op-ed, carbon pricing may not even be the most effective way of reducing emissions:
According to the International Energy Agency, the U.S. is now cutting emissions faster than Europe, even though the EU has instituted an elaborate carbon-reduction scheme. Why is this happening? It’s not due to increased domestic use of wind or solar. Instead, it’s simple economics. Cheap natural gas is displacing higher-carbon coal in the U.S. electricity-generation fleet. That option is not available in Europe, where natural-gas prices are more than two times those of the U.S.
Krugman ends by saying hydraulic fracturing “is not a dream come true,” which is a subjective assessment but one that should nonetheless be scrutinized. Just take a stroll through Pennsylvania and you’ll see that responsible natural gas production in the Marcellus Shale is revitalizing local economies and creating jobs at an incredible pace. Development of the Barnett Shale in Texas has created over 100,000 jobs. And thanks to the affordability of natural gas, residents in the Northeast are enjoying lower monthly utility bills — a testament to hydraulic fracturing and the shale revolution it has helped create.
For those who make a living bashing the benefits of natural gas, hydraulic fracturing is indeed far from a dream come true, as it makes their job of claiming natural gas is too dirty and too expensive that much harder. But for the hundreds of thousands, even millions, of people who are reaping countless benefits, shale gas development has indeed been an enormous blessing.
Prior to submitting his column for publication, perhaps Mr. Krugman should have consulted his fellow New York Times columnist David Brooks.
New poll finds Maryland voters, like their neighbors in New York and Pennsylvania, want to participate in the shale gas revolution
It may be news to government officials in Annapolis who have imposed a temporary pause on hydraulic fracturing, but voters throughout the state of Maryland actually support natural gas production. Big time.
A new poll by Gonzales Research & Marketing Strategies finds that an incredible 80% of Marylanders support natural gas production in the United States, including 60% who “strongly support” it. The poll finds large majority support for developing natural gas among both men and women, across all political affiliations, and in every region of the state.
As for producing natural gas specifically in western Maryland, where the Marcellus Shale could provide significant new economic opportunities for the Old Line State, nearly 75% of voters in the state express support. Production in western Maryland also enjoys majority support across all demographics polled in the state.
This poll comes as another Quinnipiac survey in New York shows a plurality of voters support Marcellus Shale development, a fact that has remained consistent in Quinnipiac’s polling over the past few months. A Siena poll from last month also found more New Yorkers supported than opposed natural gas production.
And in neighboring Pennsylvania, where the Mighty Marcellus is the source of significant job creation and the rebirth of manufacturing, voters say the economic benefits of drilling outweigh any perceived environmental issues by 62 percent to 30 percent.
Throughout the United States, natural gas development enjoys 81% support according to a recent poll by the American Consumer Institute (ACI).
- Gonzales Research & Marketing Strategies: Maryland Statewide Poll on Natural Gas
- Marcellus Shale Coalition: “Mighty Marcellus Continues Impressive Job Creation Streak Across the Commonwealth“
- American Consumer Institute: “New Poll Reveals Consumers Support Expanding U.S. Energy Initiatives to Create Jobs“
- Quinnipiac University: New York State (NY) Poll (Oct. 27, 2011)
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.
- FLASHBACK: Energy In Depth March 14 ICYMI: “NY State’s Top Geologist: ‘No Cases in Which [Hydraulic Fracturing] Has Led to Groundwater Contamination’”
A bad lesson in censorship
Albany Times Union, Editorial
Monday, April 4, 2011
- “Shutting down an informed voice is absolutely the wrong thing for the government to do, and for environmentalists to support, if only in their failure to denounce it.”
One might reasonably assume that the state’s top staff geologist would have some relevant thoughts about drilling for natural gas. But good luck finding out what’s on Langhorne B. Smith Jr.’s mind, now that the state has muzzled him.
If only irony were an alternative energy source. Here’s the state Education Department — an agency responsible for fostering knowledge — barring Mr. Smith from talking to reporters after his comments on gas drilling caused a backlash among environmentalists — who normally are the first to cry out when politics takes precedence over science.
We don’t particularly agree with Mr. Smith on a few key points, either. But shutting down an informed voice is absolutely the wrong thing for the government to do, and for environmentalists to support, if only in their failure to denounce it.
As the Times Union’s James M. Odato found, Mr. Smith has been forbidden to talk to reporters since he spoke out on hydraulic fracturing, a controversial process of extracting natural gas that the energy industry wants to employ in the vast Marcellus Shale formation that lies under six states.
We and many others have expressed concern about potential problems, including drinking water contamination. No permits have been issued in New York while the state Department of Environmental Conservation works on regulations and the federal Environmental Protection Agency studies the practice of hydrofracking.
Mr. Smith in an interview last month spoke positively of the Marcellus Shale’s natural gas as a “huge gift” and characterized reports of water contamination as exaggerated and distorted.
He called for vigorous oversight of hydrofracking by the DEC and said natural gas could help relieve global warming and reliance on dirtier-burning fuels like coal.
Hydrofracking opponents, such as Environmental Advocates, the Sierra Club and United for Action, objected, with some suggesting that Mr. Smith’s opinion is tainted because of his private work as an energy industry consultant.
The blowback apparently has made the Education Department uncomfortable enough to cite a protocol that requires employees to check with the agency’s communications office before talking to reporters, or face “appropriate administrative action.” The agency said it’s looking into Mr. Smith’s private work, too.
We’ve been down this unfortunate road before. The state’s former wildlife biologist, Ward Stone, endured official intimidation, including a threat of transfer, for his dogged pursuit of pollution. He was an important voice on issues like the state’s own now-defunct trash incinerator in downtown Albany, where his tests found evidence of pollution in residential neighborhoods. Environmentalists protested the state’s attempts to silence him.
Not here, though. They’re content to let a scientist they disagree with be gagged.
They should join us instead in calling on Education Commissioner David Steiner and the Board of Regents to relax their stifling policies and let public employees contribute to important public discussions without checking with official handlers. This debate should be all about finding the truth, not winning even at the cost of it.
The state Education Department bars a knowledgeable employee from talking about gas drilling.
Informed public policy won’t come from silencing diverse views.
NOTE: Click HERE to view this editorial online.
- Environmental Defense Fund: “Our natural gas supplies would plummet precipitously without hydraulic fracturing”
- What They’re Saying: Engineering Experts, Economists Confirm Fracturing’s Clear Record of Environmental Safety
- Top Nat’l Energy Expert on Forbes.com: Hydraulic fracturing critical to “developing jobs, clean sources of energy”
- Just The Facts: University of Pitt. Prof. Sets the Record Straight on Hydraulic Fracturing
- Just The Facts: Energy Experts, Top Forbes Energy Reporter Debunk “Preposterous” Hydraulic Fracturing Claims
Hosts two-day Global Shale Gas Initiative Conference in Washington this week
We’re familiar with names like Barnett, Bakken and Marcellus – but what about Silurian or Changbei? Read up on them, because not too long from now, it’s a good bet we’ll be hearing a lot more about these here in the US. Thanks to the good work of the folks over at the State Department, shale gas went global this week – and below, we recap the event in case you weren’t able to attend. Following are select excerpts of a press conference held earlier this week where David L. Goldwyn, Coordinator for International Energy Affairs at the State Department, runs through what went down:
On the Global Shale Gas Initiative Conference and Countries that Participated:
We’re up to 20 countries and 10 federal entities, as well as state and local regulators. The reason we’re doing this is it’s part of the State Department’s effort to promote global energy security and climate security around the world. The U.S. shale gas phenomenon has transformed global energy markets. Because we have discovered and we have the technology to develop efficiently large quantities of gas from shale, global prices of liquefied natural gas have decreased. Gas has become cheaper. Gas is now competitive with coal on a BTU basis, which means that countries that might use coal can now not make an economic choice, but on a competitive basis choose gas for their next level of power generation.
On Shale’s Role in Providing Energy Security and Affordability Around the Globe:
[T]his has been a terrific boon for ourselves and for global energy security, and other countries want to replicate this process. And we wish them the best in doing this, but there are a lot of things that governments need to know in order to develop shale gas safely and efficiently. And that’s why we organized a regulatory conference where we could teach them what they need to know. Now, their motivation and our motivation as the State Department to engage on this issue should be clear for foreign policy and energy security reasons. Countries around the world need diversity of energy supply. There are countries with millions of people – in fact, tens and some hundreds of millions of people – without access to electricity services. They need a feedstock and they need it for base load energy.
State and Federal Regulations, Safety, Environment:
[W]e have, in our country, an umbrella of laws and regulations that makes sure this is done safely and efficiently. We have federal regulation of air and water. We have state regulation of land use and water. We have the capacity to monitor and to regulate. And even then, there’s the need for enforcement… We’ve also had a representative from the Groundwater Protection Council, and this is an association of state regulators, because in our country, it’s really the states that are on the front lines of safe drinking water regulation. In 33 states, the state leads or co-partners with the Environmental Protection Agency. So we’ve spent a lot of time talking about water, because water is scarce in a lot of these countries.
On Groundwater Protection, Hydraulic Fracturing:
[S]afe water and safe regulation plays a huge part in our discussions. It’s really one of the main reasons that we held the conference in the first place. And while hundreds of thousands of wells have been drilled successfully in the United States so far, the lesson that we want all these countries to understand is that you have to have technically competent people operating and you have to have laws and regulations in place first. We have safe – we have safe – Clean Air Act. We have safe drinking acts. We have rules about where you can drill. We have rules about what sort of casings you have to have. And so, if done responsibly, it can be done safely, but these countries need to know you need laws and regulations in place first. I wouldn’t paint the development with a broad brush.
On the Overall Success of the first Global Shale Gas Initiative Conference:
The bottom line is that we’ve had a really successful conference, because these countries have a lot of questions. People are enthusiastic, but they’re careful. There’s a lot that they need to know and there’s a lot they need to stand up in terms of regulatory capacity before they’re ready to engage in this. And so from our point of view, this has been a big success. We want people to have rational expectations about what they have. We want them to understand that it takes not just good commercial terms but really good government and good governance in order to make sure this is done safely. So it’s another of the examples of our using smart power or creative diplomacy to try and improve energy security, but to help countries learn what they need to know.
NOTE: Click HERE for a full transcript and video of Mr. Goldwyn’s press conference from earlier this week.
Rumors are circling around Washington that an amendment seeking to give EPA authority over the regulation of hydraulic fracturing will soon be added to massive climate change legislation sponsored by Congressman Henry Waxman of California and Ed Markey of Massachusetts. It appears the amendment’s author will be Congresswoman Diana DeGette of Colorado, who sponsored similar legislation in the last Congress (H.R. 7231).
The Colorado Independent reports:
U.S. Rep. Diana DeGette is leading the charge to increase federal oversight of the nation’s natural gas industry, reintroducing a bill that specifically targets a process called hydraulic fracturing.
DeGette and hydraulic fracturing detractors claim the practice harms the environment and is damaging to public health. But Energy in Depth readers (and the EPA) know that’s not the case-and that states already effectively regulate hydraulic fracturing.
The fluids used in the process are more than 95 percent water, and fracturing activities take place thousands of feet below the water table. What’s more, extensive precautions are taken to case wells near the surface to prevent any leakage of fracturing fluid, oil or natural gas.
And while the Independent refers to highlighting the economic consequences of eliminating this safe engineering practice as an industry “tactic,” we’re sure the hundreds of thousands of Americans whose jobs rely on hydraulic fracturing might think differently.
Here are the facts:
- Hydraulic fracturing is responsible for 30 percent of our domestic recoverable oil and natural gas, and has aided in the extraction of more than seven billion barrels of oil and 600 trillion cubic feet of natural gas.
- Up to 90 percent of the wells currently operating today have been fraced, and in the future, 60 to 80 percent of new wells may have to undergo fracturing in order to remain viable.
- In 2007, $226 billion was invested in domestic exploration and production. Those investments drive economic growth, support local businesses and keep Americans working. Royalties paid by producers totaled $30 billion in 2007, and billions were paid to federal and local governments in the form of severance and income taxes.
- Hydraulic fracturing accounts for a significant portion of the total economic activity attributable to domestic energy production. More than 300,000 Americans are employed in the exploration and production of domestic oil and natural gas.
What’s more, regulating hydraulic fracturing out of existence would have disastrous economic consequences, including the loss of thousands of jobs, billions in government revenue and the closure of 150,000 natural gas wells.
America can’t afford to unnecessarily curb domestic energy production and destroy jobs-and the DeGette amendment would do just that.