Year in Review: Seven Biggest Shale Storylines of 2016
This year has been an exciting one for shale oil and gas development. And with 2016 winding down, Energy In Depth decided to reflect on some of the biggest energy developments and storylines of this past year.
1. U.S. maintains status as world’s top oil and gas producer
Despite the challenges presented by OPEC’s long — and ultimately failed — price war against U.S. shale producers, the U.S. Energy Information Administration (EIA) reported this summer that the U.S. remained the world’s top producer of both oil and natural gas in 2015, as the following EIA chart illustrates.
U.S. crude production reached its highest levels since 1972 (9.4 million barrels per day) last year and remained at the highest levels since 1986 throughout 2016. Natural gas production also kept pace with 2015’s record production throughout 2016. This resilient production has allowed the U.S. to open up global markets in a big way. EIA reports U.S. crude exports averaged more than 500,000 barrels a day in the first five months of 2016 following the lifting of the four-decade long export ban last December. The U.S. also exported 50 Bcf of liquefied natural gas (LNG) in the first six months of 2016.
The U.S. could be poised for even stronger production in 2017, considering the United States Geological Survey (USGS) recently announced the largest ever assessment of undiscovered, technically recoverable oil and gas resources in the United States, found in the Midland Basin of the Wolfcamp Shale area in the Permian Basin. The USGS reports the Permian Basin may have an estimated 20 billion barrels of continuous oil, 16 trillion cubic feet of associated natural gas and 1.6 billion barrels of natural gas liquids in the region.
2. U.S. remains only major country to reduce GHG emissions thanks to increased natural gas use
Climate change and global greenhouse gas emissions were a major discussion point in 2016, and thanks to the increased use of natural gas, the United States continues to earn some major bragging rights. In fact, at the same time oil and gas production has increased dramatically, the U.S. remains the only country to dramatically reduce emissions, as EID’s 2016 Earth Day video highlights:
In fact, a recent study by the Global Carbon Project finds U.S. CO2 emissions declined 2.6 percent from 2014 to 2015, even as Americans used more oil and gas last year. The report also projects U.S. emissions will decline another 1.7 percent in 2016 when data becomes available.
This data are part of a decades-long trend in which we’ve seen our emissions drop a whopping 11.5 percent from 2005 levels. In August, Energy Information Administration (EIA) Administrator Adam Sieminski told the Washington Examiner that CO2 emissions will fall to their lowest levels in 24 years. He credited the return to levels not seen since 1991 to:
“The drop in CO2 emissions is largely the result of low natural gas prices, which have contributed to natural gas displacing a large amount of coal used for electricity generation.”
Sieminski isn’t the only one that acknowledged the incredible drop in emissions this year. The National Oceanic and Atmospheric Administration (NOAA), U.S. Environmental Protection Agency (EPA), EIA, Department of Earth Sciences at Royal Holloway — University of London, Brookings Institute, ICF International , and ExxonMobil all have reports detailing how U.S. emissions are not driving global emissions increases and shale developed has contributed to the U.S.’s decreased emissions. And areas with heavy oil and gas activity like North Dakota, Texas, Colorado, Pennsylvania and Utah are also seeing decreases.
More incredibly, these GHG reductions are coming as the U.S. economy continues to grow, an “unprecedented” decoupling illustrated by the following EID graphic.
3. Shale development was great for the economy (again)
As the above graphic also illustrates, it’s no secret shale development has tremendous economic benefits. In fact, U.S. Energy Secretary Ernest Moniz reaffirmed in August that shale development has been beneficial to the economy and environment:
“The increased production of oil and natural gas in the United States has, obviously, been a major story in terms of our economy, and also our environment,” Moniz said at a field hearing in Seattle. “The natural gas boom, in particular, has led to the displacement of high-carbon coal with low-carbon natural gas producing fewer [carbon dioxide] emissions.”
There were also several studies and reports released in 2016 that showed just how true this statement actually is:
- National Bureau of Economic Research (NBER), December (report / EID post) — This report quantified U.S. economic activity from 2012 to 2014 and found that $3.5 trillion of the increased equity of the U.S. stock market has been the result of shale oil development. It also detailed a 4.6 percent increase in jobs (4.6 million total net jobs) as a result of shale oil technology.
- University of Chicago / National Bureau of Economic Research (NBER), December (report / EID post) — This report found fracking is generating “enormous benefits” to local economies and to average households “by roughly $1,300 to $1,900 per year.” It also concluded “that the average local benefits from hydraulic fracturing outweigh the costs.”
- Brookings Institute, December (report / EID post) — This report found that between 2000 and 2015, the U.S. expanded its gross domestic product (GDP) 30 percent while cutting its carbon emissions 10 percent. It also found that 33 states have “delinked” their economic growth and carbon emissions, “showing that economic growth does not inevitably require emissions growth.”
- London School of Economics, December (report / EID post) — This study found that for every two jobs directly created by fracking, at least one more is created in the manufacturing sector. The study recognizes that fracking has made natural gas more readily available and affordable across the U.S. in the last decade.
- White House National Economic Council, October (report / EID post) — The report notes that since early 2010, U.S. manufacturing has added over 800,000 direct jobs and that “The surge in American natural gas production has lowered energy costs for manufacturers and driven job growth…”
- IHS; American Petroleum Institute (API), March (report / EID post) —This report found the oil and gas industry is creating hundreds of thousands of jobs for woman and minorities.
- American Petroleum Institute (API), January (report / EID post) — This report found that the industry supports around 9.8 million jobs and makes up eight percent of the country’s Gross Domestic Product (GDP).
4. EPA’s final groundwater report further confirms fracking not a serious threat to drinking water
The EPA released the final version of its long-awaited groundwater report, and the data within the 666-page document confirmed the draft report’s conclusion of “no widespread, systemic impacts to drinking water sources” from fracking. Though the agency made some wording changes to its previous topline finding — namely deleting the “widespread, systemic” language, leading to some misleading headlines suggesting the EPA had reversed course — EPA Deputy Assistant Administrator Thomas Burke confirmed to the Wall Street Journal and CBS This Morning that that “the overall incidence of impacts is low.”
EPA claimed “data gaps” kept it from reaching a definitive conclusion on fracking’s impacts on drinking water in its final report. But that the agency had 4,100 applicable scientific references, six years and $33 million in taxpayer funding at its disposal, and found no evidence that fracking is a serious threat to drinking water.
5. U.S. energy security is the strongest its been in decades
The EIA reported in May that fracking has allowed the U.S.to lessen its reliance on foreign oil and gas imports, resulting in foreign natural gas imports dropping to their lowest levels since 1986.
The U.S. Chamber of Commerce Institute for 21st Century Energy also released its annual Index of U.S. Energy Security Risk in December, finding U.S. energy security is the strongest it’s been since 1996. Our security risk level dropped three points to 78 in 2015, marking the fourth year in a row that the U.S.’s overall energy security risk has declined.
In other words, in 2016 we showed that yes, we can drill our way to energy security:
6. “Keep It In The Ground” movement had a rough year.
The “Keep It In The Ground” (KITTG) movement experienced some major blows this year. The group’s primary goal is to enact a national fracking ban — something a U.S. Chamber report this year found would devastate the U.S. economy to the tune of 14.8 million lost jobs and a $1.6 trillion decrease in GDP, to go along with skyrocketing consumer costs.
U.S. voters showed their understanding of the importance of shale, turning out in record numbers in support of pro-fracking candidates and policies (California, Pennsylvania, Ohio), while the Democratic National Committee rejected a ban on fracking on its national platform. And that’s despite the efforts of these extremists to convince them with stunts like placing fake poop and anti-fracking messages under statues of donkeys throughout Philadelphia where the DNC convention was held.
In fact, the group was so extreme, U.S. Sen. Heidi Heitkamp (D-N.D.) blamed the KIITG movement for Democrats’ devastating losses in the November election, and prominent Democrats rebuked the movement’s goals as “not possible.”
Internationally, Quebec lifted it’s longtime moratorium on fracking, with Canadian Prime Minister Justin Trudeau responding to the KIITG movement’s criticism of his decision to expand the oil-sands corridor with,
“There isn’t a country in the world that would find billions of barrels of oil and just leave it in the ground while there is a market for it.”
Another of the movement’s major focuses this year was on banning oil and gas development on federal lands, a move another U.S. Chamber report found would have an “immediate and severe” impact on the U.S. economy. Those losses include “$11.3 billion per year in annual royalties and rental fees for federal and state governments,” and a loss of “more than 100,000 direct jobs” and another “280,000 indirect and induced jobs.”
Activists targeted the federal Bureau of Land Management (BLM) with a “die-in” when BLM continued with an oil and gas lease auction in Colorado, and even faked getting hit with an SUV by a BLM official to halt sales. The BLM did not give in to the extreme demands of activists across the country though and instead relied on sound science to open up lands like the Wayne National Forest for lease auction following years of protests from extremists.
7. #ExxonKnew campaign exposed in a series of devastating setbacks
Speaking of the KIITG movement’s woes, though its biggest supporters are in denial, the #ExxonKnew campaign unraveled in spectacular fashion in 2016. Not only did the Rockefellers admit paying for the #ExxonKnew media coverage supporters claimed “prompted” the New York Attorney General Eric Schneiderman’s investigation, it was revealed activists actually colluded with Schneiderman and other AGs long before those “investigative” pieces came to be. It was also revealed the AGs initially involved in the campaign signed an agreement to keep #ExxonKnew documents secret. And to top it all off, the investigators are now being investigated, as the lone two AGs who remain involved in the fiasco — Schneiderman and Massachusetts AG Maureen Healey — have been issued discovery orders to determine whether “bias or prejudgment” influenced their decision to initiate a “bad faith” investigation into ExxonMobil.
These developments cement the fact that this failed campaign was never about climate “fraud” and was always about targeting individuals and groups who disagree with certain policies on climate change. As editorial boards across the country have noted, the investigations are a “dangerous arrogation of power” with “alarming” implications for free speech.
Looking ahead: Infrastructure will be the talk of 2017 for both industry supporters and anti-fracking activists.
Earlier this month, the National Association of Manufacturers (NAM) released a survey that found voters in Ohio and Pennsylvania support an increase in infrastructure such as pipelines that are needed to get oil and natural gas to markets across the country. In fact, the increased use of natural gas brought in to cities through pipelines is helping places like New York City reduce consumer costs and improving health for residents. Due to the extreme importance of this issue, bipartisan initiatives are already underway.
A NAM report from earlier this year found that the building of pipelines will increase jobs and boost the economy. And as shale development continues to increase, the manufacturing industry will see some of the biggest benefits.
Despite all of this good news, activists have made it clear pipelines will be a major focus as they try to prevent future oil and gas development. Lena Moffitt, director of the Sierra Club’s Dirty Fuels campaign, even explained in a recent Bloomberg article:
“We’re in this critical window where renewables are going to be cost competitive in a few years,” said Moffitt, who is based in Oakland, California. “If we can forestall gas infrastructure being put in the ground and locking in that demand for the next 60 years — if we can forestall that by maybe just five years — the hope is that renewables will come in and be cost competitive in all markets.”
With efforts already occurring to stop the Dakota Access Pipeline, stories being fabricated by groups against other pipelines and talk of Texas becoming the new North Dakota for protesters, it’s not too surprising that we’ll likely see more focus on infrastructure moving forward.
2016 was quite the whirlwind of events and we can’t wait to see what 2017 will bring. From everyone at Energy In Depth, have a happy, healthy and prosperous New Year!