Does shale oil boom mean U.S. energy independence near?

Reply Thu 22 Dec, 2011 10:22 am
Dec. 21, 2011
Does shale oil boom mean U.S. energy independence near?
Kevin G. Hall | McClatchy Newspapers

last updated: December 21, 2011 07:16:14 PM

TOWANDA, Pa. — Ever since Richard Nixon's 1973 promise to attain energy independence, successive U.S. presidents all have pledged the same goal, even as foreign supplies composed a larger and larger share of the U.S. energy mix.

Now, almost 40 years later, a measure of independence is within reach. But as this booming mountain town in northeastern Pennsylvania shows, the quest for independence involves both opportunities and trade-offs.

It may surprise Americans who've lived through many years of dependence on foreign fuels, but in less than a decade the United States could pass its 1970s peak as an oil and natural gas producer. If that happens — and many analysts think it's possible — the United States would edge past Saudi Arabia and Russia to become the world's top energy producer.

That alone wouldn't make us completely energy independent. Mexico and Canada are likely to remain stable providers of oil to supplement growing U.S. production. And other factors will help too, ranging from advances in battery technologies and alternative fuels such as ethanol to greater fuel economy in automobiles.

However, the biggest potential game changer for U.S. energy production is natural gas, which previously had been supplied largely from the Gulf of Mexico region. Just a few years ago, terminals were being built at U.S. ports in anticipation of importing natural gas; today, there's talk of exporting it.

Technological advances have allowed drillers to go down almost 7,000 feet, smashing through rock formations and drilling horizontally, freeing trapped oil and gas that long had been considered inaccessible.

"Shale gas, the biggest energy innovation since the start of the new century, has turned what was an imminent shortage in the United States into what may be a hundred-year supply and may do the same elsewhere in the world," Daniel Yergin, the world's most prominent oil historian, wrote in his new book about energy security, "The Quest."

The promise of shale gas is present in many places that are being developed across the country, but it's nowhere more visible than in northeastern Pennsylvania's Bradford County, which is in the aptly named Endless Mountains region. Communities here sit atop the Marcellus Shale formation, which runs along southern New York state through western Pennsylvania into eastern Ohio and parts of Maryland and West Virginia.

Geologists think the Marcellus Shale formation contains the second-largest natural gas deposits in the world, behind only Iran's South Pars-North Dome gas field in the Persian Gulf, off the coasts of Iran and Qatar. If America becomes energy independent, it'll be in large part thanks to this region. Energy consultancy PFC Energy projects that the United States will recapture the flag of top energy producer within the next eight years.

"We need to continue to have increased drilling and production. It looks like the resource base is there to support that. The evidence is there for that; I think it's a pretty high probability," said Bob MacKnight, a PFC senior manager, who added that large U.S.-based energy companies are "rediscovering" the United States. "A lot of these companies had left the U.S. for dead 10 years ago, and are now realizing the type of growth they can get here onshore is a scale they didn't think existed."

Onshore is the operative word. Offshore drilling has brought new oil resources, and before the April 2010 BP oil spill, new ultra-deepwater production was replacing lost conventional domestic supplies and beginning to reduce the amount of imported oil. On Dec. 14, the federal government unsealed the winning bids on the first deepwater leases since the devastating BP spill, fetching more than $337 million and showing there's still strong interest in deepwater drilling.

But oil and gas from shale is the biggest new phenomenon.

"To have energy independence, you need to have energy," said Brian Grove, the director of corporate relations in Towanda for Chesapeake Energy, the most active player right now in Pennsylvania's Endless Mountains region. "We've grown our production here from zero to hundreds of millions of cubic feet per day. ... It's going to take decades for development."

Grove was the fourth local employee for Chesapeake Energy back in early 2009. Today, the company employs more than 1,400 in wholly owned subsidiaries that operate in the Bradford County area, not to mention the hundreds of contractors it works with locally.

The natural gas coming out of the shale formations can be fed into a pipeline that already passes through the region, operated by El Paso Corp. The region's stepped-up natural gas production has led to a number of high-profile announcements of new power plants in the Northeast that won't need oil or coal to operate.

Utilities are expected to be the largest beneficiaries of the new production, and that's likely to translate into cheaper electricity for companies and consumers alike. Forecaster IHS Global Insight projects that the abundant supply will lower natural gas prices, reduce electricity costs by an average of 10 percent nationwide and boost industrial production by 2.9 percent by 2017, as manufacturers enjoy cost savings. Natural gas is also likely to displace a lot of heating oil in the Northeast.

Demand remains a limitation. Manufacturers are big users of natural gas, and some cities have switched public buses to natural gas. But the scale of demand has yet to approach the available supplies, and producers want a more active federal policy that encourages the wider use of natural gas.

"We've got a supply of natural gas. We need an energy policy that reflects that," said Kristi Gittins, the vice president of industry and public affairs for Chief Oil & Gas, a Dallas-based driller that's drilled more than 150 wells along the Marcellus Shale formation and has three that now are operational.

Chief has invested more than $1.5 billion in a relatively short time, she said.

"That's a pretty significant investment to a company like ours," Gittins said.

Shale gas production now accounts for anywhere from 23 to 34 percent of U.S. marketed production, according to differing estimates by energy consultants. That'll grow to at least 42 percent by 2020, PFC Energy said. IHS Global Insight projects that it will grow to 60 percent by 2035.

In fact, in a thick study released recently, IHS Global Insight forecast $1.9 trillion in capital investment from 2010 to 2035. The industry will have spent $48 billion by 2015 to reach oil and gas trapped beneath shale deposits, the group said.

"You're talking about something that's the next level," said Anthony Ventello, the executive director of the Central Bradford Progress Authority, an economic development agency. By the agency's count, more than 700 wells have been drilled in Bradford County, more than 300 are operational and more than 2,000 drilling permits have been issued.

Environmental concerns are one potential brake on the shale boom. There are worries about risks to water tables from hydraulic fracturing, the fancy name for shooting pressurized water, sand and chemicals deep into the ground to ease shale gas to the surface. Industry says the process is safe, but the Environmental Protection Agency early this month linked chemicals in the groundwater of a small Wyoming town to hydraulic fracturing, also known as fracking.

State and local governments are struggling to keep up with the rapid pace of development here. The Philadelphia Inquirer newspaper spotlighted in a four-part series this month how there's little regulation of the pipelines that feed from the new wells into a pre-existing transmission pipeline that serves the densely populated Northeast. Pipelines in interstate transmission are federally regulated, but in rural Bradford County and elsewhere, it's essentially self-regulation.

Locals in Bradford County share many of those concerns, but some consider it a chance they're willing to take.

"Forty years from now we might look back and say, 'What the hell did we do?' Or maybe not. Life's a gamble," said Adam Dietz, who was interviewed in the town of Wyalusing as he oversaw operations at TransZ, a company that offloads sand from railcars onto trucks for use in gas-well drilling.

Dietz, who's the town's volunteer fire chief, too, stresses that he and others here are grateful for a boom when most of the nation struggles with high unemployment.

"It's change. And people hate change. But if it wasn't for this industry ... we'd be in tragic times right now. There's no other way to look at it," Dietz said.

Nearby tiny Towanda looks and feels like the bustling U.S.-Mexico trade corridor in South Texas. The rumble of diesel engines is everywhere as trucks haul the pipes, equipment, water and sand needed for hydraulic fracturing.

A new Best Western has gone up in a town that previously was known for quaint bed and breakfasts. At $169 a night, the hotel's almost always sold out. Room and board often must be found far away.

"I've had people visit here and they have to stay 40 or 50 or 60 miles away. The local hotels are booked up," said Amit Daga, the vice president of Towanda Metadyne Inc., a local manufacturer of mining products that use tungsten carbide, the second hardest material in the world, after diamonds.

Metadyne's tungsten carbide tips on hammer-drill bits are used to break rock formations deep below the Earth's surface. The drill bits are as wide as a garbage-can lid.

The boom keeps Lehigh Railway busy. The 56-mile rail line moved about 2,000 railcars into the area last year. This year the number is about 12,000, and 80-car trains are now common.

"Since I've been here, I have never seen an 80-car train. Since the 1970s we haven't had an 80-car train," said Ventello, the progress authority chief.

Lehigh Railway expects to move 15,000 railcars next year. It added more than six miles of new track this year and expects to add more next year, said Jim Raffa, the company's vice president of marketing.

"This is going to continue to grow. It's just at what percentage of growth rate," Raffa said.


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Reply Thu 22 Dec, 2011 10:33 am
Dec. 21, 2011
As shale oil fracking booms, environmental protection lags
Renee Schoof | McClatchy Newspapers

WASHINGTON — America's race for cheap natural gas and energy independence has been outpacing the flow of state rules aimed at assuring people that gas production won't harm their health.

Today 24 states have wells that use hydraulic fracturing: pumping water, sand and chemicals into deep layers of rock at high pressure to release oil and gas. Because the nation's major environmental laws exempt the oil and gas industry, regulating hydraulic fracturing — also known as fracking — is largely up to state environment departments. States have been issuing new rules and guidelines, but often years after the boom began.

The biggest environmental issue, especially in Pennsylvania, the heart of Marcellus Shale formation fracking, is what happens to the wastewater that gushes up from deep in the Earth when a well is fracked. The water is full of salt and contains naturally occurring radioactive elements and metals from deep layers, as well as the fracking chemicals.

"The industry's practices have been rapidly evolving here over the last few years," said David Yoxtheimer, an extension agent at the Penn State Marcellus Center for Outreach and Research.

Pennsylvania geology lacks many underground wells where wastewater can be stored. Companies increasingly recycle the wastewater by cleaning it enough for new fracking jobs. The salt sludge that gets removed is sent to landfills. Some of the wastewater goes to wells in Ohio.

The companies "do recognize in the long term there might not be adequate disposal capacity," said Yoxtheimer, a hydrogeologist. "There's frankly going to be a fair amount of waste generated from the development of these energy resources. Finding safe, environmentally responsible disposal may be a challenge," and that's why they're looking at deep wells.

In New York state, which shares part of the Marcellus Shale formation, there are no deep natural wells to store wastewater permanently, said Emily DeSantis, a spokeswoman for the state's Department of Environmental Conservation. The state will need to send any wastewater that can't be recycled to other states for treatment or storage if it decides to proceed with fracking next year, she said. New York has stopped issuing permits for horizontal drilling, which is used in fracking, until it completes a new study of the environmental impact.

Pennsylvania's environment department asked drillers in April to inject wastewater into deep wells or recycle it instead of taking it to water-treatment plants that weren't equipped to handle it, though drillers aren't required to do so.

The Marcellus Shale Coalition, an industry trade group, immediately agreed to comply, said Kevin Sunday, a spokesman at the state's Department of Environmental Protection.

"It's a sea change in disposal practices," he said.

Sunday said his department estimated that in past years, about 95 percent of the wastewater from fracking in Pennsylvania was sent to sewage plants that didn't have the technology needed to treat it. In parts of the state, the water flowed into rivers that millions of people used for drinking water.

Travis Windle, a spokesman for the Marcellus Shale Coalition, said its members accounted for 95 percent of the horizontal drilling rigs in Pennsylvania and all of them had agreed not to send the wastewater to treatment plants for discharge.

"Without question, Pennsylvania's regulatory framework is one of the nation's most forward-leading," said Kathryn Klaber, the industry group's president. She said her group would work with state regulators to make sure that standards for wells and rules for wastewater worked to protect the environment. The industry also was "focused on continuously improving upon our best management practices," she added.

Myron Arnowitt, the Pennsylvania director for the environmental organization Clean Water Action, said there was little planning by the state for the impacts of large-scale gas drilling before problems arose.

"The states have not gotten ahead of the curve," said Amy Mall of the Natural Resources Defense Council. "They're just catching up to the industry."

The Independent Petroleum Association of America, a trade group for smaller producers, contended that states have successfully regulated hydraulic fracturing in vertical wells for decades.

"We definitely think the environmental issues are best handled at the state level," spokeswoman Julia Bell said.

A flash point in the well contamination issue was Dimock, Pa. State regulators determined that Cabot Oil & Gas Corp. had drilled defective natural-gas wells that let gas escape into 14 water wells. Cabot denied wrongdoing, but it paid fines and fixed water supplies. Some residents said those efforts fell short, and they're still fighting Cabot for restitution.

Texas, where the shale gas boom began, has thousands of storage wells for fracking wastewater. On Dec. 13, Texas regulators required operators of new wells that get permits after Feb. 1 to disclose the chemicals and the amount of water they use to fracture them. State officials said that companies voluntarily reported the chemicals for about half of the existing wells in the state. The reports in Texas and other states are entered on a national registry website, FracFocus.org.

In Pennsylvania, people are pressing for more complete disclosure, said Steve Hvozdovich, the Marcellus Shale policy associate for Pennsylvania Clean Water Action.

"Part of the issue we have is that there's such a wide range of chemicals used, nobody knows for sure what the industry is using at a particular well site," he said. Hvozdovich said the industry had insisted on gag orders on the results of some court cases over fracking problems. "All this is adding a bit of mystery and cloud over water issues."

The Environmental Protection Agency is studying whether fracking practices have harmed any drinking water supplies. The study is expected to be completed in late 2014.

An early draft report caused a stir Dec. 8 when the agency found that wells in Pavillion, Wyo., contained pollutants "likely associated with gas production practices, including hydraulic fracturing." It said the samples were generally below safety standards and that the shallow wells in Wyoming were unlike those in other parts of the country.

The EPA's news release repeated what it usually says when fracking comes up: "Natural gas plays a key role in our nation's clean energy future and the Obama administration is committed to ensuring that the development of this vital resource occurs safely and responsibly."

Burning natural gas for power produces much less air pollution than coal does. But that doesn't mean that natural gas is pollution-free. Hot spots of smog show up in places where many drilling engines and other equipment are at work.

The EPA has proposed the first national air-pollution standards for the oil and gas industry. Its final version is expected in April.

The industry is opposed. The EPA's proposed rules aren't "practical and cost-effective," said Howard Feldman, the director of regulatory and scientific affairs at the American Petroleum Institute. "The public is already protected with an ample margin of safety."

The EPA's rules would limit conventional air pollution and seepages of methane, a potent greenhouse gas and a major component of natural gas. The EPA estimates that the industry would save money by doing more to capture emissions. Feldman said the EPA had overestimated the savings.

The Department of Energy's Argonne National Lab reported in November that even when fugitive emissions of methane are factored in, shale fracking's greenhouse gas emissions are 33 percent lower than coal's.

Those findings contradicted another study this year. In April, Robert Howarth at Cornell University published a report that said natural gas produced from shale with fracking had higher greenhouse gas emissions than coal did because of the methane that escaped from shale gas wells.

Howarth said in an email that he stood by his study. He said other studies underestimated the emissions.
Reply Thu 22 Dec, 2011 10:36 am
Dec. 21, 2011
EPA announces historic rule to clean or shut coal-burning power plants
Renee Schoof and Halimah Abdullah | McClatchy Newspapers

WASHINGTON — Unveiling a historic rule, the Environmental Protection Agency on Wednesday announced the first national requirement for the nation's coal-fired power plants to reduce emissions of mercury, arsenic, cyanide and other toxic pollutants.

The landmark ruling took more than 20 years for EPA to finish. Under the Clean Air Act, many other sources of air pollution have been cleaned up, but power plants were so important to the economy that they long had a pass.

About 60 percent of the nation's plants, however, already comply with the new requirement because of state rules. The remaining 40 percent are a major source of pollution, producing more than half the mercury emissions in the country, the EPA said. The ruling will require coal-fired power plants to add pollution control equipment or close. Many plants already scheduled to close are 50 years or older.

EPA estimated that the new requirement will prevent as many as 11,000 deaths, 4,700 heart attacks and 130,000 cases of childhood asthma each year.

"This is a great victory for public health, especially for the health of our children," EPA Administrator Lisa Jackson said in an announcement ceremony at Children's National Medical Center.

Mercury harms the nervous systems of fetuses and young children, reducing their ability to think and learn as they grow up. Other toxic pollutants from the plants have been linked to cancer and other diseases. Soot, or particle pollution, can cause heart and lung diseases.

"The dirty, soot-spewing coal plant will soon become a relic of the past — a dirty industrial dinosaur," said Frank O'Donnell, president of the watchdog group Clean Air Watch. "Today's action ensures that the cleanup of coal-fired power plants will be the signature clean-air achievement of the Obama administration."

EPA estimates that it will cost companies $9.6 billion to comply. It said the health benefits would outweigh that by as much as 9 to 1. It also predicted a net gain in jobs — up to 46,000 short-term construction jobs and 8,000 long-term jobs in maintenance and operation of pollution controls.

Lawmakers from coal producing and manufacturing states such as Kentucky, Michigan and West Virginia have been fighting the EPA all year and have proposed legislation to weaken it.

"Not only has President Obama's regulatory agenda made it harder for new electricity generation to be built, but these new regulations will increase energy prices for Americans who can least afford to pay more to light and heat their homes, and for businesses that need reliable, affordable energy to compete globally," said Rep. Ed Whitfield, R-Ky., chairman of the House Energy and Power subcommittee.

Jeff Holmstead, former EPA air administrator under George W. Bush and who now represents energy companies at Bracewell Giuliani, a law firm, also predicted there would be problems with brownouts if the rule survives likely court or legislative challenges.

However, a study by the Edison Electric Institute, an association of U.S. shareholder-owned electric power companies, found that the ruling is unlikely to result in widespread brownouts and blackouts. EPA and Department of Energy also have issued reports concluding that the ruling won't compromise electricity generation.

The White House released a statement saying that companies would have three years to reduce their mercury and other toxic substance emissions and could appeal for an additional year. Beyond that, in cases where a key plant was needed for the reliability of the grid but couldn't upgrade in time, the law allowed a fifth year.

Jackson said she expects that fifth year will be needed rarely, if at all. "But the president wanted people to know there are options in the Clean Air Act for the lights to stay on."

Some industry officials said seven to eight years would be more realistic.

The Tennessee Valley Authority, which generates electricity for much of the Southeast, "will comply with any new rules put in place by EPA. However, based on decades of experience in installing pollution controls, constructing new generation, and upgrading its transmission system, TVA knows that more time will be needed to comply with EPA's emerging regulations," said Scott Brooks, a spokesman for TVA.

The National Mining Association called the ruling "costly and economically damaging." The Kentucky Coal Association, in a state where more than 90 percent of the electricity is generated from coal, predicted higher costs to consumers.

Others praised the rule.

"This is going to be have very important public health benefits for years to come," said Michael A. Livermore, the executive director of the Institute for Policy Integrity, a think tank affiliated with New York University School of Law. And from an economic perspective the rule was a "slam dunk," he said. "The benefits swamped the costs."

The Rev. Mitch Hescox, president of the Evangelical Environmental Network, speaking at the hospital with EPA's Jackson, said: "I'm standing here because we agree on the need to protect children from mercury. Christians are called to protect life. It's sacred."

Bishop Stephen E. Blaire, in a statement for the U.S. Conference of Catholic Bishops, also stressed the vulnerability of children and fetuses to toxic pollutants. "In the end it just makes good sense to want to have clean air for our children and families to breathe and for future generations," he said.

Environmental groups called the ruling historic and applauded the Obama administration.

"We can breathe easier today. After decades of industry-induced delay, the Environmental Protection Agency did exactly what it was designed to do: look out for our health and our environment," said Frances Beinecke, president of the Natural Resources Defense Council.

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