My daughter recently started attending college in Ohio. While driving with her through western Pennsylvania and eastern Ohio, I could not help but notice all of the new oil and gas wells being drilled throughout the area. It also seems that every other billboard along the interstate is related to the oil and gas business—jobs for oil and gas workers, training to get people jobs in the oil and gas business, service companies selling services to the oil and gas business—you get the idea.
While this always has been hydrocarbon country (the first wells ever drilled in the U.S. were drilled in western Pennsylvania), there now is greatly accelerated activity here, as it is in the middle of the Marcellus Shale “play”—one of the richest deposits in the country of “tight” oil and gas (i.e., oil and gas trapped in shale formations that was previously unrecoverable with conventional drilling). With the application of hydraulic fracturing (fracking), these hydrocarbons can be recovered and are being recovered at record rates.
Import-Export Balance Sheet
We are at an interesting point in the history of energy production in this country—the oil import-export “inflection point.” This is the point at which U.S. domestic oil production exceeds import levels, making us no longer a net importer of oil. It is projected that the net percentage of imports is expected to continue to drop for the next 30 years.
Some of this change is due to reduced demand (due to a lower growth rate, lower manufacturing output, and energy efficiency and conservation efforts), but the single largest factor cited by many experts is increased supply through higher domestic production of oil and natural gas using fracking.
The U.S. Energy Information Assn. (EIA) projects that U.S. oil production will increase almost 11% in 2014, primarily from increased production of tight oil. Monthly domestic crude oil production is expected to surpass 8 million barrels per day, the highest level since 1988. Domestic natural gas production also is estimated to continue to increase (44% over the next 30 years, almost all from shale gas production), and the U.S. likely will become a net exporter of liquid natural gas by 2016.
Fracking is not new and has been used in oil and gas production for more than 50 years. Its resurgence as a well development technology in tight formations, however, is remarkable. Reports indicate that more than 90% of new gas-producing wells in the U.S. use fracking. This technology is spreading rapidly worldwide and has the potential to vastly change the landscape of worldwide energy markets and pricing for the foreseeable future. EIA estimates that without fracking, U.S. gas production by 2035 would be 18% lower, and gas and energy prices would be 17% higher than they would be if the technology is used and continually developed.
While news stories citing the risks of fracking—particularly relating to the contamination of groundwater—are too numerous to count, it is important not to blame fracking for risks and incidents that really are related to oil and gas well development in general. The application of fracking itself has not been implicated in any serious incidents. Furthermore, our technological capabilities and regulatory controls are advancing. Even organizations representing the water industry are not opposed to fracking, but call for environmentally responsible oil and gas development practices.
Some of the louder voices in this debate have described the fracking-driven rejuvenation of the domestic oil and gas industry in the U.S. as a “detour on the road toward a fossil fuel-free future.” I am in favor of the rapid development of all economically viable sources of alternative energy, but a fossil fuel-free future? I doubt it.
Oil and gas will continue to supply a significant portion of our increasing need for energy well into the next century and beyond. Estimates of U.S. deposits of shale-based oil and gas are beyond most people’s imaginations. American shale is said to contain the equivalent of more than 2 trillion barrels of oil. Considering that experts also estimate that the world has used 1 trillion barrels of oil since the first oil well was drilled in Titusville, Pa., development of domestic sources of oil and gas could put us on a course to be truly energy independent—or even a net exporter—within our lifetimes.
We have been drilling for oil and gas in the U.S. for more than 100 years. Accidents and contamination events have occurred, but this is true of any industrial development. Any aspect of oil and gas development carries risks. This has not changed since the first wells were drilled in Titusville in the early part of the 20th century. Our ability to manage those risks, however, has improved. I do not believe that we have to choose between using fracking and having clean water. We can have both.
The benefits of domestic oil and gas development are substantial. The economic, political and security benefits are enormous. A sound energy policy is one that includes responsible and aggressive domestic energy production with advanced technologies.