Dear Shale Protestor,

At the Cornell Debate on November 15th I was asked, "What does fracking mean for the economy?"  I was given 4 minutes to answer the question.  I post what I said here because I think it is the core argument of why the United States needs to develop shale, and do it now.  

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Energy independence has been in the nation’s psyche ever since it was first proposed in November 1973.  An aspiration akin to landing the first man on the moon, or defeating the Soviet Union, energy independence has proven far more elusive. So to put the economic effect of fracking in context, when the IEA [International Energy Agency] issued its forecast this past Monday -- that the United States will be the world’s largest oil producer by 2020 and energy-self-sufficient by 2035 --  it predicted that something that has been impossible for two generations could be achieved largely because of fracking.

Energy markets are global, meaning energy independence does not insulate the United States from global affairs or global prices.  However, as the persistent $10-20 spread between Brent and WTI oil price shows, it is possible to have differential prices in global markets for an extended period of time.  

When price differences are large and stable, investment follows.   For example, the price of natural gas in the United States has fallen from $9 to $3/MCF because of fracking.  Natural gas is priced at an oil equivalent of $20/BBL, a 4X advantage over world prices.  As a result, fuel, electricity, transportation and raw materials are priced lower here than anywhere else.  Investment follows like the multi-billion dollar one Shell has announced in Western Pennsylvania for a world-class ethane cracker creating thousands of jobs and a hub for the resurgent petrochemical industry.

When lower prices from the US transmit around the world, it opens a door for everyone including individuals living in "grinding energy poverty" [phrase used by Secretary of State Hillary Clinton in a speech given October 19, 2012 at Georgetown University] on the lowest rungs of the economic ladder.  1.2 billion people do not have access to electricity. 3 billion people cook over fires fueled by dung, wood, charcoal and coal.  When cooking fuel becomes cheaper and cleaner, their lives will improve, and so will ours. This problem will not wait for the next generation.  People want better lives now. 

Another possibility brought forward by fracking is the potential for China and India to bypass coal and move directly to natural gas.  Both countries have large resources of shale. 

American jobs are another obvious benefit. The most recent estimate is 1.7 million direct, indirect and induced jobs have been created because of fracking. That number could double in the next 10 years. 

Industry jobs are criticized for being boom and bust.  I have personal experience with that joining the industry during a boom and leaving to go back to school during a bust.  I don’t think it’s ever realistic to think that a job is guaranteed for life no matter what industry you join.

Industry jobs require skills and expertise in engineering and science, management, accounting and law.  Skills are transportable.  Industry also provides high paying jobs for blue collar workers, who have an unemployment rate 3% higher than the national average. 

It’s instructive to look at what has already happened in Pennsylvania.  Before the Marcellus, the state imported 75% of its natural gas from the Gulf Coast States and Canada.  Now the state exports gas.  Money that used to flow out of the state is collected within the state and contributes severance, ad valorem and income taxes to state and local budgets.  During the first year of implementation in 2011 the impact fee on unconventional natural gas wells raised $205 million.

You don’t have to take my word for it.  Go see for yourself.  It’s easy to drive to Tioga, Bradford or Susquehanna counties.  Go to the diner.  Talk to people.   Of course there are some nay sayers, change is never easy, but by and large people are enthusiastic about what’s happening.   All eight elected state representatives from these counties, Republicans and Democrats, are in favor of natural gas.

As State Senator, Lisa Baker, from Susquehanna County said in a speech she gave on June 29, 2012 to the Pennsylvania Senate supporting Shell’s ethane cracker, “Over the years we’ve seen multiple economic strategies launched and countless incentives and assistance programs offered to jump start job creation.  Few have had any hope of yielding the economic payoff anticipated from this project. “

Till Next Time,

Energy Mom

New York City

Dear Shale Protestor,

Once the cameras stopped, the real action began in the public fracking debate I participated in between industry representatives and Cornell faculty held November 15th on campus. 

During the debate, industry representatives aimed a fusillade of shots at Bob Howarth, Rene Santoro and Tony Ingraffea’s paper claiming that unconventional natural gas development causes more greenhouse gas emissions than coal.  Criticism ranged from the general, like no paper written since supports them, to the specific, like a pumper (production field hand) driving up to a well venting such large amounts of methane would have to have a death wish. 

Howarth defended the work.  He doubled down saying that his new findings will show plumes of methane coming off natural gas fields, which have been aerially photographed by both Purdue and Cornell Universities.  He also shot back with some wicked humor snidely insinuating that anyone who disagrees has “methane coming out of more places than we know.” 

After the debate, everyone shook hands in a show of sportsmanship.  Panelists on either side continued talking in pairs and small groups.  I thought Howarth would drop the disdain and engage the criticism showing intellectual curiosity worthy of a professor.  

He did just the opposite.

When I asked whether he would work with an industry advisory committee, he replied that he didn’t need one.   When I asked about including a petroleum engineer among his co-authors, he replied that he already had one, Tony Ingraffea. When I asked if and when he was going to retract his paper, he went into a tirade about how he had spent his life doing real science unlike industry hacks like me. 

Each question caused him to get more agitated, drawing closer and closer.  By the time it was over, he was standing so close to me that I felt personally threatened.   

So why would a tenured professor at an Ivy League institution stoop to name calling and physical intimidation?  Is this education?  Or is it indoctrination?

By the way, if any graduate student reads this and recognizes themself in my shoes, go file a harassment complaint as fast as you can! 

Till Next Time,

Energy Mom

New York City

Dear Shale Protestor,

The energy panel organized by undergraduate students at Columbia University here in New York City asked a lot of good questions.  The first question was, "What are the potential environmental consequences of fracking?  Out of the impacts which are short term and which long term?" 

I told them that there are all kinds of worries, but most are not very substantial.  Yet, while the potential for environmental impact is small, it is not infinitesimal. 

Here is what can happen and what is being done about it:

1.      Short term Impact:  Well drilling is a construction project: first the surface location is prepared, then the equipment is placed, finally supplies are delivered and the drilling takes place.  It takes anywhere from a few weeks to a year or more depending on how many wells are drilled, how deep and long they are.  Truck traffic is significant and roads take a beating.  To counter this, states like Pennsylvania collect an impact fee.  In 2011 that totaled $205 million in 2011.  The money is divided between the state, state agencies, counties and municipalities.  It is used to repair roads, bridges, provide affordable housing, preserve open space and buy equipment for first responders.  Communities that allow drilling must be fairly compensated.

2.      Short term Impact:  All wells are drilled through aquifers.  Nearby water wells may run cloudy for a few days while drilling occurs.  That’s from the pressure wave that is created by drilling the surface hole.  Typically the disturbance clears up in a few days.  If it doesn’t, it’s usually because there is a problem with the water well.  In the United States there are millions of rural, unmonitored, unregulated water wells.  Many of the wells are old and have never been maintained.  Natural gas drilling can expose pre-existing problems with methane and bacteria that the homeowner may not have been aware of.  Pre-drilling water samples, and monitoring water while drilling, can be used to improve rural water supplies.

3.     Short term Impact:  Chemicals and brine handled on the surface may spill.  This is not new and companies have procedures to reduce the risk, mitigate the impact, and clean up the spill.  All Spills have to be reported to the state authorities.  Companies are increasingly using food grade chemicals in their wells.  They are self-reported on http://fracfocus.org. By the way, more than 200 energy-producing companies have registered over 15,000 well sites in the past year, not because they had to, but because it was the right thing to do.

4.      Long term Impact:  Improperly constructed and poorly maintained wells cause problems.  They are conduits for gas migration. Surface casing has to be set across the aquifer and cemented into place.  This has to be verified with a pressure test and a cement bond log. Intermediate casing must be set across shallow gas zones and cemented into place.  This has to be verified with a pressure test and cement bond log.  Casing head pressure has to be monitored.  If a well develops a casing leak or a tubing leak it has to be repaired.

5.     Long term Impact:  Poorly sited equipment causes problems.  Compressor stations and condensate tanks located near homes cause complaints about noise and smells.  Compressors need enclosures and noise abatement.  Tanks need vapor recovery.

6.      Long term Impact:  Improperly plugged and abandoned wells cause problems.  The proper procedure is once the well is past its life, it is pumped full of cement.  The valves at the surface are disconnected and hauled off.   Producers have to set money aside for P&A (plug and abandon) costs.  Abandoned and orphaned wells are a problem in some states because this wasn't done.  Texas serves as a model for how to cope with the problem.  Despite having drilled over a million wells, the state only has 8,000 orphaned and abandoned wells and aggressively locates and plugs 1,400 wells per year.

Every one of these impacts can be addressed by effective regulation and oversight.  

Most of them are already being addressed by good will and self interest.  

Till Next Time,

Energy Mom

New York City

Dear Shale Protestor,

I just returned from speaking at the inaugural event of the Columbia University Energy Club.  The students were great!  About 80 attended a 2-hour panel discussion focused on the Marcellus, petroleum, "clean" energy and energy self-sufficiency. 

Ironically, the day before, the International Energy Agency (IEA) published their annual World Energy Outlook 2012 predicting that the United States will become energy self-sufficient by 2035.  

While the kids in the audience didn't appreciate the significance, the old timers on the panel were stunned.  Many of us remembered November 1973 when Richard Nixon announced the goal of energy independence for the United States.  He challenged the country to do it in 10 years. 

Nixon built on Kennedy's challenge to put a man on the moon never imagining which was the bigger gauntlet.  Even with the discovery and development of the giant Alaskan oil fields and offshore Gulf of Mexico, energy independence remained elusive.

Well 62 years later, the U.S. just might do it. It turns out that the keys to the kingdom are a combination of developing unconventional resources (55%) and energy efficiency (45%). 

To be sure, there are a lot of things that have to go right.  Energy independence could still slip away.  Prices have to cooperate, neither too high nor too low, technology must improve and the promise of shale has to be fulfilled.  Are the hydrocarbons really there in commercial quantities?  We won't really know until we drill the wells.  Plenty to screw up in the next 23 years.

Yet, to think that there really could be a viable path to energy independence is worthy of a full-stop pause.  Do you think that the United States oil and gas industry could win the next Nobel Peace Prize?

Till Next Time,

Energy Mom
New York City

p.s. - Assuming that the Nobel Committee does not award the Peace Prize to industry, I am going to frame the front page of the Wall Street Journal, U.S. Redraws World Oil Map, November 13, 2012.
It's close enough.