by Russell Gold
On a smaller scale, there are many people lowering their energy usage. They add insulation and double-paned windows to their homes and purchase more efficient heating and air-conditioning systems. Some run their cars on fuel made from leftover vegetable oil or inedible plant material. Installation of residential solar panels is booming as prices drop, allowing people to generate their own electricity on their roofs. The most committed can even install batteries to store excess solar power and use it at night, cutting the wires that connect them to the grid altogether. This declaration of energy independence—or, at least, independence from fossil fuels—is a personal choice. But it is not a choice that the US economy can make today.
Renewable energy advocates point to Germany as an example of what could be. A quarter of the electricity comes from wind turbines, solar panels, and burning biomass—leftover wood chips and the like. Power generation has also been democratized: the majority of the new renewable electricity comes from homeowners, cooperatives, and municipal governments, not traditional power utilities. Germany pledged to reach the goal of 80 percent renewable power by 2050. It sounds great, and it is—to an extent. It will require new technologies (improved batteries for power storage) and billions of dollars to string up new power lines. Meanwhile, companies that use gas, coal, and nuclear fuel are in trouble. “Conventional power generation, quite frankly, as a business unit, is fighting for its economic survival,” said the chief financial officer of RWE, Germany’s second-largest utility. Germany began this transition in 1986, after the catastrophic meltdown at the Chernobyl nuclear power plant in Ukraine, and implemented a focused federal energy policy in 2000 to eliminate coal and nuclear power. Energy delivery systems are enormous and complex. Changing them takes time, political will, and patience.
The United States went about its own Energiewende—what the Germans call this energy change—driven by a very different set of forces. The United States has stumbled about without a comprehensive energy policy for decades. It relied on the market to supply the energy its people and industries wanted. Early government support for new natural gas extraction technologies led to a much larger free-market investment. Collaboration between shale drillers, millions of landowners, and Wall Street moneymen created a national energy policy: drill a lot of shale wells, unearth a huge new source of natural gas, and let the pieces fall where they may. There was enormous risk-taking by private companies in pursuit of even larger financial rewards.
Perhaps that’s a lesson to be learned from both George Mitchell and Aubrey McClendon. You can’t have the benefits of a bumper crop of new energy and economic growth without brashly taking chances. Both Mitchell and McClendon set in motion huge technological and social changes without an inkling of understanding where it all would lead. Fracking began as a way to get at the Barnett Shale’s natural gas, but has proven just as effective at unlocking the Bakken’s crude oil. Rapid drilling and fracking created problems that need to be addressed. Some nations require proof that a new technology will not cause public harm before companies can engage in it. The United States doesn’t subscribe to this approach. Exxon’s Rex Tillerson, for one, approves. “If you want to live by the precautionary principle, then crawl up in a ball and live in a cave,” he said.
The unfettered market is the ugly beauty of the US energy system. You can usually count on this free-market approach to deliver needed energy, but it can also make you want to turn away and not look too closely. It is the responsibility of the industry, landowners, and the energy-consuming public to ask hard questions and make sure there are no corners cut.
Nobody would argue that a nuclear plant should be built as quickly as possible without spending the necessary time to ensure it is safe and robust. Fracking is different. The risks of any single well are tiny compared to a nuclear power plant. But several hundred wells? Several thousand? When McClendon’s Chesapeake began to drill and frack thousands of wells, his appetite for risk and ability to push the pace was breathtaking. It is entirely possible for the energy industry to develop oil and gas from shale safely, but not while simultaneously more than doubling the number of wells it drills in a decade.
Fracking arrived at an auspicious time. Just when it seemed like we had used up all the easy-to-tap fossil fuels, forcing the world to get serious about renewable energy technologies, an enormous new supply of oil and gas emerged. It provided an economic boost for the United States—and many large checks to landowners amid the economic meltdown that began in 2008. The US dollar is strengthened by lower imports of crude and energy-intensive industries feasting on cheap gas to export more goods. America’s energy revolution is even untangling some of the thorniest foreign policy challenges the nation has faced for the past forty years. Rising US crude oil production could weaken OPEC’s influence and make geopolitical demands of major Middle Eastern producers, notably Saudi Arabia, less pressing for Washington’s diplomats. OPEC, the supplier of one in three barrels of oil consumed around the world, said in a report posted on its website in April 2013 that the shale-driven oil boom in the United States was “threatening to drastically reduce America’s oil-import needs.” In 2014 China is expected to pass the United States as the world’s largest importer.
In late 2005 the chairman of the Federal Reserve, Alan Greenspan, told Congress that America was running dangerously short of domestic natural gas and warned that rising prices would threaten economic growth. His tutor on the subject was Lee Raymond, then the chairman and chief executive of Exxon Mobil. As it turned out, natural gas prices had a profound impact on the US economy, but not the way that Greenspan predicted. Chesapeake and others found so much natural gas that prices dropped below $4 per million British thermal units—and even dipped below $2 for a brief span. Big industrial consumers of gas scrambled to take advantage of the bounty. Inexpensive gas! In the United States! Steelmaker Nucor, in 2011, began construction of a $750 million iron ore upgrader, creating 150 permanent jobs in Saint James Parish, Louisiana, that paid an average of $75,000 a year. Seven years earlier, Nucor had closed a similar upgrader in the same spot, dismantled it, packed it in crates, and shipped the entire thing to Trinidad, a small Caribbean nation that had discovered natural gas off its shores. Companies that make petrochemicals, fertilizer, and aluminum are building new facilities in the United States, creating a much-needed boost in the midst of the economic downturn created by the real estate crash of 2008 and 2009. After a long decade of hemorrhaging manufacturing jobs overseas, thousands of blue-collar jobs are being created when many believed those jobs were gone for good.
To supply all these new steel mills and chemical plants requires thousands and thousands of new wells. As a result, a major industrialization of both rural and urban parts of the United States is taking place. Wells are being drilled and fracked by rumbling machinery that appear one day in the middle of a field. Following behind are new pipelines and processing plants to strip out ethane, butane, and other valuable liquids from the gas. It would be unwise to throw away this energy and its benefits. It would also be unwise not to seriously grapple with how to extract this energy in a way that lessens the burden for communities above the shale and avoids creating problems for future generations.
I don’t fear fracking. I fear carbon. The emergence of fracking—along with improved horizontal drilling and radical improvements in drilling speed and cost—has created an abundance of fuel, but it has also opened a Pandora’s box. The availability of all this energy has thrown a lifeline to fossil fuels. There’s a great quote attributed to Sheikh Zaki Yamani, the Saudi Arabian oil minister in the 1970s: “The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” Fracking ensures that the age of oil—and its princely hydrocarbon cousin, the natural gas molecule—will not end because we have run out of fossil fuels. But it may end because burning these wonderful fuels puts the planet farther down a path we don’t want to head down.
All the economic boosts delivered by increased
drilling—and inexpensive energy—won’t last forever. As the late petroleum economist Paul Frankel put it succinctly, “There is always either too much or too little.” The corollary to Frankel’s statement should be: when there is too much, we will use more and more until there is too little again. It’s already happening. The Nucor facility is one of a hundred new industrial facilities planned to take advantage of the new abundance of natural gas. Shutting down coal power plants is also increasing demand for gas. Then there are the dozen or so schemes to export natural gas on giant thermos ships. And there are plans afoot to run more cars and trucks on natural gas, and to replace fuel oil for home heating in the northeastern United States. I don’t know how—or when—the era of gas abundance will end, but I am sure it will. And given the rush to take advantage of this domestic fuel, I suspect it will be in my lifetime.
Fracking provides a couple decades to make wind and solar generation better, improve battery technology needed to store renewable power for windless, dark nights, and even build new nuclear power plants. Until then, natural gas is the best available option available for reducing carbon emissions, without grinding the wheels of modern economies to a halt.
The shale revolution provides important insights into how energy change takes place, lessons worth studying by people interested in a future powered by renewable fuels. Free-market adherents argue this energy surge was the result of companies making risky investments because of rising fuel prices and private landowners pursuing their economic self-interest. In short, they declare the shale revolution was a victory for market forces. Good government supporters point out that the Energy Department bankrolled early research into shale exploration that was picked up and carried forward by Mitchell Energy. The federal government also provided stable and consistent policies, in particular how the injection of water that is the heart of hydraulic fracturing would be regulated. They contend the government laid the groundwork for the revolution. Finally, there are technocrats who celebrate the power of two disruptive technologies, fracking and horizontal drilling. It wasn’t market forces or government policies, they argue, but the power of technology that won the day.
The truth is all three camps are right. To take off, the shale revolution required consistent government policy, disruptive technologies, and a healthy dose of market forces. They all came together and were pulling in the same direction for the first time in decades. The result has been staggering and transformative. Modern societies face many complex challenges, from building an adequate health care system to devising robust economic policy. The lesson of America’s energy revolution seems to be that when faced with stubborn problems, the right approach is to broadly align government policy and market forces in order to create fertile ground for disruptive technologies. The growing amount of carbon in the atmosphere creates another seemingly intractable problem. How can a country quickly transition to low-carbon energy without wrecking its economy? The lesson from the development of modern fracking likely applies here as well: create the right market signals, set smart long-term policy goals, and let the technologists develop needed breakthroughs.
It is too soon to declare victory in fracking. The work improving individual wells isn’t over. Widespread use of Claude Cooke’s leak-detection tool—or something comparable—seems like a smart direction in which to head. It’s not the only necessary upgrade. Fracking has expanded so quickly that many eminently sensible technologies to lower the impact of drilling—such as recycling water needed to frack a well or using gas to power the machinery, instead of emission-spewing diesel generators—only began to be adopted years into the drilling boom.
The unofficial policy was to drill first and ask questions later. But questions are being asked and answers are beginning to emerge. How well those answers are heeded will likely determine whether we look back on the shale revolution with relief or regret.
Will the construction of mobile factories for drilling and fracking leave local residents with worse health, whether from breathing too many air pollutants or being stressed out by the noise, trucks, and fear of spills? One tool for answering that question is called a health impact assessment. It’s a lengthy process, promoted by the Pew Charitable Trusts, the Robert Wood Johnson Foundation, and the US Centers for Disease Control and Prevention, that brings together local governments, the industry, and residents to tease out the potential health impacts of an industrial development and devise ways to mitigate those impacts. The first—and, as of this writing, the only—assessment of a gas development took place in Battlement Mesa, Colorado, in 2010. This was years after the energy boom began. The assessment was inconclusive. There weren’t enough data, the public health investigators said, to determine what impact drilling wells nearby would have on the community. Local officials had to make decisions about permits and were “often unable to wait for science to catch up,” the investigators wrote. Much more research was needed.
Another basic question about shale development deserves particular attention. Natural gas—specifically its primary ingredient, methane—is a more potent greenhouse gas than carbon dioxide, although it breaks down in decades, not centuries. When a shale well is fracked, the fluid flows back to the surface. It is either recycled or sent to a disposal well. Some gas comes up with the fluid—and is often vented into the atmosphere. More gas leaks from pipelines on its way to residential and industrial consumers. Scientists have been arguing about whether the typical shale well releases so much methane into the atmosphere that it erases any global warming benefits of using gas instead of carbon-intensive coal. This question is critical. Unfortunately, the debate over the subject began in 2010, a full decade into shale development. By that point, the industry had already drilled one hundred thousand shale wells, and that’s a conservative estimate.
What’s the answer? A Cornell study, backed by the antifracking Park Foundation, found the amount of natural gas released was so significant, we were better off burning coal. This research was widely criticized, and a subsequent, much larger study by two Massachusetts Institute of Technology researchers came to the opposite conclusion. The debate rages on, although the balance of recent scholarship comes down on the side of the MIT research. It’s disturbing how many wells have been drilled before this question of methane leakage was asked. The MIT study points out that a couple states require—and some operators employ—“green” completions. They capture the fluid, take out the natural gas, and sell it. What’s striking is that using this green technology costs between $1,000 and $3,000 per day—on wells that can routinely cost $10 million. And by capturing and selling off the gas, a green completion more than pays for itself. This technology will be required by federal rules in 2015.
These upgrades to the basic fracking tool kit could also help reduce air pollution. Natural gas wells, during drilling and fracking, can emit pollutants and chemicals that form ozone. Indeed, a rural corner of Wyoming (population 11,500) with substantial drilling has recorded concentrations of ozone-forming pollutants similar to metropolitan Chicago (population 9.2 million) and Phoenix (population 3.8 million). Breathing in high levels of ozone can impair lung function and trigger asthma. Even the Texas Commission on Environmental Quality, not known for its aggressive pursuit of industry, found instances when faulty valves released enough benzene in the Barnett Shale to exceed air-quality standards.
Why wouldn’t the industry adopt technologies that both protect the environment and boost its bottom line? The same reason that there are enormous flares of natural gas in North Dakota. The industry has wanted to move extremely quickly to drill the wells—to beat the ticking clock of lease obligations, to meet or exceed Wall Street’s earnings forecasts, and to begin generating a return on the money it invested in wells. In North Dakota, companies don’t want to wait for gas pipelines to be installed, not when it can begin to pump out valuable crude. And most don’t want to wait around if green completion equipment isn’t available.
It’s time to slow down. My father rewired t
he Farm—even if the inspector’s complaint was that the electrical boxes were a quarter inch too small. “If anything happened to those kids because of the wiring, I would never forgive myself,” he said. It might not have made any difference, but maybe it would have. When it comes to fracking, getting it right is important. And if we blow it, we’re never going to forgive ourselves.
So, as the animated country singer in the Dallas museum intoned, “Take the time to get it right. There’ll be gas tomorrow night.”
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1. I have used the spelling frack and fracking throughout this book for two reasons. First, they are the preferred spelling of the Wall Street Journal and other major newspapers. Second, the spelling fraced simply doesn’t convey the clipped cadence of the word as it is pronounced by opponents and engineers.
Thanks and Acknowledgments
When I began reporting on the petroleum industry more than a decade ago, my knowledge about fossil fuels was limited. Gasoline came in three flavors: regular, premium, and superpremium. It had something to do with crude oil. I thought oil and gas was a low-tech business. I once naïvely asked a sales representative from a data storage company what he was doing at the world’s largest gathering of oil vendors. Computing power was for Silicon Valley, not Houston.