New GP Columnist Scott Montgomery explores the controversial choice presented by frac technology.
I‘m beginning this column with a provocative discussion of a controversial subject. Energy, after all, is a topic that touches everyone so deserves debate and multiple viewpoints. Let’s start with a question: is there any doubt whether the “fracking revolution” has come with considerable benefits for global energy and geopolitics? There shouldn’t be.
In a decade, this “revolution” has created a new era. It has, for example, flooded the U.S. with natural gas whose price has been so cheap as to replace coal use in dozens of states. More generally, it has transformed the U.S. from the world’s largest importer to its largest total producer of oil and gas, giving it growing impact as an exporter on the world stage. U.S. oil production, in particular, has deeply cut into OPEC’s market power. Indeed, the cartel’s most ferocious competition today comes not from large state-owned firms in places like Russia or Norway but from hundreds of small, independent companies mainly operating in the American West.
Then there are the forecasts. In 2013, U.S. analysts predicted that the flood of new supply would be mostly a short-term gush, ending by around 2020 before declining along with the rest of U.S. production. But by late 2016, this had become a forgotten prophecy. Projections now have U.S. production rising for decades, through 2040 and into the starry beyond. Even the International Energy Agency, usually cautious in its prognostications, has said the U.S. will be a net exporter of oil in less than a decade (it still imports about 30% of its crude). Hopes are strong in many quarters that the world will now depend less and less on OPEC and Russia as it makes the transition to electric vehicles. This especially applies to nations like China, South Korea, Japan, and India, where such dependence is especially high. And while debates flourish about how much oil the U.S. really has, reports have appeared from credible sources stating reserves are even larger than those of Saudi Arabia. This is likely to be possible only at higher oil prices, of course (>$60/bbl). But even as an example of lubricated enthusiasm, it expresses the level of change that has taken place.
This is big news for the world, not just the U.S. The technology is now being applied in Canada with considerable success and will add to that country’s export capability too. China’s shale gas/oil production is growing annually, as it is in Argentina, with continuing programs in India, Colombia, and elsewhere. On top of this, the “revolution” has survived a period of collapsed oil prices that it helped create itself. To bring prices up, OPEC has had to reach beyond its own membership to forge a deal for cutting production with ten other nations, including Russia. That was in late 2016. They have since agreed to continue the cuts till late 2018. The size of this group and the length of the cut reflect the market power of the “revolution” in just the U.S. With development elsewhere, Russia’s energy influence in Europe and the concerns that have so long been focused on a handful of oil-rich states in the Middle East would fall no small amount.
None of this, however, is enough to quell the conflict about fracking. Certainly no major advance in the oil industry goes unpunished (especially in the U.S.), but this hardly says it all. Much of the controversy has centered on water, the presumed contamination and overuse of it, including surface, ground, and aquafer supply. But fracking has been associated with many other problems too: massive methane release, earthquakes, air pollution, radioactivity, increased cancer incidence, underweight babies.
Taken together, these claims suggest a public threat equal to the combined perils of 19th century industrialism. Indeed, “fracking” has become nothing less than a new four-letter word in the glossary of greens everywhere. Here is not the place to take up the debate in detail, except to say that, as with other science controversies, fact is diluted with unfortunate doses of anecdotal “evidence,” fear, and exaggeration, including about water contamination. Fracking, it may be, serves as a stand in for larger worries about perceived threats related to corporate and governmental power. And this raises a question.
What if the controversy, as now constituted, defines a distraction from a greater and more long-term conflict? What if worries over water, earthquakes, etc., focus too much attention on the wrong controversy? The question is sure to anger some readers. But there is a reason to ask it.
Geologically speaking, frac technology has confirmed a striking truth: our planet holds vastly more oil and gas than previously imagined. Fracking has transformed shale, by far the most abundant sedimentary rock on Earth, into a common hydrocarbon reservoir. Leaving aside the cautious estimates offered to date, if only a small percentage of the planet’s total shale volume contained hydrocarbons, this would mean many trillion cubic meters of natural gas and trillions of barrels of oil, immense volumes. Advancing frac technology further, adapting it to individual shales, could unlock a much more of the total resource. To deny this is to side with statements in the early 2000s that U.S. production had peaked long before and would never rise again. Even a glance through the U.S. Geological Survey’s global evaluation of petroleum systems shows hundreds of onshore and offshore shale and tight formations with hydrocarbon potential. This doesn’t include the thousands of existing and abandoned fields that might be revitalized by the technology.
The upshot is this: having consumed roughly 1.3 trillion bbls of oil-equivalent since 1860, the world has only just entered the Hydrocarbon Era that could be. At the historical moment when the world needs to shift from high-carbon to low- and zero-carbon energy, it is faced with a radical abundance in fossil fuels.
Frac technology thus presents us with a controversial choice regarding the energy future. Does it make sense to utilize some part of the vast bounty and benefit that hydrocarbons from fracking can provide? Or is it better for the world to ignore such an immense resource and its advantages and instead turn to other sources in the hope that such advantages can be recouped in some way? True, many nations are turning away from coal, also abundant. But coal is high-carbon and highly lethal in its pollution; natural gas is neither. In fact, as a replacement for coal in heating and power generation, it is also a substitute for oil, not only in these same two areas but in land transport (electricity for electric vehicles), petrochemicals, generator fuel, and marine fuel.
For some, the answer to our question of choice will be easy, even automatic. But for policy makers, I wager, it will be more difficult and less final. If there is one thing we have learned about energy and climate change, it is that first impressions and early decisions tend to have a brief lifespan.