Oil Production Soars, Prices Fall, Water Contest Grows

copenhagen-globe-11The Department of Energy earlier this  month reported that crude oil production in the United States climbed to 5.88 million barrels per day, the most since 1998. Meanwhile the share of oil demand taken up by imports is declining. After nearly three decades of steadily falling domestic production, the U.S. is now in the midst of an oil boom that is in its third straight year, with no sign of abating.

Last night on the way home from Grand Rapids I paid $3.16 a gallon for regular gas. I can’t recall the last time gas was so close to the $3.00 mark in Michigan. A number of factors account for the moderating price of gas, not the least of which is lower demand and increasing supply in the United States.

Big Texas and North Dakota Oil Plays
The latter is closely related to the deep shale oil drilling booms now underway in North Dakota, soon to be the second largest oil production state, which is on track to supply 150 million barrels of oil this year, nearly 40 percent more than in 2010. The other big new oil play is the Eagle Ford Shale in east Texas, where deep shale oil development has helped push that state’s daily production to 1.4 million barrels per day, up from 1.1 million barrels per day last year.

The U.S. once produced an average of 9.84 million barrels per day. That was back in 1970, when we were using 11.1 million barrels per day. The ample domestic supply and its low price fueled the drive through economy, the spread out life of cars and convenience, that is now in a state of accelerating collapse.

Still, this new oil boom, and its related boom in natural gas production, is providing a period of reprieve for the principles of choice and mobility that motivate what’s left of our national spirit. Domestic oil production could well climb to near the 1970s levels, reducing imports, limiting our interference in oil-exporting regions of the world that hate us, holding prices in check, and adding to domestic stability. It is providing hundreds of thousands of new jobs, and making a handful of companies and their executives and owners even richer than they are.

The big question for the United States is twofold. One, can we summon the will to limit the environmental damage the drilling is causing across the country? Two, can we break through the rhetorical impediments — no new taxes, regulations are killing jobs, government doesn’t work, etc  — to require developers to pay state and federal fees on every new barrel of oil and thousand cubic feet of natural gas produced?

A 15 percent state and federal fee just on the new oil production alone would generate $10 billion annually, enough to resolve the deficits in new energy producing states like New York, Ohio, and Pennsylvania. A similar tax on new natural gas development would generate $20 billion annually, by my calculation. That would be enough to make substantial investments in science, research, education, infrastructure, transit, and clean energy to put the U.S. in contention globally to at least compete in the new markets of the 21st century. Moreover, as oil and gas production increased, as it now seems likely to do over the next generation, so would revenues to invest in public projects.

My sense is the environmental community has an opportunity to lead on this one. Along with demanding accountability and transparency to limit damage to land and water, environmentalists also have the chance to move beyond their own institutional inertia. They should call for a public return on natural resources to reposition the country to leverage the wealth from new energy development to speed the new era of efficiency, low carbon energy generation, innovation and job growth. Use the power of organizing to move the country to a new thought. Otherwise the same old thinking will prevail with a few getting filthier rich as they damage the land, water, and what remains of our national purpose.

— Keith Schneider

More on the Energy Boom and Water


Since June 2010, Circle of Blue has pursued a comprehensive and ground breaking reporting project – Choke Point: U.S. — to understand the confrontation between energy production and fresh water supply. Circle of Blue, where I serve as senior editor, is a non-partisan, non-profit, online news organization covering the global freshwater crisis from our six-person newsroom in Traverse City, Michigan. You’ll see from the Web site that when it comes to serious original reporting on water, energy, food, law, and policy, we’re punching way above our weight.

Simply put, rising energy demand and diminishing fresh water reserves are two trends in dramatic collision across the country. Moreover, the speed and force of the collisions – what we call choke points — are occurring in the places where growth is highest and water resources are under the most stress: California, the Southwest, the Rocky Mountain West and the Southeast.

These regional energy-water choke points are getting tighter because the defacto national energy strategy is devoted to more production, particularly for unconventional sources of deep shale oil and shale gas, which use three to four times more water to produce a gallon of fuel or 1,000 cubic feet of natural gas than from conventional petroleum and natural gas reserves.

Moreover, not nearly enough attention is paid by federal and state governments or the energy industry to addressing water supply and distribution, the primary impediments. We found, in fact, that a far-reaching federal program of research and analysis, funded by Congress and designed to help the nation anticipate and temper the mounting conflict between rising energy demand and diminishing supplies of fresh water, has been brought to a standstill by the DOE.

The research program, known as the National Energy-Water Roadmap and ordered up by Congress as part of the 2005 Energy Security Act, was meant to provide lawmakers and the executive branch two studies of the impending conflict between energy and water. The program also explains what to do about the collision. The first, completed by a team of federal scientists in December 2006 and made public a month later, described the serious consequences the nation is already encountering, as the United States encourages more energy production, which is the second largest water-using sector, but gives scant consideration to water supplies, which are in retreat in most regions of the country.

Meanwhile, the second and final report that Congress commissioned-a comprehensive research agenda to better understand the nation’s energy-water choke points and begin developing real world solutions – has been held out of public view for more than four years. The DOE declined repeated requests for interviews about the reasons for keeping the report from publication.

Technical Basics
Scientists define water consumption by two basic measurements. One is how much water is withdrawn from America’s rivers, lakes and aquifers for domestic, farm, business and industrial use, most of which is returned to those same sources. The second is how much water is actually consumed in products, by livestock, plants and people, or evaporates in industrial processes.

In both measurements of withdrawal and consumption, energy is at the top of the charts. The United States withdraws 410 billion gallons of water a day from its rivers, lakes, aquifers and the sea. About half is used to cool thermoelectric power plants, and most of that is used to cool coal-powered plants, according to the most recent assessment by the United States Geological Survey (USGS).

Similarly, the country consumes about 100 billion gallons of water a day. Nearly 85 percent is used for crop and livestock production. Of the 16.1 billion gallons that remain, half is devoted to producing energy. That balance is tilting to more water consumption for energy production:

Among other details, Circle of Blue found:

  • The region that is confronting the energy water choke point first and most dramatically is the Southwest, as climate change steadily diminishes snowmelt in the Rocky Mountains. The Colorado River transports less water than it did a decade ago. In 2010, when we did our reporting, Lake Mead, which stores water from the Colorado River and is one of the largest reservoirs in the country, was 41 percent full. The lake’s water level had fallen 135 feet since it was last full in 1999. Declining water levels prompted federal managers to reduce the Hoover Dam’s hydroelectric generating capacity 33 percent. Last winter, heavy Rocky Mountain snows put more water in the reservoir, but generating capacity is still reduced.
  • The next era of hydrocarbon development is well underway in the United States as energy companies tap the “unconventional” oil sands of Canada, the oil shales of the northern Great Plains, and the gas shales of the Northeast, Texas, Oklahoma and the Upper Midwest. But tapping each of these carbon-rich reserves is producing more damage to the land, generating more carbon emissions, and using three to four times as much water than the conventional oil and gas reserves they are replacing. Essentially, the energy industry is becoming a mining industry, turning carbon-rich sands into fuel and using water shot into the ground under super high pressure to shatter deep shales to release oil and gas. The scale of the industrial enterprise is immense and moving with amazing speed. In tar sands production alone, oil companies and pipeline developers are spending $15 billion to develop the tar sands; $30 billion to build a new network of pipelines from Canada to U.S. refineries (including one that has produced a dispute between state and the EPA), $20 billion to modernize refineries in the Great Lakes, Illinois, Oklahoma and the Texas Gulf.
  • The political influence of the energy industry has few equals in the U.S. In Kern County, Calif., where the agriculture industry and the oil industry compete for diminished supplies of water for irrigation and energy production, the big winner is the oil industry. While a severe drought wracked the state, and agricultural and environmental groups wrangled over sharply reduced water shipments to irrigate the arid San Joaquin Valley, the oil industry received 8.4 billion gallons a year-as much water as it needed-from the web of aqueducts and canals that carry water from rivers and reservoirs high in the Sierra Nevada.
  • Carbon capture and storage technology, which is the favored tool to reduce carbon emissions from fossil-fueled electric generating plants, is undergoing a handful of tests, including at a new electric-generating plant just permitted and partially financed by the DOE in arid Kern County. But the technology also increases water consumption at coal-fired utilities 40 percent to 90 percent, according to the Department of Energy.
  • Unless the United States plans more carefully, generating energy from clean alternatives is almost certain to consume much more water than the fossil fuels they are meant to replace. Generating one gallon of fuel from irrigated corn, for instance, takes 650 gallons of water. Generating one gallon of gas from oil takes one gallon. Solar thermal power that is conventionally cooled consumes more water than a coal-fired and nuclear-powered plant. Of all the available green energy technologies, only wind and solar photovoltaics consume less water than fossil-fueled energy. Geothermal can save water or consume more depending on the technology used and the location.


  • Contest between energy and water could cause huge electricity price rise in Arizona
    When it was completed in 1974, the 2,250-megawatt Navajo Generating Station (NGS) near Page, Arizona, provided the power to draw 1.42 billion gallons of water a day out of Lake Havasu, fed by the Colorado River and along the border with California, and pump it 336 miles and nearly 3,000 feet uphill in the Central Arizona Project (CAP) canal all the way to Tucson. The power plant and the canal reflected the hubris of a rich nation at the height of its wealth, and determined to build in one of the driest regions on the continent energy-hungry and thirsty cities that defied the laws of nature. Nearly four decades later, in an era marked by the warming climate, the increasing financial and environmental costs of generating power with coal, and declining reserves of fresh water in the West, the historically tenuous cords of legal agreement and civic support that have always defined the CAP are threatening to come unraveled. At the core of the problem is the price of water, which is closely tied to the cost of operating the plant. Both could rise substantially if the Obama administration and the U.S. Environmental Protection Agency issue new rules to limit emissions of carbon dioxide and other haze-producing gases. There is also a drought that has persisted for more than a decade on the Colorado Plateau, raising a serious question about how much Colorado River water will be available to both cool the giant power plant, and also supply the CAP’s farm and business customers, and 80 percent of Arizona’s residents.
  • Very big new hydro dam in Alaska
    At a press conference in Anchorage on July 25, Alaska Governor Sean Parnell signed a ceremonial copy of a bill to authorize a 200-meter (700-feet) rockfill dam on the currently dam-free Susitna River. Parnell signed the official bill on July 13, after it had passed the state legislature in June, the Anchorage Daily News reports. Senate Bill 42 gives the Alaska Energy Authority (AEA), a public corporation owned by the state, the power to issue bonds and enter into contracts to build the dam, which is scheduled to be completed by 2023 and is estimated to cost $US 4.5 billion – a figure that does not include some of the new transmission lines that would be built, according to Karsten Rodvik, AEA’s external affairs manager. The Susitna Dam, planned for a site halfway between Anchorage and Fairbanks, will create a storage reservoir 63 kilometers (39 miles) long and three kilometers (two miles) wide at its broadest. If completed, the dam would be the tallest built in the U.S. since the 218-kilometer (717-feet) Dworshak Dam in Idaho, which began construction in 1966 during the height of the American dam-building era.
  • Scarce Water in Texas prompts power plant cooling design change
    Earlier this month, the Lower Colorado River Authority in Texas rejected a permit application from the White Stallion power plant to use billions of gallons of water for its proposed coal plant in Matagorda County. The authority’s decision, the first of its kind in Texas, was prompted by the historic drough, which forced White Stallion to change the design of its cooling system from once-through wet cooling to dry cooling towers, which are more expensive and reduce generating efficiency. Local residents and farmers have been actively opposing the new plant because of concerns for water supply in the Lower Colorado River basin.
  • Water supply limiting factor in oil shale boom
    In North Dakota, now the fourth largest oil-producing state and quickly heading to number two behind Texas, energy companies and state officials are racing to head off an oil production disruption caused by shortages of water. State figures project oil developers will need 5 billion to 6 billion gallons of water annually to frack the more than 1,000 wells drilled each year in North Dakota. For the time being, say state officials, there is enough supply. The problem is that oil developers are concerned about access. Private companies are building their own water supply systems, using pumps and miles of pipes; the state last year authorized a $150 million water distribution system, the largest in North Dakota.

    Similar issues emerged in the last few years with the development of the Eagle Ford Shale formation in Texas, which requires more water per well than in other locations. A single well in the Eagle Ford Shale can require 7 million to 13 million gallons. To obtain this amount during the drought, companies have offered farmers 70 cents per barrel of water.

— Keith Schneider