Modeshift

Converging trends  are roiling the clean energy manufacturing and production sectors here in Michigan and  nationally. President Obama knows it and is worried. The collapse of the Solyndra solar plant in California is  a prickly presidential campaign issue. Jobs and the country’s capacity to reduce its climate changing emissions, (as shown in the emissions counter above in NYC), also are big outcomes.

On Tuesday evening, the president told the story of an unemployed west Michigan furniture worker who landed one of 50 new jobs at Energetx Composites, a wind turbine blade manufacturer in Holland, Mich. that is the beneficiary of big state and federal clean energy grant support. Holland, by the way, also is the site of two big government-supported battery plants involved in supplying the state’s electric and hybrid car sector.

The president’s spotlight on the Holland worker and his vow in the State of the Union to “not walk away from the promise of clean energy” reflects, to some extent, his administration’s deep concerns about the swift evolution in overseas competition. He’s also worried about the fast-changing markets for energy, investment capital, and political and public support that are buffeting the American alternative energy sector.

Indeed, while a new wind energy production line opened in Holland last year, 140 miles away Evergreen Solar, a Massachusetts-based solar panel maker, declared bankruptcy in August and closed its new Midland, Michigan plant that employed about 40 people.

On the production side, solar and wind-generated power are holding their own. Solar energy developers added roughly 2,000 megawatts of new generating capacity last year, about double what was added in 2010. Wind energy propducers added nearly 7,000 megawatts of new generating capacity, 31 percent more than in 2010, according to the American Wind Energy Association.

But siting new plants is often a dogfight. Here in Benzie and Manistee counties where I live Duke Energy threw in the towel this month for a proposed 112-turbine wind farm. Opponents were essentially motivated by their revulsion to big towers interrupting a gentle wooded landscape. The issue was scale. Similar opposition is developing to the Obama administation’s proposal to open federal lands to big solar developments, as my Circle of Blue colleague, Brett Walton, discovered in Colorado’s San Luis Valley.

The popular pushback to big new clean energy projects is just one of the sources of turbulence in the U.S. clean energy manufacturing sector. On the one hand, big companies like GE announced plans in October to build a $300 million solar panel plant in Aurora, CO., that will employ 355 people when it opens this year. On the other hand Amonix, which in May completed a $18 million, 244,000-square foot plant in North Las Vegas to put over 300 people to work manufacturing equipment for big solar thermal plants in the desert Southwest, announced on January 25 that it was laying off 200 workers because of slow market conditions.

The picture in the wind energy manufacturing sector is a little clearer, though not by much. Gamesa, the big Spanish wind turbine maker, has two plants in Pennsylvania and employs 800 people. The company has opened over a dozen big wind farms nationally, including three in its adopted state. In 2009 it laid off several hundred workers but has rehired them. Meanwhile Vestas, the Danish wind energy manufacturers has built four wind manufacturing plants in Colorado that employ 1,500 workers.

Several market trends are smacking the wind energy. First is foreign competition, especially from South America, where new wind blade plants have been built specifically for the U.S. wind market, the world”s second largest behind China. The second is the federal wind energy production tax credit, which expires at the end of this year. Vestas, for instance, has threatened to close its Colorado plants if the tax credit is not renewed. While support for renewal is weak among Republican U.S. House and Senate members, it is strong among Republican governors in windy states — Ohio, Michigan, Nebraska, Kansas, the Dakotas — because of the role it is playing in encouraging job growth.

The third big trend affecting the wind industry is the boom in natural gas production, which is lowering prices and prompting more utilities to consider gas-powered generating units. Last week, the United States reduced its estimate for how much gas lies in the nation’s deep shale deposits by 40 percent. But those numbers are almost certain to be revised again, probably repeatedly, as production companies gain a better understanding of what is there. Even with the lower estimate there are still huge reserves of gas, and of oil, in those shales.

– Keith Schneider

Four years ago, when he campaigned for the office he now holds, Barack Obama described the urgent need to pursue clean energy development because of a grave and persistent problem. Demand and prices for oil were rising, along with national and economic security risks tied to ever higher imports. Supplies of domestically-produced fuel, meanwhile, were falling.

Last night, as the president defined the basic outlines of an “all-out, all-of-the-above strategy that develops every available source of American energy,” the country greeted much different conditions. Domestic production of oil and natural gas is climbing rapidly. Demand is going down. Imports are steadily declining. Prices have steadied.

The result is that while President Obama is still pressing for more sources of cleaner energy — “I’m directing my administration to allow the development of clean energy on enough public land to power 3 million homes,” he said — the allure of pursuing them is not nearly so keen. Summed up, the surge in fossil fuel production has indeed produced an economic reprieve, but one that is exceedingly risky for land and water, and could well turn out to be a surrender to the future.

Here’s why.

Rush to Drill
Horizontal drilling technology coupled with high-pressure water blasting — much of it developed with the help of federal research grants — has opened deep beds of hydrocarbon-rich shales all over the country to gas and oil production. An energy boom has erupted in eight Great Plains states, three mid-Atlantic states, plus Louisiana and California. In 2011,  according to the Energy Information Administration, production of natural gas from deep shales reached 630 billion cubic feet a month, a third of the total U.S. natural gas production and 17 times more than in 2000. U.S. oil production last year reached almost 6 million barrels a day, and has been rising for three straight years, the first time that has happened since the 1970s.

“Right now — right now — American oil production is the highest that it’s been in eight years. That’s right — eight years,” said the president. “Not only that — last year, we relied less on foreign oil than in any of the past 16 years.”

The boom is generating tens of thousands of new jobs in politically strategic places like Ohio, Pennsylvania, and Colorado that are essential to the president’s re-election chances. Since 2005, according to EMSI, an Idaho-based labor market research firm, oil and gas production activities alone generated almost 200,000 new jobs nationally. Nearly 400,000 other jobs in transportation, manufacturing, service, and related support sectors also were created, said EMSI.

The other side of the president’s plan — building a bridge to a new era of cleaner energy sources — is unfolding at a much slower pace. Last year, according to the American Wind Energy Association, almost 7,000 megawatts of wind energy capacity was constructed in the U.S., 31 percent more than in 2010. But China built more than 14,000 megawatts of wind energy, or twice as much.

Fitful Clean Energy Development
It takes big and consistent federal and state investment in wind, solar, cellulosic biofuels, geothermal energy, nuclear energy, clean cars and trucks, trains, and energy-efficient buildings to give innovators and entrepreneurs a solid grip in the cleaner economy. In the era of deficit and disinvestment that describes the political conditions at work in Washington and most state capitals, lawmakers supported by the fossil fuel sector have expressed no enthusiasm for making those investments.

The arguments for pursuing wind, solar, and other cleaner sources of energy make a lot of sense, as do reasons for being more cautious about the consequences of oil and gas production. The use of water is a good starting point.

Much of the shale gas and shale oil development is occurring on the arid Great Plains, where drillers require 2 million to 5 million gallons of water to hydrofracture each well. In a region where competition for water is fierce, water managers are not sure where the supply for thousands of new wells a year will come from. In addition, much of the water that goes down each well has to be brought back to the surface and disposed safely because it contains chemical contaminants. States are only now considering requirements for wastewater disposal from shale oil and shale gas fields.

Contrast that with generating power from solar photovoltaic and wind energy installations, which require, essentially, no water to operate. Or generating fuel from switch grass and other sources of plant-based fuel that can be grown on marginal lands and don’t need to be irrigated.

Reprieve or Suurender
Big clean energy projects, though, are proceeding fitfully. Because of the surge in domestic oil and gas production, they face mounting price competition in energy markets. And they are confronting serious opposition at the grassroots across the country. My colleague at Circle of Blue, Brett Walton, is reporting later this week on one fight over constructing solar plants in Colorado’s San Luis Valley, which is identified by the Obama administration as one of the 17 most favorable places in the U.S. to develop solar energy.

In effect, the fossil fuel reprieve could easily turn out to be a devastating surrender to the future. Researchers at the Massachusetts Institute of Technology, who evaluated the effects of rising shale gas production on clean energy innovation, reached much the same conclusion in a report earlier this month. “People speak of [natural] gas as a bridge to the future, but there had better be something at the other end of the bridge,” said Henry Jacoby, co-director emeritus of MIT’s Joint Program on the Science and Policy of Global Change, and co-author the MIT Energy Initiative’s  The Future of Natural Gas.

– Keith Schneider

Every month the Energy Information Administration, a unit of the Energy Department, updates its Total Energy report, one of the most useful compendiums of data describing the interest and capacity of the American energy sector. The latest edition, published last month, illustrates a national oil and gas sector on a roll.

Among the rich field of data charts contained in Total Energy, two are arguably the most revealing. Table 5.1 (page 77) reports that the number of oil and gas drilling rigs in operation across the U.S. last year reached an 11-month average of 1,865. That is the highest rig count since the mid-1980s, according to the EIA.

Table 5.2 (page 78) reports on the number of wells drilled each year. It shows that the surge in oil and gas production began around 2003, when just under 33,000 wells were drilled in the U.S. Last year about 45,000 wells (including one in North Dakota pictured above) were drilled.

Still, the two most important statistics within the table are these:

1. More than 20,000 oil wells were drilled in the U.S. in 2011, higher than any year since 1985.

2. Of the more than 40,000 oil and gas wells drilled in 2011, just over 10 percent were dry.

Said another way, 90 percent of the wells sunk into America’s shale oil and shale gas fields are producing commercial quantitites of fuel. In contrast, in 1985 drillers sunk almost 71,000 new wells. Over 21,000, or 30 percent, came up dry.

As I’ve noted on ModeShift since returning from a reporting trip to North Dakota last month, a national oil and gas drilling boom is engulfing eight Great Plains states, four others in the mid-Atlantic and South, plus California. A convergence of new exploration and drilling techniques, rising global demand and prices, and suspect governing oversight is producing what looks to be the most powerful surge in fossil fuel production in U.S. history. From every vantage – economic, environmental, cultural, and security — the consequences are momentous.

The abundance of fuel in the carbon-rich shales, coupled with the “nearly can’t miss” risk, is attracting huge investments in the shale reserves, many of them now coming from overseas. Bloomberg reported this week that “Chinese, French and Japanese energy explorers committed more than $8 billion in the past two weeks to shale-rock formations from Pennsylvania to Texas after 2011 set records for international average crude prices and U.S. gas demand. As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc. (IHS)”

Last week Bloomberg reported that “China Petrochemical Corp., the second-largest Chinese oil company, agreed to buy a one-third stake in five Devon Energy Corp. exploratory oil projects in the U.S. for $900 million to expand holdings of reserves trapped in shale. The company, known as Sinopec Group, will pay $900 million in cash and as much as $1.6 billion in Devon’s future drilling costs, funding 125 wells in the coming year.” Devon is a major player in the Eagle Ford shale development in Texas.

Another example is Total SA, France’s largest oil company, which announced just after the start of the year that it paid $2.32 billion to Chesapeake Energy Corp. and EnerVest for 619,000 acres of mineral rights in Ohio’s Utica shale region.

There’s more to come in 2012. In central Louisiana, Devon Energy is developing new wells in the Tuscaloosa Marine Shale that researchers said may contain as much as 7 billion barrels of oil.

– Keith Schneider
(Thanks for the lead to Total Energy from Bob Deans,  former White House correspondent for the Atlanta Journal-Constitution, and now the Natural Resources Defense Council’s associate director of communications.)

Early this morning Scott Terrell boarded Amtrak’s Empire Builder in Coeur d’Alene, Idaho for the overnight ride east to Williston, N.D. A month ago I met Scott while riding the same train to the heart of the northern Great Plains oil and gas boom. In the weeks since, I’ve learned more about the influence of energy development in the Dakotas and other states, and how it affects men like Terrell.

Let’s just put it this way. It’s about the money. Terrell is 58, and an under-employed painter and carpenter from Idaho. He’s been earning good money since August driving a haul truck on a construction crew that builds drilling pads and does reclamation work.

“My current wage scale is $20 per hour with $30 overtime kicking in after 40 hours for that week,” he told me. “I average 70- to 80-hour work weeks during long summer daylight hours. I believe 80 hours was my max for a week’s work.” It adds up to roughly $2,000 a week, sometimes more.

Late this week, the government said the economy added 200,000 jobs in December, double November’s pace and all of it coming from the private sector. The unemployment rate fell to 8.5%, down from November’s revised 8.7% rate.

As we reported here earlier, three of every five new jobs generated in the U.S. since 2005, according to EMSI, an Idaho labor market research firm, were the result of oil and gas production and related industries. How ironic that the energy sector, arguably President Barack Obama’s most implacable political foe, is largely responsible for building the employment numbers that are likely to get him re-elected.

Terrell (who took these shots and is pictured below), is one of the estimated 1.5 million Americans who’ve gained jobs since 2005 working in energy production and related industries. He’s found good work and a place to live in a bed and breakfast with four other oilfield workers in Sidney, Montana, just west of Williston. He’s trading his labor — remodeling the home’s basement — for room and board. His housemates come from Texas, Louisiana, New Mexico, and Billings, Montana. “The oldest is in his mid-40s; the youngest just 19 years old. And what a mix of personalities.”

“I could have worked more hours, but chose to take weekends off for trade-out labor,” he said. “I am finishing a basement with two rooms and a new bathroom. The project will finish up by February 1st.

“This to say, $7000 per month is probably an average monthly amount that I earn. Like I mentioned, I worked a 10-week stretch without a trip home, because I started late in August. I took a break of two weeks at Thanksgiving and two weeks this Christmas.

“I am trying to get a set schedule with my company, either four weeks on, one week off or, preferably, ten days off. The request seems to be under review at this time.”

Terrell is married and said he missed his wife. He said most of the men he knows, except the very young guys, are so tired after a day’s work that they just gather for dinner and go to sleep.

Days start in the dark before dawn. The pictures at the top and bottom of this post were taken by Terrell at 5:15 a.m. at the Loaf-N-Jug in Fairview, Montana. “It’s a daily sight on our way into Williston,” he said.

“Our three-man reclamation crew basically works six days at 12 hours. Once in awhile there are 90 to 100-hour weeks when it’s crunch time.

“Now that the winter season is kicking in with less daylight, we’re probably looking at 12-hour days. Our crew has transitioned from reclaim work sites to helping build oil drilling pads. Most likely I will have to work six days a week to make it work financially for our winter work plan. So the motivation is to complete the bed and breakfast basement project, and work more hours in the oil patch.”

The pace and fury of the development carries dangers. Last September, an explosion and fire on a drilling rig killed two young workers and badly burned two others. “I could see the smoke on the horizon the day the workover rig exploded just outside of Williston,” he said.

Almost 30 years ago, Terrell worked 100-hour weeks on the Alaska North Slope. “We were a mobile exploration crew and worked minimum seven days at 14 hours per day, with a few extra hours usually thrown in. It was much more organized in Prudhoe Bay and the outlying oil fields and exploration areas compared to the oil patch in the Dakotas, Montana, and Wyoming. The fracking and all that’s required with this process makes it much more intense and heavy equipment-oriented. Hence, my term for Williston – The War Zone.”

“The age factor wears on ya, at least it does me,” he concluded. “It has had a compounding effect on me, both physical and mentally. Most of this challenge, in and of itself, is not a big deal. But when you throw it all together, the compounding effect kicks in.”

– Keith Schneider

Joel Bleth, a lawyer and engineer who co-founded Solar Bee, a very successful Dickinson, N.D.-based manufacturer of solar-powered equipment to circulate wastewater at treatment plants, sent a message here today asking how long the oil and gas boom in his state would persist.

Dickinson, a prairie city of 18,000, has grown more than 10 percent since the turn of the century and for several years has experienced swelling markets for retail and office buildings, hotels and motels, and housing. Much of that is related to the Bakken shale oil and gas boom, centered in Williston 132 miles north, but which is steadily surrounding Dickinson and other communities closer to the border with South Dakota.

I interviewed Joel (see pix above) at the Solar Bee plant last month. He’s one of the rare executives in the alternative energy sector in what is now the fourth largest oil producing state.

My reporting in the United States, and from three other continents in the last few years, clearly indicates that the Bakken development, as well as drilling in the Tyler and Three Forks shale formations, which lie above and below the Bakken, is very likely to persist for at least a generation.

Production in North Dakota (see pix below by Scott Terrell) has already reached 500,000 barrels per day and, according to industry executives and state oil and gas regulators, will reach 1 million barrels daily within a year. The Bakken contains some 22 billion recoverable barrels, say state officials. The two other shale reserves also contain billions of recoverable barrels, they say. 

Moreover, the market for the crude oil and natural gas pouring out of the energy fields of the northern Great Plains, which includes Montana and two Canadian provinces, is huge and growing. While it is true that U.S. demand for crude oil has temporarily declined in recent years, largely because of the Great Recession, demand for oil in China is rising fast.

In 2000, China imported 1.4 million barrels per day, or 29 percent of the 4.8 million barrels it consumed each day that year. In 2011, China imported 5.4 million barrels a day, or 58 percent of the 9.2 million barrels it consumed daily. In the last decade, in other words, China’s oil imports more than tripled and its overall oil consumption nearly doubled.

The Energy Information Administration said that the growth in China’s consumption in 2010 and 2011 represented almost 40 percent of the increase in world oil demand during the two-year period.

Having spent weeks in China during four trips from November 2010 to September 2011, and having reported on energy, water, and China’s soaring economy, I saw no evidence that China has any plan other than accelerating its development. China, which last year overtook the U.S. as the largest energy consumer on the planet, is also now the largest market in the world for grain, cars, coal, steel, cement, glass, chemicals, trucks, trains, construction equipment, power plants, dams, etc. The risk to the United States and the global economy from China is that it’s growing so fast, any number of factors — commodity shortages, price increases, inflation, domestic unrest, droughts, floods — will cause Chinese markets to implode.

Barring that, China will continue to drive the market for oil, a global commodity. And as North Dakota and the other big shale oil production fields in the United States expand, helping to lead the U.S. out of recession, the improved domestic American economy will also prompt higher consumption of oil and gas. So for those reasons, and others, it’s my conclusion that the Great Plains energy surge will persist for decades because the resource is there.

Joel, though, sent the chart below comparing gold and oil prices over time:

“How long will the high oil price and corresponding drilling last?” he asks. “The answer depends on whether the price of oil is being held up by (a) demand for fuel, now and in the future  vs. (b) oil is a commodity being purchased mostly to hedge against inflation.

“The chart comparing gold to oil prices over the past 5 years seems to confirm, with other info on oil use, that demand (neither present or future) is not the driving factor in the price of oil, and that oil is just another commodity that money has flocked to for protection against inflation as the governments around the print money to solve the debt crisis.

“If demand for fuel is keeping oil high, than a general economic recovery will make it go even higher since fuel usage will go up.  If, as I suspect and the attached chart would indicate, oil is just another commodity being purchased to hedge against inflation, then when a recovery occurs that same money holding up oil now will probably be moved into the stock market (more reactive to the 70% of economy driven by consumers), and then oil will fall.  In that case this drilling would end in perhaps 2-3 years instead of 40 years.”

Interesting thesis but I don’t think it’s going to turn out that way.

– Keith Schneider

More reporting in this series:

In North Dakota’s Bakken Oil Field, The Smell of Diesel, the Sound of Trucks

Boom in Bakken Oil Play, and Elsewhere Starting to Drive U.S. Economy

Bakken Oil Wells Surround North Dakota National Park

Is American Energy Exploration and Production Breaking the Great Recession?

Bakken and Other Big Oil and Gas Plays Produced 600,000 New Jobs Since 2005

Great Plains Bakken Riches Describe New Wealth, New Risks

North Dakota Oil Boom Like Air Ambulance Flying In Storm

The day after Christmas, Scott Terrell, a painter and carpenter from Coeur d’Alene, Idaho turned 58. Never has he felt the weight and wear of his years so acutely. Last August Terrell joined the army of oilfield mercenaries that are rapidly converting great stretches of North Dakota, Montana, South Dakota and Wyoming into the most productive fossil fuel development zone in U.S. history. He quickly landed a job driving a Volvo haul truck on a heavy equipment construction crew that builds the flat-as-a-table, laser-graded oil drilling pads. There is plenty of work. Last year in North Dakota alone, drilling companies punched 2,000 new wells into ground. Terrell (pictured below and who took the shot above) spends 14 hours a day behind the wheel, breathing dust in North Dakota’s hot summers, and pulling up his collar against the fierce wind and cold of the Dakota winter.

The pace is relentless and dangerous. The drilling crews on nearby pads are probing portions  of the oil-bearing Bakken shale formation saturated with hydrogen sulfide, a lethal gas. North Dakota state health and environmental agencies have documented over 1,000 spills of oil, chemicals, and other compounds, nearly five times as many accidents as in 2004. Traffic fatalities doubled from 2010 to 2011 and injuries connected with the movement of heavy oilfield equipment climbed 40 percent in a year in western North Dakota. An explosion and fire on a drilling platform in September killed two young workers and badly burned two others.

There is nothing, in short, to hold Terrell to this work other than the wages — $7,000 a month for his three-week-on, one week-off schedule.

“It’s chaos,” Terrell told me in December. “When I leave, it’s as if I’ve never been here. When I return, it’s as if I’ve never left. It’s sort of unreal when you’re away from it all. And the return just sucks you back into the whirlwind. Just got to strap it on and ride it out as best you can.”

To some considerable extent, Terrell’s astute summation of his disruptive but necessary career in North Dakota reflects the essential economic contest of our time. In weighing the utility of immediate and generous oilfield income against the longer term risks to his health and emotional equilibrium, Terrell chose the money. Northern Idaho’s reluctant economy doesn’t generate as much demand as it once did for carpenters and painters.

While it is new to Terrell and to most of the other 45,000 men who’ve arrived from across the nation to work there now, the Dakota oil field represents something that was once familiar and secure in America. It is a place that provides men with ample opportunities to work for a living wage, the risks be damned.

That central notion, elevated to both national and global perspectives, is what we confront in this era of economic tumult and transition. During the past month, in two weeks of field reporting in the Dakotas and the Pacific Northwest, and in online research and interviews, the full dimensions of the immense riches and the equally dire hazards of the North Dakota oil boom became much clearer. To wit:

1. The energy surge in North Dakota is being duplicated in scale and intensity in almost a dozen other states – South Dakota, Montana, Wyoming, Utah, Colorado, Kansas, Texas, Ohio, Pennsylvania, California, and Alaska.  New  York, meanwhile, is about to lift its moratorium on fracking and relaunch development of the gas-rich Marcellus shale.

2. The national oil and gas surge has generated roughly 600,000 new jobs since 2005, new employment in high-paying work that came while the nation was losing 2.5 million jobs during the same period, according to EMSI, a labor market research group in Moscow, Idaho.

3. The number one American export in 2011 was refined petroleum products. The U.S. exported 1 billion barrels of gasoline, diesel, and aviation fuel worth $88 billion. The last time the country exported more fuel than it imported fuel was 1949, when the U.S. also was the only functioning industrial nation on Earth.

4. Low natural gas prices, generated by a convergence of new technology unlocking vast new supplies, and domestic politics that shielded the developers from government oversight, is prompting big shifts in industrial planning. New steel plants are opening in Ohio, along with new manufacturing plants for water hauling truck trailers, oil drilling equipment, and chemical factories. Utilities are installing new gas-fueled turbines to generate electricity. Pipeline construction is accelerating. Pricewaterhousecoopers produced a report last month that predicted low natural gas prices would generate 1 million new manufacturing jobs over the next decade or so.

5. The U.S. is in the third straight year of increasing oil production, the first time that has happened since the 1970s. Oil imports, which peaked at 455.6 million barrels in August, 2006, fell to 340.8 million barrels in October, 2011, a 25 percent reduction.

6. Shale oil reserves, like those in North Dakota, look to be immense. The estimates of recoverable reserves in the Bakken formation underlying North Dakota have grown to 22 billion barrels, more than 5 times higher than a federal estimate made in 2008. Similarly huge shale oil reserves are under development in Ohio, Texas, Oklahoma, the northern Great Plains, and Colorado. And the horizontal drilling and fracking technology that is unlocking oil from shales miles beneath the surface also is being deployed to tap the country’s existing conventional fields to produce more oil.

6. North Dakota, which had been losing population for decades, is now the fifth fastest growing state, according to a U.S. Census Bureau report in December.

So, very clearly, new U.S. oil and gas production is producing a surge of jobs, investment, and wealth in the American economy.  But Jeremy Rifkin, a Wharton-trained economist and author of the Third Industrial Revolution (Palgrave MacMillan 2011) says the oil and gas boom also is inordinately dangerous because it is  “the last gasp of the old industrial revolution.”

“The oil companies and related industries are trying to resurrect the energy sources of an era that is sunsetting,” he said. “The costs are immense for the economy, the environment, and for this society and others around the world. We’re at the endgame of the second industrial revolution. And while there are jobs connected to it, the price of energy is high and the real time impacts of industrial induced climate change on agriculture are being felt around the world. The question is what we do about it? And it doesn’t look good for the U.S. ”

European nations led by Germany, Rifkin said, are converting their energy production infrastructure to renewable technologies. China, Circle of Blue noted in its Choke Point: China report last year, is aggressively developing hydro, solar, wind, and nuclear options and taking command of the global alternative energy sector. The U.S., meanwhile, is abandoning the federal commitment to public investments in non-fossil fuel energy sources, and state incentives, led by renewable energy mandates on utilities in 33 states, could be in trouble.

Bottom line: the oil and gas boom has produced a reprieve that is likely to last at least a generation. It looks to have taken the urgency of planning for peak oil shortages off the table in the U.S., and globally. Large shale gas and oil reserves are under development in Africa and Asia. High prices have made it practical to develop the deep ocean reserves now being discovered and tapped in Angola, the U.S. Gulf, Alaska, Russia, and Venezuela.

But the issue we need to address is can the nation and the world endure another generation of fossil-fueled economic development? Energy industry executives say of course we can. Global climate change is not a threat, they argue, and they’ve successfully convinced their allies in Congress and state legislatures to govern without regard to the warming atmosphere.

Much of the rest of the world, though, understands the risks of a warming planet. Still, few nations are responding with genuinely effective domestic programs that promote low carbon alternatives. As we learned in Choke Point: U.S. and Choke Point: China, the aggressiveness with which industrial nations are pursuing carbon-based fuels – coal, oil, gas – and the reluctance to develop low-carbon alternatives is stressing food production, water supplies, and governments all over the world.

My sense is that the national and international fossil fuel development surge is like a global helicopter ambulance flying in a jarring storm. While capable of lifting the economy out of harm’s way, the aircraft also is in ever-present danger of crashing.

– Keith Schneider

The drilling boom on the northern Great Plains, especially in North Dakota, rivals Texas and the U.S. Gulf as the largest oil producing region in the U.S. Photo/Keith Schneider

Sunday evening, December 2011, Amtrak’s eastbound Empire Builder pulls into Williston, North Dakota, a fast-growing northern Great Plains city riding the lashing tail of an oil-drilling dragon. A crowd gathers on the station platform. Men coming. Men going. Big pickups rumble in the parking lot.

Four years into a drilling frenzy that has pushed North Dakota to the top of the nation’s oil-producing states, the sound of Williston is diesel engines. The scent is diesel fuel. It is below zero, windless for a change, and exhaust vapors hang in the air. The swirl of men, talking loud and walking fast to warmed pickup cabs, is like a swift eddy in a strong stream. The currents of purpose and planning, assignments and destinations, are so keen it feels like a military campaign.

A lot is at stake here — for this state, for the 35,000 men who’ve come from every corner of America to find work in the 18,000-square-mile oilfield, and for the nation. Williston — the population of which now measures an estimated 18,000, up 40 percent from a decade ago — is one of the epicenters of a national oil and gas drilling boom that is engulfing eight Great Plains states (as well as California and four states in the mid-Atlantic and South).

A convergence of new exploration and drilling techniques, rising global demand and prices, and suspect governing oversight is producing what looks to be the most powerful surge in fossil fuel production in U.S. history, say state officials and energy industry executives here and elsewhere. From every vantage, the consequences are momentous.

The Department of Energy recently reported that crude oil production in the United States has climbed to 5.88 million barrels per day, the most since 1998. After nearly three decades of steady declines, U.S. oil production has increased for three straight years, the first time that has happened since the 1970s. Oil imports are decreasing. And last year, refined petroleum products — gasoline, diesel, and aviation fuel — were the top American exports. The last time the U.S. exported more refined fuel than it imported was 1949.

The fossil fuel sector’s swift and extravagant growth also has produced a host of new jobs. A new analysis of federal labor data, completed by Economic Modeling Specialists Inc. (EMSI), a labor market research group in Moscow, Idaho, finds that the oil and gas production sector employed 807,000 people in 2011 — an addition of 187,000 over 2005.

EMSI also found that every new oil and gas production job generated two more energy-related positions in manufacturing, services, transport, and in other industries: 374,000 more jobs. In other words, the oil and gas boom accounted for 561,000 new jobs — or more than 20 percent of the nation’s new jobs since 2005. In a down economy, such numbers are impossible to ignore.

“It’s certainly stunning and noteworthy. Something big is going on,” said M. Henry Robison, the chief economist and founder of EMSI. “I don’t think the public is aware of thjs.”

Indeed, the energy sector’s advance across the Great Plains and other regions came with such speed and force that it surprised residents and regulators alike. Now environmental leaders and academics, along with a select group of state agencies and a number of federal units — the U.S. Fish and Wildlife Service (USFWS), the Department of Energy, and the Environmental Protection Agency (EPA) — have raised the alarm about the consequences of the drilling frenzy.

***

A pad of ice four inches thick greeted Ron Ivory on a clear and cold December morning at the busy water depot south of Williston. Ivory is 47-years-old, a stocky and bearded truck driver from Vernal, Utah, with 23 years in the business. He’d been in North Dakota two weeks, working 14-hour days hauling fresh water, 130 barrels a load, to oil production sites.

One of the reasons that North Dakota and the other big U.S. shale energy fields have generated so many new jobs is because drawing gas and oil from the Bakken formation — a thin but widespread shale layer roughly two miles beneath much of the state’s northwest corner — is as close as man has gotten to drawing blood from a stone.

It takes a lot of water, millions of gallons per well, to perform the operation known as hydraulic fracturing, or “fracking.” The typical well receives 300 to 400 tanker loads of heated fresh water that is mixed with sand, solvents, and other chemicals and then pumped down 10,000-foot well bores at pressures eclipsing 7,000 pounds per square inch. Coupled with explosives and other evolving production practices, the water cannon-shot pulverizes the shale, opening spaces in the rock through which oil and gas flows.

Thirty-five fracking crews work day and night in North Dakota now, and there are likely to be ten more before the end of 2012. Some 70 to 100 jobs are connected to a frack crew, according to the state Oil and Gas Commission. A few of those jobs involve operating the powerful fracking pumps. The rest are connected with transporting water from pumping stations like this one. There are dozens of water depots scattered across the territory, and the roads of western North Dakota are jammed with thousands of water tanker trucks.

“Everybody is up here to make money,” said Ivory. But those profits come at a tremendous cost.

In December, the EPA, which is preparing a study on the risks of fracking to drinking water, found persuasive evidence that the high-pressure, water- and chemical-intensive production practice had contaminated groundwater in Wyoming. The USFWS, in court documents filed in Bismarck, estimated that up to 1 million migratory birds drown or are poisoned each year after landing in the toxic soup of chemicals, drill cuttings, and drilling muds held in waste pits that accompany almost every drill site across the Great Plains.

And it’s not just water contamination. A study conducted last spring by researchers at Cornell University determined that fracking releases large quantities of methane as “fugitive emissions.” Emmissions of methane, a much more powerful climate change gas than carbon dioxide, amount to approximately 2 percent of the natural gas released by a fracked well — 1,000 times higher than similar emissions of methane from conventional wells, said the researchers.

For the time being, North Dakota officials and residents consider the economic riches worth the risks. “People say it’s generally a good thing,” said Mary Massad, chief executive and manager of the Southwest Water Authority, which supplies fracking crews with water. North Dakota’s energy companies are producing 500,000 barrels of oil a day from more than 6,000 wells. The resource is worth $45 million a day, at current market prices, and generates $4.5 million a day in state tax revenue, according to state officials. Production could top 1 million barrels per day sometime next year — placing North Dakota just behind Texas as the number two oil-producing state. But a number of economists and environmentalists assert that the big American oil and gas surge amounts to surrendering our economic and environmental future.

“It’s the last gasp of the old industrial revolution,” said Jeremy Rifkin, a Wharton-trained economist and author of the Third Industrial Revolution. “The oil companies and related industries are trying to resurrect the energy sources of an era that is sun-setting. The costs are immense for the economy, the environment — for this society and others around the world. We’re at the endgame of the second industrial revolution.”

***

After dark, beyond Williston’s last lit living room and heading east on state highway 1804, North Dakota’s landscape turns alien. Steel towers of active oil drilling rigs, flooded by lights as bright as a sports stadium’s, flank every steep rise. Bright orange flare gas fires, like flames on 20-foot birthday candles, break the pitch dark of every deep valley. The sound of ceaseless prairie winds and big trucks hauling water and drilling wastes and metal pipes is the background music of an energy industry that attracts thousands of workers — young workers — to a state that for decades shed jobs and its young adults.

Last August, Jon Moore and Rick Harding migrated here from their hometown in Sandpoint, a small resort city in northern Idaho. They are both 26-years-old, unmarried, and have partners back home with young children. They also are ambitious.

Within days of landing in Williston, they secured good jobs paying $60,000 to manage nine freshwater pumping stations for tanker trucks hauling water to drilling sites. Moore and Harding plan to bring their families to the mobile homes they rent, perched side by side at the top of a big hill overlooking the highway and drilling site on the floor of the Red Mike Valley

Moore is a big-shouldered man, earnest and hard-muscled from his days as a landscape contractor in Idaho. Harding is lean, compact, edgy, and with his tight goatee looks a lot like a young Sean Penn. They are western guys, at ease with the land and their new careers. Managing the water depots, handling the pumps and gauges, learning how to fix stuff came easily. During the long rides in the company truck between the depots, they plot out their futures in North Dakota and in business.

“I think I’m here for awhile,” Moore told me, adding that he and Harding have a plan to become investors in the development. “Back home there was just nothing going on. We heard about North Dakota and came over to get jobs. It’s working out real well.

But Moore and Harding aren’t blind to the cultural fissures opening, as the unrelenting pace of exploration and production creates environmental challenges and population growth overwhelms the region’s cities and towns. The state has counted over 1,000 oilfield-related spills of fuel, oil, saltwater, and waste — five times higher than the number of spills in 2004. Traffic deaths in western North Dakota in 2011 were double what they were in 2010, and injuries are 40 percent higher, according to the state police. A bad drilling rig explosion and fire in September killed two young workers and burned two others. Emergency medical and ambulance crews describe in published reports how picking up the pieces on the drill sites, highways, and man camps that have sprung up everywhere is like treating the wounded in a war zone.

That, of course, is not the view of oil and gas industry leaders or most residents in North Dakota. In 2010, the North Dakota Petroleum Council, the leading state trade organization, sponsored a public opinion survey conducted by Westwood Research and Statistical Services, a Bismarck firm, and Minot State University. Of the 632 adults questioned by phone and in a written survey, 87 percent agreed or strongly agreed that the “oil industry provides positive benefits to our state’s citizens,” and 72 percent agreed or strongly agreed that “the oil industry in North Dakota takes appropriate steps to protect the environment.”

“North Dakota is our home, too,” said Ron Ness, the petroleum council’s president. “It’s critical that people feel we’re being a good neighbor.”

Just how long the favorable sentiments will persist is anybody’s guess. For now, young men keep coming — because there are good jobs that pay very well and because workers have the sense that their labor is helping the American economy to recover. “This is energy that we produce here,” said Harding. “We’re not sending dollars out of the country.”

***

The Saturday morning that Scott Terrell and I had breakfast at Gramma Sharon’s Family Restaurant in Williston, every seat was taken by roughnecks and drivers fueling up on eggs and chicken-fried steaks before heading out to work.

Terrell, a 58-year-old underemployed painter and carpenter from Coeur d’Alene, Idaho, joined the army of oilfield mercenaries last August. He quickly landed a job driving a Volvo haul truck on a heavy equipment construction crew that builds the flat-as-a-table, laser-graded oil drilling pads.

There is plenty of work. Enbridge, the Canadian transport company, is building a $145 million expansion to its oil pipeline network in North Dakota. Burlington Northern is building prairie depots to load oil aboard unit trains that transport 100,000 barrels a day to the Gulf Coast. There are two proposals for new refineries. Last year alone, drilling companies punched 2,000 new wells into the North Dakota prairie. During the long light of summer, Terrell said, he spent 14 hours a day behind the wheel breathing dust. In the fierce cold, wind, and dark of the Dakota winter, he works 12-hour days. He earns roughly $7,000 a month.

But the pace is relentless and dangerous — and it leads to accidents, like the explosion on the drilling rig in September.

“I could see the smoke on the horizon,” he said.

Terrell, who is tall and more fit than the average guy his age, described his time in North Dakota with a kind of burdened sigh, Just driving to and from work is hazardous, he said. During the first year of operation every drill site is served by an average of 2,000 round trips by big trucks hauling equipment, chemicals, men, water, and other materials. With 2,000 wells drilled in 2011, that’s nearly 110,000 round-trips to well sites every day. In short, the highways in western North Dakota are packed with big trucks moving fast — the principal cause for the increase in highway fatalities.

Terrell said he’d been around long enough to contend with other risks, too. In early December, his crew discovered that diesel oil and chemicals had been illegally dumped into a waste pit they were reclaiming at a drilling site. The crew dug out tons of contaminated soils, loaded the toxic mess aboard trucks, and shipped it to a regulated disposal site. But such incidents are on the climb as more and more workers come from outside the region, with no longtime connection to the land and no plans to stay, and limited oversight produces little in the way of consequences.

“It happens and nobody knows who’s doing it,” Terrell said.

When we finished breakfast, the line of customers waiting to pay their bills was so long that I simply left cash on the table and slipped out. I felt a little guilty doing it, like I was violating the ethos expressed on the hand-lettered sign next to the cash register.

Please be patient, it said in plaintive neat cursive. We are short-staffed every day.

***

Lynn D. Helms — bearded, lean, and genial — looks nothing like the rock star he’s become in the American oil industry. Helms spent 20 years earlier in his career as a roughneck and petroleum engineer. Now he is the director of the state Department of Mineral Resources, the agency charged with both promoting and regulating oil and gas production. In 2011, the condition of the waste pits used by drillers was at the top of his list of concerns — and for good reason.

During the winter of 2010–2011, his agency counted roughly five hundred open waste pits full of drilling muds, chemicals, diesel fuel, and brine-saturated water. Such pits were allowed by state law to be kept open and full of liquid for a year. During a run of heavy snowmelt and flooding in North Dakota in the spring, though, 40 pits overflowed. Twenty were severe enough to contaminate land and some surface water beyond the drill sites. Helms said his agency issued $3 million in fines.

“This year we count 867 open pits,” he said. “We can’t allow that to continue.”

North Dakota is set to implement new regulations in April to require companies to build much smaller pits that contain only dry materials and no liquids. State rules also require the pits to be covered by nets to prevent wildlife from drowning or being poisoned. A number of companies didn’t comply. Last summer, the Justice Department, with help from the federal Fish and Wildlife Service, filed cases against eight companies under the Migratory Bird Treaty Act for deaths of waterfowl at drilling sites. Three companies pled guilty and paid small fines; three others are contesting the charges. The case against a seventh company was dismissed, and one case is under seal. The growing number of prosecutions is worrisome, said state regulators; it suggests that fines for environmental regulations are regarded as a standard business expense.

Helms is sensitive to this charge — especially in light of the built-in conflict in his own agency. The dual charge of promoting oil and gas development and enforcing all regulations governing drilling and production is essentially the same operating system as the old federal Minerals Management Service, a unit of the Department of Interior that promoted and regulated offshore drilling in the Gulf of Mexico before it was disbanded following the Deepwater Horizon disaster in 2010.

Helms promises that his $3 million-a-year state agency in North Dakota will do better. The department is adding 17 new people to its staff, which will number 75. Sixteen of the positions will be on the regulatory side. “We’ve built in a system of checks and balances,” Helms said. “We act as two separate agencies under the same head, which is me. I have to straddle the fence.”

***

Despite Helms’s assurances, the phalanx of industrial equipment required to wrest oil and gas from the deep shale is utterly rearranging the big sky landscape.

Buck Hill is one of the tallest points in Theodore Roosevelt National Park, which spreads across more than 70,000 acres of grass and tight canyons south of Williston, where North Dakota meets South Dakota and Montana. Several weeks ago Valerie Naylor, the park superintendent, hiked to the summit and counted six oil-drilling platforms.

In the next few months more rigs will surround the park’s boundaries. With them will come open waste pits full of toxic drilling muds and liquids lifted out of the two-mile-long bore holes. There are roads and drill pads scraped from the grasslands, diesel trucks by the hundreds, and plenty of men. Naylor diplomatically described the new steel towers, bright lights, gas flares, and guttural sounds of the oil boom gathering at the park’s perimeter as “an intrusion in the national park experience.”

Fortunately, drilling will not occur inside the park. U.S. National Park Service policy forbids oil and gas exploration in any national park, so all production activities are occurring beyond the park’s boundaries. The same can’t be said for the Dakota Prairie National Grasslands, a 1.259 million-acre stretch of wildlands in southwest North Dakota and northern South Dakota. The grasslands are administered by the U.S. Department of Agriculture, which is busy leasing federal minerals and preparing permits for at least 90 drill sites.

Landmen, the advance guard of the industry, swarm county clerk offices, too, hoping to lock up private mineral leases. Drilling rigs are poised to advance into South Dakota in the spring. The Bakken formation in North Dakota and Montana — and its related Three Forks and Tyler shales in North Dakota, Montana, South Dakota, and Wyoming — are said by geologists to contain nearly 30 billion barrels of recoverable oil. The boom, far from abating, may be just getting started.

To understand how powerful the energy rush is in North Dakota, just stand for a few minutes at any place alongside U.S. route 85 north or south of Williston. Semis hauling heavy equipment, pipe, water, fuel, oil, rigging, and any number of other loads roll past, an unyielding train of oil field gear and supplies and products. And in the spaces where there aren’t semis, there are pickups hauling men back and forth to the drill sites.

Five years ago, say townies, U.S. 85 in early December was as quiet as a dance floor on Tuesday morning, and the small towns of western North Dakota were drying up like shallow lakes in the desert. Now people are predicting that Williston, where fewer than 13,000 people lived a decade ago could reach 35,000 by 2020, maybe 100,000 after that.

“I think we have to plan for a North Dakota with a million people, believe it or not,” said Lynn Helms. “We’ll also be producing a million barrels a day.”