Modeshift

BENZONIA, MI — It’s apparent why a great number of Americans wonder about the risks of fracking and whether states and the federal government ought to shut the technology down. The breakthrough that now enables developers to recover oil and natural gas from hydrocarbon-rich shales 6,000 to 10,000 feet beneath the surface is potentially fraught with danger.

No new technology comes without assorted risks, especially one as environmentally significant and economically powerful as fracking. But along with the risks come benefits. The question is whether the U.S. has the capacity to significantly reduce the threats through regulatory safeguards, or is there one or more aspects of the technology that are so inherently dangerous that fracking should not be allowed at all?

Answering the question involves distinguishing the difference between “potential” and “actual” risks and benefits. On the potential side of the discussion, the risks seem fearsome.

The fracking process blasts millions of gallons of water mixed with chemicals down a well at ultra-high pressure to shatter the rock and release the fuel. Anecdotal evidence, and several instances of contamination confirmed by the federal Environmental Protection Agency, point to a risk that fracking can contaminate freshwater aquifers much closer to the surface. It’s not clear yet how significant that risk is, though the EPA is studying the issue and preparing to issue a definitive report next year.

Public health authorities in Pennsylvania also are starting to study the consequences of fracking to human health, and are focusing on air pollution. Big diesel engines operate at the well sites, and it takes roughly 2,000 truck trips to transport water, fuel, and equipment to each well. Vehicular collisions, moreover, have taken the lives of dozens of truck drivers and motorists in North Dakota and Pennsylvania.

Fracking takes millions of gallons of water at each well and is leading to confrontations over water supply on the Great Plains and desert Southwest. Disposing wastewater and fluids from the process has led to spills in North Dakota and Wyoming. Pumping the wastes down deep disposal wells also has caused small earthquakes in Ohio, Arkansas, and Texas. The concentration of wells in a region, all tied together by new roads, pipeline corridors, and assorted processing and pumping stations, has significant implications for the uses of land, particularly if the development occurs in a forested area like Michigan.

Other potential risks identified by expert panels as varied as the U.S. General Accounting Office and the Society of Petroleum Engineers include the toxicity of the chemicals used in the process, the level of methane (a potent greenhouse gas) that can escape the well as “fugitive” emissions, and the hazards of the drilling process; in China the shale reserves contain high concentrations of hydrogen sulfide, an acutely poisonous gas.

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Consumer Energy's Lake Winds Energy Park under construction near Ludington, Michigan. Photo/Keith Schneider

The farm fields and rolling hills near Ludington, Michigan, sport new decoration now: big wind turbines that take advantage of the gales of nearby Lake Michigan. Consumers Energy, Michigan’s statewide utility, is constructing the $235 million, 56-turbine, 100-megawatt Lake Winds Energy Park with Danish-designed Vestas equipment, some of which arrives in Mason County by rail. The winter white towers and turbine blades soar above orchards, forest, and cropland, powerful sentinels of Michigan’s capacity to reckon with the new economic and environmental conditions of the 21st century.

On Sunday, a wondrous August afternoon of towering banks of cumulus clouds and brilliant blue Michigan sky, I drove by the wind park. It’s impressive, not only because of the scale of the enterprise, but also what it represents. Consumers Energy found a way to deal with grassroots opposition and build a clean energy installation that responds to climate change, promotes advanced manufacturing, and gets people in Michigan a little more comfortable with generating electricity with an energy source other than coal, natural gas, and nuclear energy.

One impending, and potentially disastrous impediment, though, is the reluctance by Republicans in Congress to renew federal clean energy tax credits, so crucial to financing new alternative energy projects. Vestas, for instance, said again this week that it is prepared to layoff 1,600 workers, most of them in Colorado, if the tax credits are not renewed by year-end.

Still, Michigan’s clean energy industry is persistent. In November Michigan voters will decide on whether or not to more than double the amount of electricity that must be produced from renewable energy — 25 percent by 2025, up from the current goal of 10 percent by 2015, which was enacted in 2008. Jacob Wheeler, a colleague at Circle of Blue, today posted a fine assessment of this proposal and how it fits in the roiled energy policy and politics of the Great Lakes region.

Over at the Michigan Land Use Institute, managing editor Jim Dulzo reports on how careful planning and a sound strategy helped a wind developer,  Richard Vander Veen, build a big wind energy park in Gratiot County north of Lansing, the state capital.

So, despite all manner of market challenges and political resistance, there’s progress here in Michigan on clean energy.

– Keith Schneider

President Barack Obama made clean energy development a centerpiece of his 2008 campaign. Four years later, gas and oil production are higher presidential priorities.

Late in July 2008, when gas prices broke $4.00 a gallon for the first time and when the “drill baby drill!” chant was first heard at John McCain rallies, I flew to Barack Obama’s campaign headquarters in Chicago. The mission: to rally support for Obama’s clean energy, good jobs message among the leaders of his media team, who were nervous about the political costs of rising energy prices. At the time I was national communications director of the Apollo Alliance, a San Francisco-based non-profit that had helped develop the environmental, economic, and national security rationale for pursuing a new industrial strategy based on developing cleaner home-grown sources of power. 

Obama’s team didn’t buckle and the candidate ended up carrying the clean energy message into the White House, where it served as the $100 billion-plus, jobs-producing centerpiece of the $787 billion federal stimulus bill, the American Recovery and Reinvestment Act, that Congress approved in February 2009. Over the next two years, and with the help of the largest federal investment in clean energy in U.S. history, Michigan built a lithium-ion battery sector to power the next generation of electric and hybrid vehicles. Great Plains states joined Texas as important centers of wind power. Nuclear energy returned to the national conversation. Toledo solidified its brand as a solar manufacturing hub. Research universities expanded programs to generate transportation fuels from woody plants and exotic grasses.  States developed their own clean energy investment programs to stimulate entrepreneurs. And tens of thousands of new jobs materialized in companies that specialized in energy efficiency, built blades, turbines, and towers for new wind farms, and contributed material and clean energy know-how.

Dimming Clean Energy Sector
It was a heady time for the sector that is now entering a new, and more uncertain phase. As the 2012 presidential campaign gathers momentum, the nation’s clean energy economy is slowing. A new report issued today by a five-member team of researchers from the Brookings Institution, the Breakthrough Institute, and the World Resources Institute explains that part of the reason is the rapidly receding influence of federal clean energy investment. Congressionally mandated sunsets on federal tax incentives and loan guarantee programs are dramatically reducing funding for the sector, disrupting markets and planning for new products and installations.

But the authors of the study, Beyond Boom & Bust, also argue that withdrawal of federal support for clean energy initiatives is not necessarily a death sentence.

“Many of today’s existing subsidies and clean energy programs, after all, are poorly optimized, characterized by a boom and bust cycle of aid and withdrawal, or in need of thorough revision thanks to either recent progress in the price and performance of subsidized technologies or the mounting fiscal burden imposed by some programs,” said the study. “The end of the present policy regime therefore offers the opportunity to implement smart reforms that not only avoid a potential ‘clean tech crash’ but also accelerate technological progress and more effectively utilize taxpayer resources.”

“We provide some ideas about how to taper and adjust financial supports in a careful, selective, pro-innovation way as opposed to the kind of brute ‘cut-offs’ some are talking about,” said Mark Muro, senior fellow and policy director at the Metropolitan Policy Program at Brookings, and one of the co-authors. “Ours is a realistic kind of ‘mend-it-don’t-end-it’ approach.”

The report comes amid a torrent of political attention to, and investment in, the nation’s fossil fuel production, the industrial sector that clean energy was gradually supposed to replace. Just five days ago, for instance, President Obama issued an executive order to speed the development and heighten the safety of drilling for natural gas in the nation’s deep shale reserves. The shale gas boom, which has lowered prices and disrupted markets for clean energy, offers an object lesson in the sort of long-term, stable, and committed federal policymaking and investment for clean energy that the authors of Beyond Boom & Bust recommend.

A good portion of the technical knowledge and financial support that the energy industry needed to tap shale reserves came as a result of a very generous tax credit approved by Congress in 1980 under Section 29 of the Internal Revenue Code. The Section 29 unconventional fuels tax credit provided energy companies with incentives to develop the drilling and production technologies for hard-to-tap gas-saturated geological layers. In Michigan, for instance, the Section 29 credit spurred the development of the Antrim shale, the first big shale play in the country, which lay beneath much of the state’s northern lower peninsula. Most of the 9,100 Antrim wells drilled in northern Michigan qualified for the credit.

Object Lesson – Section 29 Tax Credit for Gas Producers
The credit also prompted development of other shale reserves around the country because it allowed energy producers to subtract from their federal taxes $1.02 for each thousand cubic feet of gas produced. Any well drilled in the Antrim formation, or in other shale and coal seam gas reserves across the country before December 31, 1992, qualified for the credit. The lucrative tax write-off did not expire until December 31, 2002. Initially, Congress estimated that the total cost of the Section 29 credit would be $500 million to $1 billion over 22 years. The subsidy, however, cost taxpayers $10 billion before it ended, according to the U.S. Treasury Department.

In reporting on the 92 distinct federal policies and programs supporting the clean energy sector from 2009 to 2014, the authors of Beyond Boom & Bust make clear that there is nothing comparable to the big and long-term Section 29 credit to encourage deployment and operations for wind, solar, geothermal, or any other clean energy source. In fact, just the opposite is true. The  clean energy investments contained in the federal stimulus bill are now entering a state of what the authors say is a “policy collapse.” In 2009, according to the report, the U.S. spent $44.3 billion on clean energy. This year, federal spending in the sector will fall to $16.2 billion. By 2014, spending will be $11 billion.

“Without timely and targeted policy reform, several sectors are likely to experience more bankruptcies, consolidations, and market contraction ahead,” said the study.

The report’s authors — who also include Letha Tawney of the World Resources Institute; and Jesse Jenkins, Ted Nordhaus, Michael Shellenberger, and Alex Trembath of the Breakthrough Institute — recommend altering federal clean energy policy to stress innovation, research, development, and deployment of the best practices and equipment.

Adjustments Needed
When subsidies are necessary, they need to be durable enough politically — like those for the fossil fuel sector — in order to provide what the report calls “sufficient business certainty.” The wind energy industry, for instance, is now fighting for its life because the production tax credit that supports it has always been temporary, and is due once again to expire at the end of the year.

“The issue, as we show, is much broader than the narrow question of what happens to the production tax credit  for wind later this year,” said Muro.  “The report raises the issue of whether the U.S. is about to abdicate any role on fostering advanced energy.”

One of the big market drivers that the government should consider, say the report’s authors, is establishing performance-based standards for clean energy, similar to the higher fuel-mileage standards set by the Obama administration. Those standards require automakers to build fleets that average 54.5 miles per gallon by 2025. The fuel mileage requirement is already influencing vehicle designs and markets, enhancing the bottom lines of auto companies, providing consumers with more choices, and reducing consumption of gasoline and diesel.

— Keith Schneider

Activists with 350.org and tcktcktck ring alarm about the warming climate at a UN Climate Conference in Barcelona in 2009. Photo/Keith Schneider

Starting in 1989, a group of wildcatters raced across a 12-county stretch of northern Michigan to drill natural gas wells, and build all the roads, pipelines, pumping stations, and processing facilities to develop the region’s Antrim shale, the first shale gas play tapped in the U.S. For most of that time, until Wyoming’s coalbed-methane reserve development really got rolling in the late-1990s, northern Michigan was the most intensively drilled region of the continent. More than $2 billion in infrastructure was installed — including over 9,000 wells — across a heavily forested region that sustained considerable environmental damage. The Antrim shale yields about 130 billion cubic feet of gas a year now, ranking number 13 nationally among shale gas plays.

Although the intensive development prompted vigorous civic opposition and new state laws to reduce damage, the resistance amounted to a mere nuisance to the drilling companies. With two exceptions — drilling was barred in a 22,000-acre protected forest reserve in 1998, and the state Legislature and Congress intervened in 2002 to outlaw wells from being drilled beneath the Great Lakes — the companies went where they wanted and did what they needed to do.

Michigan’s experience with the Antrim play is typical and consistent with what’s going on now to tap oil and gas shale reserves nationally. A boom is occurring not only because prodigious oil and gas reserves exist and new technology enables companies to bring them to the surface, it’s also because law and policy confer to energy producers rights that are superior to almost any other industry.

The most powerful advantage is mineral rights, authorized by state law, to develop oil and gas where it exists. A mineral right, essentially a property right that provides access to reserves that lie deep in the earth, is superior to a landowner’s right to manage land on the surface. In cases where surface owners do not also own their minerals, the owner of the mineral right has the authority to install wells and other infrastructure needed to develop the reserves. It’s a bitch for people who have “severed minerals.” They literally have no legal way to prevent drilling or other development on their land. And once developers secure access to oil and gas through binding leases, all they need to develop them is a state or federally issued permit. The permit provides an absolute property right to develop those reserves. Local zoning provisions are rendered moot for establishing new wells, though they can be applied to compressors and some other oil and gas installations in regions that have effective rules and the will to enforce them.

The oil and gas industry also enjoys other legal and policy privileges. Those include the smorgasbord of exemptions from federal and state air, water, hazardous waste, and siting laws that apply to other industries. In Ohio, regulators recently issued stricter regulations for managing Class II deep injection wells used to dispose wastewater from oil and gas production sites. The state took the action because of earthquakes that occurred around a year-old Class II well in Youngstown.

The energy industry’s toxic wastewater is exempt from many of the stringent disposal requirements of the Resource Conservation and Recovery Act, the federal hazardous waste law. As a result, oil and gas producers can pour their wastes down Class II wells instead of the more rigorously constructed and managed Class I disposal wells. The federal government does not require an assessment of earthquake risks for building and operating Class II wells. It does for the more expensive Class I wells, which typically receive the most hazardous wastes.

The oil and gas industry’s competitive advantage includes favorable tax credits, direct grants, and other public investment. And they include the phalanx of state and federal elected lawmakers, appointed officials, and academics — all dependent to one degree or another on the stream of energy industry investment in the public process — who are sympathetic to the industry’s production goals and terrifically positioned in the legislative and executive branches to assure that those goals are achieved. The result, as we are witnessing with the new American energy boom, is a massing of industrial might marching virtually unchallenged across the country to perpetuate the fossil fuel economy.

Now contrast that with the barriers to entry for the clean energy industry. They are high and often insurmountable. Let’s start with a little story, also from this region of northern Michigan.

Two years ago Duke Energy responded to Michigan’s renewable energy standard for electricity — requiring utilities to produce 10 percent of their power from renewable sources by 2015 — by proposing to build 112 utility-scale wind turbines in Manistee and Benzie counties. Three months ago Duke baled after a fierce push-back from residents who developed a scientifically disputable but effective critique of the project’s consequences for health, land, property values, the economy, the environment, and the quality of life. The short lifespan of the Duke windfarm here reflects more than the nation’s new 21st century DNA — do nothing anywhere — it also illustrates the mismatch in the barriers to entry that exist for clean energy producers and fossil fuel producers.

Developers of wind and solar plants have no established property right to execute their projects, like the oil industry does. Opponents of clean energy installations can turn to local zoning, state wind and solar siting requirements, local and state public health requirements, various environmental review steps, operating requirements of utilities that purchase the power, and an endless number of other measures that require public notice, public review, public comment. In contrast, the oil industry contends with virtually no public comment steps when it develops privately-owned minerals. And it faces scant public comment when developing mineral rights owned by states and the federal government.

The clean energy industry also faces constant doubt and opposition from fossil fuel-supported lawmakers about the value of federal clean energy subsidies, and the cost of state renewable energy standards. Congress has not decided whether to renew the federal production tax credit for wind, which is really hurting markets for manufactured components. In Ohio and Michigan, Republican lawmakers propose to eliminate renewable energy requirements for utilities, though the Republican governors in the two states support the standards. The uncertainty is a challenge to the clean energy industry’s prospects in the Midwest.

– Keith Schneider

Laser-graded, table flat drilling pads being constructed atop the steep Appalachian ridges on both sides of the upper Ohio River. Photo/Keith Schneider

The story of American energy used to be we use too much. There’s not enough. And a technical breakthrough in clean alternatives will save us.

How 20^th century. The new narrative – really, it’s true — of American energy is this: We’re using less. A national boom in oil and gas production, engulfing 12 states from California to Pennsylvania and North Dakota to Texas, is showing we have much more than we thought. And the clean energy economy, tiny by comparison and roiled by uncertain markets, is still decades away.

In no state are these trends colliding with more immediacy right now than in Ohio, which for years has been a modest oil and gas producer, and not long ago was widely viewed as a leader in passing legislation, promoting jobs, and installing  manufacturing for a clean energy economy.

Over the last year, though, everything in Ohio’s energy sector, like the nation’s, has changed. At night, on both sides of the upper Ohio River valley south of Pittsburgh, floodlights illuminate the laser-graded, table flat summits of steep Appalachian ridges that now serve as production pads for natural gas wells and processing plants (see pix from West Virginia side of river above). Drilling rigs 18 stories tall are starting to tap huge reserves beneath 17,000 square miles of eastern and central Ohio, beneath which lie two layers of deep gas and oil-bearing shale.

Big Production Results From First Wells
Early production results from Columbiana, Carroll, Harrison, and Belmont counties show the first completed wells are capable of producing millions of cubic feet of gas and over 1,000 barrels of oil a day. Families are signing drilling leases that pay up to $5,800 an acre. Nearly $2 billion in new gas processing and transport facilities have been announced for sites in the Ohio River Valley. The economy of the 145 miles of river from Pittsburgh to Marietta, for two generations a laboratory of industrial ruin, is perking up.

“It’s fantastic what this could do for this region,” said Sharon Davis, who owns a restaurant in Sardis, Ohio and recently earned up to $5,250 an acre for the 168 acres of minerals she and her family own in Monroe County.

Meanwhile, a plan to build an offshore windfarm in Lake Erie, near Cleveland, has faltered. Another proposal to build a big wind farm in western Ohio was fought to a standstill by local residents, who filed a lawsuit that went all the way to the state Supreme Court. In January one of the state’s prominent solar manufacturing companies laid off half its workforce, and the chairman and founder of a second solar company resigned, leaving a skeletal staff and big debts. Cardinal Fastener, the Cleveland company that supplied bolts to wind turbine manufacturers, and which was visited by President-elect Obama in January 2009, declared bankruptcy last June, laid off most of the staff, and then was bought in November by a German manufacturer.

“The energy picture has changed dramatically,” said Eric Burkland, president of the Ohio Manufacturers’ Association. “The price of electrical power is low. The price of natural gas is low. It’s changed the thinking on all alternative technologies. It’s affecting solar. You could say it’s taking the wind out of wind.”

It wasn’t very long ago, 2008 in fact, that clean energy production, and the development of a manufacturing sector to support it, represented a cogent business plan for Ohio, and other states interested in developing new jobs and contributing answers to environmental pollution and risks to national security.  President Obama ran on a platform that responded to rising gas prices and industrial obsolescence with a clean energy, good jobs message.

A National Clean Energy Drive Slows
Four years later the president’s energy goals, like this state’s, reflect a convergence of technology, market opportunities, politics (“drill baby drill”) and policy that has elevated fossil fuel production to a top economic priority and weakened the glow of clean energy.

President Obama now talks about an “all of the above” energy strategy, as he did in January in the State of the Union, when he hailed the fossil fuel sector for generating more natural gas than ever before and for relying “less on foreign oil than in any of the past 16 years.”  Weeks later the president dispatched Interior Secretary Ken Salazar to Ohio to tour a manufacturing plant that is adding jobs to build the bulk tank trailers used to haul millions of gallons water to drill sites to hydro-frack the nation’s deep oil and gas-bearing shales.

In the geography of Ohio’s energy sector, the contrast between the sagging fortunes of clean energy manufacturing and the boom in the fossil fuel industry is striking. In 2008, Ohio approved a renewable energy law that required utilities to purchase 25 percent of their power by 2025 from renewable and advanced energy sources. In 2010, the Environmental Law and Policy Center of the Midwest (ELPC), a Chicago-based nonprofit, counted 106 Ohio companies involved in supplying components for the wind industry, 63 supplying materials to the solar industry, and 7,500 workers in the state’s clean energy sector.

Today, noone in state government or the private sector is sure how many clean energy companies and jobs are still around in Ohio.  Almost everybody agrees the sector is struggling. “There isn’t one big thing influencing the market here,” said Robert Kelter, a senior attorney in ELPC’s Columbus office. “There are a lot of factors. There’s been a change in administration in Ohio. The Legislature wants to change the renewable energy law. There are other setbacks that lead to delay and layoffs. It’s hurting the industry.”

It’s not that Ohio has stopped generating power from new renewable energy installations. Iberdrola Renewables is getting ready to open a 304-megawatt wind farm in western Ohio, where another company opened a 100-megawatt wind farm last year. A 50-megawatt solar installation is planned for southern Ohio, along with a manufacturing plant that wants to build the solar panels in a new factory in Toledo.

The Solar Energy Industries Association reported this month that 1,855 megawatts of new photovoltaic capacity was installed in the U.S. last year, more than double the 887 megawatts installed in 2010.  The American Wind Energy Association said that U.S. utilities installed 6,810 megawatts of wind capacity in 2011, a 31% increase from 2011.

Clean Energy Companies Falter
But Ohio solar energy manufacturers, like others in the West – the Solyndra failure in California last year has become a presidential campaign issue — are going out of business. Wind energy suppliers are laying off workers. Competition from foreign manufacturers, from low prices for natural gas, which is steadily replacing coal as a favored fuel for electrical generation, and from uncertainty in renewing the federal production tax credit for wind power are blamed.

Iberdrola Renewables laid off 50 of its 900-member staff in January and the company’s executives say an amendment to Ohio’s renewable energy law would make it much harder to finance new wind farms in the state. The proposal, which Republican Governor John Kasich supports, would enable AK Steel, an Ohio steelmaker, to use state renewable energy credits to develop electricity from waste gases from its blast furnace. The co-generation project, notes Eric Thumma, Iberdrola’s director of policy and regulatory affairs, is itself fueled in part by non-renewable natural gas.

AK Steel’s co-generation technology, the company asserts, fits into clean and renewable energy development in Ohio. The U.S. Department of Energy has already approved a $30 million grant for the project. Gov. Kasich, who has introduced a new state energy plan that emphasizes fossil fuel production, has said repeatedly that using waste heat or gases from industrial processes to generate electricity should qualify for renewable energy credits.

But there is already more than enough wind energy online and planned, says Thumma, to soak up the available credits. The AK Steel project would add 100 megawatts of new power to the already saturated market and essentially render the renewable credits worthless. “It will crash the market for wind as a renewable energy in Ohio,” said Thumma.

Contrast the unsettled economic geography of Ohio’s renewable energy industry with the massing industrialization by the state’s fossil fuel sector. Some $3 billion, according to the Ohio Department of Natural Resources, is being spent on drilling and production, pipeline construction and supply chain manufacturing to serve the fossil fuel sector.  One new steel plant is opening in Youngstown, and three others in Lorain and Canton are expanding to meet demand for drilling pipe and other equipment made of steel in and outside Ohio.

Contrasting Economic Landscapes
It takes a lot of steel to tap Ohio’s 4,000-foot deep Marcellus shale, and 2,000 feet below it, the Utica shale.  Geologists in state government say the Marcellus contains trillions of recoverable feet of natural gas, a good deal of it so-called wet gas that produces ethane, propane, and other compounds that can be easily processed into valuable fuels and feed stock chemicals for rubber and plastics. Royal Dutch Shell, this month, announced that an upper Ohio River site, just across the state border, in Monaca, Pa. is its favored site to build a multi-billion dollar plant to convert natural gas to ethylene and other feed stock chemicals.

The Utica shale may be even more valuable, say state geologists, because it holds 15.7 trillion cubic feet of gas, and 5.5 billion barrels of recoverable oil. As of March 11, the state had issued 172 drilling permits, all but 13 for the Utica play, and 57 wells had been drilled, using the horizontal drilling and hydro-fracking.

The two drilling and production technologies, using millions of gallons of water shot down long wells at super high pressure, has stirred safety, health, and environmental concerns in Ohio and other energy-producing states. The Environmental Protection Agency, which is conducting a comprehensive assessment, confirmed last year that drinking water wells in Wyoming were contaminated by racking. The Colorado School of Public Health in March issued a report that found air pollution from the heavy equipment used in fracking may contribute to “acute and chronic health problems for those living near natural gas drilling sites.”

Gov. Kasich insists that Ohio is prepared for the onslaught and ready to limit the risks. Two years ago the state strengthened the law that oversees operations in the oilfield. “You cannot degrade the environment at the same time you’re producing this industry,” said Kasich in January. “It’s not acceptable. It’s not a false choice. The biggest companies know that you need tough environmental rules.”

Because fracking requires so much water, a good deal of which comes back to the surface contaminated with hydrocarbons and chemicals, wastewater disposal from the oilfield is a big challenge. Ohio requires the wastewater to be recycled or disposed in deep injection wells.

This month, in a step that seemed to confirm the governor’s pledge to be vigilant, the Ohio Department of Natural Resources (ODNR) imposed tough new regulations on the operators of the state’s 177 deep injection wastewater disposal wells. The new rules, prompted by earthquakes last year that were centered around a year-old injection well in Youngstown used to dispose of wastewater from hydro-fracked wells, will make Ohio’s Class II deep-injection wells among the most stringently monitored and regulated in the nation.

“We have the opportunity to get in front of the development with stricter rules,” said Trent Dougherty, staff attorney and director of legal affairs at the Ohio Environmental Council. “It’s only just getting started. We have a chance to oversee the industry better than other states have.”

State regulatory infrastructure will be tested in Ohio, as it is in other states. Similarly dense, hydrocarbon-rich shales lie beneath much of the rest of the country, and are being tapped at a frantic pace. Last year, according to the Department of Energy’s Energy Information Administration, the number of oil and gas drilling rigs in operation across the U.S. reached an average of 1,865 a month. That is the highest rig count since 2008, according to the EIA. More than 20,000 oil wells were drilled in the U.S. in 2011, higher than any year since 1985.

High Percentages
The deep shales, moreover, are almost a can’t miss opportunity, Of the more than 40,000 oil and gas wells drilled in 2011, said the EIA, almost 90 percent produced marketable quantities of fuel. Natural gas production last year set a record, a third of it from deep shale, and in December oil production climbed to 5.88 million barrels per day, the highest since December 2001.

The consequences are profound to the nation’s energy security and economy, By 2014, according to the U.S. Department of Energy, the U.S. will be a major exporter of natural gas. By 2030 or so, U.S. oil and fuel imports as a share of total consumption are projected to fall to around 22 percent. To energy economists, that’s a number that defines energy security. “It’s happening very quickly and it’s for real,” said Kenneth B. Medlock, an energy and resource economist at the Baker Institute For Public Policy at Rice University in Houston, who organized a one-day conference of environmentalists, scientists, academics, and executives in January 2012 to explore the American fossil fuel boom.  ”Increased supplies affect the balance of payments. It affects our geopolitical security. It has a lot of impact on reducing the cost of energy in manufacturing, making us much more competitive. It is, potentially, one of the most important economic events of the last 50 years.”

From the ridge summits high above the upper Ohio, on an unseasonably warm day late in a winter that wasn’t, some of the equally profound risks of perpetuating America’s fossil fuel economy also are visible. The growl of bulldozers clearing trees for new roads and drill pads can be heard across a landscape that consists of miles of unbroken forests and is now being fragmented. Wide and muddy corridors have been cut up and down steep hillsides for pipelines that gather natural gas for transport to processing stations. Erosion is increasing and pouring mud into the region’s streams. Big trucks, pouring diesel exhaust into the air, strain in low gear to haul equipment and frack water up narrow roads with such acute grades that in the West Virginia gasfield near Martinsville, authorities require they be escorted to limit traffic accidents.

Certainly the new energy comes with economic benefits, and a new era of reckoning for the little towns that hug the river long accustomed to having no pace other than the passing of old people to the grave and young people moving out. Motels and campgrounds are full with skilled oilfield workers from Ohio and other states. Restaurants are busy. But many people, even those who’ve gained new jobs in the industry, or reaped windfalls from their mineral rights, are nervous.  “Things will change now,” said Sharon Davis, the restaurant owner in Sardis. “We know that.”

An edited version of the article was posted by Yale Environment 360 on March 29, 2012.

– Keith Schneider

Making the complex simpler to understand is one of the guiding missions of my life as a journalist. In the last several years, in reporting from Australia, Europe, Asia, and North America, I’ve devoted much of my time to reporting on global energy issues, particularly the coal production and clean energy surge in China; the gas and oil boom in North America, and the promising rise and troubled fall of clean energy prospects in the U.S.

A new piece of this saga is unfolding in Ohio, of all places.

Ohio, as you may know, is a center of clean energy manufacturing. During the 2008 campaign, and just prior to the inauguration, President Obama visited Cardinal Fastener, a manufacturer of specialty bolts used in wind energy production. The Legislature approved a decent renewable energy standard for utilities in 2008 (12.5 percent by 2025) and established several loan and investment accounts to encourage clean energy manufacturing and production, resulting in new wind farms and encouraging wind and solar plant expansions.

Ohio, as you may not know, also is steadily elevating as a center of oil and natural gas production. The Marcellus shale (natural gas) and the Utica shale (oil and gas) lie beneath much of eastern and southern Ohio. Two weeks ago, Interior Secretary Ken Salazar visited the MAC Liquid Tank Trailer in Kent, Ohio, which expanded its bulk tank and trailer production facility. The equipment hauls water used in fracking deep oil and natural gas wells that are coming online in eastern and southern Ohio, and in neighboring Pennsylvania and West Virginia. A torrent of investment in mineral leases, manufacturing plants, pipeline construction, and drilling platforms signals what business executives and state energy officials say is the most significant surge in oil and gas development in Ohio in decades. Since 2005, Ohio’s employment in the drilling sector has grown by 1,100 jobs, according to an analysis by EMSI, a labor market research group in Idaho.

The fossil energy and clean energy narratives are now colliding across Ohio. One poignant example is what’s going on at AK Steel, a Middleton, Ohio company that proposes a $310 million expansion in steel production. The proposal includes deploying new technology to use gases from its blast furnace as a fuel to produce steam for a 100-megawatt electrical power plant rather than emitting a waste gas that it must by law now flare. The co-generation electrical plant would be large enough to power a city of 85,000.

Where this idea becomes interesting and relevant to the new state and national energy narratives is what lies behind the plan. The AK expansion is prompted by rising demand for steel in the growing gas and oil production sector in Ohio, as well as the surging auto industry. Three new steel facilities are under construction in Ohio to serve the energy sector. Another is under construction south of Toledo for auto manufacturing.  A fifth $7 billion steel plant, proposed by a Russian-German-American consortium, is under consideration in southern Ohio.

AK Steel’s co-generation technology, the company asserts, fits into clean and renewable energy development in Ohio. The U.S. Department of Energy has already approved a $30 million grant for the cogen project.  AK steel has asked the Legislature to amend the state’s clean energy development statute so that it can gain some of the $1.5 billion that lawmakers put there when it passed three years ago. If the Legislature agrees, the other new steel plants, as well as Ohio’s existing steel manufacturers, could gain state funds to convert their facilities to produce electricity. John Funk of the Cleveland Plain Dealer wraps up more of the details here.

Ohio’s major environmental organizations, among them the Ohio Environmental Council, support the change. So does the NRDC and the EPA. But the state’s wind energy production and manufacturing sector, led by Iberdrola Renewables Inc., opposes the amendment. The wind industry believes it would further disrupt Ohio’s clean energy power markets that are already roiled by low prices for natural gas. Iberdrola executives, who built a 304-megawatt wind farm in Ohio, predict that if the amendment is approved it would end wind farm construction in the state.

The debate outlines the steadily mounting influence that oil and gas production is having in Ohio’s clean energy sector, and nationally. Rising oil and gas production is rattling the alternative energy manufacturing and production industry. Simply put, the entire conversation about energy is being turned on its head in Ohio and nationally.

Since the 1970s the essential narrative on energy in the U.S. was this: We use too much, and oil and gas reserves are declining.

But since 2008 we’ve been using less and domestic supplies are increasing.

Those of us who’ve reported on energy all these years anticipated that the technological breakthrough that would alleviate our energy woes would come in the alternative fuels sector — wind, solar, geothermal, algae, cellulosic ethanol, and the like. Wrong. The big breakthrough came in drilling and extraction technology – most specifically in horizontal drilling and high pressure hydro-fracking that is drawing the U.S. steadily closer to an unexpected era of fossil fuel security.

– Keith Schneider

See more of my reporting on the American energy boom.

Plus these pieces from North Dakota:

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

How Long Will North Dakota Bakken Oil Surge Last? Decades Due To China

The New York Times is catching up to the grassroots opposition to big energy projects, clean energy or dirty. Today the paper reported on the developing push back to big oil pipelines, big electrical transmission lines, and other energy transport projects of scale.

The dimensions of what needs to be done to push the country from high-carbon energy production to lower carbon production is as vast as anything the nation has attempted. That’s why it’s going much more slowly than most environmentalists and business executives anticipated. Not only are there technical gulfs to be crossed, there also are social oceans to navigate.

Among the most important is a basic American revulsion to size and scale in the clean energy sector that is expressing itself in every part of the country. Here in northern Michigan, for instance, Duke Energy late last year abandoned its plan to build 112 utility-scale wind turbines in Benzie and Manistee counties, principally because of revulsion by enough summer and full-time residents to their size.

As we’ve reported here for several years, there aren’t too many American clean energy sector projects of scale that haven’t come under pressure at the grassroots simply for being big. Big wind. Big solar. Big geothermal. Big transmission lines.

The clash over the Keystone XL Pipeline, which would extend from Alberta, Canada to the Gulf Coast, also involves scale to some extent. It’s the first big individual infrastructure project of the new era of unconventional fossil fuel development that has attracted such public upheaval, though the water-intensive hydro-fracking production technology that led to the higher oil and gas production also is generating pointed criticism.

The oil and gas industry will have a much easier time moving their products to market, as the developments in North Dakota, Texas, Oklahoma, Colorado, and the mid-Atlantic show. Americans are more comfortable with the fuels they know. And most of the pipeline infrastructure is already in place and simply needs to be extended to reach the new gas and oil fields. There’s almost $17 billion worth of pipeline construction, just completed or now occurring in the U.S. without the $7 billion Keystone XL and its earlier completed $5 billion Keystone project.

Completed and Proposed Oil and Natural Gas Pipelines in U.S.

Alberta Clipper — $3.3 billion

Southern Access Extension — $350 million

North Dakota System Expansion – $100 million

Enbridge Bakken Expansion – $560 million

Bakken Marketlink – $140 million

Bakken North -  $200 million

High Plains Expansion – $220 million

Northern Gateway Pipeline — $5.5 billion

Rocky Mountain Express gas pipeline — $4.5 billion

Proposed Cochin natural gas connector — $550 million

Quintana Capital Group oil pipeline: $250 million

Monarch pipeline —  $1 billion

Texas Longhorn — $275 million

Clean energy is encountering more difficult circumstances. The big solar and wind projects, for instance, that only a few years ago were viewed as low-carbon savior technologies by the American environmental community, are now seen as threats — to viewsheds, endangered species, public health, whatever. Transmission lines across wild lands are now viewed as dangerous and unsightly.

The public push-back points to a new stage of development, from centralized power generation in big plants, to decentralized clean energy production. That means installing solar arrays on individual business and residential rooftops, or building small wind generating stations that fit into neighborhoods and communities. While the concept may seem attractive, implementing such a scheme will take at least a generation even if it doesn’t run into any new civic opposition.

In the meantime, America is pushing as hard as it can to perpetuate the fossil fuel era, and losing momentum to China and Europe in clean energy production. The 750 kv transmission line in Gansu Province, China (above), which I photographed a year ago, transports power from new wind and solar installations in the northwestern deserts to the interior, and encountered no opposition.

In contrast, just last week in Michigan, Energy Conversion Devices, the parent of United Solar Ovonic, announced its plans to file for bankruptcy. United Solar Ovonic, the maker of thin-film photovoltaic panels, was for a short time one of the darlings of Midwest clean energy manufacturing sector.

– 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

Aware of the growing and visible opposition to the 1,700-mile Keystone Pipeline, much of it organized by writer Bill McKibben and his colleagues at 350.org, the White House today blinked. In a statement, the administration said it would evaluate a new pipeline route from Canada to the Gulf Coast, one that presumably takes it away from sensitive wetlands in Nebraska. Protests there have been so strong that even Nebraska’s Republican Governor Dave Heineman announced his opposition.

I’ve written extensively about tar sands and the Keystone Pipeline, which its proponents consider vital to the energy economy and security of the U.S. It is intended to transport oil from Alberta, Canada to refineries in the Midwest and Gulf Coast. Its opponents attacked the $6 billion proposal as a threat to wetlands and water (from leaks), a useless drain on economic activity designed to wean the nation from oil, and a threat to the climate because of all the greenhouse gases it will release during mining, processing, and use of tar sands-generated oil.

Next month I head out to the Pacific Northwest and northern Great Plains to report on several more big facets of this story — the fight over shipments of big equipment from Idaho and Montana to Alberta, and the expanding oil and gas fields of North Dakota. Make no mistake about what’s happening in American energy development. The United States is diligently perpetuating the drive-through fossil fuel economy. The struggle over building the Keystone Pipeline is a clear indication that Americans are paying attention to the consequences.

– Keith Schneider