Energy Boom: Is It For Real? Looks Like Answer is Yes

Prompted by President Obama’s unexpectedly cheery assessment of America’s energy outlook in the State of the Union, the Washington Post asked whether the surge in fossil fuel production was real. Yes, the paper concluded, but not for very long. The Post, it appears to me, is too pessimistic.

U.S. oil production peaked in 1970s at about 9.6 million barrels per day. It dropped to 4.96 million barrels a day in 2008, the lowest production since the late 1940s. But since 2008, production has steadily climbed, reaching around 6 million barrels per day as the year ended and steadily moving upward.

The Energy Information Administration projected oil production will grow to 6.7 million barrels a day by 2020, and will remain above 6 million barrels daily through 2035. Because the transportation sector is growing more energy efficient, principally from new fuel mileage standards, oil consumption is expected to remain close to where it is today at less than 20 million barrels a day.

Oil imports are anticipated to fall to 37 percent of domestic supply by 2035, a level not seen since the 1980s. And when increasing domestic supplies of natural gas for transportation, manufacturing, and electrical generation are taken into account, the EIA predicts, overall fossil fuel imports will fall to 22 percent of supply, a level that the agency said is close to the national goal of achieving “energy security.”

It’s for those reasons  that in the State of the Union the president celebrated the highest levels of oil production in eight years, the lowest level of oil imports in 16 years, natural gas supplies that could last a century, and “a future where we’re in control of our own energy, and our security and prosperity aren’t so tied to unstable parts of the world.”

While the new supplies of oil and gas provide what clearly appears to be an economic reprieve, there’s little comfort in the environmental costs the boom is producing on land, water, and the climate.

In the last weeks of 2011 and first weeks of 2012, a flurry of reports produced by the Energy Department and prominent research institutions both confirmed the immensity of the oil and natural gas reserves that are opening around the nation, and the potential for considerable harm.

In November, a special panel of experts convened by the Department of Energy to advise the government on shale gas production urged the government to embrace a 20-step program to make the development safer for air and water. The advisory board was chaired by John M. Deutch, a former director of central intelligence in the Clinton administration, former acting assistant secretary of energy during the Carter administration, and a member of the faculty at the Massachusetts Institute of Technology since 1970. During a lecture last year at MIT, Deutch called the boom “the biggest energy story that’s happened in the 40-plus years that I’ve been watching energy development in this country.”

He’s not unaware, though, of the safety and environmental issues. The advisory committee called on the federal government to embrace the E.P.A.’s draft air quality rules, introduced in July and scheduled to be made final in April, and to support the EPA’s work eliminate the use of diesel fuel in fracking fluids.

In December, the Massachusetts Institute of Technology published a separate study on the effects of shale gas on the economy, and especially to innovation and manufacturing in the alternative energy economy. The study concluded that the huge reserves of natural gas “makes a big difference,” said Henry Jacoby, co-director emeritus of MIT’s Joint Program on the Science and Policy of Global Change, and co-author of the study, The Future of Natural Gas. “It helps lower gas prices, it stimulates the economy and it provides greater flexibility to ease the cutting of emissions. But it also suppresses renewables.”

“People speak of [natural] gas as a bridge to the future, but there had better be something at the other end of the bridge,” he said.

In mid-January, the Baker Institute at Rice University held a one-day energy conference in Houston that is a must-read, must-view for anybody interested in understanding the economic, environmental, and cultural dimensions of the energy surge.

Deutch summed up the promise and perils in a compelling talk that opened the day. “This morning,” he  said, “I wish to make three points to frame the discussion. First, the potential positive impacts of this increase are enormous, but as yet not fully appreciated by the public, business, and the nation’s political leadership. Second, we should be cautious in assuming that the appearance of such an opportunity will necessarily lead to a favorable outcome. There are significant environmental challenges.”

He added: “Absent serious action to reduce the environmental impact, not just talk about the need for such action, we run the risk of losing the public’s confidence in this technology and delaying or prohibiting its growth. Third, the U.S. government should adjust its policies, and industry should adjust its practices to maximize the benefits of this welcome new energy opportunity. Unfortunately, my impression is that neither government nor business is doing what needs to be done.”

— Keith Schneider

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