Snake Oil: How Fracking's False Promise of Plenty Imperils Our Future
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Figure 6. US Natural Gas Production and Prices, 2000–2012.
Source: Adapted from J. David Hughes, “Drill, Baby, Drill,” Figure 34; data from Energy Information Administration, December 2012. Production data fitted with 12-month centered moving average.
Then, using the same hydrofracturing technology, the industry began to go after deposits of oil in tight (low-porosity) rocks. In Texas and North Dakota, US oil production began growing. It was an astonishing achievement, especially since the nation’s oil production had generally been declining since 1970. Suddenly there was serious discussion in energy policy circles of America soon producing more oil than Saudi Arabia. None of us Peakists had predicted this. Point Cornucopians.
Figure 7. US Crude Oil Production, 2000–2013. US oil production reversed decades of decline in 2008 and then surged in late 2011.
Source: Energy Information Administration, May 2013. Data include lease condensates and exclude natural gas plant liquids, refinery process gain, and biofuels.
That brings us to the present. As of 2013, the game is tied and headed into overtime. Cornucopians have the momentum and the historic advantage, so they’ve been quick to claim victory. Meanwhile, at least one prominent Peakist has publicly conceded defeat: in a widely circulated essay, British environmental writer George Monbiot recently proclaimed that “We were wrong on peak oil.”4
It doesn’t look good for my team. It appears to most people that the “Shale Revolution” (the tapping of shale gas and tight oil, thanks to advanced drilling techniques) has changed the game for good. Is it time for us to exit the playing field, heads bowed, shoulders slumped?
* * *
As you’ve probably guessed from the title of this book, the pages that follow are not intended as a capitulation. Rather, my purpose is to alert readers to relevant and important information that is, with rare exceptions, failing to find its way into the public discussion about our energy future. Its upshot is that the game is about to turn again.
Almost no one who seriously thinks about the issue doubts that the Peakists will win in the end, no matter how pathetic my team’s prospects may look for the moment. After all, fossil fuels are finite, so depletion and declining production are inevitable. The debate has always been about timing: Is depletion something we should worry about now?
Readers who’ve seen articles and TV ads proclaiming America’s newfound oil and gas abundance may find it strange and surprising to learn that the official forecast from the US Energy Information Administration (EIA) is for America’s historic oil production decline to resume within this decade.5
But the EIA may actually be overly optimistic. Once the peak is passed, the agency foresees a long, slow slide in production from tight oil deposits (likewise from shale gas wells). However, analysis that takes into account the remaining number of possible drilling sites, as well as the high production decline rates in typical tight oil and shale gas wells, yields a different forecast: production will indeed peak before 2020, but then it will likely fall much more rapidly than either the industry or the official agencies forecast.
There’s more—much more. This book tells an analytic story assembled from proprietary industry data on every active and potential US oil and gas play. It’s a story about shale gas wells that cost more to drill than their gas is worth at current prices; a story about Wall Street investment banks driving independent oil and gas companies to produce uneconomic resources just so brokers can collect fees; and a story about official agencies that have overestimated oil production and underestimated prices consistently for the past decade.
The book also relates a human and environmental story gathered from people who live close to the nation’s thousands of fracked oil and gas wells—a tale of spiraling impacts to drinking water, air, soil, livestock, and wildlife; about companies failing to pay agreed lease fees; about declining property values; about neighbor turned against neighbor; and about boom towns in turmoil.
Here, in briefest outline, are the findings the evidence supports:
The oil and gas industry’s recent unexpected successes will prove to be short-lived.
Their actual, long-term significance has been overstated.
New unconventional sources of oil and gas production come with hidden costs (both monetary and environmental) that society cannot bear.
Further, these conclusions lead inevitably to one final, crucial observation:
The oil and gas industry’s exaggerations of future supply have been motivated by short-term financial self-interest, and, to the extent that they influence national energy policy, they are a disaster for America and for future generations.
* * *
This book is aimed at the general public and at policy makers, who need to understand why the current received wisdom about US fossil fuel abundance is dangerously wrong.
It is especially directed toward local anti-fracking activists across the United States and throughout the world who are working hard to limit or prevent harms to water and air quality, wildlife, and human health. Bolstering environmental arguments with economic data showing the likely brevity of the fracking boom can only help win debates regarding the regulation of this dangerous technology.
The book is meant as well for the thousands of readers who learned about peak oil during the past decade, took the information seriously, and made extraordinary efforts to reduce their personal petroleum dependency and to prepare their communities for the end of the era of cheap oil—only to see their credibility erode as a result of oil and gas industry disinformation and spin. These are my people, and they need some encouragement right about now.
Finally, and perhaps most importantly, this book is directed toward anyone and everyone who cares about the fate of our planet. The only realistic way to avert catastrophic climate change is to dramatically and quickly reduce our consumption of fossil fuels. That project will pose economic and technical challenges. But politics may present the biggest obstacle of all.
There are two kinds of arguments for policies to reduce reliance on oil, coal, and gas—environmental and economic. Environmental arguments point to the consequences of rising greenhouse gas emissions from burning hydrocarbons, including rising sea levels, extreme weather, and likely catastrophic impacts to agriculture. Economic arguments highlight the inevitability of future fossil fuel scarcity as society burns these finite, nonrenewable resources in ever-greater quantities. The clear solutions in both cases: find other energy sources and reduce overall energy consumption now.
The fossil fuel industry has, quite understandably, fought back against both economic and the environmental arguments. Oil companies (notably ExxonMobil) have not only funded the efforts of climate-denial front groups to sow doubt about what is in fact established science (ExxonMobil now officially acknowledges the reality of human-induced climate change), they have also mounted a sustained public relations campaign to undermine the credibility of peak oil analysts. At the same time, the industry would like nothing better than to divide its opponents, and it has achieved some success in this regard: a few climate activists have mistakenly disavowed peak oil, perhaps because they see it as a distraction from, or dilution of, their own message. They often point out that if industry estimates of fossil fuel reserves are correct, burning all that oil, coal, and gas will result in environmental destruction on a scale beyond our ability to comprehend; with so much at stake, why quibble about when oil production rates will max out? Meanwhile, a few Peakists have made the foolish claim that climate change is not a serious problem because the global economy will crash due to soaring energy prices before we are able to do really serious damage to the environment.
Success in shifting energy policy depends upon coordination of environmental and economic arguments against continued reliance on fossil fuels. Are there enough accessible hydrocarbons to tip the world into climate chaos? Absolutely. But activists concerned about climate change would do well to embrace economic (supply constraint) arguments against
fossil fuel dependency. By erroneously reinforcing industry hype about the future potential of shale gas, tight oil, and tar sands, they keep the debate exactly where the industry wants it—as a choice between environmental protection on the one hand and jobs, economic growth, and energy security on the other. It’s a false choice and a losing strategy.
* * *
Here’s what readers can expect to find in the pages ahead. After a quick overview in Chapter 1 of what the peak oil and gas discussion is all about and why it matters, we will take a close, hard look in Chapter 2 at fracking—what it is and what it means. In Chapter 3, we’ll examine key producing regions, the rates at which per-well output tends to decline over time, and trends in drilling. And we will explore the implications of those data.
We will then look at the environmental costs of unconventional oil and gas in Chapter 4, sampling reports from the front lines of the fracking fields across the United States regarding impacts to water and air quality, land, and public health. You may be surprised to learn who is fighting the drilling juggernaut—it’s not just environmentalists.
In Chapter 5, we’ll inquire who actually benefits from the fracking boom and explore Wall Street’s role in the current mania. Investment bankers make money on the way up (as bubbles inflate) and on the way down (as companies sell off assets and submit to mergers and takeovers). Therefore, it is in their interest to support drillers’ exaggerated claims for reserves and future production potential. When the fracking boom inevitably goes bust, it won’t be the banks that will take the hit; it will be the investors (including retirees) who bought shares of stock in oil and gas companies.
Finally, in Chapter 6, we will examine other unconventional fuels and fuel sources (tar sands, methane hydrates, and oil shale) to see whether they might be game changers waiting in the wings. And we will explore likely scenarios for our real energy future. (Just one preliminary hint: it’s time to learn how to live well with less.)
* * *
The data we will survey in the chapters ahead suggest that, through the technology of hydrofracturing, the oil and gas industry will generate 10 or fewer years of growing fuel supplies. (In the case of shale gas, the clock started ticking roughly five years ago; for tight oil, about three years ago). Industry promises of a hundred years of cheap, abundant gas, and of domestic oil production growth making the nation self-sufficient in petroleum are unlikely to be fulfilled given what we know now about the nature of the resources and the technology being used to access them.
Let me be clear: I am not saying that the United States will run out of shale gas or tight oil sometime in the next five to seven years, but that the current spate of oil and gas supply growth will probably be over, finished, done and dusted before the end of this decade. Production will start to decline, perhaps sharply.
Meanwhile the brief, giddy production boom we are currently seeing in towns, farms, and public lands in Texas, North Dakota, Pennsylvania, and a few other states will have come at an enormous cost. In order to achieve just a few years of domestic supply growth, the industry will need to drill tens of thousands of new wells (in addition to the tens of thousands brought on line in just the last three to five years), ruining landscapes, poisoning water, and forcing families to abandon their homes and farms.
This temporary surge of production may yield a very few years of lower natural gas prices and may temporarily improve the US balance of trade by reducing oil imports. What will we do with those years of reprieve? In the best instance, the fracking that has already been accomplished could provide us a bonus inning in which to prepare for life without cheap fossil energy. But to make use of this borrowed time we must build an energy infrastructure of wind turbines and solar panels rather than drilling rigs and pipelines. This will constitute the biggest investment, and the most ambitious project, of our lifetimes. Currently, instead, many renewable energy efforts are being hampered by the false perception of vast, long-term supplies of cheap natural gas.
We are starting the energy transition project of the 21st century far too late to altogether avert either devastating climate impacts or serious energy supply problems, but the alternative—continued reliance on fossil fuels—will ensure a future far worse, one in which even the bare survival of civilization may be in question. As we build our needed renewable energy system, we will also need to build a new kind of economy, and we must make our communities far more resilient, so as to withstand environmental and economic shocks that are inevitably on their way.
Meanwhile the fossil fuel industry is doing everything it can to convince us we don’t have to do anything at all—other than simply to keep on driving. The purveyors of oil and natural gas are selling products that we all currently use and that we still depend upon for our modern way of life. But they’re also selling a vision of the future—a vision as phony as the snake oil hawked by carnival hucksters a century ago.
SNAKE BITES
1. THE INDUSTRY SHILLS SAY:
Peak oil is crap. World oil reserves are increasing.
THE REALITY IS:
The industry has overstated world oil reserves by about a third and is working harder and harder just to stand still.
2. THE CONVENTIONAL WISDOM SAYS:
Unconventional oil (tar sands, tight oil) will seamlessly replace the current energy output from conventional sources.
THE REALITY IS:
It takes energy to get energy. The energy returned on energy invested (EROEI) of unconventional fossil fuels is significantly worse than for conventional resources.
Oil production technology is giving us ever-more expensive oil with ever-diminishing returns for the ever-increasing effort that needs to be invested.
— Raymond Pierrehumbert, Professor of Geophysical Sciences, University of Chicago
Chapter One
THIS IS WHAT PEAK OIL LOOKS LIKE
Oil is the linchpin of our modern industrial way of life. Nearly all energy used for transport derives from it, and transport is essential to virtually all trade. Take petroleum away and the global economy would shudder to a halt in a matter of minutes.
It wasn’t always this way. The petroleum age started when the first commercial oil well was drilled in the late 1850s, and it wasn’t until the early 20th century that energy-dense, easily portable “rock oil” found widespread use.
With automobiles, airplanes, tractors, chainsaws, diesel-fueled trains, oil-powered ships, and diesel-powered mining and road-building equipment, it became possible to intensify and expand nearly every extractive and productive process known to humankind—including the process of drilling for oil. Agriculture, fishing, mining, transportation, manufacturing, and trade burgeoned as never before, lifting billions from poverty (or undermining their more sustainable traditional ways of life, depending on how you look at it) and providing several hundred million humans with a level of amenity, convenience, and mobility undreamt of even by the pharaohs and emperors of previous eras.
All these benefits have come at a cost. The growth of extractive industries has led to increasing rates of depletion of minerals, soil, water, fish, and forests. At the same time, the expansion of industry has created burgeoning streams of waste products that nature cannot absorb. The most pervasive of industrial wastes is carbon dioxide, released when oil and other fossil fuels are burned. As ambient levels of carbon dioxide rise, the planet’s atmosphere traps more heat, changing the climate and precipitating extreme weather events, potentially leading to conditions in which civilization cannot persist.
Resource depletion and climate change are problems that undermine the survival prospects of future generations. Many people still tend to think their impacts are decades away, but we are beginning to see those impacts unfold in real time all around us.
In this chapter, we will take a whirlwind tour of a controversy that has roiled the oil and gas industry for the past decade and more. The discussion about oil supplies, reserves, and production that goes by the name of “peak oil” is comple
x and subtle and has often been mischaracterized or ludicrously oversimplified (“We’re running out!” versus “We’re not running out!”). It is a discussion that readers must be familiar with in order to properly understand and evaluate the claims of abundance currently being made by representatives of the fossil fuel industry. What follows is intended both as an overview of the current state of that discussion, and as an effort to set the record straight with regard to economic life-or-death issues that have sometimes been distorted by those who profit from our fossil-fueled status quo.
PEAK OIL: WHAT THE FUSS IS ABOUT
Individual oil wells have a finite life span. Sometimes aggressive techniques—such as water flooding—can be deployed to extend an oil well’s life, but depletion is inexorable, and eventually every oil well reaches the point where production rates decline severely and the cost of extraction efforts exceeds the value of the oil being extracted. When that happens, the well is capped or plugged with cement, and equipment is removed from the site.
The same principle holds for larger aggregations of petroleum resources. When a new oil field is discovered, a few exploratory wells are drilled to help determine the size of the deposit and the nature of the geology. With this information, engineers determine optimum well placement and start drilling in earnest. The production rate for the oil field increases as more wells are drilled. Gradually, as older wells deplete, their production rates begin to decline, but new wells are drilled to offset those declines. Eventually, when all of the possible drilling locations have been used and production from most wells is tailing off, it becomes impossible to stave off the dwindling of the overall extraction rate.