By: Andy Crawford
Part of what we do on BBT is write about any topic which we find interesting. We’ve written on topics as diverse as the Delta Blues, Appalachian forestry, and spark plugs. So, allow me to come out of left field with another topic: fracking.
I recently began reading a lot about U.S. energy policy, including a series of articles in Foreign Affairs addressing fracking from many different perspectives. In short, it’s an interesting topic with far-reaching and fascinating effects that is completely reshaping the national, and indeed global, economy.
What is fracking?
Without knowing anything, fracking is a bit of a scary word. It summons images of violent cracks in the Earth that could lead to earthquakes or massive sink holes. Even the word itself is hard and violent sounding.
Fracking is a process of extracting oil and natural gas by injecting high-pressure water, sand, and chemicals into shale. Until recently, drilling technology could not efficiently reach reservoirs of oil and natural gas packed into the shale. By drilling the well horizontally into the ground, instead the traditional vertical direction, we can now reach large amounts of oil and natural gas in a much more efficient way.
So why is fracking such a big deal?
If you recall 2007/2008 you’ll remember U.S. energy policy was at the forefront of the presidential election. It was a time of high gas prices, and chants of “Drill Baby, Drill” could be heard at campaign rallies. Some called for more oil refineries and offshore drilling, and others insisted wind and solar weren’t unicorns and could actually replace fossil fuels.
It was around this time that fracking really took off in America. All of a sudden there was a huge surge in domestic oil and natural gas production in our own backyards. In 2008 the price of natural gas per thousand cubic feet was $13.50. By 2009 that price had dropped to $4.00. Considering natural gas is 25% of American energy consumption, this was a huge boost to an economy recovering from the Great Recession.
There was a similar effect in the oil industry. The price of a barrel of oil has not been close to the $100 per barrel we saw for much of the first part of this century. The United States is now one of the largest oil producers in the world, and is expected to overtake Russia, the second leading oil producer, by the end of the decade. The International Energy Agency projects that the U.S. could eventually surpass Saudi Arabia to become the leading oil producer in the world.
It is no wonder that the two states that have embraced fracking the most have experienced huge economic growth over the last six years. Thanks to a booming energy sector, North Dakota’s unemployment rate is an astounding 2.6%. According to the American Enterprise Institute, Texas accounted for 15% of the nation’s job growth in 2013, even though the state accounts for only 8% of the population. This is largely thanks to a booming oil industry.
It’s also worth noting that the abundance of natural gas is driving a comeback of the American manufacturing sector.
Why is this only happening in America?
America has been on the front end of the shale revolution. Four million oil and gas wells have been drilled in the U.S. versus 1.5 million in the rest of the world. This is because America is one of the freest developed nations on Earth. American law respects private property owners, allowing them to own the mineral rights below the surface of their property. In Europe, Russia, and China, property owners often have no right to the resources below the surface. An enterprising company must navigate an expensive and bureaucratic process before they can begin to drill.
America also has a financial system that makes it easy for entrepreneurs wishing to invest in new technology to receive the capital they need. Fracking was not developed by Big Oil. Those companies gave up on the mainland a long time ago, and have been drilling in the ocean for decades. It was small, competitive, and innovative companies that developed fracking technology.
Lastly, America has largely left fracking unregulated (although some states and cities have banned the process). Environmentalists, particularly in Europe, have managed to restrict the practice. France has actually banned fracking all together. (This means they will continue to import oil and gas from Russia, and directly fund Putin’s aggression toward Ukraine and Georgia…but whatever.)
What about environmental concerns?
It’s completely reasonable to question the environmental impact of fracking. Drilling always leads to questions of soil and water contamination, possible seismic activity, and pollution that can come from the above-ground drilling site itself. For example, there have been recent concerns raised about planned fracking in Virginia possibly leading to a contamination of the Chesapeake.
Fracking usually takes place well below the water table, which means there is little chance of contamination. Any instances of tainted water have been isolated, and are connected to poor well construction or the inevitable surface spill. While worrisome, it is important to remember that these are complications that can come from any kind of drilling, and not just fracking. There is no evidence the action of fracking causes ground pollution. In fact, the chemicals used to break the shale are those found in toothpaste or ice cream.
As for air pollution, locations near oil and gas wells have seen large increases in smog. Oil wells in Colorado, most of which have been built since 2010, are the state’s largest cause of smog. Most of this is produced by the tanks, valves, and trucks used to store and transport the gas and oil.
Ultimately, fracking becomes a risk-benefit analysis. The economic benefits are clearly substantial. The world continues to run on oil and gas, and that will continue into the foreseeable future. Fracking continues to give America an advantage over other countries in energy production, and that takes power away from geopolitical foes like Russia and virtually the entire Middle East. Furthermore, natural gas is much cleaner than coal, producing much less carbon dioxide and sulfur dioxide into the atmosphere. Still, there are environmental risks of which people should be aware. Oil and gas companies must continue to develop industry-wide best practices to minimize pollution and any other hazards that can result from drilling.
Andy is reminded of that episode of The Office where Michael Scott reads one article on China and thinks he’s an expert. It should be pointed out that 90% of the information in this article was gleaned from the May/June Issue of Foreign Affairs. In particular, please see “Welcome to the Revolution,” by Edward L. More, “The United States of Gas,” by Robert A. Hefner, III, and “Don’t Just Drill, Baby- Drill Carefully,” by Fred Krupp.