The Painful Impact of Anti-Oil and Gas Policies

I am writing this article having lived through the first half of the presidential primaries. It has been painful. I have been watching the debates on television and listening to proposals put forth by the Democratic candidates. In particular, I am concerned by their proposed regulatory changes that would ban hydraulic fracturing – a practice that was first patented in 1948 and successfully used throughout the United States since that time. Their proposals have not surprised me because they fall into the constant anti-fossil fuel rhetoric I hear.

The Math of Frac’ing

It has been said that wise people surround themselves with the smartest people they can find and then listen to them. I am always looking for opportunities to learn something about the future of oil and gas from people in other disciplines. In late February, with that thought in mind, I attended a luncheon hosted by the Unites States Association for Energy Economics at the Federal Reserve building in Houston, Texas. I met Michael C. Lynch, the keynote speaker and an analyst with Strategic Energy and Economic Research, and Edward Hirs III, energy fellow at the University of Houston, at the luncheon. It was thought provoking to meet and listen to these professionals who view oil and gas issues from a non-geologist’s lens. I would like to share some of what I learned while attending the USAEE luncheon.

While eating lunch prior to the speaker beginning his presentation, I casually asked the professionals at my table what they thought about the Democratic debate proposals to immediately ban frac’ing. Ed Hirs told me that I needed to read his article, “The Arithmetic of Fracking” in that month’s Forbes magazine. Please consider reading it for yourself. The following are just a few highlights from Ed’s article:

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I am writing this article having lived through the first half of the presidential primaries. It has been painful. I have been watching the debates on television and listening to proposals put forth by the Democratic candidates. In particular, I am concerned by their proposed regulatory changes that would ban hydraulic fracturing – a practice that was first patented in 1948 and successfully used throughout the United States since that time. Their proposals have not surprised me because they fall into the constant anti-fossil fuel rhetoric I hear.

The Math of Frac’ing

It has been said that wise people surround themselves with the smartest people they can find and then listen to them. I am always looking for opportunities to learn something about the future of oil and gas from people in other disciplines. In late February, with that thought in mind, I attended a luncheon hosted by the Unites States Association for Energy Economics at the Federal Reserve building in Houston, Texas. I met Michael C. Lynch, the keynote speaker and an analyst with Strategic Energy and Economic Research, and Edward Hirs III, energy fellow at the University of Houston, at the luncheon. It was thought provoking to meet and listen to these professionals who view oil and gas issues from a non-geologist’s lens. I would like to share some of what I learned while attending the USAEE luncheon.

While eating lunch prior to the speaker beginning his presentation, I casually asked the professionals at my table what they thought about the Democratic debate proposals to immediately ban frac’ing. Ed Hirs told me that I needed to read his article, “The Arithmetic of Fracking” in that month’s Forbes magazine. Please consider reading it for yourself. The following are just a few highlights from Ed’s article:

Hydraulic fracturing has put an additional $200 billion dollars into the pockets of U.S. consumers by dropping the commodity price to $2.56 per thousand cubic feet – the same price it was in 1987 without any significant damage to surface or ground water resources. More recent wastewater disposal well regulations have reduced the incidence of localized earthquakes. These improved practices leave only the massive flaring issue – about 900 thousand cubic feet per day in the Permian Basin – as the major negative environmental impact, and the Texas Railroad commission and shareholders are looking to significantly reduce this practice.

The collapse on natural gas prices has expedited the transition from coal to gas power plants and has lowered the price of plastics, glass and fertilizer, which are viewed by the general public as good things. Finally, the jump in 2019 oil production to 12.5 million barrels per day, of which 8 million a day comes from the shale play, has resulted in a nearly $169 billion boost to U.S. GDP. Eliminating hydraulic fracturing would reduce natural gas and oil production quite rapidly, given the short life span of producing wells in the shale play.

The estimate given by luncheon speaker Michael Lynch was that it would take a little more than two years before we started to feel the effect of this policy in higher costs for natural gas and oil as feed product stock. This would result in an increase in unemployment and commodity-induced inflation. The last time we had this combination of events, it resulted in substantially reduced U.S. GDP. The worst is that we would not see much reduction in greenhouse gas emission from flaring, because non-Western governments like Russia and the Middle East, where our fossil fuels would come from, do not have similar environmental regulations.

Anti-Pipeline Movements

There has been a strong national movement to block any and all pipelines, called “Keep it in the ground,” regardless of what is being transported through them. Speakers at the USAEE luncheon discussed an example of the unintended consequences of blocking pipelines. They pointed out that New England is currently meeting peak gas demand with Russian LNG instead of using low-cost natural gas from the Marcellus in Pennsylvania.

You might ask, “How this can happen?”

Anti-pipeline groups successfully blocked the Access Northeast pipeline project in the Massachusetts state legislature. The goal of this pipeline was to meet the growing natural gas demand in New England in the face of declining natural gas supply. The result of this effort is increased energy costs for residents in New England.

Another, more personal example I can share of this movement is the “Stop Pipeline 5” campaign, which is everywhere in northern Michigan, my home away from home. Activists believe that the entire Great Lakes ecosystem will be destroyed if the currently operating pipeline under the Straits of Mackinac is not permanently closed right now, despite the costly innovative engineering plan that Embridge, the pipeline operator, has proposed. Shutting down this pipeline would likely result in increased tanker truck traffic, more oil-carrying marine vessels and higher fuel prices in the region.

ACE 2020 DPA Luncheon

Continuing in the belief that wise people surround themselves with the smartest people they can find and then listen to them, I have invited Scott Tinker, state geologist of Texas, to be the keynote speaker at the Division of Professional Affairs Luncheon at the 2020 AAPG Annual Convention and Exhibition in Houston currently planned for June. He is an engaging speaker and widely-quoted geologist. Scott has a good understanding of the energy transition and the unintended consequences of poorly throughout polices. Be wise and please join me at the ACE 2020 DPA Luncheon.

Comments (10)

Response to Comments on “Painful Impact of Anti Oil and Gas Policies”
I was surprised by the number of comments to my last article “Painful Impact of Anti Oil and Gas Policies” given that there was an article in the March EXPLORER titled “Lawmakers, Candidates Propose Nationwide Ban on Hydraulic Fracturing” written by the EXPLORER magazine Editorial Staff that was almost identical to what I wrote with the exception of the pipeline issues. Due to all the comments I feel obligated to respond to each one. Gulf Ex – Please read my comments to Ryan. I believe they cover your issues with my article.
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5/2/2020 8:04:32 AM
Response to Comments on “Painful Impact of Anti Oil and Gas Policies”
Edith – Indeed you are correct, I wrote this article on the last day of February and submitted it in the first week of March. I simply wrote an article that pointed out what was being discussed in the race for the Presidency and its ramifications along with ramifications of pipeline legislation in New England and potential ramifications of closing pipeline 5 in Michigan. Perhaps you did not like the editorial staff’s title to my article? No hubris intended.
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5/2/2020 8:02:07 AM
Response to Comments on “Painful Impact of Anti Oil and Gas Policies”
Ryan – I am unclear what “opinion” in my DPA President’s “Commentary” column you found objectionable. First, if you watched the USA Democratic debates banning fracking is a core plank of their platform. Please read the March EXPLORER article “Lawmakers, Candidates Propose Nationwide Ban on Hydraulic Fracturing” by the EXPLORER staff. Second, The Massachusetts Legislature blocked the Access Northeast pipeline resulting in the import of Russian LNG into Boston/New England in the winter instead of using low cost Marcellus gas. This is because of the growth in natural gas power generation and increased demand for natural gas for home heating in the winter. The result is that the “consumers” are left with high cost natural gas to heat their homes plus high cost electric utility bills in the winter. Finally, there is a movement to stop Enbridge Pipeline 5. I see the protest signs across northern Michigan, and I watch the political debate on the evening news when I am up north. The standard position is that Michigan does not use products in Pipeline 5 so we should close it to protect the Great Lakes. Enbridge Pipeline 5 crosses the Mackinac Straits because it is the shortest path to southern Ontario from western Canada. This is one of the largest metropolitan areas in Canada. This pipeline is so vital to southern Ontario that Enbridge has offered to tunnel under the Mackinac Straits to alleviate potential spill concerns in the Great Lakes. The shutting of Pipeline 5 will not curb demand for its product in southern Ontario. The loss of pipeline transportation will be made up from one or all the following: tanker truck, train tankers or marine tankers. Most likely would be the latter because it is the safest. Given that the great lakes can be very treacherous, think Esmond Fitzgerald. None of these transportation methods are without known risks.
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5/2/2020 8:00:29 AM
Response to Comments on "Painful Impact of Anti Oil and Gas Policies"
I was surprised by the number of comments to my last article “Painful Impact of Anti Oil and Gas Policies” given that there was an article in the March EXPLORER titled “Lawmakers, Candidates Propose Nationwide Ban on Hydraulic Fracturing” written by the EXPLORER magazine Editorial Staff that was almost identical to what I wrote with the exception of the pipeline issues. Due to all the comments I feel obligated to respond to each one. Gretchen – I appreciate your comments on flaring. When writing the article, I looked up information on flaring worldwide. The results from that search showed that Russia was the largest contributor to flaring in the world. I also saw that Iraq and Iran were numbers two and three hence the Middle East reference. I want to be clear that I am opposed to flaring stranded associated gas and it was sad to see that the flaring is growing in the US. This exactly the problem in the Williston Basin and the Permian Basin. Both areas are in the unconventional resource oil play. This makes it impossible, due to low perm, to reinject stranded associated gas. However, given the maturity, they were originally all conventional plays, of these basins I believe that subsurface storage could be found and used. I recognize this costs money, but it is part of the cost of doing business.
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5/2/2020 7:57:34 AM
Which members?
May I respectfully suggest that Mr. Wrightstone support AAPG members by listening to us, rather than excoriating our views, which are not accurately reflected in his comment below.
4/24/2020 9:19:08 AM
Outreach
I did not watch the Democratic presidential primaries, but I do know from news stories that Democrats typically prefer no fracturing or better controlled fracturing. Labeling Democrats as anti-fossil fuel or Republicans as anti-healthcare is divisive. I'm sure Mr. Lynch and Mr. Hirs are wise people to whom we should listen, but I suggest the editorial board find another wise person who would like to respond to Mr. Jordan's opinion piece. While the presidential candidates are not unwise, they are not scientists. Please find a wise scientist outside the oil and gas industry to publish a contra-opinion to Mr. Jordan's. We should listen to scientists on both sides of the fracturing debate. I assume we have all held opinions we thought were in our best interest until we heard a different persuasive opinion. Fracturing shouldn't be a Democrat vs Republican issue. It shouldn't be an us vs them issue. Geologists want to frac wells and develop reserves, but do they want, in their backyard, some of the known publicized ground water contaminations, seismic damage, surface spills or blowouts from bad frac jobs. Letting some small number of people or somebody else suffer harm for our "greater good" is small-minded and insulting to my concept of humanity. If we don't care about others, they won't care for us. If both sides act as zealots filled with righteous pride, then conflict - not solutions - will result.
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4/23/2020 9:35:30 PM
Support our members and reject the anti-oil crowd.
Apparently at least some of the readers of the Explorer don't like articles that mount a vigorous defense of fossil fuels and oil and gas in particular. This anti-fossil fuel movement within the AAPG has been advocating for some time the need to switch from fossil fuels and move to eco-friendly renewables in order to save the planet. All the while these anti-oil zealots ignore the many benefits of the use of fossil fuels. The American Association of PETROLEUM Geologists should NOT be ashamed of how their membership has benefited humanity by providing low-cost, abundant and reliable energy. None of those three attributes can be attributed to their precious renewables. If some within the membership want to purchase the rope to hand to the hangman for the execution of the few remaining fully employed members, then that is their right but the organization needs to stand up proudly for our business and livelihood. I don't want any parts of this anti-oil agenda. No thank you. No thank you at all.
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4/23/2020 2:00:33 PM
Hubris
This article was written prior to the energy demand drop due to the COVID-19 pandemic, but it is a palpable reminder to embrace the qualities of humility in the face of change and respect for data if we are to emerge from this more-rapid-than-ever transition as the architects of our future.
4/23/2020 11:37:34 AM
The painful impact is articles such as these.
I am curious, what does the EXPLORER believe that it accomplishes by publishing content like this? AAPG is a science-based organization. It's not an industry or political lobby group. Yes, most of us would agree that fossil fuel consumption will be a substantial part of life for the foreseeable future; however, opinion pieces like this do significant damage to AAPG's reputation as a balanced disseminator of scientific fact. Across the globe, society has clearly demonstrated its appetite to eventually move beyond fossil fuels. AAPG would be wise to incorporate this sentiment into its mission and publications.
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4/23/2020 10:59:30 AM
Data on gas flaring
Thank you for a thought-provoking column. You state: "The worst is that we would not see much reduction in greenhouse gas emission from flaring, because non-Western governments like Russia and the Middle East, where our fossil fuels would come from, do not have similar environmental regulations." I found gas flaring data (2014-2018): http://pubdocs.worldbank.org/en/887251581002821897/Revised-2014-2018-flare-volumes-estimates.pdf Speaking only for myself, I note that Saudi Aramco is joining the World Bank’s initiative to reduce gas flaring to zero by 2030, but the USA has not (although several companies operating in the USA have joined): https://www.reuters.com/article/us-saudi-aramco-climatechange/saudi-aramco-joins-initiative-to-reduce-flaring-to-zero-by-2030-idUSKBN1XG27I
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4/23/2020 10:26:13 AM

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