Post Carbon Institute Goes to Washington
May 31, 2013
It may be an exaggeration to say that the nation’s capital was built on a swamp, but being there with temperatures hovering at 90°F (32°C) and humidity at nearly 100%, you can see why that myth has persisted. It doesn’t help that the political climate makes the air feel that much more oppressive.
Speaking of myths, I was in Washington, D.C. last week with PCI Fellow David Hughes and Energy Policy Forum’s Deborah Rogers to help counter the prevailing (and delusional) view that Fracking Will Save America!
Much of the debate over drilling for shale gas and tight oil has focused on the environmental and health impacts. These concerns can’t be underestimated, but our work in recent months—with the publication of our major Drill, Baby, Drill? report in February and the launch of shalebubble.org with our partners at Energy Policy Forum and Earthworks—has been focused on the geological and economic realities of fracking.
It seems the hype about the “Shale Revolution” is more abundant than the resources themselves. We’re being told, even by the nonpartisan energy information agencies (the EIA and the IEA), that we can expect decades worth of growth in US natural gas production at stable and low prices and that the US will become a net exporter of oil by 2030 [pdf]. All thanks to the miracles of hydraulic fracturing (“fracking”) and horizontal drilling, which will create jobs and long-term economic benefits to the communities where fracking is taking place.
These claims have not only saturated the media, they have led policymakers to debate what to do with this surplus of natural gas. The attention now, it seems, is on liquefied natural gas (LNG) exports.
In our 10-year history, Post Carbon Institute has largely stayed away from proactively engaging members of Congress or the White House. That’s largely because of our limited organizational capacity (with a <$1M annual budget) and our emphasis on local, community-scale resilience building. But I’ll admit that it’s also been a result of cynicism about the ability of elected officials to deal with long-term, systemic threats like energy limits and climate change. Unfortunately, my time at the Capitol didn’t do much to assuage that cynicism.
How Fast Can We Freeze This Stuff and Sell it to Japan?
Our visit began with the Senate Energy & Natural Resources Committee forum on natural gas supplies and exports. Deborah Rogers was the only person invited to participate in the panel who even questioned the conventional wisdom of supply abundance (her opening statement begins at 1:06:00 here), with the exception perhaps of Harry Vidas from ICF International who insisted (based on an American Petroleum Institute funded report) that claims we have 100 years worth of natural gas in the US were absurd—that in fact we have 150 years worth!
The forum was a big disappointment, though perhaps not surprising. (If you listen closely to the recording, you might actually hear the sound of my eyes rolling at many of the comments made.) Though billed as a discussion of supply and exports, the forum really centered around the Department of Energy’s permitting process. No exploration of whether the supply would actually be there to justify 20-year contracts. No retrospection about lessons learned from the rush to build LNG import terminals just a decade ago.
As evidenced by the tremendously thorough research done by David Hughes on the productivity of shale plays in “Drill, Baby, Drill,” it’s clear that exporting liquefied natural gas is an unwise energy policy. But that’s not industry’s motivation here, after all. For them it’s about profiting from the enormous gap between US natural gas prices (currently about $4.15/MMBtu) and those in Europe and Asia, where prices are more than three times higher.
Amazingly, the LNG export industry representatives at the forum claimed that this wasn’t the motivation, at all. In fact, the Vice President of Governmental and Regulatory Affairs at Cheniere Energy said with a straight face that this was about saving ratepayers money…in the United Kingdom. If true—as David Hughes drily remarked to me—that means foreign customers will get the benefits of the gas while US communities will get the “benefits” of the wells.
It was interesting to note that of the 22 members of the Senate Committee on Energy & Natural Resources, only five bothered to show up, and most of them only briefly. Senators Wyden and Murkowski, who organized this series of forums on natural gas, themselves stepped out for portions—leaving Al Franken (D-MN) to chair the forum at one point, despite the fact that he had missed all of the opening statements and most of the discussion.
I mention this not as a criticism of these Senators specifically but of the environment within which they have to operate. Wyden and Murkowski shuttled back and forth for pressing votes on the floor of the Senate; the Senators who never appeared were likely engaged in other important and timely issues. But that could only mean one of two things: 1) The forum was intended to serve more as spectacle than substance or 2) the Senators were counting on their staff to listen closely and advise them.
Whether or not true in this case, my brief time at Capitol Hill (and later at the State Capitol in Albany, New York) made it crystal clear to me just how much our elected representatives rely on their staff to formulate their views on all kinds of important matters. I’m certain that these staff work their tails off and advise as best they can, but the reality is that many of them are young, inexperienced, and inexpert on topics as complex as energy production. It’s simply unfair and unwise to place so much responsibility for our nation’s welfare on them.
You Are What You Eat
I will admit that—particularly with regard to matters like energy policy—I struggle at times to see much difference between the Republican and Democratic parties. But having lunch in the Senate Dirksen Building cafeteria and then grabbing a drink at the House cafeteria was a reminder that there are indeed differences. Not only is the Senate cafeteria much fancier (a reminder of which legislative body is the alpha dog), but the Democrats in charge there have instituted a pretty thorough composting and recycling program. The Republicans in control of the House cafeteria, on the other hand, ended the composting program that former House Majority Leader Nancy Pelosi (D-CA) had instituted, opting for styrofoam cups and containers instead.
Meeting with the Energy Information Agency
Our friends at Earthworks (who organized the entire trip) arranged for a meeting with a number of folks at the Energy Information Agency, including the new Administrator Adam Sieminski. I’ll be honest: The conversation was a bit awkward at times. Members of their team had read “Drill, Baby, Drill?” and expressed a little defensiveness about our highlighting of the EIA’s track record in forecasting energy production.
I can understand feeling defensive, but I’m afraid that it doesn’t change the facts: the EIA has been consistently wrong in their forecasts, and almost always in favor of over-estimations. To their credit, every year they publish an audit of their performance, though I’ve yet to hear a member of the mainstream media or a politician reference their less-than-stellar track record.
There was also a bit of a bizarre discussion about net energy, a concept to which the EIA folks didn’t seem to have paid much attention. Sieminski was puzzled as to why a low Energy Return on Energy Invested (EROEI)—like that of in situ tar sands (with an estimated EROEI of 3:1)—was a concern, if the market could bear the cost. On our end, we were perhaps even more puzzled as to why this wouldn’t be a concern for the Energy Information Administration.
And that perhaps is the real issue here: differing expectations of the purview of the EIA. It’s almost impossible to overstate the critical role that energy and energy policy play in virtually every facet of society, and so it would seem to me that the EIA—as an ostensibly nonpartisan government agency on which policymakers and the media continually rely for guidance—should be deeply engaged in thinking about the systemic nature of our energy predicament.
As a resource for energy data, the EIA is a national treasure. If the Administration was able to think and communicate more systemically about the complex nature of energy (things like net energy, energy prices and economic growth, climate, and impacts of extraction on people and places), it could be a godsend.
The Briefing: Industry’s Worst Nightmare
Okay, so I’m a bit biased, but I just have to say that Dave Hughes and Deborah Rogers in combination should scare the pants off fracking proponents.
Unfortunately, the fossil fuel industry has learned over the decades how to combat environmental opposition fairly well: deny concerns… claim that the evidence isn’t conclusive… promise improvements… and when necessary, enter into greenwashing arrangements like the newly formed Center for Sustainable Shale Development (sic!) . Oh, and I almost forgot… give politicians lots of money.
Ultimately, however, the industry relies on perceived economic and energy security benefits to overcome environmental opposition. The anti-fracking community, I must say, has done a remarkable job raising awareness of the environmental and human health risks associated with driling for shale gas and tight oil. They’ve made this a real fight. But the Achilles Heel for industry is their supposed strength—jobs, low prices, revenue for cities and states, etc.—and that is why what Dave and Deborah have to say is so threatening.
You can view the slides from their presentations here, but I wanted to share a few choice nuggets:
- 80% of shale gas production comes from just five plays. But because the wells deplete so quickly (the average 3-year decline is 84%) and because the most productive wells tend to be clustered in sweet spots that get drilled off first, all plays tend to follow a similar pattern in their lifecycle—peaking in a handful of years. In fact the only play still growing is the Marcellus.
- Because of the unrelenting decline rates and non-uniformity of well quality, it seems highly unlikely that cities and states can rely on revenues for decades to come. For example, 44 wells in production in 2008 generated $50M in revenues for the City of Fort Worth, Texas. Just four years later, there were 397 wells (a 10-fold increase) in production but revenues only amounted to $23M. And in states where fracking is taking place, revenues from severance taxes or impact fees don’t offset the costs they have to bear simply to maintain and repair roads damaged by thousands upon thousands of trucks.
On the whole the trip was extremely valuable; even if our impact was limited, I came away certain of three things:
- We won’t have long to wait for the bubble-like nature of the “Shale Revolution” to make itself undeniable.
- But while time will prove us right, time we just don’t have. Permitting of LNG export terminals are proceeding apace (though it was interesting to note that newly sworn in Energy Secretary Moniz delayed approval pending further review). And every day that the hype of shale abundance dominates the energy conversation is a day lost that should be spent investing in an energy future not reliant on fossil fuels.
- Pushing back on the economic and supply rhetoric of industry is critically important. Unfortunately, we can’t send David Hughes and Deborah Rogers to community after community with this message. That’s why we need concerned citizens like yourselves—especially in areas where fracking is on the table—to speak up.