A Balanced Approach to Hydraulic Fracturing and the US Emergence

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Chapter 2

Securing the Benefits: A Balanced Approach to Hydraulic Fracturing and the U.S. Emergence as a Global Energy Superpower Erik G. Milito* American Petroleum Institute, 1220 L Street, N.W., Washington, DC, 20005, United States *E-mail: [email protected]

The technologies of hydraulic fracturing and horizontal drilling have elevated the United States (U.S.) to global prominence as an energy superpower. Because of the advanced application of these technologies, the United States is now the world’s largest producer of natural gas and could soon become the world’s largest producer of crude oil. This energy revolution has helped to energize the U.S. economy by driving domestic investment in energy projects, creating jobs, and enhancing U.S. energy and national security interests. This shift in the U.S. energy paradigm has successfully occurred through a balanced approach that secures these vital economic and societal benefits while protecting workers, the public and the environment. Safe and environmentally responsible development of U.S. resources has occurred largely through the application of industry best practices and standards that apply before operations begin and continue all the way through production and abandonment of the well site. This chapter will provide an overview of industry standards in place to ensure safety and environmental protection for purposes of unconventional resource development, including hydraulic fracturing operations.

© 2015 American Chemical Society In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


“The U.S. Is an Energy Superpower” The headlines say it all. On June 9, 2012, Daniel Yergin, Vice Chairman of IHS and Pulitzer Prize winning author of The Prize, declared and described “America’s New Energy Reality” in The New York Times. As Yergin put it, “energy independence was a subject to get laughs. The joke was that America was actually becoming more and more dependent upon imports. But now ‘energy independence’ has become a subject of serious discussion and debate (1).” Then, just over a year later on October 3, 2013, the front page of the Wall Street Journal pronounced “U.S. Rises to No. 1 Energy Producer.” This headline was based upon the news that the U.S. surpassed both Russia and Saudi Arabia as the largest producer of petroleum and natural gas hydrocarbons in 2013. The Journal referred to this changing energy paradigm as “a comeback fueled by shale-rock formations of oil and natural gas that was unimaginable a decade ago (2).” The Journal highlighted a quote from Energy Information Administration (EIA) Administrator Adam Sieminski who said “This is a remarkable turn of events. This is a new era of thinking about market conditions, and opportunities created by these conditions, that you wouldn’t in a million years have dreamed about (2).” Then, just one day later, on October 4, 2013 Time magazine ran the headline that sums it up best -- “The U.S. Is an Energy Superpower.” And almost simultaneously with the Time and Journal pronouncements, to underscore the true force of the reemergence of the U.S. as an energy superpower, Investor’s Business Daily ran an online editorial on October 3rd with the heading “U.S. Fracking Success Threatens Russian Economy, Strategy.” It has become abundantly clear that the benefits of this U.S. energy revolution are real and dramatic, and run the gamut from job creation to government revenue generation to consumer savings to the promotion of U.S. national security. The energy boom owes its success to uniquely American engineering ingenuity behind the cost-effective application of hydraulic fracturing combined with the rapid development of horizontal drilling at increasing depths. The use of these engineering technologies has fueled the U.S. energy renaissance by allowing effective and increasingly affordable access to low porosity and low permeability oil and natural gas bearing shale and sandstone formations, referred to as “tight formations.” The U.S. has abundant supplies of tight oil and gas resources, and it is through the productive application of these two technologies that the U.S. has become the largest producer of natural gas and is projected to become the largest producer of crude oil within the next few years. Without hydraulic fracturing, the U.S., and the world, would be in a world of hurt, with far less available supplies of oil and natural gas, far less jobs, far less government revenues, far less disposable income, and far greater national security risks. While hydraulic fracturing is not a new technology – it was first applied commercially in 1949 – it has become a prominent topic of debate in policy circles, with questions raised about potential adverse impacts from the use of the technology. Fortunately, through a balanced approach, the U.S. is well positioned to both harness the tremendous benefits flowing from the use of hydraulic fracturing and ensure the protection of the environment. This has been made quite evident, and in many respects proven, through the industry’s development and implementation of standards and best 46 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.

practices for operations utilizing hydraulic fracturing. This chapter will focus on the benefits derived through the deployment of hydraulic fracturing and on the standards developed to ensure continued responsible development through the use of hydraulic fracturing for decades to come.


Hydraulic Fracturing From a technical standpoint, hydraulic fracturing is defined as “injecting fracturing fluids into the target formation at a force exceeding the parting pressure of the rock thus inducing fractures through which oil or natural gas can flow to the wellbore.” This definition is provided in API Guidance Document HF2, Water Management Associated with Hydraulic Fracturing, First Edition, June 2010. The Department of Energy provides a more detailed description as follows: Hydraulic fracturing is a means of creating fractures emanating from the well bore in a producing formation to provide increased flow channels for production. A viscous fluid containing a proppant such as sand is injected under high pressure until the desired fracturing is achieved. The pressure is then released allowing the fluid to return to the well. The proppant, however, remains in the fractures preventing them from closing (3). It is this technology, combined with precision guided, steerable horizontal drilling, that is responsible for catalyzing America’s energy future. While recent advancements in hydraulic fracturing and horizontal drilling have made this American energy revolution possible over a relatively short period, the fundamental technology of hydraulic fracturing has been in commercial use since 1949. In fact, the story of hydraulic fracturing takes us much further back to the early days of the oil and natural gas industry. Since the drilling of the original Drake well more than 150 years ago, it became readily apparent that we have “good rocks” here in the U.S. In other words, we have tremendous geological deposits of oil and natural gas trapped below our feet all across the country. The engineering challenge confronting petroleum geologists and engineers since the drilling of that first Drake well has been fairly straightforward: How can you most effectively free the oil and natural gas from these good rocks and get it to the surface for economic use? As reported in an Energy Tomorrow Blog by Mark Green of the American Petroleum Institute on March 17, 2014, in a 2010 piece in the Society of Petroleum Engineers’ Journal of Petroleum Technology (JPT), Carl Montgomery and Michael Smith describe efforts in the 1860s to engage in “shooting” operations intended to “rubblize” the rock to enable the flow of oil. Moving forward to 1947, Stanolind Oil experimented with “Hydrafrac” operations in Kansas that sound almost exactly like modern hydraulic fracturing operations, wherein the company pumped fluid and propping agents into a well to create fractures. Montgomery and Smith describe the ensuing commercial applications as follows:

47 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


A patent was issued in 1949, with an exclusive license granted to the Halliburton Oil Well Cementing Company (Howco) to pump the new Hydrafrac process. Howco performed the first two commercial fracturing treatments—one, costing USD 900, in Stephens County, Oklahoma, and the other, costing USD 1,000, in Archer County, Texas—on March 17, 1949…. In the first year, 332 wells were treating, with an average production increase of 75%. Applications of the fracturing process grew rapidly and increased the supply of oil in the United States far beyond anything anticipated. Treatments reached more than 3,000 wells a month for stretches during the mid-1950s (4). Thus, March 17 is recognized as the birthday of hydraulic fracturing. In 1999, the U.S. Department of Energy released a report entitled Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology, in which DOE identified both hydraulic fracturing and horizontal drilling as technologies that provide such benefits. This DOE report not only identified the environmental benefits of hydraulic fracturing, but also recognized the widespread use of the technology about a full decade before the onset of our current energy revolution: First introduced in 1947, hydraulic fracturing quickly became the most commonly used technique to stimulate oil and gas wells, ultimately enabling production of an additional eight billion barrels of North American oil reserves that would otherwise have been unrecovered. By 1988, fracturing had already been applied nearly a million times. Each year, approximately 25,000 gas and oil wells are hydraulically fractured (5). [Emphasis added.] In retrospect the only error in the paragraph above appears to be in the gross underestimate of U.S. oil supplies recoverable through hydraulic fracturing which, according to a 2013 estimate from EIA and Advanced Resources International, is 58 billion barrels. This vintage DOE report also provides this interesting assessment of hydraulic fracturing: It makes the development of some low-permeability, tight formations and unconventional resources economically feasible. When the flow of hydrocarbons is restricted by formation characteristics, injecting pressurized fluids and solid additives can stimulate wells to increase production. Fluids are pumped into the formation at pressures great enough to fracture the surrounding rock. A proppant flurry follows, biodegrading the sand proppant that holds the fractures open, allowing free passage of fluids to the wellhead. So successful has this technology been that the industry currently spends a billion dollars annually on hydraulic fracturing (5). The current shale boom has brought with it a major surge in investment related to hydraulic fracturing far greater the $8 billion cited by DOE in this 1999 report. In 48 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


its economic study on the impacts of unconventional resource development, IHS estimates investment levels at a $121 billion level in 2012 and projected to rise to $240 billion in 2025 (6). The difference in the application of hydraulic fracturing from 1999 to today is in the move from primarily vertical wells and conventional formations to the widespread use in horizontal wells and shale and tight sandstone formations. The dramatic turnaround in the energy landscape brought about by hydraulic fracturing led The Economist to characterize the U.S. as “The petrostate of America” a February 15, 2014 editorial, declaring: All of this is a credit to American ingenuity. Commodities have been a mixed blessing for other countries (see our leader on Argentina). But this oil boom is earned: it owes less to geological luck than enterprise, ready finance and dazzling technology. America’s energy firms have invested in new ways of pumping out hydrocarbons that everyone knew were there but could not extract economically. The new oilfields in Texas and North Dakota resemble high-tech factories. “Directional” drills guided by satellite technology bore miles down, turn, bore miles to the side and hit a target no bigger than a truck wheel. Thousands of gallons of water are then injected to open hairline cracks in the rock, and the oil and gas are sucked out (7). So successful is the development of unconventional resources that the drilling of a dry hole in these formations is a rarity. The “hunting and gathering” aspects of onshore conventional wildcatting have in many ways been replaced by “farming and harvesting” aspects of unconventional horizontal production. A frequently asked question is why this is an uniquely American success story. It is certainly not because the U.S. is the only country with potentially rich resources of unconventional oil and gas. The estimated world shale gas and shale oil resources as identified by EIA and Advanced Resources International (ARI) demonstrate that the U.S. is not alone in possessing substantial amounts of the resources (8). According to EIA, China, Argentina, and Algeria may be ahead of the U.S. in estimated shale gas resources and others appear to also possess huge quantities. (ARI’s estimate puts the U.S. in first place in technically recoverable shale gas resources.) Likewise, the U.S. is second in estimated shale oil resources with Russia in the lead and China, Argentina, Libya and Australia holding potentially large deposits. Shale oil and shale gas production is only occurring in four countries. According to EIA, the U.S., Canada, China and Argentina are the only countries producing shale oil or gas in commercial quantities, and the “United States is by far the dominant producer of both shale gas and tight oil (9).” The Economist partly answers this question in discussing American ingenuity as a key, stimulating factor in the energy boom. Other driving factors that have spurred the U.S. shale revolution include private mineral ownership; an established system of state permitting and regulation of oil and gas operations, with the proven flexibility to adapt and tailor its regulations and enforcement mechanisms; a comprehensive network of existing infrastructure, in the form of drilling rigs, materials and personnel on the production side and processing 49 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


plants, pipelines, marine transport, rail transport and terminals on the midstream side; a ready market with ample demand to utilize oil and gas for transportation, home heating and cooling, electricity generation, back-up energy for renewables, manufacturing, petrochemical and other uses; and a fundamental desire to become, if not energy independent, then energy secure in order to help enhance our overall national security. Over the long term, the U.S. and the world will continue to greatly rely on oil and natural gas to fuel their economies. The EIA expects large increases in energy efficiency, conservation and the use of renewables, but the EIA still projects oil and natural gas to constitute 60 percent of the U.S. energy portfolio and 55 percent of the global energy portfolio in 2040 (10). The shale energy renaissance is arguably in its infancy and current projections indicate that hydraulic fracturing will be a key asset in ensuring secure supplies of oil and gas for decades to come. This chapter will explore the economic benefits that are tightly linked to the use of hydraulic fracturing, as well as the industry standards that are in place to ensure that this energy is produced safely, responsibly and with confidence.

Economic Benefits – Increased U.S. Energy Production Because of hydraulic fracturing, the United States has transitioned from an era of perceived energy scarcity to an era of energy abundance. The pursuit of energy independence has been the touchstone of Presidential pursuits for decades. As Mr. Yergin explained in his New York Times piece, energy independence is no longer a laughing matter, and the shale energy revolution – led by the application of hydraulic fracturing – has positioned the U.S. for strength in oil and gas supplies. Using 2008 as a baseline, with the shale revolution getting underway at that time, we have witnessed the growth of U.S. marketed natural gas production from 21 trillion cubic feet per year to 27 trillion cubic feet per year in 2014, a 28.6 percent increase (11). In the same years, U.S. consumption increased from 23 Tcf per year to about 27 Tcf per year. In a dramatic turnaround, the U.S. has moved from being an importer of natural gas to becoming self-sufficient in natural gas (11). In 2008, the EIA was projecting that the U.S. was on track to become an importer of about 2.8 Tcf per of liquefied natural gas (LNG) per year, amounting to about $18 billion annually in LNG imports (12). However, LNG facilities that were once designed for imports are now going through the laborious government permitting process to transition to exports. The U.S. became the world’s largest producer of natural gas in the 2009 to 2010 timeframe, and EIA stated that “[i]ncreased use of horizontal drilling in conjunction with hydraulic fracturing spurred natural gas supply gains (13).” Looking ahead, EIA projects domestic natural gas production to continue to increase to meet growing U.S. demand for this clean-burning, affordable resource and potentially also for supplying our allies around the globe with secure shipments of natural gas. EIA projects production to rise to 38 Tcf per year in 2040 with most of this increased production coming from shale and tight formations that rely upon hydraulic fracturing; EIA predicts production from shale and tight formations will increase by 10 Tcf per year from 2012 to 2040 (14). 50 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


On the oil side, the story is much the same, with tight oil production driving the surge in overall U.S. crude oil production. In 2008, the U.S. averaged exactly 5 million barrels of crude oil production per day, and in December of 2014 U.S. production climbed to 9.2 million barrels per day, at a level not seen since May of 1974 (15). Production from tight oil formations has increased rapidly. Tight oil production averaged less than 1 million barrels per day in 2010 and was already accounting for more than 3 million barrels per day by the end of 2013 (14). EIA’s 2014 Annual Energy Outlook included three scenarios for projecting future U.S. crude oil production. The low resource case has production peaking at 9.1 million barrels per day, a level that has since been exceeded; the middle resource case has production peaking at 9.6 million barrels per day; and the high resource case has production peaking at more than 13 million barrels per day (14). In all three cases, production remains at levels above 6.5 million barrels per day through the year 2040, and in the high resource case crude oil production is projected to be at more than 13 million barrels per day in 2040 (14). EIA projects tight oil production alone to peak in a range between 4.3 and 8.5 million barrels a day (14). Of course, the price of oil and natural gas factors into the EIA projections, and future EIA reports will necessarily adjust as price and other factors fluctuate. Furthermore, the amount of estimated technically recoverable oil and gas resources for the U.S. has climbed significantly due to increased estimates of recoverable shale oil and gas resources. In 2008, U.S. technically recoverable oil resources as estimated by EIA stood at about 160 billion barrels and today the estimate stands at about 220 billion barrels (12, 14). On the natural gas side, EIA estimated U.S. natural gas resources at about 1,600 Tcf in 2008 and today the estimate is that we have about 2,400 Tcf (12, 14). The big jump is due to our continuously improving ability to recover shale oil and gas resource through the cost-effective use of hydraulic fracturing and horizontal drilling. EIA’s estimates now include 58 billion barrels of shale oil and 665 Tcf of natural gas resources. EIA’s estimates may actually be considered conservative, given that ARI estimates U.S. shale resources at 1,161 Tcf and ICF International estimates them at more than 1,900 Tcf (8). The rapid increases in production of oil and natural gas from shale and tight formations actually led the EIA to develop and publish a Drilling Productivity Report beginning in October 2013. The conclusion to be drawn from this monthly report is, not only is the U.S. rich in shale oil and gas resources, but U.S. companies continue to get better and better at developing oil and gas from these formations. The number one finding of the initial report states “[i]creases in drilling efficiency and new well productivity, rather than an increase in the number of active rigs, have been the main drivers of recent growth in domestic oil and natural gas production (16).” Drilling Productivity Reports from October 2013 through March 2015 have consistently demonstrated that the industry is continuously improving its ability to get more oil and gas from each well drilled. For example, a new well in the Bakken formation in November 2012 was producing just under 300 barrels of oil per day and a new Bakken well in March 2015 was estimated to be producing 577 barrels per day. The same trend is true for natural gas production. A new well in the Marcellus formation in November 2012 was producing about 4,500 million cubic feet of gas per day and 51 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


a new Marcellus well in March 2015 was estimated to be producing more than 8,000 million cubic feet of gas per day. This tremendous growth in productivity is owed to advancements in both drilling and hydraulic fracturing technology, as well as improved understanding of reservoir characteristics and performance. These compelling improvements in efficiency and productivity bode well for the future of oil and gas development in the U.S., and the world, because the industry is getting better and better at its work, getting more and more resource from each rig, each well, and each stimulation, and thereby advancing its overall cost-effectiveness by leaps and bounds. U.S. supplies have fundamentally shifted the global balance of energy power. When looking at the production of crude oil combined with production of natural gas liquids, the United States’ production has already surpassed that of both Saudi Arabia and Russia, according to the International Energy Agency and Bank of America (17). This is based upon U.S. production of crude oil and natural gas liquids (NGLs) surpassing 11 million barrels per day in the first quarter of 2014 and remaining above that level throughout 2014. (Crude and NGL production actually hit 12.5 million barrels per day in December 2014 according to EIA.) In his 2012 New York Times piece, Daniel Yergin elaborated on the significance of the rise of U.S. energy in global markets: According to the old script, United States oil production was too marginal to affect world oil prices. But the gap today between demand and available supply on the world market is narrow. The additional oil Saudi Arabia is putting into the market will help replace Iranian exports as they are increasingly squeezed out of the market by sanctions…. But if America’s increase of 1.6 million barrels per day since 2008 had not occurred, then the world oil market would be even tighter. We would be looking at much higher prices – and voters would be even angrier (1). The Economist cut quickly to the chase in its December 6, 2014 “Shiekhs vs. Shale” editorial: So the economics of oil have changed. The market will still be subject to political shocks: war in the Middle East or the overdue implosion of Vladimir Putin’s keptocracy would send the price soaring. But, absent such an event, the price of oil should be less vulnerable to shocks or manipulation. Even if the 3m extra b/d that the United States now pumps is a tiny fraction of the 90m the world consumes, America’s shale is a genuine rival to Saudi Arabia as the world’s marginal producer (18). In other words, U.S. shale oil and gas production now are now undeniably a critical factor in the global energy equation.



Economic Benefits – Jobs, Money, and More Jobs A healthy U.S. energy production sector brings with it a strong U.S. economic stimulus in the form of capital investment, job creation, and affordable supplies of vital fuels for the economy. The oil and natural gas supply chain is long and strong, requiring steel, cement, equipment, machinery, valves, controls, trucks, tanks, boots, protective gear, information systems hardware and software, and, most importantly, people: people to make the steel and cement, protective gear and computer systems; people to use and apply the materials, equipment and technology systems; and people to develop the chain of infrastructure to process and deliver the oil and natural gas to the consumer. Oil and natural gas has been a stalwart in the economy since production began in the U.S., but particularly so in the past few years. A PriceWaterhouseCoopers 2013 report entitled Economic Impacts of the Oil and Natural Gas Industry in 2011 showed that America’s oil and natural gas industry – including both operation and capital investments – supported 9.8 million jobs in 2011, accounting for 5.6 percent of the total U.S. workforce. According to the report, These impacts result directly from the employment and production within the oil and gas industry, indirectly through the industry’s purchases of intermediate and capital goods from a variety of other US industries, and by the personal purchases of employees and business owners both within the oil and natural gas industry and out of the additional income in the supply chain to the industry and from dividends received from oil and natural gas companies (19). The report also concluded the “industry’s total impact on US GDP was $1.2 trillion, accounting for 8.0 percent of the national total in 2011 (20).” More specifically, the energy renaissance driven by hydraulic fracturing has been a driving force behind economic and job growth over the past several years. A report by IHS, America’s New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy; Volume 3: A Manufacturing Renaissance – September 2013 reveals the clear benefits of the development of unconventional oil and gas resources, or those resources that rely upon hydraulic fracturing for extraction. This revolution has brought with it $121 billion in capital expenditures in 2012, projected to increase to $240 billion in 2025 and expected to total $2.75 trillion from 2012 through 2025. From a jobs standpoint, unconventional resource development supported 2.1 million jobs in 2012 and this is expected to increase to a level of 3.9 million jobs in 2025, with more than 500,000 of the jobs in 2025 in manufacturing. When considering GDP, unconventional development accounted for $284 billion in value added contributions in 2012, projected to rise to $533 billion in 2025. And the government derives tremendous benefits as well, receiving an additional $74 billion in revenues at the state and federal levels in 2012, expected to increase to a level of $138 billion in 2025. It is important to note that reports that project future economic impact take into account certain price assumptions. As economic realities set in, the actual economic impacts 53 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


may ultimately diverge from the initial projections. With price levels for crude oil actually lower than initially projected, the economic impacts likely would also be lower over the short term. In any event, the reports cited in this paper are illustrative of the economic impacts that have already occurred and the types of impacts that may occur as the shale revolution presses into the future. Businesses throughout the country in every state are helping to contribute to the success of the shale oil and gas boom, and putting Americans to work in many ways as part of it. The American Petroleum Institute conducted a survey in 2014 entitled Oil and Natural Gas Stimulate American Economic and Job Growth: Vendor Survey Findings Report. The survey provides a list of nearly 30,000 companies through the country, located in every state and almost every Congressional district that are contributing to and benefitting from the shale energy revolution. The actual number of such business is in reality much higher. For example, whereas the report includes the names of more 600 business located throughout the State of Ohio, the Ohio Department of Job and Family Services has reported that there are more than 13,000 shale-related business establishments in the state. The report makes it very clear that the businesses and workers in the unconventional oil and gas supply chain are both plentiful and diverse, including businesses small, medium and large, and companies such as small equipment suppliers, warehouses, large container makers, real estate companies, landscape restoration companies, uniform suppliers, port-o-john companies, and many, many more. These positive impacts of the energy revolution are not only being experience by oil and gas producing states, but also by states that are not recognized for energy production. Take New York as an example, which is a state that has imposed a moratorium on hydraulic fracturing but ironically is receiving great benefits from energy development that relies upon hydraulic fracturing. The API vendor survey provides a list of over 390 companies in the Empire State that get business from oil and gas development. Moreover, the IHS Manufacturing Renaissance report shows that unconventional oil and gas development supported 44,000 New York jobs in 2012 and this is expected to increase to 78,000 in 2025. Small businesses play a significant role in energy development. According to U.S. Census Bureau data, roughly 359,000 people are employed by small business within the upstream (exploration and production) oil and natural gas industry and upstream support industries, accounting for 45 percent of employment in those sectors. The small business contribution to upstream activities is broken down in Table 1 from the Census Bureau data (20):



Table 1. Small Business Contribution to Upstream Oil and Natural Gas Activities NAICS Code

Industry Sector

Number of Small Businesses

Small Business Employment

211111

Crude petroleum and natural gas extraction

6,334

46,329

211112

Natural gas liquid extraction

92

1,507

213111

Drilling oil and gas well

1,921

32,177

213112

Support activities for oil and gas operations

7,057

44,855

23712

Oil and gas pipeline and related structures construction

1,559

36,535

23891

Site preparation contractors

34,210

184,405

333132

Oil and gas field machinery and equipment mfg.

512

13,587

54136

Geological surveying and mapping services

833

4,385

52,519

359,395

Total

Moreover, jobs in oil and natural gas can pay extremely well. The federal minimum wage pays $15,000 per year and the average job in the U.S. pays $49,700. In stark contrast, as seen in Table 2 below, jobs in oil and gas can pay more than twice the U.S. average (21):

Table 2. Average Annual Pay for Upstream and Related Oil and Natural Gas Sectors Industry Sector

Average annual pay

Oil and natural gas extraction

$154,317

Pipeline transportation

$116, 425

Drilling oil and gas wells

$94,115

Support activities for oil and gas

$81,696

Oil and gas pipeline construction

$72,667



Last, but certainly not least, business and consumers are benefitting enormously from abundant supplies of affordable oil, natural gas, and natural gas liquids supplies. Fundamentals of market economics are quite evident in oil and gas markets, with growing U.S. supplies putting downward pressure on the price of oil and natural gas. The Henry Hub price of natural gas has remained at $6.00 per millions of British thermal units (mmBtu) or less since December 2008, with most of the month since then with an average price in the $2 to $4 range (11). The abundant supplies of natural gas in the U.S. and the ability of U.S. producers to efficiently produce these resources has led the EIA and other analysts to predict natural gas prices to remain relatively low for many years. The low price of natural gas led IHS to conclude, in part, in its Manufacturing Renaissance report, that the average consumer had $1,200 additional disposable income in 2012, expected to increase to $3,500 in 2025. Similarly, the price of crude oil has come down significantly. The spot price for West Texas Intermediate crude oil averaged $95 per barrel in January 2014 (15). By December 2014 it was down to $59 and in January 2015 it was at $47 (15). According to The Economist in its “Sheikhs vs. Shale” piece: “Cheaper oil should act like a shot of adrenaline to global growth…. A typical American motorist, who spent $3,000 in 2013 at the pumps, might be $800 a year better off – equivalent to a 2% pay rise (19).” The shale energy boom has also been a catalyst to resurgent manufacturing and petrochemical sectors, which rely on low cost energy to fuel operations and on natural gas and natural gas liquids as feedstock for production. For example, the American Chemistry Council (ACC) has identified 197 chemical industry investment projects valued at $125 billion that have been announced as of September 2014 (22). According to ACC, during peak investment year, these projects could support 275,000 jobs, $16 billion in payroll, and $46 billion in output. Those projects could also generate $18 billion in permanent local, state and federal government revenue by 2023. As indicated by the report, these investments and projects are made possible by lower natural gas prices and increased availability of ethane, an NGL and key chemical feedstock, which are a result of the shale energy revolution. Also, the IHS Manufacturing Renaissance report concludes that “the combined upstream, midstream and downstream unconventional oil and gas production process, and the chemical industry benefiting from it, will support more than 460,000 combined manufacturing jobs by 2020, rising to nearly 515,000 by 2025.”

National Security The positive geopolitical and national security implications of the re-emergence of the United States as an energy superpower are huge. Fundamentally, the more oil and natural gas that the U.S. produces here at home, the less the U.S. and the rest of the world need to buy from unfriendly regimes who often use energy as a political weapon. General Martin Dempsey, Chairman of the Joint Chiefs of Staff, had this to say about the opportunity presented by 56 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.

U.S. energy independence and exports during a hearing of the Subcommittee on Defense Appropriations in the U.S. House of Representatives in March 2014:


An energy independent [U.S.] and net exporter of energy as a nation has the potential to change the security environment around the world – notably in Europe and the Middle East. And so, as we look at our strategies for the future, I think we’ve got to pay more and particular attention to energy as an instrument of national power. And because it will very soon in the next few years potentially become one of our more prominent tools (23). Our allies in places like Central and Eastern Europe and Southeast Asia have a significant policy interest in seeing the U.S. produce and export more oil and natural gas. On the oil side, the U.S. is importing much less because of the increased domestic production. This means an improving trade imbalance, which can weigh heavily on the economy, and less oil purchased from foreign nations. On the natural gas side, the fact that the United States is not importing significant quantities of natural gas means that there are substantially more quantities on the global market, giving nations around the world greater supplies and greater diversity of supply to choose from. Unfriendly regimes rely upon their own oil and natural gas to both fund their governments and militaries and to exercise power over neighboring countries. This is particularly true on the natural gas side with much of Eastern Europe almost fully dependent upon Russian gas for supplying its economies, and the rest of Europe tied to that market as well. According to a January 10, 2013 editorial in the Wall Street Journal, “in Europe, American LNG exports will be a welcome source of diversification to cut energy dependence on Russia (24).” On the oil side, both the increased supplies on the global market and the decrease in the price of crude oil resulting from the U.S. energy boom weigh heavily on threatening oil producing regimes. According to The Economist editorial “Many winners, a few bad losers” published on October 25, 2014, “For those governments that have used the windfall revenues from higher prices to run aggressive foreign policies…things could get uncomfortable. The most vulnerable are Venezuela, Iran and Russia (25).” According to The Economist, Iran relies upon oil prices of $140 per barrel, Venezuela relies upon oil prices of $120 per barrel, and Russia upon oil at high prices to fund their government spending budgets. The U.S. shale revolution has helped to drive prices well below those levels, putting the future economic viability of those regimes at greater risk. The U.S. energy renaissance has certainly put the country in a much better place from a geopolitical standpoint than it could imagined even ten years ago. Increased U.S. production alone is having a significant impact on the world energy power dynamic. By opening up its borders to the free trade of oil and natural gas, the U.S. could have an even greater impact and we would be responding directly and positively to the pleas of our allies to share our resources. Exports of these commodities will not only increase our national security interests as described by General Dempsey, but will also increase production of oil and natural gas in the United States spurring additional spending and job growth throughout the country. 57 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


However, applications to export LNG linger in government bureaucracy and crude oil exports are subject to a 70s era ban that has long-outlived any purpose it may have served. It is in the best interests of the President and Congress to move past partisan gridlock over these issues and make the necessary decisions to expedite exports of both oil and natural gas. Both branches of Congress have the ability to make the necessary changes in both oil and natural gas export policy, and the President could do it today with the tools at his disposal. In discussing Liquified Natural Gas (LNG) exports, an op-ed in the Wall Street Journal by Robert Johnston and Leslie Palti-Guzman summed it as follows: “through its power to permit exports of U.S. gas…, the White House will effectively say yea or nay to the emergence of the U.S. as a global gas superpower. The world is waiting for an answer (25).”

A Balanced Approach to Harnessing the Benefits through Development and Implementation of Industry Standards The benefits of producing oil and natural gas from shale and tight formations through the use of hydraulic fracturing are obviously enormous from the many perspectives identified above. At the same time, the industry takes very seriously its commitment to produce oil and gas in a safe and environmentally responsible manner. This is evident in the industry’s continued development of standards and best practices designed to ensure safe and responsible development of the nation’s resources. Industry standards create the framework for safe, environmentally sound operations, and they are widely disseminated and shared within the industry and with regulators. Using industry standards helps to create a consistent basis for safe, environmentally sound operations. Industry relies on standards and best practices for safe operations and continuous improvement in the operating environment. Government regulators rely upon industry standards and best practices as a means to learn from and engage with the industry, and also for the design of a credible and effective regulatory and permitting regime for oversight of industry operations. The development and implementation of standards and best practices at its core ensures that we are harnessing the varied, positive and consequential benefits, and real world experience through a balanced approach that promotes safe and environmentally protective operations. The American Petroleum Institute (API) offers a full suite of robust industry standards and best practices for the safe development of shale energy resources. The API standards program, which was established in 1924, promulgates voluntary consensus standards that promote the use of safe, interchangeable equipment and operations through proven, sound engineering practices. The standards are developed collaboratively by industry experts and others from government, academia and other interested stakeholders, including professional societies. API’s more than 600 standards cover every aspect of the oil and natural gas business. They are widely used by companies in the United States and around the world and are frequently referenced in federal, state and international regulations. 58 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


API’s standards program is accredited by the American National Standards Institute (ANSI), which signifies that the procedures API uses to create standards meet all of ANSI’s essential requirements for openness, balance, consensus and due process. While hydraulic fracturing is a subset of the technical operations involved in the development of shale energy resources (hydraulic fracturing operations normally last for under seven days for a well that can be in production for 20 years or more), API has published well over 100 standards documents that relate and contribute to the safe, environmentally sound development of shale energy resources (26). API standards documents include the following different categories of documents: specifications, which are generally intended to create consistency around the design and manufacture of specific categories of materials and equipment, and “are written in such a way as to facilitate communications between purchasers, manufacturers, and/or service suppliers”; recommended practices, which” communicate recognized industry practices,” including how to generally conduct a particular operation; standards, which combine “elements of both specifications and recommended practices”; and bulletins and technical reports, which are generally guidance-type documents and “convey technical information on a specific subject or topic (27).” Examples of documents that fit into each of these categories include the following: • • • • •

API Specification 7K, Drilling Equipment API Recommended Practice 51R, Environmental Protection for Operations API Standard 65 Part 2, Isolating Potential Flow Zones API/ANSI Bulletin 100-3, Community Engagement Guidelines API Technical Report 10TR3, Cement Thickening Time Tests

It is through a full suite of API standards and best practices covering the various aspects of oil and gas development, including shale operations, that the industry is able to form a strong baseline for U.S. and global operations to conduct safe and environmentally responsible development. The portfolio of API standards and best practices applicable to shale oil and gas development is comprehensive, systematic and robust, but for purposes of this chapter we will focus on standards and best practices related to aspects of shale development and operations that have been the subject of active dialogue at the local, state and federal levels: community engagement, well integrity, water use and management, and environmental management. API standards and best practices related to each of these areas are designed to effectively address the relevant concerns by ensuring both a balanced dialogue with affected communities and by implementing operational practices to protect the environment.



Community Engagement API’s Community Engagement Guidelines, API Bulletin 100-3, was published in July 2014 and constitutes a first of a kind document when it comes to providing guidelines for engaging with and respecting the local communities located where operations are intended to occur. Oil and gas development can be a new activity for a local community, and operators have been developing constructive best practices and tools to create close alignment with the priorities of local communities in and around locations of oil and gas development. API’s Community Engagement Guidelines brings together the collective thinking of the industry to establish a document with the following purpose: The Community Engagement Guidelines are recommendations designed to promote the safe and responsible development of the nation’s oil and natural gas resources by engaging and respecting the communities where these operations occur. The oil and gas industry can bring prosperity, economic development and enhancements to an area and assist in securing our national energy interests. In order to promote oil and gas development that results in a positive experience for communities, recommended development activities should be aligned with community concerns and priorities grounded in responsible practices and lessons learned from former experiences. The industry’s commitment to being a good neighbor throughout the full project life cycle requires ongoing dialogue with local communities and other key stakeholders. Stakeholders, for use of the Community Engagement Guidelines, are defined as: Any person, group or entity that has interest or concern in an organization and its activities is considered a stakeholder. Stakeholders can affect or be affected by the organization’s actions, objectives and policies (28). The document establishes a baseline of engagement for the industry and local communities by tying the five phases of an oil and gas project’s life cycle to the overarching principles of integrity, safety and environmental responsibility, and communicating effectively. The five phases of oil and gas projects include entry; exploration; development; operations/production; and exit. The phases are then broken down separately within the document in order to identify engagement considerations for operators and to provide insight into what can be expected by the local stakeholders. With regard to the principle of integrity, companies should “strive to build positive and constructive relationships within the community and accumulate long-term sustainable relationships (29).” With regard to the principle of safety and environmental responsibility, the “goal should be to operate daily in a manner that protects the safety, environment and health of communities, employees and contractors during the complete lifecycle of the project (30).” With regard to the principle of communicating effectively, companies are encouraged to “[p]romote education, awareness, and learning during the five phases of the project life cycle and work to bridge any knowledge gaps by providing tailored information that is targeted to the community (30).” 60 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


Community engagement is both part of the planning process by identifying ways to mitigate potential impacts to local communities and part of the operations process by continuing to engage with local communities throughout the complete life cycle of the project to achieve the key principles discussed above. Moreover, the document is an effective tool that can be used by local communities to help achieve those objectives. As the document itself provides, the “oil and gas companies encourage communities to use these guidelines in a manner that invites conversation, facilitates learning and enhances cooperation, working collectively to mitigate potential impacts and driving for long-term sustainability.”

Well Integrity API has published two documents that are directly designed to help ensure well integrity and the protection of groundwater resources: API Guidance Document HF1, Hydraulic Fracturing Operations – Well Construction and Integrity Guidelines (October 2009), and API Standard 65−Part 2, Isolating Potential Flow Zones During Well Construction (December 2012). According to HF1, well integrity is a key design principle and feature for all oil and natural gas wells, and maintaining integrity is essential for two reasons (30): 1.

2.

To isolate the internal conduit of the well from the surface and subsurface environment. This is critical in protecting the environment, including the groundwater, and in enabling well drilling and production. To isolate and contain the well’s produced fluid to a production conduit within the well.

HF1 is designed to provide guidance and highlight the recommended practices for hydraulically fractured wells. HF1 outlines the various considerations for an operator to take into account when designing and constructing a well so that groundwater and the environment are protected. The layers of protection inherent in both the well design and the geology of the rock are described as follows: Groundwater is protected from the contents of the well during drilling, hydraulic fracturing, and production operations by a combination of steel casing and cement sheaths, and other mechanical isolation devices installed as a part of the well construction process. It is important to understand that the impermeable rock formations that lie between the hydrocarbon producing formations and the groundwater have isolated the groundwater over millions of years (31). HF1 provides detailed guidance on drilling the hole, logging the hole, running casing (steel pipe), cementing the casing, logging the casing, perforating the casing, hydraulically fracturing or stimulating the well, and monitoring well performance. In addition to HF1, API has published Standard 65−Part 2, which provides practices for isolating potential flow zones by cementing, which is an “integral element in maintaining well integrity (32).” Standard 65−Part 2 is a 61 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


highly technical document and includes two primary objectives: “help prevent and/or control flows just prior to, during, and after primary cementing operations to install or ‘set’ casing and liner pipe strings in wells,” and “help prevent sustained casing pressure (33).” These objectives are important in the design and construction of any oil or natural gas well. In fact, Standard 65−Part 2 has been adopted by reference into regulation by the federal government’s Bureau of Safety and Environment Enforcement for offshore operations. The U.S. oil and gas industry has demonstrated great success ensuring that the objectives of the above well integrity standards are achieved and in preventing groundwater contamination. Tens of thousands of oil and natural gas wells are drilled each and every year, with a great portion of those wells being hydraulically fractured. The evidence strongly demonstrates that hydraulic fracturing has been effectively applied over the past several decades without adverse impact to groundwater supplies. In fact, an estimated 35,000 wells per year are hydraulically fractured and more than 1 million wells are estimated to have been hydraulically fractured since the first well in the late 1940s (33). Former U.S. Environmental Protection Agency (EPA) Administrator Lisa Jackson testified before Congress in May 2011 and stated there is no “proven case where the fracking process itself has affected water (34).” These sentiments have been echoed by various government officials and were reiterated more recently by EPA Administrator Gina McCarthy during her confirmation hearing in April 2013: “I am not aware of any definitive determinations that would contradict those statements [by Lisa Jackson, referenced above] (35).” Most recently, in its Draft Assessment Report on the Potential Impacts to Drinking Water Resources from Hydraulic Fracturing Activities released on June 4, 2015, EPA acknowledged that “hydraulic fracturing activities have not led to widespread, systemic impacts to drinking water resources.” The draft Assessment Report is the most complete compilation of scientific data to date (including over 950 sources of information, published papers, numerous technical reports, information from stakeholders and peer-reviewed EPA scientific reports) to assess the potential for hydraulic fracturing for oil and gas to impact the quality or quantity of drinking water resources. Nevertheless, the industry takes its commitment to groundwater protection very seriously. This is evident in the industry’s development and application of standards and best practices to maintain well integrity, and in the industry’s success in producing shale energy and gas from thousands upon thousands of wells without incident.

Water Use and Management API Guidance Document HF2, Water Management Associated with Hydraulic Fracturing (June 2010) was developed by the industry to “identify and describe many of the current industry best practices used to minimize environmental impacts associated with the acquisition, use, management, treatment, and disposal of water and other fluids associated with the process of hydraulic fracturing (36).” HF2 outlines the planning considerations for the acquisition, use and 62 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


management of water in hydraulic fracturing operations. These considerations are designed to address source water acquisition, transport, storage, use, reuse and recycle, and treatment and disposal. The document also includes a checklist of eleven key considerations for minimizing the environmental and societal impacts associated with those various water-related activities. For example, the first objective states that “[o]perators should engage in proactive communication with local water planning agencies to ensure oil and gas operations do not constrain the resource requirements of local communities and to ensure compliance with all regulatory requirements (37).” HF2 recognizes the primary role of local and state governments in water use and management decision making, and suggests opportunities for operators to seek to reduce future demands on available water resources.

Surface Environmental Management API has published two documents that help guide the industry to better overall environmental performance during oil and gas development operations: API Guidance Document HF3, Practices for Mitigating Surface Impacts Associated with Hydraulic Fracturing (January 2011) and API Recommended Practice 51R, Environmental Protection for Onshore Oil and Gas Production Operations and Leases (July 2009) (RP 51R). HF3 is designed to “identify and describe practices currently used in the oil and natural gas industry to minimize surface environmental impacts—potential impacts on surface water, soils, wildlife, other surface ecosystems and nearby communities—associated with hydraulic fracturing operations (36).” The various specific API standards described in this chapter are obviously interrelated and should be used together to create a synthesized approach in applying best practices. HF3 actually includes a section on water management, but is distinct from HF2 in that HF3 specifically discusses on-site fluid handling, surface impoundments and storage tanks, spill prevention and control, and storm water management and control. HF3 provides best practice considerations for maintaining equipment and facilities, minimizing surface disturbances, protecting air quality, preserving visual resources, and mitigating noise impacts. HF3 also discusses the importance of transparency regarding the disclosure of the chemical ingredients used in hydraulic fracturing operations. Disclosure has been made possible by the development and widespread use of the FracFocus chemical disclosure registry, which provides for well-by-well disclosure of the specific components used in fracturing operations. As of June 4, 2015, more than 99,000 wells have been registered on the site. Most oil and natural gas producing states have disclosure requirements as part of their regulatory programs, and the great majority require disclosure through FracFocus. The public can readily review this information at www.fracfocus.org. RP 51R adds important elements for planning and operations by addressing considerations for lease roads, waste management, pit location and construction, handling of water discharges, waste disposal, lease gathering and systems lines, and production and water handling facilities. RP 51R includes an important resource at Annex A, which is the document’s “Good Neighbor Guidelines.” 63 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.

The Good Neighbor Guidelines have the three objectives of protecting the public safety, protecting the environment, and respecting the property rights of others. In order to effectively advance those objectives, the guidelines include this checklist of good neighbor practices:


• • • • •

Listen to the land owner or surface user concerns and respond appropriately; Communicate with land owners and surface users; Respect the property and rights of others; Promote the safety of the general public; and Protect the environment.

The specific API standards documents described above are only six examples of more than 100 API standards that promote safety and environmental performance in onshore oil and gas exploration and production operations, yet they serve to comprehensively guide operators in identifying aspects of operations that have the potential to impact local communities and the environment and provide a roadmap for determining best practices to mitigate and prevent such potential impacts. Fundamentally, oil and gas companies are committed to safe and environmentally responsible oil and gas development. At its core, safety is good business, and good business is safety. The commitment of the industry to safe, environmentally sound operations is abundantly evident through its voluntary development and utilization of standards and best practices that form a comprehensive, systematic and robust framework for safe and environmentally responsible operations. This commitment and framework serve to credibly demonstrate the balanced approach in place in the U.S., which harnesses the tremendous positive benefits of shale energy development and promotes prudent and responsible development.

Effective System of State-Based Regulation Serves To Ensure a Balanced Approach The leadership of the industry in advancing a strong system of standards and best practices is complemented by an effective regime of state-based permitting, regulation and enforcement. State level governments and regulators have been effectively overseeing oil and natural gas operations for decades, and have ensured that requirements and standards are in place for safe operations, protection of public health and interests, and protection of the environment. Oil and gas producing states have regulatory structures in place for the protection of surface and groundwater, the disclosure of the components of hydraulic fracturing fluids used to stimulate production of oil and gas, and the use and management of water resources. According to its website, the “Interstate Oil and Gas Compact Commission [IOGCC] is a multi-state government agency that promotes the conservation and efficient recovery of domestic oil and natural gas resources while protecting health, 64 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


safety and the environment (38).” The membership of the IOGCC is comprised of the Governors of the oil and natural gas producing states in the U.S. According to the IOGCC, “hydraulic fracturing is regulated by the states. IOGCC member states each have comprehensive laws and regulations to provide for safe operations and to protect drinking water sources, and have trained personnel to effectively regulate oil and gas exploration and production (39).” The IOGCC expands upon this by stating, “[t]he Commission’s member states have a well-established history in successful regulation resulting in sound environmental practices. Issues vary from state to state, and experienced regulators across the nation have shown great leadership in protecting our environment. Many times, federal regulations offer a “one size fits all” approach, which does not effectively regulate the oil and natural gas industry (40).” And recently, IOGCC and the Groundwater Protection Council (GWPC) worked together to create the States Oil and Gas Regulatory Exchange (SOGRE) to help facilitate the flow of information between oil and gas regulators. One of the first projects of SOGRE was the 2014 publication of a reported entitled State Oil and Gas Regulations Designed to Protect Water Resources. The report includes the following statement in the preface to the document: State regulators place great emphasis on protecting water resources from adverse impacts that can occur during oil and natural gas exploration and production (E&P) activities. The GWPC and Interstate Oil and Gas Compact Commission (IOGCC) believe that regulation of oil and gas field activities is managed best at the state level where regional and local conditions and best applied practices are understood, and where regulations can be tailored to fit those conditions. While there are aspects of oil and gas regulation that occur at the local and federal government level, in the vast majority of instances the greatest experience, knowledge, and information necessary to regulate effectively resides with state regulatory agencies (41). Then, after reviewing the regulatory programs of 27 oil and gas producing states, the report includes the following as the ultimate conclusion: Overall, state oil and natural gas regulatory agencies have been diligent in addressing the technological, legal and practical changes that have occurred in oil and gas E&P over the past four years. By employing highly trained, experienced staff and implementing rules designed to protect water resources, agencies have maintained a standard of regulatory management that assures water availability and sustainability (42). Given the success of the oil and gas producing states in implementing comprehensive and effective regulatory systems for environmental protection, and the clear interest of those states, as expressed above, in continuing to maintain primary responsibility for environmental oversight, it is clear that the state-based 65 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.

approach serves as an effective mechanism for ensuring a balanced approached to shale energy development.


Environmental Benefits of Hydraulic Fracturing In 1999, the U.S. Department of Energy Office of Fossil Energy published a report entitled the Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology. The report included both horizontal drilling and hydraulic fracturing as advanced technologies that provide environmental benefits. With regard to hydraulic fracturing, the report identified the following environmental benefits: • • •

Optimized recovery of valuable oil and gas resources Protection of groundwater resources Fewer wells drilled, resulting in less waste requiring disposal

The report also included the following economic benefits: Increased well productivity and ultimate recovery Significant additions to recoverable reserves Greatly facilitated production from marginal and mature fields As described throughout this chapter, the economic and environmental benefits of shale oil and gas have played out through the current energy renaissance, some 16 years after the publication of this government report. And the environmental benefits are much greater than described in that 1999 DOE report. The shale energy revolution has unleashed affordable, abundant supplies of clean-burning natural gas, which have helped contribute to lower greenhouse gas (GHG) emissions. According to EIA, U.S. carbon dioxide (CO2) emissions resulting from energy use during the first quarter of 2012 were the lowest in two decades (43). The U.S. State Department concluded that “a major contributor to the decline in U.S. GHG emissions has been the displacement of coal with natural gas that is extracted from shale rock formations through hydraulic fracturing and horizontal drilling (44).” In addition to the GHG benefits, electricity generated from natural gas produces very low emissions of carbon monoxide, nitrogen oxides, particulate matter, volatile organic compounds, and sulfur dioxide, and no emissions of mercury. The shale energy boom has truly unlocked a resource that provides the triple benefit of driving significant economic growth, enhancing global energy security, and producing clean energy.

The U.S. as an Energy Superpower: Harnessing the Benefits for Generations to Come Looking back on the past few years, it is clear that the shale revolution has provided a much needed bright spot for the U.S. economy during the height of the recent recession. According to EIA, from “the start of 2007 through the end 66 In Hydraulic Fracturing: Environmental Issues; Drogos, Donna L.; ACS Symposium Series; American Chemical Society: Washington, DC, 2015.


of 2012, total U.S. private sector employment increased by more than one million jobs, about 1%. Over the same period, the oil and natural gas industry increased employment by more than 162,000 jobs, a 40% increase (45).” Numbers like these led the Washington Times to run a June 3, 2014 op-ed by Richard Rahn entitled “How Fracking has Saved Obama.” Mr. Rahn maintains that “[w]ithout fracking of oil and gas deposits, there would have been no economic growth in the U.S. over the past five years…. Without those brilliant entrepreneurs and engineers in the private sector who developed the new techniques to unlock massive amounts of oil and gas at reasonable cost, it is unlikely that President Obama would have been re-elected (46).” Of course, this is a question to which we will never know the answer, because hydraulic fracturing did advance in America and has generated tremendous economic growth, and President Obama was re-elected. Looking ahead, we know from EIA projections that America and the world will continue to rely on oil and natural gas to fuel their economies for decades to come. According to EIA, in the year 2040, the U.S. is projected to rely upon oil and natural gas for about 60 percent of its fuel needs and the world is projected to rely on oil and natural gas for nearly 55 percent of its needs (10). EIA data shows that global oil demand alone is expected to rise by about 30 percent over the same time period, from about 90 million barrels per day in 2013 to about 117 million barrels per day in 2040 (47). Given the recent success of shale energy development in the U.S. in unlocking massive amounts of oil and natural gas, the question becomes whether shale development will see similar success on a global level. This same query led The Hill to run an op-ed by Dr. Robert Shum on March 18, 2014 entitled “Can fracking save the world?” Dr. Shum identifies various important global challenges that hydraulic fracturing can help address, including rising energy demand, concerns about climate change, and global geopolitical security. In re-emerging as a global energy superpower, the U.S. has already gone a long way toward addressing these important issues in a very positive way, for both American and our global allies. Perhaps, while not necessarily “saving the world,” shale energy development will continue in its trajectory as the logical response to the global call for affordable energy, economic stimulus, energy security and geopolitical leverage. If so, then we will all have hydraulic fracturing to thank for that.

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