U.S. CHAMBER OF COMMERCE

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Energy Blog

US Chamber of Commerce Blog

Sean Hackbarth 350.org founder, Bill McKibben, speaks at a Bernie Sanders campaign rally.350.org founder, Bill McKibben. Photo credit: Scott Eisen/Bloomberg.

A big part of public policy debates involves countering misleading claims. In this regular feature, I highlight important facts about the key issues being debated around Washington, D.C.

Claim: Fracking causes water and air pollution.

What you need to know: After leading the charge against the Keystone XL pipeline, anti-affordable-energy zealot Bill McKibben's next target is fracking.

“Natural gas” has “to be left in the ground," he declared in The Nation. “We need to stop the fracking industry in its tracks, here and abroad.”

First, McKibben blames fracking for water contamination, despite it taking place thousands of feet below the ground, far away from water supplies:

The Marcellus Shale, though, underlies densely populated eastern states. It wasn’t long before stories about the pollution of farm fields and contamination of drinking water from fracking chemicals began to make their way into the national media.

The key word is “stories.” Researchers from EPA, Yale, and elsewhere have found that fracking is done safely and doesn’t contaminate water.

Most-recently, researchers at the University of Cincinnati tested water from wells before, during, and after fracking took place nearby. Their conclusion: There is “no evidence for natural gas contamination from shale oil and gas mining.”

But what really scares McKibben is supposed methane leakages. He cites a Harvard study claiming to show that “U.S.  methane emissions had spiked 30 percent since 2002.” “We closed coal plants and opened methane leaks, and the result is that things have gotten worse,” he writes.

But like claims of water contamination, facts don’t live up to McKibben’s methane horror.

According to EPA data, “Methane emissions from hydraulically fractured natural gas wells are down nearly 79 percent since 2005,” writes Mark Green at Energy Tomorrow.

This makes sense since methane is natural gas, and energy companies are in the business of selling that to customers. There is an obvious incentive to minimize leaks and capture as much product to maximize sales.

energytomorrow_methane_from_fracked_natgas_wells.jpg Methane released from fracked natural gas well completion has fallen since 2005.Methane released from fracked natural gas well completion has fallen since 2005.Source: Energy Tomorrow.


But if that’s not enough, a top environmental thinker thinks the McKibben is “misleading” the public. Ted Nordhaus, co-founder of The Breakthrough Institute, read the same Harvard study that got McKibben quaking in his hiking boots and came to a very different conclusion:

[Researchers] concluded that while the United States has seen a 20% increase in oil and gas production since 2002, “the spatial pattern of the methane increase… does not clearly point to these sources.”

To use Nordhaus’ words, the scientists that McKibben puts on a pedestal don’t “clearly point to a source of the increase in atmospheric methane concentrations.”

Fracking opponents like McKibben understand that they can’t win the public debate when it’s about the benefits the technology has given us: access to abundant, affordable energy; millions of new jobs created; and increased energy security. That’s why a recent University of Texas at Austin poll found that more people support fracking than oppose it.

Instead, they have to scare people and mold facts like Play-Dough to push their unrealistic, irrational, “keep it in the ground” fantasies of meeting America’s energy needs without fossil fuels.

The biggest energy challenge is low prices--which is a great boon for consumers. That’s a 180-degree turn from only a decade before. Fracking and the shale boom that resulted from it is an impressive illustration of the power of American enterprise and innovation. Opponents cannot be allowed to undercut that success story by misleading the public.

 
Sean Hackbarth An oil jack near Corpus Christi, Texas.An oil jack near Corpus Christi, Texas. Photo credit: Eddie Seal/Bloomberg.

Even with almost two years of low oil prices, United States production hasn’t collapsed.

How can this be when services firm Baker Hughes reported that the number of oil and natural gas drilling rigs operating right now number 443, a multi-decade low?

eia_crude_oil_production_2009-2016_800px.jpg  2009-2016.EIA chart: U.S. crude oil production: 2009-2016.


The answer comes from an Energy Information Administration report showing that “costs in 2015 were 25% to 30% below their 2012 levels.”

Energy companies are enduring the oil prices slump by relying on innovation and technology to produce more energy for less.

eia_well_drilling_costs_2006-2015.png  2006-2015.EIA: U.S. well drilling costs: 2006-2015.Source: Energy Information Administration.


Here are a few ways companies are doing this.

1. Finding the Sweet Spot

Companies are focusing their efforts on the wells with the highest potential oil and natural gas production, CNBC reports:

Most of the cost of a new well lies in drilling and fracking it, so producers are only spending money to bring new production online in places where they're reasonably certain they can extract oil on the cheap.

Not only are producers moving rigs to their best land, but they're also completing more fracking stages per well, Charles Cherington, co-founder of the energy-focused private equity firm Intervale Capital.

"That's caused the sort of rollover in U.S. production to happen more slowly than people might have anticipated," he told CNBC's "Squawk Box" on Monday.

2. Big Data Computes

Companies are finding these sweet spots by using Big Data processing power to analyze the massive amounts of data their sensors provide, as Technology Review explains:

Thanks to new sensing capabilities, the volume of data produced by a modern unconventional drilling operation is immense—up to one megabyte per foot drilled, according to [the Manhattan Institute’s Mark] Mills’s “Shale 2.0” report, or between one and 15 terabytes per well, depending on the length of the underground pipes. That flood of data can be used to optimize drill bit location, enhance subterranean mapping, improve overall production and transportation efficiencies—and predict where the next promising formation lies. Many oil companies are now investing as much in information technology and data analytics as in old-school exploration and production.

3. Walk on the Wild Side

When companies determine the best places to drill, they use drilling rigs that walk from drilling pad to drilling pad, instead of being taking apart and rebuilt over and over, as Bloomberg reports:

More efficient drilling rigs that cost a third less than just a year earlier are changing the face of the U.S. shale industry, helping boost per-rig output in the four largest fields by at least 40 percent since the crude price plunge began in 2014.

4. More, More, More

After drilling comes the fracking, and the innovation continues. As Reuters puts it, shale producers are pushing fracking technology to the limit.

One way is driving more water and sand into a well to create more cracks in the shale, releasing more oil and natural gas, CNBC reports:

For example, drillers are now adopting a hydraulic fracturing method pioneered by companies such as Liberty Resources and EOG Resources that uses larger amounts of water and minerals. While it's a more costly process, it has been shown to boost production rates in the first crucial year of a well's life, after which output drops off dramatically.

Processes such as these have reduced the break-even cost of producing a barrel of oil and kept profitable some acreage that drillers might otherwise have left idle.

The Manhattan Institute’s Mark Mills explains, “Sand used per well has risen, from 5 million to 15 million pounds, on average,” and “Operators, for example, increasingly use more powerful pumps to move the water-sand mixture faster and at higher pressures, greatly increasing the amount of sand used to keep shale cracks open.”

Another way is fracking a well again. Bloomberg reports that 80 wells in North Dakota’s Bakken region showed “30 percent more oil in the month after the refrack than they did after the original completion.”

5. Rethinking the Entire Production Process

Another approach is being taken by Liberty Resources in North Dakota. It is rethinking the entire process of producing energy from shale formations by maximizing operational efficiency and optimizing each part of the production process with a “massive centralized oil production facility in Tioga, North Dakota, called Stomping Horse.” The Wall Street Journal dubs it a 10,000 acre, 96-well “oil factory” [subscription required]:

The self-contained facility was designed with efficiency and cost savings in mind. It can process wastewater on site, obviating the need to run trucks to and from the drilling site, and wells were intended to be fracked 10 at a time, to improve the network of fractures.

One way Liberty Resources is squeezing out costs is by relying more on pipelines:

Notably absent were tanker trucks. Liberty Resources has spent $16.2 million building pipelines to deliver fresh water and send out natural gas and oil, greatly reducing the need for trucks. Another pipeline sends gas from its wells to drilling rigs and other machinery, cutting diesel consumption in half and reducing the number of fuel trucks required.

“Getting trucks off the road is one of the main drivers in controlling the costs,” says Chris Clark, the production manager. Trucking water for disposal, for example, can cost $1.75 a barrel, about 50 cents more than shipping water via pipeline, he says. Overall, pipeline usage helps Liberty make an additional $3 a barrel for oil, mostly from reduced costs but also because the company can more easily get its oil to locations where it brings in higher prices, he says. “We are spending more to make more,” Mr. Clark says.

6. Tech Applied After Fracking

Innovation doesn’t stop after fracking. The Manhattan Institute’s Mills notes how one company is successfully analyzing its well data to maximize energy output:

ConocoPhillips combined the latest sensors (which extract data by the minute rather than daily), wireless networks (often requiring building dedicated remote cell and Wi-Fi towers), and big-data analytics to boost output by 30 percent in existing wells.

Information Week added that ConocoPhillips jumped into the “Internet of Things” movement by building a network of radio and wi-fi towers to collect real-time natural gas well data and spot ones that aren’t producing efficiently.

In each step of the energy development process--from where to drill and how to drill to studying data after drilling—companies are using the latest technologies to get us the oil and natural gas that helps power the American economy.

Not sitting still, always innovating. That’s how companies are persisting in the low oil price environment.

 
Heath Knakmuhs  2015 U.S. average electricity retail prices.Click here for a state by state breakdown of electricity rates.

Today we are back with one of our most popular features – an annual update to our retail electricity price map.  These prices best reflect what business, industry, and you must pay for a given unit – or kilowatt hour – of electricity.  Last year’s edition found electricity prices climbing in all but a single state.  This year, however, our analysis shows a mixed-bag of increases and decreases among the fifty states and the District of Columbia. 

Thirty states continued to watch their average electricity rates increase, while this year twenty states and the District of Columbia enjoyed a reprieve from the elevation of electricity rates they experienced from 2013 to 2014.  Michigan remains the exception, which again saw its average retail electricity price decrease on a year-to-year basis. 

While starting with the highest rate from our 2015 survey (of 2014 annual rates), Hawaii experienced the greatest decline in 2015 average electricity prices, with an over 8 cents/kwH decline.  This can be attributed to Hawaii’s primary reliance on petroleum for electric generation, which has experienced a significant price decline since mid-2014.  Unfortunately for the Aloha State, even with a price drop Hawaii continues to lead the country with the highest electricity rates.

Alaska remains second in terms of highest cost, with other traditionally expensive states in New England, California, New York, and New Jersey rounding-out the ten most expensive places to flip your light switch.  Given that each of these states have been or are a member of the Regional Greenhouse Gas Initiative (RGGI) or California’s AB 32, each of which are regional precursors to the EPA’s widely-opposed Costly Power Plan, their hold on high-electricity prices is expected.  Interestingly, New Jersey did see a slight decrease in their annual average electricity rates, potentially connected with their withdrawal from the RGGI cap-and-trade system.

On the other end of the spectrum, states that rely primarily on affordable and reliable coal power to supply their electricity continue to enjoy the lowest electricity rates in the nation.  Arkansas, Iowa, Kentucky, Oklahoma, Utah, West Virginia, and Wyoming each find themselves again in the top-ten cheapest states thanks to their primary reliance on coal to generate electricity.  Washington and Idaho continue to enjoy the benefits of low-cost and geographically-dependent hydroelectric power to maintain their positions in the low-cost ten, while Louisiana rounds out the ten-best list with ample supplies of electricity from natural gas, which has seen nearly historic low prices as of late.  If you are looking to set up shop with an energy-intensive business, you will surely keep these ten states on the short list.

Given that this year finds us in the heat of the legal battle over the EPA’s Costly Power Plan, we looked at where states land on the electricity price continuum when compared to whether they are opposing – or supporting – EPA’s unprecedented and costly carbon regulation rule.  Of the 28 states that are opposing the EPA and its Costly Power Plan in court, fourteen of those states saw their annual electricity rates go down this past year, while the other half experienced slight increases in their average rates.  Thus, an even shake on whether rates are trending up or down.

On the other hand, among the eighteen states that are supporting the EPA’s Costly Power Plan in court, the following can be observed:

Thirteen of those states saw their electricity rates increase over the past year; Only five experienced rate decreases (most of which were only by tenths of a penny, aside from Hawaii); and  Of the five states with rate reductions, two of them are among the three states that are exempt from the Costly Power Plan (Vermont and Hawaii).

Thus, if you live where your state is subject to regulation by the Costly Power Plan and your state’s leaders are defending that plan in court, you faced a greater than eighty-percent chance that your electric bills have increased in the past year.

These conclusions beg the question as to why eight of the ten highest-cost states have decided to support the EPA’s effort to drive electricity prices even higher.  Have they considered the homeowners and businesses in their states that have to bear these price increases on top of already unreasonably high-priced electricity?  Perhaps that is a good question to ask those state leaders that are spending taxpayer dollars to support the Costly Power Plan in court.

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Note 
In order to eliminate any confusion that may arise when making a direct comparison of this year’s map to the 2014 rate map, it is important to note that we utilize the U.S. Energy Information Administration’s (EIA) preliminary annual data, from the February edition of Electric Power Monthly, to develop our annual maps and rate comparisons.  The EIA’s preliminary data is then subject to modification in the subsequent months as EIA finalizes their rate data.  We use EIA’s preliminary data in order to deliver timely information, but slight variances from the final figures are possible.  Please note, however, that for the purposes of comparing year-over-year trends, we have used EIA’s near-final 2014 numbers instead of the preliminary numbers used in our 2014 map to maximize the accuracy of our trend analysis. 

Editor's note: This post originally appeared on the Institute for 21st Century Energy's blog.