Ernest Moniz, President Obama’s nominee to become Secretary of Energy, encountered a minor tempest this week when environmentalists unearthed a 2011 MIT study on natural gas production and fracking, which Moniz led as the head of MIT’s Energy Institute.  The study, which concluded that the potential environmental damage from fracking is “challenging, but manageable,” was conducted by a team that included two researchers with ties to the oil and gas industry.  The White House quickly defended Moniz as an independent scientist, and the controversy is unlikely to keep Moniz from succeeding Stephen Chu atop the Energy Department.

Independent or not, the MIT report now rests on a shelf that groans under the weight of fracking studies and reports that multiply almost as fast as the natural gas wells themselves.  The latest version, which heavily favors the natural gas rush, comes from the University of Southern California and the Communications Institute, an L.A. think tank, and was “funded in part by a grant from the Western States Petroleum Assn.,” reports The Los Angeles Times.

There are plenty of examples of counter-studies detailing the horrors of fracking.  The granddaddy of anti-fracking reports was produced by Robert Howarth of Cornell in 2011, and concluded that over the long term, “shale gas is worse than conventional gas and is, in fact, worse than coal and worse than oil.”

Howarth’s gloomy findings have been disputed by studies from “the Environmental Defense Fund, the National Resources Defense Council, the Council on Foreign Relations, the Energy Department and numerous independent university teams, including a Carnegie Mellon study partly financed by the Sierra Club,” noted Forbes contributor Jon Entine.

Another 5 Years

In New York, a highly touted report from the Geisinger Health System is “likely years away,” the project’s leader acknowledged recently.  New York lawmakers and Governor Andrew Cuomo are in a struggle over limitations – or an outright ban – on fracking in the state, which overlies parts of the vast Marcellus Shale formation, which some geologists believe holds enough shale gas to provide U.S. electricity needs for a century or more.  New York’s review of the social and environmental effects of fracking is now in its fifth year, with no end in sight.

So proliferative is the research on fracking that the industry is in danger of being “entombed” by endless “iterative studies,” wrote a commenter on The Motley Fool, a stock-trading website.  Some supporters have had enough: University of Oklahoma professor David Deming, who has a rich history of provocative statements dismissing the concepts of peak oil and renewable energy, declared recently in a Wall Street Journal editorial that the oil and gas industry needs to man up and emulate the NRA by forcefully confronting its critics and “seizing the moral high ground.”

“The fossil-fuel industry—which could be the most powerful lobby in Washington—is hopelessly ineffective and self-defeating,” Deming moaned.

No Stopping

That is manifestly false – Steve Coll’s book on Exxon Mobil, Private Empire, provides 600 pages of evidence that the oil majors are among the most powerful entities on earth, often functioning as quasi-governments, for both good and ill, in the countries in which they operate.

At any rate, the thousands of pages of research on the effects of fracking scatter, for now, like confetti on the tracks as the locomotive of the natural gas boom thunders past.  That train is not slowing down soon.  Rather than taking an adversarial stance to regulators and environmental groups, natural gas producers could reduce their costs and risks by cooperating with regulators, being transparent about the chemicals they inject underground, and sharing infrastructure in areas with multiple producers.  Those are the conclusions of, you guessed it, a study by Accenture.

There are efforts afoot to do just that.  The Pittsburgh-based Center for Sustainable Shale Development is working on a new set of standards for the industry that would include a certification process to verify that producers are operating in environmentally safe and socially responsible ways.  As my colleague Dave Hurst reports, the Center has been set up by a group of organizations across the energy spectrum, including Chevron, Shell, the Clean Air Task Force, Consol Energy, the Environmental Defense Fund, Group Against Smog and Pollution, Heinz Endowments, and the William Penn Foundation. Lawrence Livermore National Laboratory is helping to develop the technical standards.  Such cooperation offers a much more productive approach than burying your opponents in a blizzard of conflicting studies.

On March 20^th, a group led by major natural gas drilling companies Chevron, CONSOL Energy, EQT Corporation, and Shell announced that they have negotiated a set of voluntary environmental standards for shale gas hydraulic fracturing.  The new coalition includes five environmental groups and two foundations that have environmental interests.  The new Center for Sustainable Shale Development (CSSD) certification will include 15 performance standards for fracking operations.

This effort is encouraging because, until now, the arguments about fracking have been largely based solely on two voices: the drillers claiming that the technology is absolutely safe and the environmentalists claiming it is irreparably flawed.  While the truth is grayer than these positions, the bottom line has been that America’s thirst for energy has trumped any environmental concerns, until politicians get an earful from constituents and ban fracking altogether.  The CSSD standards have been compared to the LEED certification for certifying construction of environmental buildings and are likely to help relieve some of the tension surrounding fracking.

Mostly Marcellus

The CSSD standards are a good first step, but I see a few flaws that are likely to undermine some of their effectiveness.  For the most part, these new standards cover groundwater, the water used for fracking, the flaring of natural gas, and the type of diesel fuel that can be used at drilling sites.  The standards do not seem to make any effort to address the air pollution associated with drilling or the land use.  Most of the time, the air pollution surrounding fracking operations is substantially worse than other areas.  What’s more, the CSSD standards ignore the pollution impact of all the motors running on a drilling site.

Drill motors are almost always considered non-road diesel engines by the U.S. Environmental Protection Agency, and therefore, have different requirements than the diesel trucks that are used on the road.  Natural gas-fueled motors for drilling operations are starting to come into play, but these remain few and far between and the CSSD standards are unlikely to push that front.

Another challenge with the CSSD standards is one of geography: these standards (so far) only apply to the Appalachian area and the Marcellus shale gas region.  Whether they’ll be accepted by drillers in Wyoming and western states remains an open question, though it should be noted that Chevron and Shell both drill in those areas as well.  This geographic limit is likely driven by the number and location of environmental partners in the CSSD, but it gives the impression of more political posturing.

Still, the fact that drillers and environmentalists came together to put together some standards that appear to help reduce the impact of fracking is huge.  So, the billion dollar question is: will voluntary CSSD standards be enough to quell the fracking concerns and stave off additional legislative regulations?  Don’t bet on it.  The Sierra Club has already blasted the voluntary nature of the standards, and the Environmental Defense Fund has come out saying that these should complement, not replace, regulations.  Ultimately the success of these new standards will rest in the court of public opinion, and the public, right now, shows little inclination to limit the natural gas bonanza.

According to a New York Times report, Japan has successfully mined natural gas from the sea.  While this sounds like major news, the feat is neither all that new nor all that significant.

The availability of methane hydrates as a hydrocarbon resource has been known for centuries, and several other Japanese and Canadian experiments have successfully brought up methane from hydrate beds.  An enormous amount of methane lies beneath the floors of the world’s oceans.  The Japanese research project is a small step towards the economical and safe exploitation of methane hydrates; but a number of advances still remain to be achieved:

1).  Environmental containment: Methane hydrates are essentially ice crystals with a few molecules of methane trapped inside.  But the crystals aren’t blocks of ice like the cubes in your freezer.  They are fragile, lattice-like frames.  Any disturbance to a methane hydrate bed can lead to a cascade of collapsing crystals, followed by one gigantic belch of methane gas from the seabed.

This is bad for two reasons.  The gas you want to mine escapes, and that bubble of valuable hydrocarbons now enters the atmosphere, where it traps heat at nearly twenty times the rate of carbon dioxide.  Some even speculate that methane burps from the seabed caused prehistoric global warming incidents.

How do you stick a drill-pipe into sediment that has the consistency of cobwebs, without disturbing it?  There’s probably an answer out there waiting to be discovered — but nobody knows how to do it today.  And there’s no sign that the Japanese project has succeeded in doing so.

2).  Economics: Most methane hydrate deposits exist underneath dozens or hundreds of feet of mud and gravel.  Where the mud stops and the methane starts is a very blurry line.  Thus the fluid that’s brought to the surface will include an enormous amount of extraneous material.  That problem can be solved relatively easily, but not cheaply.

Separating the methane from everything else will be an enormously expensive task that far exceeds the separation requirements of other “tight” natural gas resources (such as coal-seam methane and shale gas).  There’s no simple way around that cost, which means the extraction costs of seabed methane will always be higher than any other gas deposits.  At the current natural gas prices of $3.64 per million metric BTU, there’s no economic rationale for investing in methane hydrate projects.

3).  Infrastructure: There is no industrial infrastructure currently built to mine, process and deliver methane from seabed deposits.  Unlike traditional underground formations that are highly concentrated, seabed methane beds spread over vast areas.

To eventually extract that methane will probably require specialized floating infrastructure that can follow the resource.  The creation of an entirely new infrastructure to gather the hydrates and turn them into usable fuel, will require tens of billions of dollars worth of all-new, untested equipment.

While some of the breathless reports about the Japanese “discovery” claim that a brand new fossil fuel resource has been stumbled upon, the facts are a little less sensational.

A new report commissioned by clean-energy VC firm Claremont Creek Ventures gives a hopeful version of the future of energy in the United States.  The U.S. can achieve full energy independence by 2025, the report (carried out by graduate students at the University of Michigan’s Erb Institute for Global Sustainable Enterprise) claims.

“With the right mix of technology, smart policy, and the collective intelligence of talented people – the same principles that got the United States to the moon in the 1960s – we can secure our energy future,” said Nat Goldhaber, managing director of Claremont Creek Ventures.

Getting to the moon was probably cheaper.  As shown in the chart below, this blessed state would be achieved mostly by replacing crude oil imports with natural gas, Canadian supplies of “tight” oil (i.e., shale oil), and the replacement of 10% of the internal combustion engine vehicles on the road today with electric vehicles.

(Source: Claremont Creek Ventures)

That last projection is most unlikely, according to the latest Pike Research report on Plug-in Electric Vehicles.  By 2020, we forecast, sales of all electric vehicles, including hybrids, plug-in hybrids, and battery electric vehicles, will be just over 400,000, or 2% of total light duty vehicle sales.  It will likely take another decade or more for EVs to reach 10% penetration.

As for replacing nearly 5 quads (a “quad” is a unit of energy equal to a quadrillion BTU) worth of crude products with Canadian shale oil, that brushes aside a barrel full of questions around politics and sustainability.  The real question here, though is: Do we really want to be energy independent?

Typically the term “energy independence” is used to mean “totally self-reliant for all domestic consumption of energy; free of imports.”  In both economic and sustainability terms, that is not the ideal state.  What America needs is not energy independence but energy diversity and security.

In purely economic terms, islanding ourselves from the global energy markets would mean we would almost certainly pay more for energy – the price of natural gas is artificially low in this country right now not only because we have abundant new domestic supplies of shale gas, but also because of the price difference between natural gas from fields in Gulf Coast and Rocky Mountain states, and gas from Europe.  Unlike the market for crude oil, the natural gas market is not fully globalized yet, mostly because of the difficulty and expense of compressing or liquefying NG for transport.  This state of affairs is temporary, and that’s a good thing: rational, transparent market structures benefit everyone in the long term, and being the low-cost source of energy is not a recipe for long-term prosperity.  As for crude oil, the price – in political capital, in dollars, in environmental sustainability, and in the opportunity cost of not developing alternative resources – of importing oil from low-cost overseas producers is likely to remain lower than the true price of extracting dirty shale oil and shipping it by pipeline south to Oklahoma and the Gulf Coast.

When people say “energy independence,” what they often mean is “stopping imports from the Persian Gulf.”  It’s important to remember that, as the graph below shows, imports from Saudi Arabia, at about 1.2 million barrels a day (mbbl/d), accounted for less than 14% of U.S. crude oil imports in 2011.  The other top five importers to the United States are Canada (at 2.2 mbbl/d, by far our largest source of crude), Mexico, Venezuela, and Nigeria.

(Source: EIA)

There are reasons of morality, economics, and statecraft to reduce imports from all of those countries, with the possible exception of Canada.  But, speaking plainly, we will pay a financial price for doing so.  And so far, neither politicians nor the American public have shown a willingness to pay that price.

“Even though it may feel good to say that we’re on track to be a net exporter of energy, it has not had the benefits we were promised,” wrote Andrew Holland, a senior fellow at the nonpartisan American Security Project, earlier this year on the release of the Project’s annual white paper, “America’s Energy Choices.” “Our consumers are still stuck paying the global price for oil – set by the whims of speculators and the most recent threat of war in Iran. Our energy supply is still insecure, economically unstable, and environmentallyunsustainable.”

All of those qualities – security, economic stability, and sustainability – are way more important than mere “energy independence.”