Technology — and Policy — Transforming American Energy Outlook

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wrightbloomberg

It’s no secret that the American energy picture is undergoing a transformation. The advent of multi-stage hydraulic fracturing combined with horizontal drilling has enabled independent producers to reach deeper, wider, and into once impenetrable shale rock, unleashing millions upon millions of barrels of new oil and natural gas supplies. This technology has allowed producers to tap into new plays such as the Marcellus in Pennsylvania and the Bakken in North Dakota.

IPAA’s oil education campaign, the Declaration of Independents, has been profiling the most prominent shale plays in the U.S. Most recently, they gave the history and the current outlook of the Permian Basin in West Texas. This is a region that encompasses plays upon plays, or “stacked plays” such as the Bonespring, Cline, Spraberry, Wolfcamp, and the combination plays nicknamed the “Wolfberry” and the “Wolfbone.”

What’s most notable about this play is its rich history. The first commercial well in the Permian was drilled in 1921. As the analysis noted, “This [first] discovery set off further drilling activity, with several notable finds, including Yates Field (1926), which is still producing today, and is still one of the top 50 fields for proved oil reserves in the United States. A number of major fields discovered in the 1930s, such as Wasson, Slaughter, and Seminole are still producing today, and are still ranked by the Energy Information Administration among the top 20 in the U.S. for remaining proved reserves.” 

Permian map 5-1-13

The Permian truly exemplifies the renewed life cycles that new technology and new generations of industry minds have given to these historic plays. As the profile concludes, the Permian Basin “is a story about combining the various talents of independents, majors, and service companies in using advancing technologies to sustain the lifespan of existing fields, to tap into zones that were previously uneconomic or inaccessible, and to increase the Permian’s proven reserves in a remarkable fashion.”

Check out these recent news articles that exemplify the state of shale in the United States.

  • Associated Press: Oil Drilling Technology Leaps, Clean Energy Lags. Technology created an energy revolution over the past decade — just not the one we expected…Oil companies big and small have used technology to find a bounty of oil and natural gas so large that worries about running out have melted away. New imaging technologies let drillers find oil and gas trapped miles underground and undersea. Oil rigs “walk” from one drill site to the next. And engineers in Houston use remote-controlled equipment to drill for gas in Pennsylvania.
  • Bloomberg News: Oil Shockwaves From U.S. Shale Boom Seen by IEA Ousting OPEC. The International Energy Agency (IEA) reported this week that North America will provide 40 percent of new supplies to 2018 through the development of light, tight oil and oil sands, while the contribution from the Organization of Petroleum Exporting Countries (OPEC) will slip to 30 percent.
  • CNBC: US Oil Production Nearly Even With Imports. The amount of oil produced in the U.S., now at a 21 year high, is nearly even with the amount being imported, and the gap is narrowing. The Energy Information Administration said Wednesday in its Short-Term Outlook that U.S. oil production averaged 7.1 million barrels per day in the first quarter, and that should rise to 8.5 million barrels per day by the fourth quarter of 2014.

The U.S. is in a critical position. Policymakers have a choice – either encourage this amazing rebirth of homegrown energy that the industry is safely developing or choose to turn away from this hopeful energy picture. Two critical issues are facing the Obama administration this month: the future of natural gas exports and hydraulic fracturing regulation on federal lands.

President Obama has said that he must make a decision soon (and we agree) on the future of LNG exports. Radical environmentalists urge to ban natural gas exports because it will increase the use of hydraulic fracturing. It’s no coincidence they are targeting the very technology that has spurred this shale revolution and expanded development of fossil fuels across the nation. Putting an artificial ban on the market of natural gas would hurt not do any favors to the American people, because it would restrict expanded development of natural gas. It would especially hurt independent producers, who seek a larger market for America’s natural gas supplies. Additionally the Department of Energy has stated in a report released in December that exporting natural gas to U.S. allies would be a net economic positive for the United States. It’s thought that the White House will adhere to DOE and approve at least some LNG export facilities in the coming weeks.

Additionally, the Department of Interior is set to release the Bureau of Land Management’s hydraulic fracturing and well construction rules for federal lands. IPAA came out strongly against the first version of the rule, originally released last May, which would cause unnecessary confusion for independent producers who are already struggling to operate on federal lands. The rule is expected to take into account some of industry’s concerns, but IPAA holds that any federal rule to regulate hydraulic fracturing, when the states are already successfully doing so, is burdensome and duplicative. Different plays in different states have varying geology and environmental issues – putting a one-size-fits-all blanket rule on top of the existing state regulatory regimes makes no sense, will only cause more bureaucracy and confusion, and will certainly further drive producers from federal lands. That rule is set to drop this week (possibly today).

Natural Gas the Talk of the Town

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 Today, Ernest Moniz appeared before the Senate Energy & Natural Resources Committee hearing in order for Senators to ask him questions before they vote on a confirmation. Barring any last minute shocks, Moniz will be the next Secretary of Energy in the Obama administration’s second term.

When questioned about liquefied natural gas (LNG) exports, Moniz neither confirmed nor denied the administration’s plan to export natural gas. He did vow to “make a transparent, analytical evaluation application by application” and include a public interest criterion for each application. In response to Sen. Wyden’s criticism of DOE’s LNG study released in December, Moniz responded with a general, hearing-appropriate comment: “We certainly want to make sure that we’re using data that’s relevant to the decision at hand.” It’s thought by most in Washington that DOE will go ahead and approve at least a certain amount of natural gas export permits, but time will tell for sure. Check out IPAA’s comments on this issue.

Hopefully, the administration will indeed approve these permits, because we have more great natural gas news released today. According to the nonprofit advisory group, the Potential Gas Committee, shale fields increased the amount of U.S. natural gas that can be recovered under current technology to its highest level ever in 2012. The new assessment finds that the United States possesses a technically recoverable natural gas resource potential of 2,384 trillion cubic feet (Tcf). This is the highest resource evaluation in the PGC’s 48 year history and more than a 25 percent jump, thanks to shale gas resources in the Atlantic, Rocky Mountain West, and Gulf Coast regions. Clearly, the U.S. is awash in natural gas, and we should develop it, use it, and export it to friendly countries as the market dictates.  

Moniz also touted the benefits of hydraulic fracturing in developing natural gas and oil from shale. He also noted that “very important to have public confidence in environmental stewardship as we produce this resource.” The industry couldn’t agree more. That’s why IPAA and Energy in Depth have spent so much time educating not only lawmakers, but the American public on the process of hydraulic fracturing.

Of course, despite the broad bipartisan support, there those typical naysayers who are accusing Moniz as being “in the industry’s pocket” because he actually believes that oil and natural gas have a place in an “all of the above” energy strategy. Imagine that. More than 100 progressive and anti-fracking groups urged Senate Energy and Natural Resources Committee members to vote against Ernest Moniz’s nomination. Not least among these are the group, Americans Against Fracking, members of 350.org, the Progressive Democrats of America and Democracy for America.

Although the Department of Energy is not involved in the regulation of hydraulic fracturing, it is encouraging to hear that a possible future Secretary of Energy understands the complexities present at the state level. Citing geologic differences, Moniz noted that “the physical realities call for states to be heavily engaged” in regulating hydraulic fracturing. It will be interesting to see how much its neighboring agency – the Department of Interior – understands the differing geologies in the diverse shale plays across the country. The Bureau of Land Management is set to release its hydraulic fracturing rule on federal lands rule that it has revised in response to the comment period.

IPAA has filed comments explaining how a federal standard placed on top of existing state regulations would create great confusion and massive new red tape for an industry that is already struggling on federal lands. A federal rule administered from Washington would be especially burdensome for independent producers, who employ 12 people on average. They don’t have the cash flow to hire a team of lawyers and regulatory specialists to dissect and navigate the red tape that such a rule would create. But, we’ll keep you posted on how Interior releases this rule.

 

Shale Bringing Joyful Tidings

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This tool in oil and natural gas extraction, known as “Christmas tree” for its resemblance, comes with a major present: New jobs

 

It’s the holiday season which means a lot of things. Holiday parties, holiday shopping, holiday food. All of this involves a great deal of money, which is why this time of year can be just as stressful as it is festive. The added financial pressure of the holidays is especially rough for those folks who are out of work – struggling to put food on the table and give their kids the best Christmas possible.

The good news is that many are finding well-paying work that enables them to provide for their family in the oil and natural gas industry. Because of the shale boom that is sweeping the United States, jobs are being created from Pennsylvania to California, from Louisiana up to Michigan.

Yesterday, the U.S. Chamber of Commerce’s Institute for 21st Century Energy released a new study, done by IHS Cera, that detailed the economic benefits of shale development by state. And these benefits are enormous.

You wouldn’t think that snowy Michigan would be counted among the major energy producing states. But shale development, which hinges on the critical hydraulic fracturing process, accounted for 38,000 direct or spinoff jobs in Michigan in 2012 and is set to create 79,000 jobs and contribute more than $8 billion to the economy.

In Ohio, whose economy has struggled for decades with the departure of manufacturing companies, is experiencing oil and natural gas development due to the Utica shale play. The abundance of affordable natural gas is causing a huge comeback in manufacturing. Towns like Youngstown which has been stagnant for decades is breathing new life again. About 39,000 jobs in Ohio are linked to oil and natural gas production. This good news is just the beginning — that number is projected to triple by the end of the decade!

Now, Texas has had a long and rich history in energy development. In popular culture, cowboy hats and boots pretty much go hand in hand with the idea of oil companies. But the shale plays are energizing the state in a way that is unprecedented. The Barnett and Haynesville shale plays are a flurry of industry activity. Jobs are being created by the thousands as people rush to take advantage of golden opportunities.

But nothing beats the massive Eagle Ford shale that spans the southwestern region of Texas. This week’s Declaration of Independents did a major profile of the Eagle Ford play, which could now be more prolific than the outstanding Bakken in North Dakota that is revolutionizing that snowy state. It detailed the history of the play, the technologies being utilized there, and the targeting trends of natural gas and, increasingly, oil.

IPAA economists also highlighted the economic contributions of the Eagle Ford in the analysis, whose job creation matches those of entire states.

“Direct employment has been boosted by increased demand for workers to drill and complete wells, to provide the geophysical and engineering analysis to guide projects, and to build pipelines and processing facilities. This in turn, has increased diverse jobs for workers who provide housing, transportation, and consumer goods and services of all kinds for the larger regional workforce. This also means a workforce with rising wages with more money to re-inject into the local economy. According to analysis by the Dallas Federal Reserve Bank, the average weekly pay in the entire region rose 14.6 percent annually from the first quarter of 2010 to the third quarter of 2011, more than double the 6.3 percent rate for the U.S. as a whole. According to a study by the Institute for Economic Development at the University of Texas at San Antonio (UTSA), Eagle Ford activity supported 38,000 jobs in 2011. That figure was forecast to grow to over 82,000 jobs by 2021. In that year, it is estimated that the boost in economic activity will add more than $1.5 billion to state revenues and $888 million to local government revenues.”

And as the IHS study detailed, Texas accounts for almost half the nearly 1.3 million industry jobs associated with shale oil and natural gas production. Some 576,000 Texans were in jobs connected to shale oil and gas in 2012. By the end of the decade, the analysis projected that 930,000 people in Texas will have oil and natural gas industry jobs. Seriously, everything is bigger in Texas.

It’s not an exaggeration to say that the oil and natural gas industry, because of the amazing well-paying jobs it is creating, is giving hope to hundreds of thousands of people across the nation. These jobs give dignity to those employed, as the jobs empower them to provide for their families and give them a kind of security that is especially felt around the holiday season.

Click here to read the full Declaration of Independents article: The Eagle Ford – Texas Shale Star

Click here to read the Chamber’s IHS Cera study: The Unconventional Oil and Gas Revolution and the U.S. Economy

Thanksgiving for American Energy Renaissance

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With Thanksgiving tomorrow, it’s important to reflect upon – and be thankful for – the incredible American oil and natural gas renaissance.

The cornucopia is a symbol of abundance.

1. The U.S. is energy abundant.

The United States is one of the most resource-rich countries in the world. This is an incredible blessing and we are lucky to be accustomed to the lifestyle that energy abundance gives us. Overall, we have relatively low-cost energy for consumers in this country. Even gasoline, which does become a burden to families paying the bills, is much lower than it is in other countries. Just look at Europe. The shale revolution of recent years have further increased our access to our rich resources, with the advanced technologies of hydraulic fracturing and horizontal drilling unlocking vast reserves of oil and natural gas. As Ken Hersh, CEO of NGP Energy Capital Management said, the shale oil and gas boom will be “the redefining global phenomenon, from a finite world to a surplus world.” Each year, production levels in North Dakota, Ohio, and Pennsylvania shale plays are topping themselves and setting new records.

2. Our industry is creating jobs and strengthening the economy.

In a struggling economy, the oil and natural gas sector is providing much-needed, well-paying jobs to people across the United States. These are well-paying jobs. On average a worker in the oil and gas industry makes more than $35 per hour. The average wages in the general economy are about $23 per hour. Petroleum engineers make over $100,000 on average starting out. Oil and natural gas development also supplies amazing blue-collar jobs. Roughnecks, roustabouts, and land men do not need advanced education. These jobs pulls people out of poverty, gives hope to families, and strengthen the middle class. It’s also bringing manufacturing back to America’s shores. America’s oil and natural gas sector is also bringing enormous amounts of revenue into state, local, and federal treasuries.

3. America’s energy security is strengthened every day.

The United States is becoming the global leader in energy production. The Paris-based International Energy Agency reported last week that the U.S. will be the number one producer of oil by 2020 and the number one producer of natural gas by 2016. This would put us ahead of Saudi Arabia as the world’s top producer of oil. IHS Vice Chairman Dan Yergin, renowned energy historian, recently said “The growth of unconventional oil and gas production is creating a new energy reality for the United States.”  Our increased self-sufficiency will insulate us from shocks abroad and protect us from relying on foreign countries for our oil. After all, oil imports are down from 57% in 2008 to just 45% today. Within a decade, the IEA forecasts that U.S. oil imports will drop by more than half to just four million barrels a day, from 10 million barrels a day currently.

America’s energy boom, made possible by the oil and natural gas industry and the great men and women who are employed by our companies, is surely something to be thankful for.  

Independents Go Across the Sea

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Why do American oil and natural gas producers explore abroad?

While most of America’s independent producers only operate domestically, there are many, larger companies who operate in fields around the world. And it’s an increasing trend, too. As part of its mission to examine the “opportunity between independents and international exploration and production ventures,” the IPAA International Committee sent out a survey to our member companies asking these very questions.

Essentially, IPAA found that international activity for independent producers is indeed growing, but at a fraction compared with the ramped up activity at home in the states. In the 2005 survey, out of the 224 respondents, 21 percent were involved in international ventures. In the 2010 survey, out of 63 respondents, almost 24 percent were active internationally. This, of course, is limited to IPAA membership and the companies who participated in the survey. But nonetheless, it gives a good insight into the challenges and opportunities that come with operating overseas.

Operating abroad is challenging, yet can be very rewarding for independent producers. If they have the means and capability to do so, more independents are choosing to explore and produce overseas.

Here are some of the factors involved in the decision:

  • Competitive advantage. The ability of independents to project their home-grown technological success in the shales and unconventionals will give them (and the service companies) a seat at the table, especially considering their ability to take on smaller reserve-size targets than those typically targeted by the integrated companies.
  • Global Consumption Trends for Oil and Natural Gas. The price of natural gas abroad is much more economical than the price at home. Producers are often able to access a much stronger market based on comparative prices overseas for natural gas.
  • Enhanced Oil Recovery (EOR) Technology. The independent producers’ successes in horizontal drilling and hydraulic fracturing have created opportunities in overseas markets that have not fully modernized their E&P technological applications.
  • Offshore. Independents are increasingly active in developing international offshore areas. The time, scale and cost of these projects will generally limit involvement to the larger independents, but it remains a key opportunity going forward because the international onshore is more mature and restricted by way of access.
  • Shale Gas, Coalbed Methane, & Tight Oil. The international potential of shale is considerable, but these projects take time, infrastructure and have many above ground challenges to overcome. Based on EIA data, less than five percent of all shale gas is produced outside the United States, but as the map on the next page illustrates, the potential in this area is enormous based on analogous geographic formations occurring in various regions around the world.
  • Infrastructure. The lack of supporting infrastructure can easily double or triple the cost of a well compared to a similar type well drilled in the U.S. Many independents lack the capital to develop large scale infrastructure in new areas so they must wait until pipelinesand processing facilities have been built.

I encourage you to read the survey. It gives a fantastic overview of the dynamics, both above ground and below ground, that influence companies’ decisions. It also highlights what countries producers are drawn to. Check out the original 2008 survey here. For more information on IPAA’s International Committee, go to IPAA’s webpage.

Once “Peak,” Now Plentiful

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For years, many people predicted the “end of oil,” a doomsday scenario that hypothesized that the world was running out of oil, that we exhausted the energy underneath our feet. This is known as “Peak Oil Theory” and it was dubbed as almost undisputable in many circles. As the WSJ reported, this last scare was the fifth time in modern history that there has been widespread fear about the world running out of oil.

In the past few years, however, America’s independent producers, known as “wildcatters” reversed what many thought was the industry’s irreversible march into obscurity. Independent producers and service companies together made breakthrough advancements in technology which enabled them to access energy that people knew about, but thought was forever technologically and economically out of reach. Combining the technologies of horizontal drilling and hydraulic fracturing, independent producers were able to tap this energy that was impenetrable for decades – oil and natural gas reserves trapped in shale. Now, people’s fears have been assuaged. In fact, the truth lies in the opposite of peak oil theory. As reknowned energy expert Daniel Yergin coined it, “There Will Be Oil.”

The oil and natural gas industry has truly been resurrected. Majors followed the lead of independents and started coming home to the United States to develop the abundant new source of reserves they found in their own backyard. Plays that were once “played out” became hot spots for development, bringing the jobs and economic growth with them. Thirty years ago, people were leaving West Texas in droves because they thought the oil boom there was finished. Now, it’s booming again. Median family incomes in Permian Basin have increased by more than one-third there’s even a labor shortage. Just at the technology we have today, the Permian Basin will still be developed by the industry in 50 years!

Also, new plays were being discovered. Take the Bakken in North Dakota. It is estimated to hold 4.3 billion barrels of oil – the largest oil find in U.S. history. Towns are booming– and the state now has the lowest unemployment rate in the country. It truly is reminiscent of the gold rush of yesteryear. Not only is this great growth not diminishing, it’s getting bigger.

The jobs and economic benefits that have resulted from this energy renaissance are absolutely amazing. The oil and natural gas sector is truly a bright spot in our nation’s struggling economy. To see the way the industry is hiring like crazy, you’d think we were in a time of blissful economic growth, not a limping recession. And the benefits extend well beyond the industry. The manufacturing sector, petrochemical industry, land owners, restaurants, hotels….you name it. They are all benefiting tremendously from increased demand for their products and abundant energy that make their operations more affordable in the United States.

On the energy security side, there are amazing effects. In fact, the U.S. is slated to be the top oil producer in the world by 2017, and has clearly dramatic implications for our leadership roles on the global energy stage. This week’s Declaration of Independents outlined the dramatic implications for America’s leadership role on the global energy stage. The “real prospect to become less sensitive to external supply volatility” will undoubtedly ”create new abilities for the U.S. to deal with less predictable geopolitical elements ranging from tensions in the Middle East to resource nationalism in Latin America.”

Even the taboo phrase politics: “energy independence” is passing the lips of some of the most formerly skeptical energy experts. With the right policies, North American energy independence at least is within our generation’s grasp. That’s not a bad place for oil — or the United States — to be.

Energy Heats Up the 2012 G8 Summit

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At the 2012 Group of Eight (G8) Summit held this week in Camp David, energy held a prominent place on the world leaders’ agenda.

IPAA educated on the role of shale as a “global game changer” in G8: Camp David 2012, the official publication of the G8 Research Group that was distributed to heads of state, CEOs, financial institutions, and government representatives at the summit. IPAA highlighted how natural gas is a low-cost, abundant fuel that is pivotal for countries’ energy portfolios in the decades ahead. IPAA also demonstrated how the industry’s safe, game-changing completion process of hydraulic fracturing is playing an unparalleled role in creating jobs, enhancing energy security, and boosting economies of nations around the world.

“Despite speculation and propaganda, hydraulic fracturing is a proven-safe technology. In fact, out of the 1.2 million wells that have been fractured in the U.S., not a single case of groundwater contamination has ever been proven as a result of hydraulic fracturing. A study from the Energy Institute at the University of Texas at Austin reaffirmed this fact in February 2012. The study found “no evidence” of hydraulic fracturing ever leading to groundwater contamination.

“Like any other industrial process, industry is aware of the need for continual advancement to ensure the safety of the environment in communities where development is taking place.  From preliminary testing of the area via seismic data to restoration of the completed well site, industry places safety and the environment as a top priority in development.  Industry has stepped up to voluntary disclose chemicals used in over 11,410 wells across the United States. Safety, efficiency, water conservation, wellbore integrity, and environmental protection are key chapters in development.”

The feature also highlighted shale plays around the world – from European Union to China to South America. The proven benefits of development to the United States’ economy and job creation were also demonstrated.

IPAA concluded by discussing how natural gas from shale is an area which leaders from the different countries can and should work together to promote.

“The development of natural gas from shale presents an opportunity for global leaders to work together and provide our growing world with the energy it needs to expand, advance, and progress. From the Lower Saxony in Germany, to the Eagle Ford in Texas, across to the Cooper Basin in Australia, shale plays around the globe are redefining our world’s energy potential and providing countless economic benefits for local, federal, and global economies.”

This was a great opportunity for IPAA to advocate the amazing benefits of developing oil and natural gas from shale to an international audience. Please click here to see the full feature, which was circulated to more than 12,000 international policymakers. At the summit, the leaders released a 40-point declaration, in which the G8 leaders voiced their commitment to sharing best practices for energy production, particularly related to the technologies of hydraulic fracturing and deep water drilling.

Another energy issue brought up did not have a consensus as common-sense – tapping the strategic petroleum reserve. Last year, amid rising gasoline prices, President Obama used the Libyan crisis to justify tapping the Strategic Petroleum Reserve. IPAA responded that the administration’s action was “not a solution, yet another decision that will only prolong the nation’s vulnerability to swings in oil prices. Drilling for more oil at home will not only increase American oil supply, but will also create jobs and increase government revenues through taxes and royalties. Releasing oil from our strategic reserves cannot accomplish these other important goals.”

Now, with President Obama’s likely support, that option is on the table once again – this time in an election year for the president. In response to the volatility of world oil markets, G8 leaders agreed to “stand ready to call upon the International Energy Agency” to release oil from the Strategic Petroleum Reserve. Again, IPAA has long argued that tapping the Strategic Petroleum Reserve is a political play rather than a practical response to world supply disruptions. Instead of this knee-jerk reaction, the U.S. should spearhead a national energy policy that encourages production of American oil reserves by increasing access to federal lands and eliminating regulations that serve only as unnecessary red-tape.

For more information on energy at the G8 summit, read the White House’s fact sheet on G-8 Action on Energy and Climate Change.

North Dakota and Texas: Oil’s MVPs

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This week’s Declaration of Independents analyzed America’s rebirth of crude oil production – they kicked it off with this amazing fact:

“U.S. crude oil production, after sinking to levels not seen since the mid-1940s, rose more than half a million barrels per day just between 2007 and 2011. That size of increase has not been witnessed in the U.S. for more than forty years.”

Why is this “revival” occurring and why now? The fact is there has been an absolute revolution in oil and natural gas development technology. With new developments that combined horizontal drilling (used for about 30 years by the industry) and hydraulic fracturing (used for more than 60 years) America’s independent producers were able to break through thick shale rock that was previously impermeable to access oil (and natural gas) trapped in shale.

America’s two “All-Star States” of North Dakota and Texas, with their now famous (at least in the energy world) plays of Bakken and Three Forks in North Dakota and Permian Basin and Eagle Ford in Texas are pulling the weight in this increased production. These rich shale plays are the sweet spots from which America’s oil and natural gas companies are creating this reversal in U.S. liquids production.  

North Dakota, for its part, has increased its production by an outstanding 240 percent in the past four years alone! The state is experiencing an economic and jobs revival never experienced in the state’s history. Texas, which was experiencing a steady decline in production beginning the 1970s, has completely turned around, as evidenced by graph.

Also, IPAA’s economists noted:

“Even since we published our first article less than a year ago on the reversal in U.S. liquids production through 2010, we’ve had to add another 300,000 barrels per day to American liquid production figures just to bring things up to date with the 2011 annual data. So far in early 2012, the trend, if anything, has accelerated — U.S. liquids production in January and February has already been beating the 2011 average by an additional 660,000 barrels per day.”

Clearly this story is only getting better because America’s oil and natural gas resources “are not a static figure, but can evolve dramatically when technological advances and human ingenuity come into play.”

This is fantastic for the American economy. Increased barrels of oil mean increased jobs for Americans. According to the Bureau of Labor Statistics, the number of Americans now employed in oil and gas development and support activities has grown by more than 100,000 in five years – from 344,000 jobs in mid-2007 to 454,100 in March 2012.

Not only is this fantastic for America’s economy, it’s encouraging for America’s energy security. In fact, U.S. import dependence dropped from 50.4 percent in January 2010 to under 40 percent in February 2012. That’s a 10 percent drop in just two years.

The breakdown of numbers in this reversal is truly extraordinary. I encourage you to read the full analysis.

Great News for Louisiana

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Did you hear? Louisiana has some big news—news that is far bigger than LSU’s victory over Alabama this weekend. Okay, well maybe not far bigger for hardcore Tiger fans. In fact, LSU is featured in the good news.

Last week, former Louisiana State economics professor Loren Scott released a study which demonstrated how critical the oil and gas industry is to Louisiana’s economy. Every single parish in Louisiana has workers employed by the industry. Including production offshore from the Outer Continental Shelf, the state of Louisiana ranks #1 in oil production and #3 in gas production. Scott’s study showed that “the three sections of the oil and gas industry provided 310,217 jobs, generated more than $16.1 billion in household earnings and supported $77.3 billion in sales by Louisiana firms in 2009.”

However, Scott cautioned that these economic gains are not without serious risks from Washington. Specifically, the Obama administration threatens this growth by attacking the industry in its plan for jobs. Scott warned that this “very mobile industry…can go away” if penalized through tax hikes and burdensome regulations.

Today, Mark Kaiser and Yunke Yu—also hailing from LSU—published a detailed article in Oil and Gas Journal which discussed the impact of the Haynesville Shale on Louisiana natural gas production:

“Conventional oil and gas production in Louisiana has been in steady decline for 4 decades, but in recent years, new technology and innovation has opened up a new resource play in the Haynesville shale that is expected to play an important role in the state for many years. In the past 5 years, shale gas has reversed Louisiana’s gas production decline and promises significant growth potential in the future.”

Kaiser notes that the Haynesville shale play, discovered in the past decade, has estimated technically recoverable reserves of 73 to 289 TCF, making the region one of the largest shale plays in the US. This new technology is a combination of hydraulic fracturing and horizontal drilling – technologies that have been around for decades but utilized now in a new way.

The combined technologies of hydraulic fracturing and horizontal drilling are the key to this access – and are also under attack by environmental groups. Unleashing these technologies is key to protecting and increasing the economic gains from oil and natural gas in Louisiana.

The Technology Behind the Frack

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Yesterday, the bipartisan Marcellus Shale Caucus held a hearing on the Hill which delved into the technology behind shale gas development. The two presenters represented the technical side of the industry: Dr. Peter Duncan, founder of MicroSeismic, Inc., and Rich Downey, Completions Manager of EOG Resources, a US independent producer.

Producers usually use the technology of microseismic monitoring on the first few wells on a given field in order to fully understand the structure and complexities of the shale rock. The purpose of microseismic monitoring is to give the engineers and geophysicists the exact location of where the fracture or a “fracjob” took in the shale rock. Dr. Duncan described the way microseismic monitoring works as a “stethoscope on the face of the earth.”

Essentially, the geophones, which are typically drilled vertically into the ground, pick up on the waves from the “pops” or breaks from the fractured shale, which release the same amount of energy as a person dropping a can of soda to the floor. Contrary to what enviros would have you fear, this is not the kind of energy that would conceivably cause an earthquake. Targeting these waves reveals exactly where the frack took place (See above picture).

As Rich Downey of EOG explained, companies use microseismic monitoring because the health of a well depends upon containing the fractures within the “zone of interest.”

Let me spell this out. There is no natural permeability in shale. Permeability (whether natural or man-made) is necessary for the extraction of oil and natural gas. Hydraulic fracturing, by blasting water, sand, and a small amount of chemicals into the rock, creates permeability in the rock.

Pressure is absolutely necessary. If the fractures creep even 50-100 feet outside of the zone of interest into a fault line or other point of weakness, which is less compact than the tight shale, the pressure will be lost and thus the chance for permeability and gas extraction will be lost. If the microseismic monitoring reveals the impacts of the fractures are outside of the zone of interest, the company would immediately shut down the fracjob. In other words, the well will be rendered useless.

When drilling opponents say that hydraulic fracturing causes groundwater contamination, it is clear they misunderstand — or misrepresent — the technology which proves otherwise. The horizontal drilling and hydraulic fracturing typically occurs 7000 feet below any viable groundwater. The frack occurs within 100 feet in the shale rock. As Downey demonstrated, the well will be ruined if the fractures extend even 50 feet outside of the zone of interest – let alone 7000 feet – the length of four and a half Empire State Buildings—above to the groundwater. Not to mention, the groundwater is additionally protected with cement casing.

The oil and gas industry has historically been reluctant to delve into the complicated technical prodcedures and explain them to the public. Clearly, it’s difficult. However, thankfully, the industry now recognizes their responsibility to educate the public on the safe practices of hydraulic fracturing and horizontal drilling. This Marcellus Shale Caucus briefing is a perfect example of the kind of education the industry should continue to focus on. After hearing these presentations, it’s impossible not to be floored by cutting-edge technology of the oil and natural gas industry. It truly reenforces the safety of the process. (After all, it’s in the industry’s interest for it to be safe and for their wells to be functioning.)It’s also hard not to question if the environmentalists have taken a second to learn about the technology behind shale gas development…or if they even want the public’s fears to be dispelled.

Too much is at stake for the country in terms of economic growth, energy security, and American jobs for the industry not to educate the public on this technology. The industry must get past the talking points and delve into the difficult geophysics and technology behind shale gas development in order to truly dispel the public’s fears. After all, if the oil and gas industry is successful — as Bloomberg noted today —”Shale Gas Reserves Could Reignite the U.S. Economy.”