Technology — and Policy — Transforming American Energy Outlook

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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

Regulatory Actions are a Dime a Dozen

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There are three major regulatory actions by the Obama administration that should be developing in the coming weeks.

President Obama visiting TransCanada Stillwater Pipe Yard in Cushing, Oklahoma

1. Keystone XL. The Obama administration made the infamous decision last January to reject TransCanada’s application to build the Keystone XL pipeline. The pipeline would start in Canada’s Alberta Oil Sands and go down to the refineries in Texas. This pipeline would create thousands of new blue-collar jobs, relieve the bottleneck from Bakken crude oil in Cushing, Oklahoma, and provide energy supply from our closest ally, Canada. To approve the pipeline should have been a no-brainer and the initial rejection revealed an anti-development bias in the Obama administration – which he got a lot of flak for. TransCanada has re-submitted its application with an alternative route, and the administration is set to make a decision in the coming weeks. This decision will give us an inkling of how anti-industry that administration’s second term may look like.

2. BLM Hydraulic Fracturing Rule. In May, the Obama administration released a proposed rule on hydraulic fracturing and well construction on federal lands. This sets a new precedent as the states historically handled the regulation of oil and natural gas development. This is due to the diverse geology and environmental issues that state regulators have better capacity to manage (both budget-wise and experience-wise). IPAA submitted comments expressing our concern about the federal scope of the rule that threatens to drive even more producers from federal land. More than 59,000 comments were submitted to the Bureau of Land Management on this proposed rule, from both sides of the issue. The administration will likely make a decision on BLM HF (as it’s been coined) before Christmas. Due to the controversy surrounding the implications of this broad rule, the rumors are right now that the administration will take into consideration the comment recommendations and propose a revised rule. We shall see what ends up happening (after all, rumors are only rumors) but this federal lands issue is of paramount importance for IPAA.

3. EPA Hydraulic Fracturing Study. The EPA has undergone a study of the impact of hydraulic fracturing on drinking water supplies. Industry has long had problems with this study. For one, it is retroactive in nature – which means it is looking at sites with history of hydraulic fracturing. It is hard to make causal assumptions when the study is putting together pieces of history. Second, the EPA’s methodologies in the past have been extremely flawed, undoubtedly political in nature and quest, and have contained serious faulty science. (Think Pavillion). The study was requested in 2010 and isn’t supposed to be released until 2014, but EPA plans to give a preliminary progress report by the week’s end. Also, at the end of the day, the EPA, Interior, and other top officials of the administration have said repeatedly that there has never been one case of groundwater contamination in the over 1 million wells that have been fracked since 1947. It looks like the EPA is trying to find a ghost that doesn’t exist yet won’t rest until it comes up with some sketchy, hastily-drawn conclusions. The report will give us some indication of the motives of EPA and will give us a preview about how political the full report will be.

Again, just this week, industry is dealing with three different federal agencies with three different high-profile examples of attempts to regulate oil and natural gas development. This is a good microcosm of the fact that in total, there are 14 different federal agencies trying to regulate the industry. These are just the high-profile regulatory cases that are on the top of IPAA’s agenda this week.

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.

Our Unexpected Partner in U.S. Shale Revolution

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We talk a lot about the economic ripple effects of oil and natural gas development. The auto industry has been booming as of late because oil companies need a whole lot of pickup trucks for their operations. Chemical companies have been demanding the abundant, cheap natural gas in America. Manufacturing is coming back to the United States. Restaurants in small towns are booming. You’d be hard pressed to find a state that hasn’t benefited from what’s been termed the “shale gale” in America.

However, an unexpected region has come into play.

There’s been a lot of buzz in the oil and natural gas world in recent weeks about a region called Rajasthan in northwest India. Why would industry folks in Texas, Louisiana, and Oklahoma have their attention on an area 8,500 miles away in a developing country? It’s because Rajasthan is home to a little bean, known as guar, is a vital component in the industry’s well stimulation operations. It is used in hydraulic fracturing fluids because its hard-rock makeup, which forms a tough gel when mixed to water, enables the shale to break apart.

Guar prospers in abundant sunshine, semi-arid environments, and also needs a lot of rain – which is exactly India’s climate. Thus, India produces 80 percent of the guar gum in the world. Historically, it’s been utilized most by the food, textile, and pharmaceutical industry. So before the environmentalists start to fret about guar in fracking fluids, it’s the same substance that companies use to make ice cream the texture we enjoy (far too often) in the summertime.

Here’s the detailed use of guar in hydralic fracturing from a Rockwater Energy Solutions report:

“Guar is a natural cold water soluble polymer, so it can be used as a thickener, stabilizer, viscofier, rheology control agent, bodying, clouding agent and for processing aid either alone or with other gums, hydrocolloids, starches etc. Guar has high dispersibility in both water and mineral oil to produce an excellent fracking slurry for Oil & Gas Industry.” – Apex Resources

Thus, due to the amazing scale of the shale revolution in America (and around the world) the demand for guar has skyrocketed. This means that the prices have shot up so well – which has made previous “dirt-poor farmers in India” quite prosperous indeed.  

The New York Times reported:

“The increase in guar prices is helping to transform this part of the state of Rajasthan in northwestern India, one of the world’s poorest places. Tractor sales are soaring, land prices are increasing and weddings have grown even more colorful.

‘Now we have enough food, and we have a house made of stone,’ Mr. Singh said proudly while his rail-thin children stared in awe.”

It’s also why many in the oil and natural gas industry closely monitoring the weather forecasts in Rajasthan, India. After all, a monsoon in the region (quite common in season) could effectively devastate a whole season of guar crops, causing the price of guar to skyrocket out of control. Especially, because, as of right now, there are no alternatives that companies can use for guar. When we talk about prices increasing for guar, we are talking about a huge increase – that obviously is a concern for service companies. In the past few years, prices for guar have shot up 250 percent! However, companies are trying to grow guar in Texas and Arizona, which may have adaptable climate and soil.

It’s one of those fascinating and incredible stories about globalization which demonstrates the far-flung economic benefits of oil and natural gas development – and the prosperity the industry is bringing to even the most unlikely parties around the world.

Look to Oil & Natural Gas Industry for Interior’s Contributions to Economy

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Yesterday, the Obama administration released a report on the Department of Interior’s contributions to the economy in 2011. According to the press release, the activities of Interior added $385 billion to the U.S. economy and supported more than 2 million jobs in 2011.

Those are indeed impressive numbers. But it’s a bold move to claim that the activities of Interior contributed these jobs and dollars. After all, what is the source of these jobs?

Energy. The report does acknowledge that “energy development and mining on Interior-managed lands and offshore areas supported about 1.5 million jobs and $275 billion in economic activity.” However – it’s not even just energy development as a whole. An overwhelming amount of those economic benefits stems from the work of America’s oil and natural gas companies.

Where is this federal lands job creation happening? Interior points to Texas, Wyoming, Louisiana, New Mexico, California, and Florida. No kidding! After all, almost all of these are HUGE oil and natural gas producing states. According to IPAA’s Oil & Gas Producing Industry in Your State (OPI), Texas, Wyoming, Louisiana, New Mexico, and California (all except Florida) rank in the top 10 producing states for either oil production, natural gas production – or both. So it’s no wonder that these states have sourced “most of these jobs.”

Western Energy Alliance, which represents Western independent oil and natural gas companies, crunched the numbers. They found that 62% of the total economic value and 56% of the total jobs that the Department of the Interior claims in its report actually comes from America’s oil and natural gas industry. That’s $238.5 billion in GDP and 1.3 million American jobs!

It would be one thing if the Obama administration was touting these jobs while truly creating a national energy policy that encouraged American energy production. But between Interior’s five year offshore plan which restricted offshore access and Interior’s draft rules for a blanket, one-size-fits-all standard for hydraulic fracturing and well construction on federal lands, it seems that this administration falls far short of promoting oil and natural gas development. Instead, Interior is creating an uncertain, burdensome business climate for the very industry whose jobs the department is claiming credit for.

These very jobs and economic growth are exactly what’s at stake in the energy policy battles of 2012. That’s why the oil and natural gas industry has pushed back against Interior’s new regulations. They threaten the future of energy development on federal lands – and the job creation and economic growth that come with it.

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.