A mature shale oil industry could mean a renaissance in American manufacturing jobs
Brad Plumer’s April 4 post in the Washington Post’s WonkBlog correctly points to the lack of meaningful data on the level of methane emissions from natural gas (NG) production and distribution. Methane, as all environmentalists know, while low in CO2, is itself a powerful greenhouse gas, although a short-lived one, and purified NG is more than 90 percent methane. An academic argument has festered for several years now as to whether methane leakage is such that it undercuts NG’s claim to be a green fossil fuel—some reported levels of leakage are such to make its global warming potential worse than that of coal.
The good news is that the Environmental Defense Fund is coordinating with nine large gas producers, two universities, and two NG-fueled fleet managers to get a statistically valid read on the volume of methane emissions from the wellhead through processing and final customer application. Reports will be forthcoming this year and next. The guess here, especially given the age of much of the transport infrastructure, is that the leakage rates will be at the high end of current estimates. The cooperating companies will get no points for good behavior unless they expeditiously shut down the leaks. That’s not hard to do in principle, but it will take perseverant management, quality control, and continuous monitoring.
But the point goes far beyond methane, for the shale-based energy industry is at a crucial transitional stage. Its growth spurt has been driven primarily by entrepreneurs with limited capital who made up the rules as they went along and raced to generate product as fast as they could. They have been spectacularly successful in producing new energy at very attractive rates, but in an unusually intrusive way. Unlike conventional oil and coal, shale-based product is widely distributed and thinly concentrated. Recovering industrial-scale quantities of shale product requires venturing far beyond the places where extractive industries typically cluster. Drive through Fort Worth and environs west of the DFW airport, and you’ll see literally hundreds of mature shale wells—the rigs are long since gone—inconspicuously pumping oil and gas. One well-pipe reputedly ends underneath the 50-yard line of Texas Christian football stadium.
Continued healthy growth of the shale-based energy industry could have extremely positive economic benefits for the United States, not only shrinking energy trade deficits, but also triggering a boom in energy-intensive manufacturing, like chemicals, steel, fertilizers, and paper. The shale industry itself is a bonanza of middle-class blue-collar jobs, and the prospect of a reindustrializing America promises many more.
But to achieve that promise the industry will have to shift its business model from that of the wildcat exploration and production company to that of the high-quality manufacturer, with comprehensive quality control and reporting systems—not just for leaks, but for surface spills, water management, well casing, pre- and post-environmental status reporting, and much else. The environmental agencies and NGOs monitoring greenhouse gas emissions are just one of the audiences that the industry must come to terms with. Even more important for its continuing flourishing are the states and local communities that the industry impacts, often in quite unpleasant ways.
The best example, perhaps, is the public’s impression of the shale industry’s excessive consumption of water. In fact, a study published by Harvard University’s Kennedy school of government suggests that shale-based energy extraction uses the least water of any of the fossil fuels, and by large margins. Ethanol, a renewable biofuel, uses up to a thousand times as much.
But the industry has only itself to blame. When a new shale region is being opened, dozens of firms rush to cobble together water deals with individuals and townships, and roads soon become clogged with hundreds of 40-ton tanker trucks. Far better would be to create area water acquisition and treatment and disposal plans, with predominately pipeline transport, and a treatment facility under control of the companies, so they can track whether the waste fluids actually get there, instead of being surreptitiously dumped, as often alleged.
The industry is consolidating rapidly, as oil majors, like ExxonMobil, Shell, and Chevron take large positions, and the larger independents rack up billions in annual revenues. To keep their growth on track, they have to adopt business practices consistent with their size and the scale of their collateral social and environmental impact.