The case for ‘energy freedom’ and how the U.S. can achieve it

Am 11 2012 Energy Freedom Graphics0031We have found a solution for energy independence in the United States, but it faces pushback from environmentalists.

Oil and natural gas for decades have provided 65 percent of energy consumption in the United States “and it’s forecast to stay that way for a long time,” Toby Mack, president and CEO of the Associated Equipment Distributors (AED), said at the AED Executive Forum during his introduction to “Making the Case: Energy Freedom” session, which was attended by an editor from Randall-Reilly’s Construction Division, of which Aggregates Manager, Better Roads and Equipment World.

However, the nation is going through an energy revolution of a “monumental size” as the search continues for clean, renewable energy sources that can be found on American soil. Alternate sources of fuel such as wind and solar power are being used to decrease the use of oil and coal as the push continues to stop the use of hydrocarbons in energy. “The sole mission seems to be to stop hydrocarbons use,” Mack said. “There is a strong pushback from the anti-carbon crowd.”

However, the nation is going through an energy revolution of a “monumental size” as the search continues for clean, renewable energy sources that can be found on American soil. Alternate sources of fuel such as wind and solar power are being used to decrease the use of oil and coal as the push continues to stop the use of hydrocarbons in energy. “The sole mission seems to be to stop hydrocarbons use,” Mack said. “There is a strong pushback from the anti-carbon crowd.”

Agg Beat 11 2012 Alt Energy 3 Shale GasThere is a new solution to providing natural gas, but “we need to get the public comfortable with it,” Mack said, adding that the “great solution might die if we don’t. It has a bright future, but we don’t know when and at what price.”

Red Caveney, senior vice president of government affairs for Conoco Phillips, said during his “Energy Freedom” presentation that it’s no secret that nuclear power has a tough road ahead of it as does shale gas production. The latter uses the controversial practice of “fracking.” Caveney admits that his company has a vested interest in shale energy development: “It is currently or has the near-term potential to directly and positively impact my company.” However, it’s “also true,” he says, that this type of energy development is a valid solution and that the United States has sufficient oil and gas reserves for the next several decades to achieve “energy independence.” It’s the method of getting extracting the reserves that is contentious.

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“The problem is that energy independence is a coined phrase developed by [President] Richard Nixon,” Caveney said. “Many elected officials think it means we have to produce all of our own energy here – that we don’t import anything. But the side effect is that we can’t export. ‘Energy Freedom’ is a better term – the freedom to operate with energy.”

Caveney notes that shale for energy use is “not a short-term phenomenon. It will be around for a long time.” Shale as a source rock has been well known to the industry “for a long period of time,” he said. However, there has been concern that the gas and the oil in the rock were so encapsulated that it couldn’t migrate into the ground. The seams tend to run sideways so drilling has to be done horizontally – i.e. hydraulic fracturing, or “fracking” – to follow the seams. In some cases, it can go out eight miles from the seams, Caveney says. “Horizontal drilling and hydraulic fracturing enable low-cost development, [and] shale resources are widely spread across the continent.”

Currently, there are 21 MM net acres in North America for organic growth “in prolific, liquids-rich plays,” Caveney noted. This breaks down to 15.3 MM net acres in the lower 48 states and 5.9 MM net acres in Western Canada.

This would allow North American to be a net oil exporter after 2025, as shale increases the North American oil supply and reduces imports, Caveney says. By 2030, shale will contribute more than 50 percent total U.S. production, according to research by Wood Mackenzie, a research and consulting firm for several industries including energy, mining, metal, oil, gas, coal, refining, power, and electricity.

“This is a revolution that is not only going to affect North America but many other places in the world,” Caveney pointed out. “Argentina is considered to have some of the vest rocks.”

Caveney is quick to emphasize, though, that “this is not a slam dunk.” Those opposed to this type of energy development and the industry as a whole – much like the NIMBYs of the aggregates industry – “are pressuring the government to put more and more regulations on the industry, which will limit availability and its use.”

He also added that natural gas underwent many of the same hurdles. “There was legislation that controlled the price of natural gas because of concern there wasn’t enough supply,” Caveney said. “They made it equivalent to putting a man on the moon. This proved to be a fallacy.”