I wasn’t expecting a polka band.
It was February 2016, and I was in Houston, Texas, for CERAWeek, the annual energy-industry confab that brought together highfliers from around the world: heads of state, corporate icons, academic experts, and others came to discuss the state of the oil and gas industry, learn about new technologies, and assess what might lie ahead. With prices at crushing lows—a barrel of crude oil was trading for about thirty dollars, down from one hundred dollars two years earlier—I’d expected a somber air. But at the week’s opening evening, a grand cocktail party with the crème de la crème of the industry, sponsored by the German corporate giant Siemens, it was as though I had entered an alternate reality, one in which the industry was thriving, crude oil and natural gas prices were near all-time highs, and celebration was the order of the day.
At least that’s what it felt like as the six-person polka band started up, the tuba belting out lumps of bass notes as servers sliced thick, heavy slabs of beef at the two prime-rib carving stations. Hotel staff stood behind black-draped bars, pouring top-shelf liquor, fine wines, and microbrews. At other tables, three-tiered silver platters gleamed atop white tablecloths, boasting rich arrays of German-themed hors d’oeuvres. Regardless of the challenges the industry faced, tonight was a night to have fun, to network, and, inevitably, to commiserate about the pain of low prices.
Had it not been for the crushing prices, there would have been every reason for domestic oil and gas companies to celebrate: production of both oil and natural gas was near all-time highs, and the United States had reclaimed the title of world’s largest producer. Just ten years earlier, most had expected the country’s decades-long decline in production to continue indefinitely and, with it, an ever-deepening reliance on energy imported from other continents. But things had changed.
As I’ll describe over the course of this book, the U.S. oil and gas industry has, over the past decade or so, combined a suite of technological breakthroughs with incremental improvements that have pushed production to levels beyond what even the most optimistic forecaster would have dreamed. These innovations brought the industry to new heights, took it to new corners of the United States, and sparked controversies no one had anticipated.
It was this revolution, the “shale revolution,” that had brought me to the Hilton Americas in Houston. CERAWeek was something of a culmination for me: a chance to meet some of the industry’s high rollers after spending years getting to know the small-timers of the oilfield and traveling the many back roads of the shale revolution.
IN THE OILFIELD
My journey started in the summer of 2011. I was a graduate student at Duke University in Durham, North Carolina, and was spending the summer interning at the state’s Department of Environment and Natural Resources (which has since been reorganized and is now known as the Department of Environmental Quality). While I was there, the legislature asked the agency to write a report on the potential for shale gas development in the state. I volunteered for the job and, despite my lack of experience with the oil and gas industry, was tasked with writing a portion of the report.
As I began my research, two themes quickly emerged: one detailing a list of horror stories about the dangers of fracking and a second narrative about the glories of the American energy renaissance. As I learned more and began talking with friends about the myths and realities of fracking, I started to field an array of questions. At dinner parties, out having drinks with friends, and even over my first Christmas dinner with my soon-to-be mother- and father-in-law, I heard variations on the same few themes: Were fracking chemicals safe? Was fracking causing earthquakes? Was fracking contaminating water across the country?
Everyone who learned I was doing research on fracking had questions, and most of these questions rested on the presumption that the process was inherently dangerous. Many assumed that fracking was wreaking havoc on landscapes and communities across the United States. Gingerly, I would tiptoe through the history, risks, and unknowns of shale development. At the end of the conversation, I would occasionally get a final question: Could I recommend any books that offered an accessible discussion of the full issue? I didn’t have a good answer.
My experience that summer piqued my interest in oil and gas, but in North Carolina, there was no opportunity to witness shale development firsthand. Luckily, I began working on a research project a couple years later that provided exactly this opportunity. The project focused on local government finances: how increased (or decreased) oil and gas development had affected local revenues and services and how those issues played into state tax policy. The position took me to all the major shale gas and oil “hot spots”: western North Dakota, northeastern Pennsylvania, southern Texas, western Texas, Louisiana, Colorado, Wyoming, and more. I spent most of my days driving between small towns, stopping wherever I could snap a nice photo of a drilling rig, pump jack, or flare stack. In each town, I would spend an hour or two interviewing local government officials and eating at local restaurants, learning about people’s experience with shale development.
Once the interviews were through and I had finished my work for the day, I had a full evening on my hands to explore. If I wasn’t too tired after a long drive or day of meetings, I’d find a place to have dinner and sit at the bar, listening to the local chatter. Often, I’d join the conversation, or—just as often—my neighbor or the bartender would ask, “What brings you to town?” But they knew what I was going to say: it was the oilfield. The only question remaining was whether I was an engineer, a driller, a geologist, an exec, or something else.
When I told them I was doing research, I got a variety of reactions. Some were skeptical, assuming that I was in town to look for environmental damage and try to put them out of business. Others, after learning I was researching government issues, let loose on the evergreen topics of regulation, taxes, and the unwelcome hand of the federal government. But after a few minutes of conversation, most of my neighbors at the bar were happy to talk about what it’s been like to live or work in the oilfield through the boom and, as the heady days of 2013 turned to wary 2014 and eventually to the doldrums of 2015, through the bust.
I talked with hundreds of locals and out-of-towners, pipeliners and frackers, drill-baby-drillers and no-fracking-wayers about the oilfield. During those conversations, I learned as much about how fracking has affected the United States as I did from the hundreds of peer-reviewed articles, books, and news reports that I read during the same time.
A few years into my work, I was in Ann Arbor, Michigan, giving a talk at the Ford School of Public Policy (where I would eventually become a lecturer) describing a recent paper on tax policy related to oil and gas development. I flew in the night before and was having dinner with Barry Rabe, the professor who had invited me to town. As we ate and talked, he asked about the places where I’d traveled to do my research. When I described the kinds of conversations I’d been having—both my interviews during the day and my informal conversations with locals at night—Barry asked if I’d thought about writing a book. I agreed it’d be a great way to document the experience but didn’t think I had the time. I was busy finishing my research, looking forward to taking on new projects, and hesitant to wade into the caustic terrain that characterizes much of the debate over fracking.
But as the months went on and I traveled to even more oil and gas regions—Oklahoma, New Mexico, Ohio, California, Alaska, and others—I gathered more stories and met more people. The map in figure 1.1
shows each of the major oil- and gas-producing regions of the United States that I have visited over the past several years. This is the oilfield. The dots on the map indicate each of the more than 200,000 oil and gas wells in the United States that have been drilled directionally or horizontally, rather than vertically. These wells, particularly the horizontal ones, are where the shale revolution has taken place, and most of them have been fracked. I’ll describe what fracking is, and what it isn’t, in chapter 2
, along with a discussion of why horizontal drilling, in particular, is an important part of the story.
FIGURE 1.1 An annotated map of the author’s travels from 2013 through 2015
Map indicates all horizontally and directionally drilled wells. Data not available for Alaska. Annotations by the author.
Source: Drilling Info database.
A frequent mistake of some commentators is to assume that every place where oil and gas are pulled out of the ground looks the same. That couldn’t be further from the truth. Oil and gas production happens in and around some of the biggest U.S. cities, such as Los Angeles and Fort Worth, where wells pop up in backyards, along freeways, or next to fast-food drive-throughs. Oil and gas drilling happens in some of the most rural parts of the country, such as western North Dakota and southwestern Wyoming, where cows and tumbleweeds easily outnumber people. It happens in the fast-growing suburbs north of Denver and on the outskirts of Pittsburgh, where drilling rigs cast shadows over new apartment buildings and strip malls encroach on land previously devoted to farming, ranching, and oil and gas.
To understand how the oil and gas industry fits into the lives of people in these diverse regions, it’s helpful to know at least a little bit about them. The stories that begin each chapter of this book will take us to a few of these places, but if you’ve never visited an oilfield personally, think about adding the Permian basin, Utica shale, or another producing region to your list of travel destinations. A few days of driving through oil and gas country, coupled with conversations across a barstool, can teach you as much as dozens of journal articles and research reports.
THE CHALLENGE OF UNCERTAINTY
The goal of this book is to present a full view of shale development in the United States, drawing both from the ground-level experiences I’ve had and from the academic literature that continues to develop. In my opinion, a full view of shale development must recognize three critical facts: first, the shale revolution has created benefits; second, the shale revolution has caused damage and imposed costs; and, finally, there are still a number of important uncertainties. In this book, I will try to give readers an honest perspective on the scale and importance of all three elements.
One of the most challenging things about writing a book about fracking (or any other timely policy issue) is that many of the topics and questions are moving targets. While research on some issues is well developed and the lessons fairly straightforward, a number of unanswered questions remain, and uncertainty runs like a steady stream through some of the most important elements of this book.
For some readers, the existence of these uncertainties may elicit the question: With all we don’t know about fracking, why take the risk? This question leads to a discussion of the precautionary principle, the notion that until all the risks of an activity are fully understood, it’s best to wait.
One does not have to agree with this philosophy to understand that it is a coherent way of looking at the world. Nations such as France and Germany, along with the state of New York, have essentially adopted this approach, banning fracking or imposing extended moratoriums. Compared with their U.S. counterparts, European policy makers tend to embrace the precautionary principle more readily when considering new technologies. A prime example is genetically modified foods, or GMOs. European nations have adopted far stricter regulations than the United States for growing and selling these crops.
But if you apply the precautionary principle to GMOs or to oil and gas development, should you apply it to everything?
Consider mobile phones. Some fear that the widespread use of these devices may increase the likelihood of developing cancer. The National Cancer Institute at the National Institutes of Health stated in 2016 on its website: “Studies have thus far not shown a consistent link between cell phone use and cancers of the brain, nerves, or other tissues of the head and neck. More research is needed because cell phone technology and how people use cell phones have been changing rapidly.”1
For an individual or policy maker prone to the precautionary principle, this statement might justify a ban on cell phones. At the very least, it provides a pretty compelling reason for the risk-averse to avoid them. What’s more, there are a number of areas where we know that cell phones have caused damage. For example, research and common experience have shown that the proliferation of mobile phones has increased vehicle and pedestrian accidents2
and reduced the quality of life for anyone within earshot of an inconsiderate cell phone user (but I digress).
My analogy may be a little flippant, but the principle is clear: fracking produces benefits, risks, and uncertainties. But that’s nothing new. Policy makers and individuals balance benefits and risks every day. Cell phones provide enormous benefits to virtually every person in the United States and billions more around the world. Fracking, which serves a completely different purpose in the economy, probably provides smaller economic benefits than mobile technology, but, as I will describe in chapter 9
, the economic effects have been enormous, affecting energy consumers around the world.
In short, the precautionary approach may be appropriate in some cases, but it can’t be used to justify many of the trade-offs that y...