Aggregates for Energy Freedom

Tina Grady Barbaccia

November 1, 2012

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Shale may be the game changer to give the United States ‘energy independence,’ 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,” an educational session which was attended by Aggregates Manager.

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 problem is that wind and solar power require natural gas because they are intermittent sources. “Without natural gas, there is no one way to ensure continuity of providing energy 24 (hours per day)/365 (days per year),” Mack said.

There 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.”

“This is a revolution that is not only going to affect North America, but many places in the world,”

— Red Caveney

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 extracting the reserves that is contentious.

“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 oil in the rock were so encapsulated that they 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 8 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 million net acres in North America for organic growth “in prolific, liquids-rich plays,” Caveney noted. This breaks down to 15.3 million net acres in the lower 48 states and 5.9 million net acres in Western Canada.

This would allow North America 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 of 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 best 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.”

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