Beyond the Boom: Developing Policy to Advance US Leadership in Shale Oil and Hydraulic Fracturing TASK FORCE 2014 UNIVERSITY OF WASHINGTON HENRY M. JACKSON SCHOOL OF INTERNATIONAL STUDIES Cover Photographs Left: J. H. Fair. Environmental Health Perspectives. "A lined impoundment receives waste at a fracking site in Dimock, Pennsylvania." Digital Image, 2014. Available from: http://ehp.niehs.nih.gov/122-a50/ Top Right: United States Geological Survey. Untitled media. Digital image, 2004. http://pubs.usgs.gov/fs/2002/fs049-02/. Bottom Right: United States Department of Labor. "Well pad with hydraulic fracturing equipment." Digital Image. Available from: https://www.osha.gov/SLTC/etools/oilandgas/well_completion/well_completion.html. All trademarks mentioned in this report remain the property of their owners. Their inclusion in this report should no way be taken as an endorsement of this report or its conclusions by the trademarks owners. Printed at the University of Washington in Seattle, Washington i THE HENRY M. JACKSON SCHOOL OF INTERNATIONAL STUDIES UNIVERSITY OF WASHINGTON, SEATTLE Task Force Report 2014 Beyond the Boom: Developing Policy to Advance US Leadership in Shale Oil and Hydraulic Fracturing Faculty Advisor: Scott L. Montgomery Affiliate Faculty, Jackson School of International Studies University of Washington, Seattle Evaluator: Julia Nesheiwat Deputy Assistant Secretary of State for Implementation Bureau of Energy Resources US Department of State Task Force: Sarah Coney (Coordinator) Nikolina Stoykova (Editor) Kailyn Swarthout (Editor) Allison Ashmore Zoe Barker-Aderem Kelly Gould Davita Gurian Syailendra Kamdani Khiem Nguyen Mengqin Ouyang Monica Reeder Rebecca Snyder Stephanie Tam Emily Vyhnanek Chieh-Hsi Wang Ola Wietecha ii Table of Contents Acknowledgements………….…………………………………………………………………....iv Acronyms………………………………………………………………………………………….v Introduction………………………………………………………………………………………..1 Part I: Why Shale Oil and Why Now?: How Unconventional Drilling has Transformed the Oil Industry 1. History of Shale Oil and Fracking…………………………………………………….4 2. Federal, State, and Local Regulations...……………………………………………...17 3. Global Perspective: World Oil Reserves……………………………………...……..32 Part II: Status of the Shale Oil “Revolution”: US and Beyond 4. Current Development of Shale Oil in the US………………………………………..45 5. The Global Dimension: Resources, Development, and Regulations………………...68 Part III: Environmental Concerns and Responses 6. Air and Water Pollution……………………………………………………………...91 7. Transportation of Shale Oil…………………...…………………………………….108 8. Opposition to Fracking and Responses………………………….………………….121 9. Science Controversies……………………………………………...……………….138 Part IV: Security and Energy Diplomacy 10. Energy Security Issues..…...………………………………………………………..148 11. Impacts on the Global Position of the US…………………………………………..168 Part V: Future Outlook 12. Trends in Innovation……………………………………….……………………….185 13. Future Vehicle Transport and Implications for Oil Demand……………………….200 Conclusion……...………………………………...…………………………………………….215 Policy Recommendations……………………………...…………….………………………….219 Bibliography……………………………...…………….…………………………...………….223 iii Acknowledgements The Task Force would like to express its deepest gratitude to Scott Montgomery. This report would not have been possible without his expertise and knowledge on the subject of shale oil and fracking. We would like to extend our deepest appreciation for his dedication and determination to help every task force member, no matter how small or large an issue was. We would also like to extend our gratitude to the University of Washington libraries for hosting a research workshop, which provided our task force with valuable sources for information and unparalleled research assistance. iv Acronyms AAR Association of American Railroads AEO Annual Energy Outlook AEV Alternative Energy Vehicle AMD Abandoned Mine Drainage ANGA American Natural Gas Association ARB Air Resource Board APTA American Public Transportation Association ARPA-E Advanced Research Projects Agency - Energy bbls barrels of oil boe barrels of oil equivalent BLM Bureau of Land Management CAEATFA California Alternative Energy and Advanced Transportation Financing Authority CAFE Corporate Average Fuel Economy CFIUS Committee on Foreign Investment in the United States CVRP Clean Vehicle Rebate Project CWA Clean Water Act DECC Department of Energy and Climate Change (United Kingdom) DGS Department of General Services DOE Department of Energy DOI Department of the Interior DOT Department of Transportation E&P Exploration and Production EERE Office of Energy Efficiency and Renewable Energy EIA Energy Information Administration EPA Environmental Protection Agency EPCRA Emergency Planning and Community Right to Know Act ERAP Emergency Response Assistance Plan ERR Economically Recoverable Reserves EV Electric Vehicles FERC Federal Energy Regulatory Committee FY Fiscal Year GCC Gulf Cooperation Council GDP Gross Domestic Product v GE General Electric HEV Hybrid Electric Vehicle hhp Hydraulic Horse Power HOT High Occupancy Toll HOV High Occupancy Vehicle HTUA High Threat Urban Area IEA International Energy Agency IPAA Independent Petroleum Association of America KNOC Korea National Oil Company lbm Pound-mass LDV Light Duty Vehicle LPG Liquefied Petroleum Gas mb/d million barrels per day MEP Ministry of Environmental Protection (China) MLR Ministry of Land and Resources (China) MMTC02e Million Metric Tons of Carbon Dioxide Equivalent MOF Ministry of Finance (China) MOST Ministry of Science and Technology MRL Minimum Risk Level NDRC National Development and Reform Commission (China) NEB National Energy Board (Canada) NESHAP National Emission Standards for Hazardous Air Pollutants NGL Natural Gas Liquid NIMBY “Not in my backyard” NIOSH National Institute for Occupational Safety and Health NOKE National Operator of Energy Minerals (Poland) NORM Naturally Occurring Radioactive Material NSPS New Source Performance Standards NSTB National Transportation Safety Board OAPEC Organization of Arab Petroleum Exporting Countries ODNR Ohio Department of Natural Resources OGJ Oil and Gas Journal OPEC Organization of the Petroleum Exporting Countries OPPPW Polish Exploration and Production Industry Organization OTC Offshore Technology Conference PHMSA Pipeline and Hazardous Materials Safety Administration PNR Pioneer Natural Resources vi PWC Pricewaterhouse Coopers R&D Research and Development RCRA Resource Conservation and Recovery Act RDD&D Research, Development, Demonstration and Deployment S&ED Strategic and Economic Dialogue (US and China) SAT State Administration of Taxation SDWA Safe Drinking Water Act SEAB Secretary of Energy Advisory Board STEO Short Term Energy Outlook Tcf Trillion cubic feet TMS Tuscaloosa Marine Shale TOC Total Organic Carbon TSB Transportation Board of Canada UGTEP Unconventional Gas Technical Engagement Program ULWP Ultra Lightweight Proppant UPI United Post International USDW Underground Sources of Drinking Water USGS United States Geological Survey VOC Volatile Organic Compound WTI West Texas Intermediate vii Introduction The shale oil revolution of the early twenty-first century has placed the United States at one of its most pivotal points in recent history with regards to energy policy. The production boom in 2008 led to an increase of nearly three million barrels per day within five years, accounting for over 90% of new crude oil growth. Such growth has transformed the U.S. from the world’s largest importer to a growing exporter of petroleum products, reducing its dependence on OPEC by more than half, rendering it a major competitor to Russia in refined product exports, and promising energy self-sufficiency for North America in coming decades. In short, the shale revolution has altered the geopolitical map of global energy. Projections estimate that within the next twenty years, tight oil production in the US will increase by another four to six million barrels per day, changing the map even further. As the outlook of tight oil development has serious implications for many US interests, laying a sound framework for long-term development is integral to both US domestic and foreign policy. The revolution in tight oil production has occurred because of innovation in hydraulic fracturing technologies, coupled with long-reach horizontal drilling, that opened up the potential of vast reserves of previously unproductive, organic-rich shale formations across the United States. Different from conventional forms of drilling, “fracking” in shale involves the use of many individual stages, or horizontal intervals, for stimulation. As many as 30-45 such intervals along a horizontal borehole 5,000 – 8,000 feet in length are individually fracked, opening up much larger portions of a reservoir to production than has been previously possible. Fracking is used to penetrate source rock with low-permeability, most commonly shale, that in the past has been difficult to access with conventional drilling techniques. Perforating guns are used to pierce through the well casing to create fractures within the shale, which are then widened by the pumping of fluids into the well at high enough pressures to stimulate oil flow. Though fracking technology opens access to both oil and gas reserves, shale oil has higher influence on US interests for several reasons. First, oil represents a global market, thus one in which large increases in US production can affect many nations, including allies around the world. Second, oil has no known alternative,