The New Golden Age of Oil That Wasn't

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Last winter,
fossil-fuel enthusiasts began trumpeting the dawn of a new “golden age of oil”
that would kick-start the American economy, generate millions of new jobs, and
free this country from its dependence on imported petroleum. Ed Morse, head
commodities analyst at Citibank, was typical. In the Wall Street Journal
he crowed, “The United States has become the fastest-growing
oil and gas producer in the world, and is likely to remain so for the rest of this
decade and into the 2020s.”

Once this surge
in U.S. energy production
was linked to a predicted boom in energy from Canada’s tar sands reserves, the
results seemed obvious and uncontestable. “North America,” he announced, “is
becoming the new Middle East.” Many other
analysts have elaborated similarly on this rosy scenario, which now provides
the foundation for Mitt Romney’s plan to achieve “energy independence” by 2020.

By employing impressive new technologies — notably deepwater drilling and
hydraulic fracturing (or hydro-fracking) — energy companies were said to be on
the verge of unlocking vast new stores of oil in Alaska,
the Gulf of Mexico, and shale formations across the United States. “A ‘Great Revival’
in U.S.
oil production is taking shape — a major break from the near 40-year trend of
falling output,” James Burkhard of IHS Cambridge Energy Research Associates
(CERA) told the Senate Committee on Energy and Natural Resources
in January 2012.

output was also predicted elsewhere in the Western Hemisphere, especially Canada and Brazil. “The outline of a new world
oil map is emerging, and it is centered not on the Middle East but on the Western Hemisphere,” Daniel Yergin, chairman of CERA, wrote in the Washington Post. “The new energy axis
runs from Alberta, Canada,
down through North Dakota and South Texas…
to huge offshore oil deposits found near Brazil.”


It turns out,
however, that the future may prove far more recalcitrant than these prophets of
an American energy cornucopia imagine. To reach their ambitious targets, energy
firms will have to overcome severe geological and environmental barriers — and
recent developments suggest that they are going to have a tough time doing so.

Consider this:
while many analysts and pundits joined in the premature celebration of the new
“golden age,” few emphasized that it would rest almost entirely on the
exploitation of “unconventional” petroleum resources — shale oil, oil shale,
Arctic oil, deep offshore oil, and tar sands (bitumen). As for conventional oil
(petroleum substances that emerge from the ground in liquid form and can be
extracted using familiar, standardized technology), no one doubts that it will
continue its historic decline in North America.

“unconventional” oil that is to liberate the U.S. and its neighbors from the
unreliable producers of the Middle East involves substances too hard or viscous
to be extracted using standard technology or embedded in forbidding locations
that require highly specialized equipment for extraction. Think of it as “tough oil.”

Shale oil, for
instance, is oil trapped in shale rock. It can only be liberated through the
application of concentrated force in a process known as hydraulic
that requires millions of gallons of chemically laced water per
“frack,” plus the subsequent disposal of vast quantities of toxic wastewater
once the fracking has been completed. Oil
, or kerogen, is a primitive form of petroleum that must be melted to
be useful, a process that itself consumes vast amounts of energy. Tar
(or “oil sands,” as the industry prefers to call them) must be gouged
from the earth using open-pit mining technology or pumped up after first being
melted in place by underground steam jets, then treated with various chemicals.
Only then can the material be transported to refineries via, for example, the
highly controversial Keystone XL pipeline. Similarly, deepwater and Arctic
drilling requires the deployment of specialized multimillion-dollar rigs along
with enormously costly backup safety systems under the most dangerous of

All these processes have at least one thing in common: each
pushes the envelope of what is technically possible in extracting oil (or
natural gas) from geologically and geographically forbidding environments. They
are all, that is, versions of “extreme energy.” To produce them, energy companies will
have to drill in extreme temperatures or extreme weather, or use extreme
pressures, or operate under extreme danger — or some combination of all of
these. In each, accidents, mishaps, and setbacks are guaranteed to be more
frequent and their consequences more serious than in conventional drilling
operations. The apocalyptic poster child for these processes already played out
in 2010 with BP’s Deepwater Horizon disaster in the Gulf
of Mexico, and this summer we saw intimations of how it will
happen again as a range of major unconventional drilling initiatives — all
promising that “golden age” — ran into serious trouble.

Perhaps the
most notable example of this was Shell Oil’s costly failure to commence test
drilling in the Alaskan Arctic. After investing $4.5 billion and years of preparation, Shell was
poised to drill five test wells this summer in the Beaufort and Chukchi Seas
off Alaska’s
northern and northwestern coasts. However, on September 17th, a series of
accidents and mishaps forced the company to announce that it would suspend operations until next summer
— the only time when those waters are largely free of pack ice and so it is
safer to drill.

problems began early and picked up pace as the summer wore on. On September
10th, its Noble Discoverer drill ship was forced to abandon operations at the Burger Prospect, about 70 miles
offshore in the Chukchi
Sea, when floating sea
ice threatened the safety of the ship. A more serious setback occurred later in
the month when a containment dome designed to cover any leak that developed at
an undersea well malfunctioned during tests in Puget Sound in Washington State.
As Clifford Krauss noted in the New York Times, “Shell’s inability to
control its containment equipment in calm waters under predictable test
conditions suggested that the company would not be able to effectively stop a
sudden leak in treacherous Arctic waters, where powerful ice floes and gusty
winds would complicate any spill response.”

Shell’s effort
was also impeded by persistent opposition from environmentalists and native
groups. They have repeatedly brought suit to block its operations on the
grounds that Arctic drilling will threaten the survival of marine life
essential to native livelihoods and culture. Only after promising to take
immensely costly protective measures and winning the support of the Obama administration — fearful of appearing
to block “job creation” or “energy independence” during a presidential campaign
— did the company obtain the necessary permits to proceed. But some lawsuits
remain in play and, with this latest delay, Shell’s opponents will have added
time and ammunition.

Officials from
Shell insist that the company will overcome all these hurdles and be ready to
drill next summer. But many observers view its experience as a deterrent to
future drilling in the Arctic. “As long as
Shell has not been able to show that they can get the permits and start to
drill, we’re a bit skeptical about moving forward,” said Tim Dodson of Norway’s Statoil. That company also
owns licenses for drilling in the Chukchi
Sea, but has now decided
to postpone operations until 2015 at the earliest.


unexpected impediment to the arrival of energy’s next “golden age” in North
America emerged even more unexpectedly from this summer’s record-breaking
drought, which still has 80 percent of U.S. agricultural land in its grip. The energy angle
on all this was, however, a surprise.

Any increase in
hydrocarbon output will require greater extraction of oil and gas from shale
rock, which can only be accomplished via hydro-fracking. More fracking, in
turn, means more water consumption. With the planet warming thanks to climate
change, such intensive droughts are expected to intensify in many regions, which means rising agricultural
demand for less water, including potentially in prime fracking locations like
the Bakken formation of North Dakota, the
Eagle Ford area of West Texas, and the Marcellus formation in Pennsylvania.

The drought’s
impact on hydro-fracking became strikingly evident when, in June and July,
wells and streams started drying up in many drought-stricken areas and drillers
suddenly found themselves competing with hard-pressed food-producers for whatever
water was available. “The amount of water needed for drilling is a double
whammy,” Chris Faulkner, the president and chief executive officer of Breitling Oil &
, told Oil & Gas Journal in July. “We’re getting pushback
from farmers, and my fear is that it’s going to get worse.” In July, in fact,
the situation became so dire in Pennsylvania
that the Susquehanna River Basin Commission suspended permits for water withdrawals from the Susquehanna River and its tributaries, forcing some
drillers to suspend operations.

If this year’s
endless summer” of unrelenting drought were just a fluke,
and we could expect abundant water in the future, the golden age scenario might
still be viable. But most climate scientists suggest that severe drought is
likely to become the “new normal” in many parts of the United States, putting the fracking
boom very much into question. “Bakken and Eagle Ford are our big keys to energy
independence,” Faulkner noted. “Without water, drilling shale gas and oil wells
is not possible. A continuing drought could cause our domestic production to
decline and derail our road to energy independence in a hurry.”

And then there
are those Canadian tar sands. Turning them into “oil” also requires vast amounts
of water, and climate-change-related shortages of that vital commodity are also
likely in Alberta, Canada, their heartland. In
addition, tar sands production releases far more greenhouse gas emissions than
conventional oil production, which has sparked its own fiercely determined
opposition in Canada, the United States, and Europe.

In the U.S.,
opposition to tar sands has until now largely focused on the construction of
the Keystone
XL pipeline
, a $7 billion, 2,000-mile conduit that would carry diluted tar
sands oil from Hardisty, Alberta, to refineries on the U.S. Gulf Coast,
thousands of miles away. Parts of the Keystone system are already in place. If
completed, the pipeline is designed to carry 1.1 million barrels a day of
unrefined liquid across the United

Keystone XL
opponents charge that the project will contribute to the acceleration
of climate change. It also exposes crucial underground water supplies in the Midwest to severe risk of contamination by the highly
corrosive tar-sands fluid (and pipeline leaks are commonplace). Citing the
closeness of its proposed route to the critical Ogallala
, President Obama denied permission for its construction last January.
(Because it will cross an international boundary, the president gets to make
the call.) He is, however, expected to grant post-election approval to a new,
less aquifer-threatening route; Mitt Romney has vowed to give it his approval
on his first day in office.

Even if
Keystone XL were in place, the golden age of Canada’s tar sands won’t be in
sight — not without yet more pipelines as the bitumen producers face mounting
opposition to their extreme operations. As a result of fierce resistance to
Keystone XL, led in large part by Bill McKibben, — the public has become far more aware of
the perils of tar sands production. Resistance to it, for example, could stymie
plans to deliver tar sands oil to Portland, Maine (for transshipment by ship to refineries
elsewhere), via an existing pipeline that runs from Montreal
through Vermont and New
Hampshire to the Maine
coast. Environmentalists in New England are
already gearing up to oppose the plan.

If the U.S. proves too tough a nut to crack, Alberta has a backup plan: construction of the Northern
Gateway, a proposed pipeline through British Columbia
for the export of tar sands oil to Asia.
However, it, too, is running into trouble. Environmentalists and native
communities in that province are implacably opposed and have threatened civil disobedience to prevent its construction (with major
protests already set for October 22nd outside the Parliament
Building in Victoria).

Sending tar
sands oil across the Atlantic is likely to
have its own set of problems. The European Union is considering adopting rules that would label it a dirtier
form of energy, subjecting it to various penalties when imported into the European
Union. All of this is, in turn, has forced Albertan authorities to consider tough new environmental regulations that would make it more
difficult and costly to extract bitumen, potentially dampening the enthusiasm
of investors and so diminishing the future output of tar sands.


In a sense,
while the dreams of the boosters of these new forms of energy may thrill
journalists and pundits, their reality could be expressed this way: extreme
energy = extreme methods = extreme disasters = extreme opposition.

There are
already many indications that the new “golden age” of North American oil is
unlikely to materialize as publicized, including an unusually rapid decline in oil output at existing shale oil drilling
operations in Montana.
(Although Montana
is not a major producer, the decline there is significant because it is
occurring in part of the Bakken field, widely considered a major source of new
oil.) As for the rest of the Western Hemisphere,
there is little room for optimism there either when it comes to the “promise”
of extreme energy. Typically, for instance, a Brazilian court has ordered Chevron to cease production at its multibillion-dollar
Frade field in the Campos basin of Brazil’s
deep and dangerous Atlantic waters because of
repeated oil leaks. Doubts have meanwhile arisen over the ability of Petrobras, Brazil’s
state-controlled oil company, to develop the immensely challenging Atlantic
“pre-salt” fields on its own.

While output
from unconventional oil operations in the U.S.
and Canada
is likely to show some growth in the years ahead, there is no “golden age” on
the horizon, only various kinds of potentially disastrous scenarios. Those like
Mitt Romney who claim that the United
States can achieve energy “independence” by
2020 or any other near-term date are only fooling themselves, and perhaps some
elements of the American public. They may indeed employ such claims to gain
support for the rollback of what environmental protections exist against the
exploitation of extreme energy, but the United States will remain dependent
on Middle Eastern and African oil for the foreseeable future.

Of course, were
such a publicized golden age to come about, we would be burning vast quantities
of the dirtiest energy on the planet with truly disastrous consequences. The
truth is this: there is just one possible golden age for U.S. (or any other
kind of) energy and it would be based on a major push to produce breakthroughs
in climate-friendly renewables, especially wind, solar, geothermal, wave, and
tidal power.

Otherwise the
only “golden” sight around is likely to be the sun on an ever hotter, ever
dirtier, ever more extreme planet.

Michael T.
Klare is a professor of peace and world security studies at Hampshire College,
TomDispatch regular, and the author, most
recently, of
The Race for What’s Left. A movie based on one of his
earlier books,
Blood and Oil, can be ordered at
Klare’s other books and articles are described at his
You can follow Klare’s work on

Copyright 2012
Michael T. Klare

Image by Ray Bodden,
licensed under Creative

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