Heinberg: Unconventional Energy

Interview with Spanish website FUHEM Ecosocial

“This economic system cannot be sustained, and the longer we cling to it, the worse and fewer our options will be as it fails.”

FUHEM Ecosocial: Oil and gas extracted by fracking from slightly porous rocks, such as schist, are part of the so-called “unconventional oils”. What does this term generally refer to? What other unconventional hydrocarbons are there?

Richard Heinberg: Definitions of unconventional hydrocarbons vary somewhat. For example, some authors include deepwater oil in the category of unconventional resources, while others do not. However, just about everyone includes extra-heavy oil, bitumen, and kerogen in the unconventional oil category. Coal bed methane, shale gas, and methane hydrates are in the unconventional gas category; and coal energy produced by in situ underground gasification would be considered unconventional coal.

To what does this ‘unconventional hydrocarbons’ fever in global energy policy respond?

The expanded interest in unconventional hydrocarbons is largely a response to the depletion of conventional hydrocarbons, which are cheaper, cleaner, and easier to produce in virtually every instance. Extractive industries have understandably targeted the best resources first; as these disappear, it becomes necessary to go after lower quality resources.

As you point out, we have reached the peak of conventional oil and that of gas will come soon. About when might the peaks of unconventional gas and oil be reached? What other elements, in addition to the geological ones, will influence the zenith?

These are difficult questions, because they involve many variables and the data are murky. Perhaps the easiest of the unconventionals to predict are US shale gas and tight oil. These have become highly important in the overall global oil and gas markets, expanding supplies and lowering prices. However, individual wells deplete rapidly, requiring high rates of drilling. While the geographic regions where these resources are present are quite large, the quality of the resources within these areas varies dramatically; only small core regions offer the prospect of profitability. The number of drilling sites in these core regions is limited, and our research at Post Carbon Institute suggests that this means production will start to decline before the end of the current decade. However, the economic environment also influences rates of production. Companies have to promise profits in order to continue drilling, but, with current low US oil and gas prices, profits are elusive. Thus low prices could result in production declines before geology forces the issue. Indeed, there are those who say that US tight oil production has already peaked.

The data about the availability of hydrocarbons are given in volumetric terms, so that all fluid or gas fuels look the same, regardless of their origin. What would happen if these data were given in terms of the net energy they bring to society?

Of course this would yield a very different picture. Unfortunately, net energy analysis is plagued with inconsistency: different researchers use different boundaries, yielding different energy-return-on-energy-invested (EROEI) figures for the same energy source. Exact numbers are elusive. However, it is clear that unconventional hydrocarbon production requires more energy input per unit of energy output than is the case with conventional resources. Thus it is entirely possible that, if net energy were considered, most or all of the growth in world oil production in recent years would translate to static or declining amounts of usable energy actually delivered to society.

Lately, profound changes in the oil geostrategy are under discussion in various organizations, such as the International Energy Agency. Here, the United States is seen as a net winner. Behind these changes would be unconventional hydrocarbons and, more specifically, those extracted by fracking. What do you think of these claims?

Yes, some rather extraordinary claims have been made—including the suggestion that US oil and gas could supply the energy needs of Europe, reducing that continent’s reliance on Russian energy resources. Of course, that is pure folly: the US remains a net importer of oil and gas, and the unconventional oil and gas produced by fracking is providing only an expensive and short-term boost in American domestic supplies.

By far, the US is the country where fracking is mainly used as a source of hydrocarbons. The industry has had an explosive development, but is now facing major problems. What explains this rise and the fall?

As I explained earlier, part of the context has to do with depletion of conventional oil and gas. But there is also a financial element to the boom. When oil and gas prices were soaring, roughly a decade ago, it made sense for small companies to begin working in marginal plays that required expensive interventions like fracking and horizontal drilling. Then came the financial crash of 2008, which also caused oil prices to plummet. That caused a temporary halt to what were at that time only preliminary efforts to exploit these resources. But in response to the financial crisis the US Federal Reserve lowered interest rates practically to zero. With savings producing no returns, large amounts of US investment capital were now looking for speculative opportunities. You might say this was a bubble waiting to happen. The frackers were there on the scene with slick investor presentations, promising unrealistic but enticing returns, and so very large amounts of capital flooded into these companies—which have leased and drilled large areas of land in the years since. In many or most cases, production was actually unprofitable (because of the high costs involved), but investors mostly stuck it out because they had few better options and they really believed the hype. Now, with prices so low, oil and gas companies working the fracking fields are losing money at a much faster rate and it is harder to persuade investors to stay on board.

Do you consider that a phenomenon to what has occurred in the US will happen in other parts of the world?

No, I doubt that the fracking frenzy will take off in other nations the way it has in the US. No doubt countries like the UK and China will attempt to produce some of their unconventional resources using fracking technology, but they will need higher prices to do this profitably. High energy prices tend to undermine overall economic activity, so fracking booms are destined to be self-limiting one way or another.

What impacts does the extraction of hydrocarbons by fracking generate? And, more generally, unconventional hydrocarbons?

Broadly speaking, there have been two types of studies of the environmental and health impacts of fracking. In one type, pollution is measured from a well that has been drilled and completed at the highest industry standard. This type of study usually shows few if any impacts. Other studies look at large numbers of wells, including ones where casings fail and operators don’t comply with standards. These studies tend to show substantial impacts to air and water quality, to human health, and to the health of livestock and wildlife. The carbon emissions for oil production from bitumen (tar sands) are much higher than from conventional oil. In general, all of the environmental and health problems associated with hydrocarbon production are worse in the case of unconventionals. Also, the fact that so many wells need to be drilled (tens of thousands in the US in just the last few years) multiplies these risks.

Can you give us three representative examples of social resistance to the extraction of extreme hydrocarbons? In anti-fracking activism is there any original element in the fight against fracking which sets it apart from other mobilizations against extractivism?

One example would be the efforts of people in US towns near fracking operations to enact anti-fracking ordinances. Such ordinances have been passed in Colorado, California, and Texas. The industry has responded by persuading state legislatures (in Colorado and Texas) to ban towns from passing such ordinances. Another example might be the demonstrations against fracking in Romania, where dozens have been injured in large, repeated protests. A third example might be the anti-fracking efforts ongoing in the UK, where large protests have failed to halt drilling operations. Anti-fracking activism has much in common with long-standing activist efforts to stop or limit conventional mining and drilling. Often people with no history of environmental activism get caught up in such efforts because they have found their own health or their property damaged by extraction activities.

In the face of “peak everything,” on which you’ve been working, what strategies should be implemented to make a transition in a manner as organized as possible and in the context of a world that is changing radically?

Perhaps the most important thing policy makers could do is to realize that world economic growth is unsustainable and is coming to an end. They must come up with a plan to allow the economy to shrink while minimizing strife and stress for people. We will have less energy to work with in the future, and that means we will be less mobile and will consume less. In the ideal scenario, quality of life would improve as consumption falls. But that is only possible if we plan for contraction. And that will require rethinking money, interest, investment, and the discipline of economics as it is taught and practiced. The current economic system has a lot of momentum behind it and so leaders will naturally tend to preserve it as long as possible. But this economic system cannot be sustained, and the longer we cling to it the worse and fewer our options will be as it fails. We must find alternatives, and soon.

Read the interview in Spanish.

Heinberg