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Energy independence: What are the benefits?

In 2005, the United States imported more than 3 billion barrels of oil from countries outside of North America at a total cost of about $300 billion. If the country were energy independent, that money could have been spent within the United States.
by Adam Wilmoth Modified: September 29, 2012 at 4:29 pm •  Published: October 1, 2012

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Devon in August signed a $1.4 billion joint venture with Japan's Sumitomo Corp. for shale gas drilling in west Texas. Earlier this year, Devon announced a $2.5 billion partnership with China-based Sinopec to help pay for natural gas production in Ohio and Michigan.

French oil giant Total SA in January agreed to pay Chesapeake $2.32 billion for a minority stake in the Oklahoma City company's operations in Ohio's Utica shale. China's CNOOC Ltd. last year announced a $1.3 billion deal to help Chesapeake Energy Corp. develop parts of northeast Colorado and southeast Wyoming, just three months after the two companies announced a $1.1 billion deal in south Texas.

Such investments allowed companies to continue drilling, creating a glut of natural gas and lower prices for consumers. Oklahoma utility customers have seen the benefits from lower natural gas prices, said Matt Skinner, spokesman for the Oklahoma Corporation Commission, the state's utility regulator. Customer bills are separated into a fuel cost and the utility's rates for delivering electricity or natural gas. By law, Oklahoma utilities aren't allowed to make a profit on the fuel portion of customer bills, so lower natural gas prices are passed on more quickly to consumers.

Despite the financial and economic potential of increasing domestic production, Hamm said the greatest benefit might be harder to calculate.

“It's the psychology of not being held to OPEC, of being free of OPEC dominance and knowing that somebody else determines our fate as a nation,” he said.

No free lunches

Still, some industry observers have said that energy independence could weaken the country's influence in the Middle East as China becomes the oil-rich region's largest competitor.

“Certainly you have influence as a customer, but you also have influence as a supplier. It's a question of policy balances,” said Stephen McKeever, vice president for research and technology transfer at Oklahoma State University. “Certainly there have been disadvantages associated with being at the mercy of a supplier over the last several decades. On balance at the moment, I think we should definitely swing toward independence and becoming a supplier ourselves rather than a customer.”

Others, however, are concerned that the country's focus is too much on the short-term potential rather than the long-term risk.

“The biggest problem with the shale gas revolution is that the technology is displacing at least as much renewable energy as it is coal,” said Bill McKibben, an environmentalist author and speaker based in Vermont. “To me, whether there's carbon or not in the energy we're using is far more important than where it comes from.”

Shale is hard, dense rock formations found thousands of feet underground. Improved technologies over the last decade have enabled companies to reach oil and natural gas in such areas.

The International Energy Agency in June released its Energy Technology Perspectives 2012, which stated that inexpensive natural gas could perpetuate reliance on fossil fuels instead of renewables. This, in turn, would cause carbon dioxide levels to rise, damaging the environment irreparably, the report states.

Others say oil and natural gas can be recovered in a way that is complementary to the environment.

“You just have to do it right in how you develop the resources,” said Ming, the Oklahoma energy secretary. “The policies we've implemented here in Oklahoma at the Legislature and Corporation Commission (which regulates utilities and oil and gas drilling) have been successful at regulating the water use and pit impoundments that facilitate the water for hydraulic fracturing.”

Some are more pragmatic.

“There's no such thing as a free lunch in the energy business or anywhere else,” said Robert Bryce, a senior fellow at the Manhattan Institute and author of “Gusher of Lies: The Dangerous Delusions of Energy Independence.”

“When there is coal extraction and natural gas extraction, it comes with a significant impact. The same can be said with wind energy. There are environmental costs. I'm not minimizing those. Now that we have drilling in a lot of areas that haven't had it before, we're seeing friction in Pennsylvania, New York, even Fort Worth. That's not surprising. This happens. Nevertheless, the overall benefits to the U.S. economy of the shale gas revolution is an unequivocal positive.”

Bryce referred to an IHS study released in June that states that shale gas will support 1.5 million American jobs by 2015.

“That is an enormous benefit to the United States,” he said.

by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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