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Belmont Club

Blowout

September 30th, 2011 - 11:36 am

NPR argues that the new oil capital of the world may soon be in North America. “By 2017, investment bank Goldman Sachs predicts the US could be poised to pass Saudi Arabia and overtake Russia as the world’s largest oil producer.”

Amy Myers Jaffe of Rice University says in the next decade, new oil in the US, Canada and South America could change the center of gravity of the entire global energy supply.

“Some are now saying, in five or 10 years’ time, we’re a major oil-producing region, where our production is going up,” she says.

The US, Jaffe says, could have 2 trillion barrels of oil waiting to be drilled. South America could hold another 2 trillion. And Canada? 2.4 trillion. That’s compared to just 1.2 trillion in the Middle East and north Africa.

Jaffe says those new oil reserves, combined with growing turmoil in the Middle East, will “absolutely propel more and more investment into the energy resources in the Americas.”

The potential changes have crept up unseen in the news narrative. Who would have named the Utica Shale formation, for example, as anything to do with anything?  But the National Review says one author believes that huge shale deposits are poised to make Ohio an economic powerhouse.  But there’s a fly in the ointment: the technology which has made these vast new recoveries possible are “environmentally controversial”.

It would be, wouldn’t it? The EPA is holding hearings “on the Environmental Protection Agency’s proposed rules aimed at limiting pollution at oil and gas wells.”

The agency is proposing standards to curb hydraulic fracturing, or “fracking,” by requiring operators to capture and sell natural gas that now escapes into the air. Thursday’s EPA hearing was held in a region with a vast area of urban drilling atop the natural gas-rich Barnett Shale. The EPA’s proposal would apply new pollution control standards to about 25,000 gas wells that are hydraulically fractured each year.

While industry representatives touted the jobs and prosperity that drilling brings, critics argued it’s not worth the environmental risk of toxic spills, scattered drill site explosions, tainted drinking water and polluted air.

“No Fracking Way” is the slogan of Canadian environmentalists who argue that the technology will contaminate the groundwater, poison the Great Lakes and turn municipal faucets into Zippo lighters.

The Wall Street Journal reports that in anticipation of the potential boom, the argument over appropriate standards is now raging all across the regulatory spectrum. “The new rules also target methane, the primary ingredient in natural gas and, says the EPA, especially potent at trapping heat in the atmosphere.”

A cynic might argue that the hearings are as much about money as they are about clean air and water. Green has more than one meaning. “Shale gas is a game-changer,” said Kerry Guy of the Canadian Association of Petroleum Producers. “We now find ourselves with accessible resources that we think can be economically recovered that are more than 100 years of supply [at current demand].”

Everyone is going to want a piece of the action. This sudden access to energy may also be a political game changer. Small towns are going to suddenly be important places. Many of the legacy institutional problems which were thought to be on the verge of extinction during the recession will gain a new lease on life. Unions, government regulations, guaranteed pensions, local building booms — every unsustainable thing that is Too Big To Fail — will suddenly become sustainable again for a while. Although the public policy focus of the new oil boom has been environmental quality, it is perhaps the shadow boom in the sutlers of the army of petroleum that may prove to be its lasting legacy.

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