Path Home Shows 2012 Show Archive May 2012 Show 1220 Oklahoma Energy - Energy Independence

Oklahoma Energy - Energy Independence

Across our country there is more oil and gas drilling than in the rest of the world combined; and, if domestic oil production continues to rise we could actually become energy independent.

For more information visit these links:

Devon Energy
FERC (Federal Energy Regulatory Commission

Show Dates

Show 1220: Oklahoma Energy - Energy Independence

Air date: May 13, 2012

 

Transcript

ROB MCCLENDON:  SOMETHING UNIQUE HAS HAPPENED ACROSS AMERICA LITERALLY, RIGHT UNDER OUR FEET.  ACROSS OUR COUNTRY THERE IS MORE OILD AND GAS DRILLING THAN IN THE REST OF THE WORLD COMBINED.  THANKS TO THE INCREASE IN PRODUCTION AND GREATER EFFECIENCY, LAST YEAR THE U S IMPORTED 45% OF THE LIQUID FUELS WE USE, DOWN FROM 60% IN 2005.  AND IF DOMESTIC OIL PRODUCTION CONTINUES TO RISE WE COULD ACTUALLY APPROACH A GOAL MOST THOUGHT IMPOSIBLE, ENERGY INDPEPENCE.

PRESIDENT BARACK OBAMA:  HELLO OKLAHOMA!

ROB MCCLENDON:  WHEN A DEMOCRATIC PRESIDENT.

PRESIDENT:  IT’S GREAT TO BE HERE!  EVERYBODY HAVE A SEAT; HAVE A SEAT.

ROB:  VISITS A DECIDELY REPUBLICAN STATE IN AN ELECTION YEAR.

PRESIDENT:  IT IS GOOD TO BE BACK IN OKLAHOMA, I HAVEN’T BEEN BACK HERE SINCE THE CAMPAIGN.

ROB:  ODDS ARE IT’S ABOUT SOMETHING A LOT OF PEOPLE CARE ABOUT.

PRESIDENT:  UNDER MY ADMINISTRATION AMERICA IS PRODUCING MORE OIL TODAY THAN AT ANY TIME IN THE LAST EIGHT YEARS.

ROB:  YET GAS PRICES HAVE SOARED THIS YEAR, A TREND THE PRESIDENT ADMITS IS OUT OF EVEN HIS CONTROL.

PRESIDENT:  BUT THE FACT IS, PRODUCING MORE OIL AT HOME ISN’T ENOUGH BY ITSELF TO BRING GAS PRICES DOWN.  AND THE REASON IS, WE’VE GOT AN OIL MARKET THAT IS GLOBAL, THAT IS WORLDWIDE.  AND I’VE BEEN SAYING FOR THE LAST FEW WEEKS, I WANT EVERYBODY TO UNDERSTAND THIS, WE USE 20% OF THE WORLD’S OIL, WE ONLY PRODUCE 2% OF THE WORLD’S OIL.

ROB:  BUT THAT COULD BE CHANGING THANKS TO HORIZONTAL DRILLING AND HYDRAULIC FRACTURING, RESERVES OF OIL AND GAS PREVIOUSLY THOUGHT UNOBTAINABLE ARE NOW IN ABUNDANT SUPPLY.  JOHN RICHELS IS PRESIDENT AND CEO OF OKLAHOMA-BASED DEVON ENERGY.

JOHN RICHELS:  WE HAVE ALWAYS KNEW THAT THERE WAS A LOT OF OIL AND NATURAL GAS IN THESE VERY DEEP SHALE FORMATIONS, BUT WE DIDN’T KNOW HOW TO GET IT OUT BECAUSE THE ROCK IS VERY, VERY TIGHT.  AND WHILE IT MIGRATED OUT OVER GEOLOGIC TIME, SO WE’RE TALKING ABOUT MILLIONS OF YEARS, WHEN YOU DRILLED INTO IT YOU COULDN’T PRODUCE FROM THE VERY TIGHT SHALE FORMATIONS.  SO, THE REAL RENAISSANCE IN THIS INDUSTRY OVER THE LAST FEW YEARS HAS BEEN THAT WE’VE FIGURED OUT HOW TO USE A COMBINATION OF HORIZONTAL DRILLING, WHERE WE DRILL DOWN A MILE AND A HALF OR TWO MILES INTO THE GROUND AND THEN LATERALLY INTO THESE SHALE FORMATIONS AND THEN USE THIS TECHNOLOGY CALLED HYDRAULIC FRACTURING WHICH IS, IS, IS INJECTING A MIXTURE OF MOSTLY WATER AND SAND, ABOUT 99.5% WATER AND SAND AND THEN SOME OTHER CHEMICAL LUBRICANTS INTO THE GROUND, TWO MILES DOWN INTO THE GROUND, AND WE CRACK OPEN THE SHALE SO THAT THE OIL AND NATURAL GAS CAN BE PRODUCED.  SO THAT’S REALLY THE TECHNOLOGY THAT’S TOTALLY REVOLUTIONIZED THIS INDUSTRY, THAT’S OPENED UP THIS ENORMOUS RESOURCE BASE, BOTH IN THE NATURAL GAS SIDE AND NOW IT’S MIGRATING INTO THE OIL SIDE AS WELL, AND THAT’S REALLY RESHAPING THE FUTURE OF ENERGY IN THIS COUNTRY.

ROB:  BUT SUCH NEW FOUND ABUNDANCE DOES HAVE A DOWNSIDE.   WHILE GLOBAL DEMAND HAS KEPT OIL PRICES RELATIVELY HIGH, THE PRICE FOR DOMESTICALLY-PRODUCED NATURAL GAS HAS PLUMMETED; TOO MUCH SUPPLY AND TOO LITTLE DEMAND.

RICHELS:  THERE IS A SERIES OF EVENTS THAT HAVE COME TOGETHER THAT HAVE CAUSED NATURAL GAS PRICES TO GO AS LOW AS THEY HAVE:  THE FACT THAT SUPPLY HAS BEEN SIGNIFICANTLY INCREASED AS A RESULT OF THE TECHNOLOGY THAT WE’VE DEVELOPED IN THE INDUSTRY; THE FACT THAT WE HAD AN ECONOMIC SLOWDOWN FROM 2008 THROUGH 2009; 2010, IN THIS RECESSIONARY PERIOD; AND THEN, SOME VERY UNUSUALLY WARM WEATHER.  THIS PAST WINTER WHEN LARGE AMOUNTS OF NATURAL GAS ARE USUALLY TAKEN OUT OF STORAGE, WAS A VERY, VERY WARM WINTER.  SO, THE CONFLUENCE OF ALL OF THOSE, THOSE FACTORS HAS DRIVEN THE PRICE OF NATURAL GAS DOWN.

ROB:  AND WHILE NATURAL GAS PRICES ARE NOW AT HISTORIC LOWS, THE HEAD OF THE FEDERAL ENERGY REGUALTORY COMMISSION SAYS WHEN DEALING WITH A NON-RENEWABLE COMMODITY LIKE OIL AND GAS, REST ASSURED TOMORROW MAY NOT LOOK LIKE TODAY.

MR. MOELLER, AND I’VE HEARD YOU SAY THAT IN LESS THAN FOUR YEARS WE’VE SEEN THE ENERGY INDUSTRY ACTUALLY TURN UPSIDE DOWN, TELL US WHAT YOU MEAN BY THAT.

PHILIP MOELLER:  I GO BACK TO THE SUMMER OF 2008, WE WERE STILL BOOMING ECONOMICALLY, BOTH DOMESTICALLY AND WORLDWIDE, AND WE HAD ALL-TIME HIGH PRICES FOR PETROLEUM AND NATURAL GAS.  IN TERMS OF NATURAL GAS, IT WAS PUSHING $14 FOR MMBTU; AND THEN, THE DEBATE AT THE TIME WAS REALLY ABOUT WHETHER WE WERE GOING TO BE IMPORTING LIQUIFIED NATURAL GAS INTO THIS COUNTRY.  AND IF YOU FAST-FORWARD LESS THAN FOUR YEARS LATER, BECAUSE OF THE SHALE BOOM AND THE EXTRACTION OF IT FROM HYDRAFRACKING, WE NOW HAVE A DEBATE IN THIS COUNTRY ABOUT EXPORTING LIQUIFIED NATURAL GAS.  THE PRICE OF GAS IS AROUND $2 VERSUS $14 NATURAL GAS FROM DECEMBER OF 2008; THE WORLD HAS REALLY FLIPPED UPSIDE DOWN.

ROB:  ACCORDING TO AN INDEPENDENT STUDY, DOMESTIC SUPPLIES OF NATURAL GAS COULD FUEL OUR COUNTRY FOR THE NEXT 100 YEARS; SOMETHING HARD TO IMAGINE, JUST A DECADE AGO.

RICHELS:  RIGHT NOW WE PRODUCE SOMEWHERE AROUND 20% OF OUR ELECTRICITY IN THIS COUNTRY BY BURNING NATURAL GAS; AND THAT SHARE IS INCREASING IN A HURRY.  AND, THAT IS PARTLY BECAUSE OF THE LOW PRICE OF NATURAL GAS, BUT THERE ARE A NUMBER OF OTHER FACTORS TOO.  THE KEY IS THAT AS WE BURN MORE GAS TO MAKE ELECTRICITY, THE TWO INDUSTRIES BECOME MORE INTERDEPENDENT BECAUSE GAS IS ALSO USED TO HEAT HOMES AND HEAT WATER, PARTICULARLY IN THE COLDER CLIMATES.  AND AS THEY BECOME MORE INTERDEPENDENT, WE HAVE TO MAKE SURE THAT THE TWO INDUSTRIES ARE COORDINATED IN A WAY THAT WE CAN ASSURE RELIABILITY.

ROB:  IT SEEMS AS IF THE LONG-TERM PROSPECTS ARE SORT OF SMOOTH SAILING FOR NATURAL GAS; BUT RIGHT NOW, THE WATERS ARE PRETTY CHOPPY FOR OUR NATURAL GAS PRODUCERS, ARE THEY NOT?

RICHELS:  WELL THE WHOLE IDEA OF USING THE HYDRAFRACKING AND THE HORIZONTAL DRILLING THAT IS REALLY REVOLUTIONIZED THE INDUSTRY IN JUST THE LAST FEW YEARS AND HAS ALLOWED US TO SEE THIS INCREDIBLE DOMESTIC RESOURCE THAT WE DIDN’T REALLY KNOW WAS THERE, THAT HAS AGAIN HELPED THE CONSUMER BECAUSE PRICES ARE MUCH LOWER.  IN SOME CASES THEY’RE SO LOW FOR PRODUCERS THOUGH THAT THEY HAVE TO MAKE THEIR MONEY OFF THE LIQUIDS IN THE GAS; AND THAT THE GAS ITSELF IS PRICED TOO LOW, SO SOME OF THOSE ROLES ARE BEING SHUT IN.  AND SO, IT’S NOT ONLY CHOPPY ECONOMICALLY, BUT THERE’S ALSO THE DEBATE GOING ON AMONGST THE PUBLIC AS TO THE PROS AND CONS OF THE FRACKING TECHNIQUE.  A LOT OF PEOPLE DON’T UNDERSTAND IT, AND THAT DEBATE IS CERTAINLY HAPPENING IN PARTS OF THE COUNTRY.

ROB:  AND WHILE IT IS A DEBATE THAT COULD THREATEN ANY CHANCE OF OUR COUNTRY BECOMING ENERGY INDEPENDENT, THE LONG-TERM CHALLENGE FOR NATURAL GAS PRODUCERS IS THE ESTABLISHMENT OF THE FILLING STATIONS AND INFRASTRUCTURE TO TRANSITION AMERICA’S CARS AND TRUCKS TO CLEANER BURNING NATURAL GAS.  BUT IN THE SHORT-TERM, THE FIRST VICTIM OF LOW NATURAL GAS PRICES IS THE PROPOSED MAJOR REDUCTION IN THE STATE INCOME TAX.  LEGISLATIVE LEADERS HAVE SEEN FIRSTHAND HOW QUICKLY TAX REVENUES CAN DECREASE AS NATURAL GAS PRICES SLIP.  COLLECTIONS FROM GROSS PRODUCTION TAXES ON OIL AND NATURAL GAS WERE DOWN 20% FROM THIS TIME LAST YEAR, AND THE 5TH CONSECUTIVE MONTHLY DROP; YET, OUR STATE’S ECONOMY STILL LOOKS PRETTY STRONG.  ACCORDING TO THE STATE TREASURER’S OFFICE, DESPITE REVENUES FROM OIL AND GAS FALLING BY DOUBLE DIGITS, OVERALL TAX COLLECTIONS, WHICH IS A LEADING SIGN OF OUR ECONOMY’S STRENGTH, WERE UP BY CLOSE TO 8%.  WHEN WE RETURN, I SIT DOWN WITH THE CEO OF AMERICA’S SECOND LARGEST NATURAL GAS PRODUCER, CHESEAPEAKES AUBREY MCCLENDON.