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Report: U.S. energy independence unlikely

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U.S. energy independence is unlikely, according to a new analysis — not because of a lack of fossil fuels in the ground, but because the rate at which they can be produced will be insufficient to meet the nation's needs.

That's the conclusion of a new report, "Drill, Baby, Drill: Can Unconventional Fuels Usher in a New Era of Energy Abundance?" released Feb. 19 by the Post Carbon Institute. The California-based nonprofit anticipates a post-carbon world and conducts analysis and education to help society prepare for it.

The current report, authored by geoscientist J. David Hughes, looks at the claims for and reality of shale gas, tight oil or shale oil, tar sands and other resources.

Hughes studied shale gas wells most extensively, analyzing production data for 65,000 wells in 31 shale plays.

Shale gas has grown impressively, he wrote, from about 2 percent of U.S. production in 2000 to nearly 40 percent today.

However, the author wrote, the best shale gas plays are relatively rare. Two-thirds of that production comes from just three plays: the Barnett, the Haynesville and the Marcellus shales. Twenty-seven other plays contribute just 34 percent of the total.

Of those three, the Haynesville, first producing in 2008 and fabulously productive, already is in decline and the Barnett, producing since 2000, has plateaued, both in spite of growing numbers of wells.

In addition, shale gas wells have a high decline rate, Hughes wrote. Because of that, they require continuous inputs of capital: $42 billion a year to maintain production, compared with the value of 2012 output of $32.5 billion.

Tight oil, or shale oil, now makes up 20 percent of the nation's oil production, reversing years of decline.

More than 80 percent of the production comes from two shale plays, the Bakken and the Eagle Ford, while 19 others produce less than 20 percent, "illustrating the fact that high-productivity tight oil plays are in fact quite rare," Hughes wrote.

Like shale gas wells, tight oil wells decline quickly, he wrote, and require high capital inputs to maintain production volumes.

"In short, tight oil production from these plays will be a bubble of about ten years' duration," he wrote.

He noted in addition that the U.S. Energy Information Administration sees U.S. domestic crude oil production—including tight oil — peaking at 7.5 million barrels per day, or mbd, in 2019, below the U.S. peak of 9.6 mbd in 1970, and that the share of domestically produced crude oil is projected to be lower in 2040 than it is today, at 32 percent.

Finally, tar sands oil, primarily imported to the U.S. from Canada, requires very high levels of capital inputs. The best areas already are being exploited, Hughes wrote, and the economics of the vast remaining resource are questionable.

Other unconventional fossil resources — oil shale, coalbed methane, gas hydrates, and Arctic oil and gas—as well as technologies like coal- and gas-to-liquids and in situ coal gasification, along with deepwater oil and gas, have minimal growth prospects.

The U.S. is a mature province for oil and gas, Hughes concluded.

While new technologies have provided some breathing room, "the projections by pundits and some government agencies that these technologies can provide endless growth heralding a new era of ‘energy independence,' in which the U.S. will become a substantial net exporter of energy, are entirely unwarranted based on the fundamentals," he continued. "At the end of the day fossil fuels are finite and these exuberant forecasts will prove to be extremely difficult or impossible to achieve."

The sooner the real problems are recognized by political leaders, the sooner real solutions to our long term energy problem can be implemented, he added.

The executive summary and full text of "Drill, Baby, Drill" may be downloaded from the Post Carbon Institute website.