The Final Energy Frontier
by Matt Jenkins
The end of the oil and gas age is in sight. But a rough and wild ride still lies ahead.
This year, a wave of apocalyptic hurricanes slammed into the Gulf Coast, Cuba and Mexico and tore apart the lives of millions of people. The majority of us, however, felt the tragedy most keenly at the gas pump, as oil production in the Gulf almost completely shut down and gasoline prices nosed past $3 a gallon.
Prices are now edging back down, Congress has dutifully called gasoline company executives on the carpet over allegations of price gouging, and some of the sense of panic has begun to recede. Even so, there has been a quiet but significant acknowledgment that, in terms of energy, things will never be the same.
For almost half a century, various people, beginning with a Shell geophysicist named M. King Hubbert, have raised the prospect of "peak oil" — when the amount of oil that we can pump out of the ground reaches its peak and then begins falling, and is no longer able to meet demand.
In the United States, oil production peaked in 1970, as Hubbert predicted, and has been dropping ever since. We have made up for that shortfall with oil imported from foreign countries, which now accounts for more than 60 percent of U.S. supply. But credible predictions — including official utterances from the energy giant BP — see worldwide oil supply peaking within the next 15 years.
The concept of peak oil has at times been associated with lunatic end-of-the-world prophecies. But it is now axiomatic in the oil industry itself — as is the prospect of peak natural gas. At an energy conference this June, Lee Raymond, the head of ExxonMobil, told reporters that "Gas production has peaked in North America." Some estimates now put worldwide peak gas production somewhere between 2015 and 2035.
Even though oil and gas production in the U.S. may have peaked, it’s far from over. The West’s reserves of oil, gas and coal are still abundant. And as the Gulf of Mexico and other areas are tapped out, energy companies are eyeing the Rocky Mountain states to make up for the shortfall.
In 2004, the Bureau of Land Management approved 6,452 wells on federal land. In 2005, that number increased by nearly 9 percent, to 7,018. The demand for drill rigs is so high that drilling companies are importing them from as far away as China (HCN, 10/17/05: Overseas drill rigs head for the West). And it’s not going to slow down anytime soon: The BLM projects that it will receive 9,200 drilling applications next year.
But the current boom is itself a sign of how energy companies are turning their attention to more marginal supplies. "We’re seeking many more permits now than we used to in the old days," says Paul Matheny, a vice president at Questar Corporation, "because you have to drill more wells to get the same amount of gas." In the past three years, the number of drill rigs at work in the West has risen 63 percent, but natural gas production is down 2 percent.
It is the energy equivalent of running to stay in place, and as time goes on, we’ll only be running harder. In this issue, the second of a two-part series, we look at what this game of diminishing returns means for the West — and also at the glimmer of a brighter, more sustainable future.
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