may june 2014 edition foreign affairs

5/20/2018 May June 2014 Edition Foreign Affairs

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MAY/JUNE 2014

FOREIGNAFFAIRS .COM

Shale andthe Futureof Energy

BigFracking

Deal

Ukraine and World Order

Paul Kagame on Rwanda's Rebirth

J AV A D Z A R I F : W H AT I R A N W A N T S

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FOREIGNAFFAIRS .COM

Shale andthe Futureof Energy

BigFracking

Deal

Ukraine and World Order

Paul Kagame on Rwanda's Rebirth

J AV A D Z A R I F : W H AT I R A N W A N T S

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SHALEANDTHEFUTUREOFENER

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May/June 2014

Volume 93, Number 3

SHALE AND THE FUTURE OF ENERGY

Power to the People 2

What Will Fuel the Future?Gideon Rose and Jonathan Tepperman

Welcome to the Revolution 3

Why Shale Is the Next ShaleEdward L. Morse

The United States of Gas 9

Why the Shale Revolution Could Have Happened Only in America

Robert A. Hefner III

Dont Just Drill, BabyDrill Carefully 15

How to Make Fracking Safer for the EnvironmentFred Krupp

Electric Avenue 21

How to Make Zero-Emissions Cars Go Mainstream

David M. Levinson

Nuclear Freeze 27

Why Nuclear Power Stalledand How to Restart ItPer F. Peterson, Michael R. Laufer, and Edward D. Blandford

Powering the Pentagon 33

Creating a Lean, Clean Fighting Machine

Sharon E. Burke


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I N T E R N A T I O N A L M O N E T A R Y F U N D

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May/June 2014

ESSAYS

Rebooting Rwanda 40

A Conversation With Paul Kagame

What Iran Really Wants 49

Iranian Foreign Policy in the Rouhani EraMohammad Javad Zarif

Russias Latest Land Grab 60

How Putin Won Crimea and Lost UkraineJeffrey Mankoff

The Return of Geopolitics 69

The Revenge o the Revisionist PowersWalter Russell Mead

The Illusion of Geopolitics 80

The Enduring Power o the Liberal OrderG. John Ikenberry

Near Eastern Promises 92

Why Washington Should Focus on the Middle EastKenneth M. Pollack and Ray Takeyh

Far Eastern Promises 106

Why Washington Should Focus on AsiaKurt M. Campbell and Ely Ratner

Show Them the Money 117

Why Giving Cash Helps Alleviate PovertyChristopher Blattman and Paul Niehaus

ON FOREIGNAFFAIRS.COM

Brian Taylor on

Vladimir Putins politicalfuture.

Victor Gaetan on the

Turkish Islamic scholarFethullah Gulen.

Brenda Shaffer on

Europes real energyproblem.
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May/June 2014

Reforming the NSA 127How to Spy After Snowden

Daniel Byman and Benjamin Wittes

How the Kurds Got Their Way 139Economic Cooperation and the Middle Easts New Borders

Marina Ottaway and David Ottaway

The Rise of Rwandas Women 150Rebuilding and Reuniting a Nation

Swanee Hunt

REVIEWS & RESPONSES

Capital Punishment 158Why a Global Tax on Wealth Wont End InequalityTyler Cowen

Feeling Triumphalist in Tokyo 165

The Real Reasons Nationalism Is Back in JapanMargarita Estvez-Abe

Washingtons Weak-State Agenda 172A Decade o Distraction?James A. Schear; Michael J. Mazarr

Recent Books 176

Letters to the Editor 199

Foreign Affairs . . .will tolerate wide differences of opinion. Its articles will not represent any consensusof beliefs. What is demanded of them is that they shall be competent and well informed, representing honestopinions seriously held and convincingly expressed.. . .It does not accept responsibility for the views in anyarticles, signed or unsigned, which appear in its pages. What it does accept is the responsibility for givingthem a chance to appear.

Archibald Cary Coolidge, Founding EditorVolume 1, Number 1 September 1922


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May/June 2014 Volume 93, Number 3

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Born to a family o Oklahoma oil men, ROBERT HEFNERearned a geology degree from the University o Oklahoma

in 1957 and went on to pioneer ultra-deep natural gasexploration, drilling some o the worlds deepest wellsand unlocking reserves 30,000 feet below the earthssurface. Today, he is the owner o the GHK Companies,an oil and gas firm based in Oklahoma City, as well as anauthor, philanthropist, and collector o modern Chineseart. In The United States o Gas (page 9), he explainswhy the shale revolution could have taken off only in theUnited States.

In 2010, SHARON BURKEwas named the first-ever U.S.assistant secretary o defense for operational energy plansand programs, tasked with helping the Pentagon shrinkits vast energy footprint. A graduate o Williams Collegeand Columbia Universitys School o International andPublic Affairs, Burke has served on the State DepartmentsPolicy Planning Staff and as a speechwriter for the secretaryo defense. In Powering the Pentagon (page 33), shetells the little-known story o the U.S. militarys drive forenergy efficiency and technological innovation.

MOHAMMAD JAVAD ZARIF became Irans minister o foreignaffairs in August 2013. After studying at San FranciscoState University and earning a doctorate from the Univer-sity o Denver, he went on to become one o Irans topdiplomats, serving as a deputy minister o foreign affairsfrom 1992 to 2002 and as Irans ambassador to the UnitedNations from 2002 to 2007. In What Iran Really Wants

(page 49), he lays out the drivers o Iranian foreign policyin the Rouhani era and argues that Iran has a historicopportunity to repair its relations with the West.

A product o Japan and Spain, MARGARITA ESTVEZ-ABEis a graduate o Keio University, in Japan, and HarvardUniversity and is currently a professor o political scienceat the Maxwell School o Citizenship and Public Affairs atSyracuse University. The author o Welfare and Capitalism

in Postwar Japan, she has also written extensively on thecomparative political economy o gender. In FeelingTriumphalist in Tokyo (page 165), she explores the trou-bling reemergence o Japanese nationalism under PrimeMinister Shinzo Abe.

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Power to the PeopleGideon Rose and Jonathan Tepperman 2

Welcome to the RevolutionEdward L. Morse 3

The United States o GasRobert A. Hefner III 9

Dont Just Drill, BabyDrill CarefullyFred Krupp 15

Electric AvenueDavid M. Levinson 21

Nuclear FreezePer F. Peterson, Michael R. Laufer, andEdward D. Blandford 27

Powering the Pentagon

Sharon E. Burke 33

SHALE AND THE FUTURE OF ENERGY

The shale revolution inoil and gas production ishere to stay. It will spreadmore rapidly than mostthink. And all of that is a

good thing for the world. Edward Morse


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2

GIDEON ROSE is Editor of Foreign Affairs.

JONATHAN TEPPERMAN is Managing Editorof Foreign Affairs.

Shale may be the biggest energystory today, but it is not the only one.For the first time in a century, thanksto new technologies, the question of

how cars, buses, trucks, and planes willbe powered is up for grabs. The onceunassailable dominance of the internalcombustion engine is being challengedfrom many angles. Just who or whatwins will have enormous implications,and David Levinson of the Universityof Minnesota handicaps the race. Mean-while, nuclear energylong touted as

the worlds potentially greenest powersourceis also in flux, and Per Peterson,Michael Laufer, and Edward Blanforddescribe the promise and pitfalls of thatsector. To round out the package, finally,we enlisted U.S. Assistant Secretary ofDefense Sharon Burke to explain thecrucial role of the Defense Departmentboth as the United States largest energyconsumer and as a major incubator ofcutting-edge technologies.

In this package, as in others, our aimhas not been to pick winners or losers;the market is making those decisionsalready, in real time. Rather, by bringingthe worlds best minds to bear on themost important topics, we seek to offerspecialists and general readers alike anaccurate guide to what will fuel the

future, and why.

Power to the People

What Will Fuel the Future?

Gideon Rose andJonathan Tepperman

When we started putting to-gether a package on therapidly evolving future of

energy, our first thought was to surveyexciting innovations across the sector. Butthe closer we looked, the more we realizedthat one big thingshaleloomed abovethe rest. So we decided the occasion calledfor hedgehogs rather than foxes, andcurated the package accordingly.

To kick it off, Citis Edward Morse,one of the worlds leading energy experts,explains just how much U.S. oil andnatural gas production from shale hasgrown in recent years, why the growthwill continue, and how that will drivea fundamental change in global energymarkets. Then, Robert Hefner of the Companies, who has himself playeda key role in the development of themodern U.S. natural gas sector, describeswhy the revolution could have taken off

only in the United States and why othercountries will struggle to replicate itssuccess. And Fred Krupp, the presidentof the Environmental Defense Fund,runs through the real environmentaldangers the shale revolution entailsand shows how they canand mustbe successfully addressed.

Return to Table of Contents


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May/June 2014 3

EDWARD L. MORSEis Global Head of

Commodities Research at Citi.

ten million barrels a day asthe United States overtakesRussia and Saudi Arabiaand becomes the worlds

largest oil producer. AndU.S. production o naturalgas liquids, such as propane and butane,has already grown by one million barrelsper day and should grow by anothermillion soon.

What is unfolding in reaction isnothing less than a paradigm shift inthinking about hydrocarbons. A decade

ago, there was a near-global consensusthat U.S. (and, for that matter, non-)production was in inexorable decline.Today, most serious analysts are confi-dent that it will continue to grow. Thegrowth is occurring, to boot, at a timewhen U.S. oil consumption is falling.(Forget peak oil production; given acombination o efficiency gains, envi-ronmental concerns, and substitution bynatural gas, what is foreseeable is peakoil demand.) And to cap things off, thecosts o finding and producing oil andgas in shale and tight rock formationsare steadily going down and will dropeven more in the years to come.

The evidence from what has beenhappening is now overwhelming.Efficiency gains in the shale sector have

been large and accelerating and are nowhovering at around 25 percent per year,meaning that increases in capital expen-ditures are triggering even more potentialproduction growth. It is clear that vastamounts o hydrocarbons have migratedfrom their original source rock andbecome trapped in shale and tight rock,and the extent o these rock formations,

like the extent o the original source rock,is enormouscontaining resources farin excess o total global conventional

Welcome to the

Revolution

Why Shale Is the Next Shale

Edward L. Morse

Despite its doubters and haters,the shale revolution in oil and

gas production is here to stay.In the second hal o this decade, more-over, it is likely to spread globally morequickly than most think. And all o thatis, on balance, a good thing for the world.

The recent surge o U.S. oil andnatural gas production has been nothingshort o astonishing. For the past threeyears, the United States has been theworlds fastest-growing hydrocarbonproducer, and the trend is not likelyto stop anytime soon. U.S. natural gasproduction has risen by 25 percent since2010, and the only reason it has tempo-rarily stalled is that investments arerequired to facilitate further growth.Having already outstripped Russia asthe worlds largest gas producer, by theend o the decade, the United States

will become one o the worlds largestgas exporters, fundamentally changingpricing and trade patterns in globalenergy markets. U.S. oil production,meanwhile, has grown by 60 percentsince 2008, climbing by three millionbarrels a day to more than eight millionbarrels a day. Within a couple o years, itwill exceed its old record level o almost

GASBY

DEADTYPE

FROMTHE

NOUNPROJECT



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Edward L. Morse

4

proven oil reserves, which are 1.5 trillionbarrels. And there are already signs thatthe technology involved in extractingthese resources is transferable outside

the United States, so that its interna-tional spread is inevitable.

In short, it now looks as though thefirst few decades o the twenty-firstcentury will see an extension o thetrend that has persisted for the past fewmillennia: the availability o plentifulenergy at ever-lower cost and withever-greater efficiency, enabling major

advances in global economic growth.

WHY THE PAST IS PROLOGUE

The shale revolution has been verymuch a made in America phenomenon.In no other country can landowners alsoown mineral rights. In only a few othercountries (such as Australia, Canada, andthe United Kingdom) is there a tradi-tion o an energy sector featuring manyindependent entrepreneurial companies,as opposed to a few major companies ornational champions. And in still fewercountries are there capital markets ableand willing to support financially riskyexploration and production.

This powerful combination oindigenous factors will continue to driveU.S. efforts. A further 30 percent in-

crease in U.S. natural gas production isplausible before 2020, and from thenon, it should be possible to maintain aconstant or even higher level o pro-duction for decades to come. As foroil, given the research and developmentnow under way, it is likely that U.S.production could rise to 12 millionbarrels per day or more in a few years

and be sustained there for a long time.(And that figure does not includeadditional potential output from

deep-water drilling, which is also seeinga renaissance in investment.)

Two factors, meanwhile, shouldbring prices down for a long time to

come. The first is declining productioncosts, a consequence o efficiency gainsfrom the application o new and grow-ing technologies. And the second is thespread o shale gas and tight oil produc-tion globally. Together, these suggest asustainable price o around $5.50 perthousand cubic feet for natural gas inthe United States and a trading range

o $70$90 per barrel for oil globallyby the end o this decade.These trends will provide a significant

boost to the U.S. economy. Householdscould save close to $30 billion annuallyin electricity costs by 2020, compared tothe U.S. Energy Information Adminis-trations current forecast. Gasoline costscould fall from an average o five per-cent to three percent o real disposablepersonal income. The price o gasolinecould drop by 30 percent, increasingannual disposable income by $750, onaverage, per driving household. Theoil and gas boom could add about 2.8percent in cumulative growth by2020 and bolster employment bysome three million jobs.

Beyond the United States, the spread

o shale gas and tight oil exploitationshould have geopolitically profoundimplications. There is no longer anydoubt about the sheer abundance o thisnew accessible resource base, and thatrecognition is leading many govern-ments to accelerate the delineation anddevelopment o commercially availableresources. Countries motivations are

diverse and clear. For Saudi Arabia,which is already developing its firstpower plant using indigenous shale gas,


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Welcome to the Revolution

May/June 2014 5

open and release the hydrocarbonstrapped insideposes potential envi-ronmental risks, such as the draining orpolluting o underground aquifers, thespurring o seismic activity, and thespilling o waste products during theiraboveground transport. All these riskscan be mitigated, and they are in factbeing addressed in the industrys evolv-ing set o best practices. But that messageneeds to be delivered more clearly, and

best practices need to be implementedacross the board, in order to head offlocal bans or restrictive regulation thatwould slow the revolutions spread orminimize its impact.

As for declining rates o production,fracking creates a surge in productionat the beginning o a wells operation anda rapid drop later on, and critics argue

that this means that the revolutionspurported gains will be illusory. Butthere are two good reasons to think

the exploitation o its shale resources canfree up more oil for exports, increasingrevenues for the country as a whole.For Russia, with an estimated 75 billionbarrels o recoverable tight oil (50 percentmore than the United States), produc-tion growth spells more governmentrevenue. And for a host o other coun-tries, the motivations range fromreducing dependence on imports toincreasing export earnings to enabling

domestic economic development.

RISKY BUSINESS?

Skeptics point to three problems thatcould lead the fruits o the revolutionto be left to wither on the vine: environ-mental regulation, declining rates oproduction, and drilling economics.But none is likely to be catastrophic.

Hydraulic fracturing, or frackingthe process o injecting sand, water, andchemicals into shale rocks to crack them

Pipe dreams: a natural gas well in Sichuan, China, November 2013

REUTERS

/S

TRING

ER


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Edward L. Morse

6

and within a few years, that level couldbe under $40 per barrel.

THINK GLOBALLY

Since shale resources are found aroundthe globe, many countries are trying toduplicate the United States success inthe sector, and it is likely that some,and perhaps many, will succeed. U.S.recoverable shale resources constituteonly about 15 percent o the globaltotal, and so i the true extent andduration o even the U.S. windfall are

not yet measurable, the same applieseven more so for the rest o the world.Many countries are already taking earlysteps to develop their shale resources,and in several, the results look promis-ing. It is highly likely that Australia,China, Mexico, Russia, Saudi Arabia,and the United Kingdom will see mean-ingful production before the end othis decade. As a result, global trade inenergy will be dramatically disrupted.

A few years ago, hydrocarbon exportsfrom the United States were negligible.But by the start o 2013, oil, natural gas,and petrochemicals had become thesingle largest category o U.S. exports,surpassing agricultural products, trans-portation equipment, and capital goods.The shift in the U.S. trade balance for

petroleum products has been stunning.In 2008, the United States was a netimporter o petroleum products, takingin about two million barrels per day; bythe end o 2013, it was a net exporter,with an outflow o more than two millionbarrels per day. By the end o 2014, theUnited States should overtake Russia asthe largest exporter o diesel, jet fuel,

and other energy products, and by 2015,it should overtake Saudi Arabia as thelargest exporter o petrochemical

that high production will continue fordecades rather than years. First, theaccumulation o fracked wells with along tail o production is building up a

durable base o flows that will continueover time, and second, the economicso drilling work in favor o drilling at ahigh and sustained rate o production.

Finally, some criticize the economicso fracking, but these concerns have beenexaggerated. It is true that through 2013,the upstream sector o the U.S. oil andgas industry has been massively cash-

flow negative. In 2012, for example, theindustry spent about $60 billion morethan it earned, and some analysts believethat such trends will continue. But thecosts were driven by the need to acquireland for exploration and to pursueunproductive drilling in order to holdthe acreage. Now that the land-grabdays are almost over, the industrys cashflow should be increasingly positive.

It is also true that traditional findingand development costs indicate thatnatural gas prices need to be above$4 per thousand cubic feet and oil pricesabove $70 per barrel for the economicso drilling to workwhich suggests thatabundant production might drive pricesdown below what is profitable. But asdemand grows for natural gasfor

industry, residential and commercialspace heating, the export market, powergeneration, and transportationpricesshould rise to a level that can sustainincreased drilling: the $5$6 range,which is about where prices were thispast winter. Efficiency gains stemmingfrom new technology, meanwhile, aredriving down break-even drilling costs.

In the oil sector, most drilling nowbrings an adequate return on invest-ment at prices below $50 per barrel,


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Welcome to the Revolution

May/June 2014 7

will be among the latter, as the UnitedStates moves from having had a nethydrocarbon trade deficit o some ninemillion barrels per day in 2007, to having

one o under six million barrels today,to enjoying a net positive position by2020. Lost market share and lower pricescould pose a devastating challenge tooil producers dependent on exports forgovernment revenue. Growing popula-tions and declining per capita incomesare already playing a central role intriggering domestic upheaval in Iraq,

Libya, Nigeria, and Venezuela, and inthat regard, the years ahead do notlook promising for those countries.

At the same time, the U.S. economymight actually start approaching energyindependence. And the shale revolutionshould also lead to the prevalence omarket forces in international energypricing, putting an end to s 40-yeardominance, during which producerswere able to band together to raiseprices well above production costs,with negative consequences for theworld economy. When it comes to oiland natural gas, we now know thatthough much is taken, much abidesand the shale revolution is only justgetting started.

feedstocks. The U.S. trade balance foroil, which in 2011 was $354 billion,should flip to +$5 billion by 2020.

By then, the United States will be a

net exporter o natural gas, on a scalepotentially rivaling both Qatar andRussia, and the consequences will beenormous. The U.S. gas trade balanceshould shift from $8 billion in 2013to +$14 billion by 2020. U.S. pipelineexports to Mexico and eastern Canadaare likely to grow by 400 percent, toeight billion cubic feet per day, by 2018,

and perhaps to ten billion by 2020. U.S.exports o liquefied natural gas ()look likely to reach nine billion cubicfeet per day by 2020.

Sheer volume is important, but not asmuch as two other factors: the pricingbasis and the amount o natural gas thatcan be sold in a spot market. Most trade links the price o natural gas to theprice o oil. But the shale gas revolutionhas delinked these two prices in theUnited States, where the traditional7:1 ratio between oil and gas prices hasexploded to more than 20:1. That makes exports from the United Statescompetitive with exports fromQatar or Russia, eroding the oil link in pricing. Whats more, traditional contracts are tied to specific desti-

nations and prohibit trading. U.S. (and likely also new from Australiaand Canada) will not come with anti-competitive trade restrictions, and soa spot market should emerge quickly.And U.S. exports to Europe shoulderode the Russian state oil companyGazproms pricing hold on the conti-nent, just as they should bring down

prices o natural gas around the world.In the geopolitics o energy, thereare always winners and losers. O


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May/June 2014 9

ROBERT A. HEFNER III is Founder and CEOof the GHK Companies, the author of The Grand

Energy Transition, and the creator of thedocumentary of the same name.

2012. Moreover, becausenatural gas currentlysupplies about 25 percento the total energy con-

sumed in the United States(a figure that is rapidlygrowing), the boom issaving U.S. consumershundreds o billions o dollars a year.Combined with the other benefits, thosesavings have given the United States along-term economic advantage over itscompetitors and helped the country

recover from the Great Recession.As much as other countries may envythis catalyst for domestic growth, theywill not be able to replicate it, becauseonly the United States possesses theunique ingredients necessary to fullydevelop shale resources. A legal systemthat enshrines the private ownership oland and the resources below it, alongwith open capital markets and a reason-able regulatory system, has led to thegrowth o thousands o independent oiland gas companies, all o which are inintense competition with one another.As a result, nearly four million oil andgas wells have been drilled in the UnitedStates, versus 1.5 million in the rest othe world. The bustle o drilling activityin the United States has also led to

increases in innovation within the indus-try on an order o magnitude that othercountries can only dream of.

Although other places, such as Chinaand Europe, have substantial shale re-sources, they dont have the entrepreneur-friendly system needed to develop thoseresources quickly and productively. Solong as politicians dont get in the way,

then, the United States will profit hand-somely from the shale revolution fordecades to come.

The United States

of Gas

Why the Shale RevolutionCould Have Happened Onlyin America


Less than a decade ago, the futureo American energy looked bleak.Domestic production o both

oil and gas was dwindling, and bigU.S. energy companies, believing theirfortunes lay offshore, had long sinceturned away from the mainland. Butthen something remarkable occurred: asurge o innovation allowed companiesto extract vast quantities o natural gastrapped in once-inaccessible depositso shale. The resulting abundance drovedown U.S. gas prices to about one-thirdo the global average.

Natural gas has been a godsend forthe United States. Already, gas hasspurred a manufacturing renaissance,with investors spending and planning

hundreds o billions o dollars on newfacilities such as chemical, steel, andaluminum plants. The shale boom hascreated hundreds o thousands o newhigh-paying, middle-class jobs, and now,more than one million Americans workin the oil and gas industryan increaseo roughly 40 percent between 2007 and

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10

BEHIND THE BOOM

The story o Americas shale revolutioninvolves classic Yankee ingenuityalthough not on the part o big oil.

Beginning in the 1970s, productionfrom onshore U.S. oil and gas fieldsdeclined as those fields became whatthe industry calls mature. So themajor oil companies were forced toabandon the development o newresources on U.S. soil. In order to findgiant new oil fields, they shifted theirexploration efforts to remote foreign

lands and deep offshore waters. Suchinvestments were enormously expensiveand often required decades to negotiateand develop. In order to build thecapital resources and global reach neces-sary to deal with national governmentsand complete mammoth projects, themajor oil companies began to acquireor merge with their peers. Oil, theyrecognized, was usually cheaper to buyon Wall Street than find in the ground.

Over the next few decades, however,these companies became excessivelybureaucratic and developed tunnelvision. Focused principally on replac-ing their dwindling oil reserves, theyinvested their capital in giant foreigndeposits, such as the Kashagan field,in Kazakhstan, which has an estimated

13 billion barrels o recoverable oil; itsfirst phase o development alone cost$50 billion.

Meanwhile, smaller, independentcompanieswhich earn the lions shareo their revenue at the wellhead andlittle o it downstream (at the refiningstage, for example)were forced toinnovate or die. Beginning in the late

1990s, natural gas prices were climbing,and the companies were learning thatthe United States underground shale

formations contained vast volumes onatural gas. So such firms as the Companies (o which I am the founderand ) attempted to crack open the

shale in vertical wells and release the gasby injecting sand, water, and chemicalsinto the rock, a process known as hydrau-lic fracturing, or fracking. But it simplywasnt profitable.

Then, George Mitchell, an indepen-dent oil man wildcatting in the Barnettformation, in Texas, began to break thecode. His innovation was to drill horizon-

tally into the shale, exposing thousandso feet o gas-bearing rock, rather thanthe 100 feet or so (or often just ten or20 feet) encountered in a vertical well.In short order, gas prices got even higherand Mitchells techniques got even better,and he started achieving some commer-cial success. In 2002, Devon Energy,sensing the coming revolution, boughtMitchells company and ramped upthe innovation necessary to develop theBarnett formation. Chesapeake Energyand other independent companies soon

joined in, thus kicking off the U.S. shaleboom. Within the decade, Chesapeakesurpassed ExxonMobil as the largest U.S.natural gas supplier, and not long after,the United States surpassed Russia asthe worlds largest natural gas producer.

Not only did independent companiestransform the natural gas industry; theydid the same with oil. The newfoundgas supplies had caused the price oU.S. natural gas to drop from a high oover $13.50 per thousand cubic feet in2008 to around $3$4 per thousandcubic feet in 2009. Natural gas hadbecome so cheap that the independents

were again forced to innovate to stayalive. With gas selling at the equivalento less than $25 per barrel o oil, but oil


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The United States of Gas

May/June 2014 11

governments. In the United States, anycompany can strike a deal with a willinglandowner to lease the rights to the oiland gas beneath his land and start drill-ing, a setup that has spawned Darwiniancompetition among entrepreneurs inorder to survive and grow. And so theUnited States boasts more than 6,000independent oil and gas companies andan equal number o associated servicecompanies, compared with the handful

o independents and service companiesthat exist overseas.

At each o these American companieswells, dozens o minds work on eachpart o the development process. Using3-D models o subsurface seismic activity,engineers, often remotely and in realtime, monitor the exact location thedrill bit, so that it can stay in the most

prolific zones o the shale formation, andoptimize the size o the cracks createdby fracking, so that they are neither too

selling at about $100 per barrel, theybegan applying the technologies theyhad successfully developed for gas toextract oil from shale formations withlow permeability, known in the industryas tight reservoirs. And the resultswere similarly impressivesuch thatthe United States now stands to surpassRussia as the worlds second-biggest oilproducer by the end o the decade and,according to the International Energy

Agency, could even surpass Saudi Arabiato become the worlds largest producerby then.

None o this could have happenedwithout the United States unique legalframework. It grants landowners therights not only to the surface o theirproperty but also to everything belowall the way, theoretically, to the center

o the earth. In the rest o the world,these mineral rights are virtually allowned, or strictly controlled, by sovereign

Made in America: a fracking site in Tioga, North Dakota, November 2013

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only hundreds o horizontal wells. Andbecause each borehole runs horizontallyfor about one mile (and sometimes eventwo miles) and is subjected to ten or

more fracking injections, companies inthe United States have fracked about150,000 miles o shale about two milliontimes. That adds up to around a thousandtimes as much shale exposed inside theUnited States as outside it.

LESSER RIVALS

It is highly unlikely that other countries

will ever catch up to the United States.True, China and Europe sit on vastshale resources (in Chinas case, possi-bly containing more natural gas thanU.S. reserves). But those resources wontget extracted anytime soon. Since othercountries cannot sustain thousands oindependent oil and gas companies,their resources must be exploited bybureaucratic, slow-moving nationalcompanies and international giants(which have to deal with even morebureaucratic governments and oftenByzantine legal and regulatory sys-tems). Hammering out huge shaledeals in foreign countries and thencompleting the resulting projects willtake decades. Even in China, wherethe government exercises near-complete

control o both surface and subsurfaceland use, only a few national companiesand a few more foreign ones are planningon developing shale gas. And becausefewer minds will be working on feweroperations, it will take longer to move upthe learning curve and the productivitygains will be smaller than in the UnitedStates. So costs will be high, and

profits, thin.In many democracies, developmentis also being slowed by the not in my

large nor too small. Its as i each wellhas its own miniature Silicon Valley.Having been repeated thousands otimes, these and many other techniques

have allowed companies to maximizetheir productivity, cutting their costsand well completion times in hal fromwhere they began.

Consider how much can change inone year alone. In 2013, on properties inOklahoma in which the Companieshold interests covering 150 square miles,one large U.S. independent company

drilled and completed over 100 horizon-tal wells. Had those wells been drilledvertically, they would have exposedonly about 1,000 feet o shale, whereashorizontal drilling allowed nearly 100miles to be exposed. And rather thanperforming the 100 injections o frack-ing fluid that a vertical well would havemade possible, the company was ableto perform between 1,000 and 2,000 othem. The companys engineers alsotinkered with such variables as the typeo drill bits used, the weight appliedwhile drilling, the rotation speed o thedrill, and the size and number o frackingtreatments. Thanks to that continuousexperimentation, plus the savings fromscale (for example, ordering tubular steelin bulk), the company managed to slash

its costs by 40 percent over 18 months andstill boost its productivity. The result:in 2014, six or seven rigs will be able todrill more wells and produce as muchoil and gas as 12 rigs were able to theyear before.

Since the shale boom began, over adecade ago, companies have drilled about150,000 horizontal wells in the United

States, a monumental undertaking thathas cost approximately $1 trillion. Therest o the world, however, has drilled


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The United States of Gas

May/June 2014 13

that these European countries havesaddled themselves with a costly, notvery efficient energy infrastructure thatwill act as a brake on long-term economic

growth. And so while the United Statesreindustrializes, Europe, without newpolitical leaders who better understandthe economics o energy, may well facedecades o deindustrialization andeconomic stagnation.

THE GIFT THAT KEEPS ON GIVING

The shale revolution has its naysayers,

who point to the cyclical nature o naturalgas prices in the past to argue that futureprice spikes could render the fuel unreli-able and costly. But past volatility resultedfrom stringent government price controlsfollowed by a complex process o deregu-lation and from the high risk involved inexploring for pockets o conventionalnatural gas. In other words, prices weresubject to both the vagaries o nationalpolicy and the complexities o subsur-face geology.

Neither o those problems exists today,since price controls were abandoned longago and U.S. companies now know exactlywhere vast quantities o accessible naturalgas lie, and so the extraction o gas is areliable manufacturing process ratherthan a crapshoot. The future price o

natural gas will be determined not somuch by the size o the supplies o gasfound, as was the case with conventionalnatural gas, as by the manufacturing costo extraction. Prices, therefore, shouldstay steady in the long run, possiblyeven for the next hal century. Theymay even fall as the industry continuesto lower costs and improve productivity

at the wellhead. Additional innovationdownstreamin the transportation,distribution, and consumption sectors

backyard syndrome. Unlike Oklahomansand Texans, who have grown up with theoil and gas industry, foreign populationsare usually unfamiliar with it; most o

the 1.5 million oil and gas wells outsidethe United States are located either indeep offshore waters or remote onshoreareas. And because governments in othercountries own or control virtually all theunderground resource rights, landownershave no skin in the game. Receiving noneo the economic benefits and facing onlythe downsides o intrusive projects in their

own backyards, they justifiably tend toresist drilling projects.Such is the case in Europe, where the

problem is magnified by a hyperactivegreen movement determined to blockthe development o shale gas. France hasbanned fracking entirely, and Germanyhas put a de facto moratorium in place.Without a massive change in attitude,Europe will take even longer than Chinato develop its shale gas resources. Eveni it does develop them, the results willbe less robust and very slow in coming.

Europe is also burdened by misguidedenergy policies. At the beginning o thiscentury, European politicians arguedthat their continent should lead theworld in shifting to green energy andreducing carbon dioxide emissions. They

committed tens o billions o dollarso taxpayers money to subsidize greenenergy projects, principally to developwind and solar power, that were not yetefficient or reliable enough to compete.Unfortunately, it is doubtful that Europesmove toward green energy will resultin the utopian future its advocates havepredicted. In order to meet growing

power demands, dirty coal freed up bythe U.S. shift to natural gas is alreadyfinding its way to Europe. The reality is


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growing economic advantage could lastuntil the middle o this century or beyond.

Unless, that is, it is squandered. InCalifornia and New York, two o the

countrys largest economies, antifrack-ing activists and state politicians havemanaged to slow the development oshale resources to a snails pace. Bothstates contain large shale formations(the Monterey in California and theMarcellus in New York), the develop-ment o which would provide a majorboost to both state and national economic

growth. Politicians need to recognizethat today America has an unprecedentedopportunity for long-term economicgrowth that can generate good middle-class jobs, help it leave the GreatRecession behind for good, and grantit geopolitical advantages over itscompetitors for decades to come. Itwould be a shame not to seize it.

has not yet even truly begun. When itdoes, efficiency gains will generate billionso dollars more in consumer savings.

The bottom line is that thanks to

the shale revolution, the United Stateshas already insulated itsel from unpre-dictable fluctuations in global naturalgas prices and is coming close to doingso in terms o oil prices. Domestic oilshortages due to foreign natural disastersor political disruptions could somedaybecome a thing o the past, particularlyi natural gas starts fueling U.S. cars

and trucks. Growing energy indepen-dence will give Washington a leg up onits competitors. Should the flow o oilbe threatened by some event in theMiddle East, such as the fall o theSaudi regime, the United States willbe able to weather the storm better thanany other large economy.

Cheap and abundant natural gas addsto the countrys geopolitical capital in amore direct way: it significantly strength-ens the U.S. economy. Americans pay afraction o the price for natural gas thatthe rest o the worlds consumers do,saving as much as $300 billion annuallycompared with consumers in China andEurope. Already, the development othe United States enormous shale oiland gas reserves has boosted U.S.

by as much as one percent. In fact, with-out the growing oil and gas revolution,the U.S. economy would likely haveslipped back into recession and addedhundreds o thousands o fewer jobs.Today, most o the states enjoying theshale boom have lower levels o jobless-ness than the national average: thanksto drilling in the Bakken formation,

for example, North Dakotas unemploy-ment rate is only 2.6 percent, the lowestin the country. The United States


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May/June 2014 15

FRED KRUPP is President of the Environmental

Defense Fund. Follow him onTwitter @FredKrupp.

sector. Politicians fromboth parties, mean-while, are vying to bethe most enthusiastic

boosters o domesticnatural gas.

Yet these same experts and policy-makers are in danger o being blindsidedagain, by failing to grasp the extent o thegrowing concern among Americans overthe environmental costs o unconventionaloil and gas productiona crisis ofconfidence that threatens to halt the boom

in some states. From Pennsylvania toNorth Dakota, more and more people areexpressing concern about the environ-mental problems associated with thisproduction, including local air pollutionfrom drilling sites known as well pads,the contamination o drinking water fromspills or leaky wells, and noise and dustfrom trucks serving drilling sites.

Some U.S. communities and states,and even entire foreign countries, haveresponded to these worries by choosingto press pause on the development otheir unconventional oil and gas resources.New York State, which sits atop theMarcellus Shale, a rock formation thatextends through Pennsylvania to WestVirginia and holds an estimated 141 trillioncubic feet o recoverable natural gas,

imposed a statewide moratorium onfracking in 2010. Last year, in Colorado,the cities o Boulder and Fort Collinsvoted to ban fracking for at least fiveyears, and nearby Lafayette prohibitedall new oil and gas wells. Similar effortsare under way in other states, includingCalifornia. In 2011, France declared itsown moratorium on fracking; after its

2013 election, the German governmentdid the same, pending an environmentalrisk assessment. And although the British

Dont Just Drill,BabyDrillCarefully

How to Make Fracking Saferfor the Environment

Fred Krupp

The energy business has a wayo making smart people lookdumb. Experts were blindsided

by the shale revolution in the UnitedStates. For most o the last few decades,they had assumed that U.S. domesticenergy supplies were dwindling. Then,advances in horizontal drilling andhydraulic fracturing, or frackingtheinjection o high-pressure streams osand, water, and chemicals into under-ground shale and other rock to unlockoil and natural gas trapped theresignificantly boosted total U.S. naturalgas production, by as much as 25 percentin recent years, forcing many expertsto change their tune. Horizontal drillingand fracking are now having an evenbigger impact on domestic oil production:

five years ago, most new onshore rigswere drilling for shale gas, but today,most are drilling for oil in shale andso-called tight rock formations. Expertsare confidently pointing to the benefitso abundant supplies o this unconven-tional oil and gas for the U.S. economy:lower energy costs, new jobs, and even arevival in some parts o the manufacturing

LEAVESBY

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GASBY

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Fred Krupp

16

government appears eager to exploit theUnited Kingdoms vast shale gas reserves,public unease and protests could blockdevelopment there from moving forward,

as well.Until recently, many people assumed

that natural gas would, on balance, provebeneficial for the environment. After all,unlike coal-fired power plants, natural-gas-fired ones produce negligible amounts omercury, sulfur dioxide (which causesacid rain), and other air pollutants. More-over, when burned, natural gas produces

much less carbon dioxide than coal. Butproducing natural gas can impact theenvironment in several ways, includingby releasing methane, a highly potentgreenhouse gas that has the potentialto reduce or even erase any near-termclimate advantage. So the best one cansay is that natural gas has the potentialto provide a net environmental benefiti the serious problems associated withit can be resolved. And that remains abig if. Add the growing concern that cheapnatural gas could crowd out investmentsin solar and wind power and other renew-able sources o zero-carbon energy, andits no wonder that so many Americanshave turned against shale gas and frackingmore generally.

DIRTY WATER

Opposition to shale gas is not irrational.Local concerns stem from real problems.Three years ago, while serving on a panelset up by then U.S. Energy SecretarySteven Chu to examine the risks andrealities o shale gas, I visited rural Penn-sylvania to see the industrys impactfirsthand. There, I met a mother who

told me that she had been forced toleave her family farm because o severeair pollution from shale gas wells. The

pollution had made her young son ill.He was staying with friends so that hecould attend school; she was living outo her car.

Things were even worse in Pinedale,Wyoming, a town that has just 2,000residents but, due to its gas operations,smog rivaling that found in Los Angeles.Last year, the American Lung Association,which grades counties annually on theirair quality, gave the county containingPinedale an F for smog. In the last decade,Denvers once-notorious smog had

dissipated, largely because o the intro-duction o cleaner vehicles. But now, itis back, thanks to the oil and gas indus-try. In fact, although smog levels aredecreasing in cities across the UnitedStates, in Colorado, they have tickedupward since 2010. The states 51,000oil and gas wells, most o which weredrilled in the past decade, are now itslargest source o smog-producing volatileorganic compoundsharmful air pollut-ants that escape from storage tanks,valves, and other equipment.

Shale gas exploitation may also bepolluting the water. The gas industryinsists that there is no scientific evidencethat fracking, which usually takes placethousands o feet below the water table,can contaminate water. But fracking is

only one part o unconventional gasoperations, and scientists and observerscontend that other parts o the process,when improperly executed, can in factdo so. In a 2011 study, the Ground WaterProtection Council, an association o stateregulators, concluded that the gas indus-try, through poor well construction andsurface spills, had directly caused ground-

water contamination in Ohio and Texas.Despite the economic benefits o shalegas, the environmental risks have dragged


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Dont Just Drill, BabyDril l Carefully

May/June 2014 17

mate Change, during its first 20 years inthe atmosphere, methane is 84 times aspotent a greenhouse gas as carbon dioxide.

WHAT LIES BENEATH

To understand the dangers o methaneleakage from oil and gas development,consider how it affects the balancebetween the energy the earth absorbsfrom the sun and the energy the earthradiates back into spacea conceptknown as radiative forcing. The bigger

the difference between the amount oenergy coming to the earth and theamount leaving it, the greater the globalwarming. Climate pollutants, such asmethane, soot, and the class o refrig-erants called hydrofluorocarbons,currently cause over one-third o radiativeforcingand methane accounts formost o that amount and is expected

to continue to do so. So reducing meth-ane emissions is essential to mitigatingclimate change.

public opinion o it to an all-time low.In a Pew poll conducted in September2013, 49 percent o respondents opposedfracking, whereas just 44 percent favoredit. In 2012, John Deutch, a former directoro the and the chair o Chus naturalgas panel, said that the groups reportshowed that the environmental impactshere were real. I the gas industry wantedto get people behind shale gas, he said,it had to have a method o measure-ment and continuous improvement.

The industry cannot spin the factsto gain public acceptance or brush asidethe harmful local impacts o drilling. Norcan it ignore the prospect that leaks andother releases o natural gas, which iscomposed primarily o methane(methane is also released all along thenatural gas supply chain and from oilwells), could accelerate climate change.

Unburned methane is a particularlypowerful greenhouse gas. According tothe Intergovernmental Panel on Cli-

All hat, no hydrocarbons: protesting fracking in Los Angeles, May 2013

REUTERS

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Fred Krupp

18

much higher than the found. Valvesand compressors located at well pads,for example, all leaked more methanethan the estimated. Emissions from

chemical injection pumps, which are usedat wellheads to keep pipelines flowingor to neutralize corrosive substances,were found to be twice as high as thes estimate.

The study also pointed to the prom-ise o new emissions controls mandatedby the during well completionsatechnique for capturing methane released

at the end o the fracking process. Whencompanies conducted reduced emissionscompletions, as the process is known,the amount o leakage was much lowerthan the s estimate for wells notconducting them. The will requireall new natural gas wells to employ thistechnique beginning in January 2015,but it does not cover oil wells, many owhich also produce considerable quanti-ties o methane. Given how effectivethe process is, it should be requiredacross the board.

There is little reason for the gasindustry to balk at these requirementsand other methods o reducing emissions,since many o them cost very little. Astudy commissioned by the Environ-mental Defense Fund and released this

year by the consulting firm Inter-national analyzed 11 ways to reducemethane from 19 emissions sources.Such measures include shifting tolower-emitting pneumatic valves andclosely monitoring and repairing equip-ment to reduce unintended methane leaks.I the most cost-effective reductions werefully adopted, the gas industry would

actually save roughly $164 millionannually. Overall, found that usingcurrently available technologies alone,

Today, about one-third o methaneemissions in the United States come fromthe oil and gas industry. For natural gas,the most recent scientific research sug-

gests that the break-even point for meth-ane emissionswhen an emissions ratethat was any higher would make theswitch from coal to natural gas worsefor the climate in the short runis2.7 percent o production. No one cansay with certainty how much methaneis actually leaking from wellheads,processing plants, pipelines, and other

natural gas facilities. The Environmen-tal Protection Agency estimated in 2012that total methane emissions in theUnited States from the natural gas supplychain represented 1.5 percent o all U.S.natural gas produced, meaning that1.5 percent o the gas was lost throughemissions. But that number may under-state the true level: a 2013 Harvardstudy found that total U.S. methaneemissions could be 50 percent higherthan the s estimate.

The Environmental Defense Fund, thenongovernmental organization I have ledfor the past 29 years, has studied naturalgas closely. Two years ago, it launched16 scientific research projects designedto fill in the gaps in what is known aboutmethane leakage across the natural gas

supply chain. The projects involve about100 universities, research institutions,and, crucially, oil and gas companies.

The first o the 16 studies, the resultso which appeared last year inPNAS(Proceedings of the National Academy ofSciences), measured methane emissionsfrom 190 drilling sites in the UnitedStates. Although it found total emissions

from the production o natural gas to besimilar to the s estimate, it discoveredthat emissions from certain sources were


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Dont Just Drill, BabyDril l Carefully

May/June 2014 19

percent o all fracking jobs use chemicalsthat the industry says are trade secrets.Competitive businesses rely, o course,on intellectual property protections to

foster innovation, and trade secrecy could,in some cases, encourage the develop-ment o greener chemistry. But when itcomes to chemicals that could threatenwater tables, the publics interest shouldtrump the industrys concerns, and strictdisclosure rules should be put in placefor these chemicals.

States are also getting better at

monitoring the construction and main-tenance o wells. Gas wells consist osteel pipes surrounded by cement, whichisolates ground water from the gas andfluids that travel through the wells. Butpoorly constructed well casings and weakcement can increase the chances thatthe ground water will be contaminated.Texas recently overhauled its outdatedwell-construction requirements, incor-porating several dozen improvements,such as enhanced testing o well integ-rity, more stringent criteria for cementjobs, and new safety procedures duringfracking. Many o these improvementswere part o the model regulations thatthe Environmental Defense Fund andthe company Southwestern Energyhad drafted over the past several years.

Environmental activists have hailed thenew rules.

States are making progress on meth-ane leakage, too. In February, Coloradoadopted the first rules anywhere in theUnited States that directly regulatemethane emissions, over the opposi-tion o industry trade associations inthe state. Taking a cue from the leader-

ship o Governor John Hickenlooper,who declared last year his intention toeliminate methane emissions in Colorado,

40 percent o methane emissions couldbe eliminated over the next five yearsfor less than a penny per thousand cubicfeet o gas produced.

COLORADO RULES

Reducing the shale gas industrysmethane emissions is important, butthat alone will not restore the publicsconfidence in natural gas. The creationlast year o the Center for SustainableShale Development, in Pittsburgh, how-ever, could help. A collaboration among

oil and gas companies, environmentalgroups, and philanthropic organizations,the center set 15 voluntary environmentalstandards to improve shale gas develop-ment practices in the Appalachian basin.Drilling companies can seek certificates ooperational excellence in two categoriesair and climate and water and wastemanagementthrough an independentauditor. Among the companies partici-pating are Chevron, Shell, , and Energy. Although these voluntaryefforts by industry leaders can helpdistinguish the best from the rest andraise the bar for all, only strong rulesenforced by a system that demandscompliance will fully protect public air,water, and health from hazardous oiland gas development.

States have the leading role inregulating the oil and gas industry. Morethan 20 o them have adopted rulesrequiring companies to disclose whichchemicals they use in fracking; at leastanother seven have such requirementsunder consideration. But work must stillbe done to develop regulations thatcan get around the industrys claims o

trade secrecy, which oil and gas compa-nies invoke to resist public disclosure othe chemicals they use. Eighty-four


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and elsewhere. Reforming this growingsegment o the gas industry must notovershadow another, bigger challenge:accelerating the transition to truly clean,

renewable energy.For the next 20 years, however,

slowing the rate o climate change iscritical in order to give communitiesand wildlife a better chance to adapt.Reducing emissions o climate pollutantssuch as methane can reduce the rate owarming over the next few decades.Scientists have long warned that the

unprecedented current rate o climatechange is the greatest threat to biodi-versity. And the human cost is apparentin more frequent and more intenseextreme weather, from hurricanes andheat waves to droughts.

Working to reduce the emissions opollutants that accelerate climate changeis a project that industry leaders andenvironmentalists in the United Statesshould be able to agree on. By forgingunlikely alliances based on a mutualunderstanding o what is at stake, theenvironmental community and the oil andgas industry can create strong, sensiblestandards that reduce the risks o uncon-ventional oil and gas developmentandensure that the economic windfall benefitsthe environment, too.

the Environmental Defense Fund andthree o Colorados largest oil and gasproducersAnadarko Petroleum, Encana,and Noble Energydeveloped a proposal

for regulations to reduce air pollution,which shaped the final rules. Now, compa-nies must find leaks and fix them and usestronger emissions controls for storagetanks, dehydrators, and gas vents fromwells. For that equipment, the regulationsforce companies to eliminate 95 percento uncontrolled toxic pollutants andvolatile organic compounds.

The Colorado rules are a major break-through and a bellwether for other statesseeking to minimize the air pollutionproduced by the oil and gas industry.The process led by Hickenlooper couldchart a path for the energy industry andenvironmentalists to work together tonot only reduce emissions but addressother environmental issues as well.

Other countries with large shale gasreserves are likely to follow the UnitedStates lead in developing them, so theregulations in Colorado and elsewherein the country will set the tone wellbeyond U.S. borders. China has theworlds largest recoverable shale gasreserves, over 1,000 trillion cubic feet,more than the United States and Canadacombined. Poland, with 148 trillion cubic

feet, has the largest shale gas reservesin western Europe, and France isnt farbehind. European countries currentlyimport much o their natural gas fromRussia, and many Europeans worry aboutthe use o gas supplies as a politicalweapon, so tapping these reserves couldreduce Russias leverage.

Shale gas is not the solution to global

climate change. But it can help reducethe use o high-carbon coal in the UnitedStatesand perhaps in China, Europe,


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The new realityof our networked society is that global,

regional and industry developments are completely inter-twined. Technological revolutions are overthrowing our

conventional decision-making processes.

weforum.org

@davos @WEF

We need a level of global cooperationto address these

challenges that is increasingly difficult to attain, precisely

due to the growing complexities and interdependencies

in the world. Our existing systems, structures and formal

institutions might no longer suffice.

The World Economic Forumis a global multistake-

holder platform for dialogue, insights and action. Formore than 40 years, we have been bringing together

leaders from business, civil society and govetnment. The

success of this model has been to constantly adapt to

new challenges, include fresh voices and strike a bal-

ance between providing a safe environment of trust and

collaboration and positive disruption.

We live in a fast-moving, highly interconnected world.

Problems of global magnitude can arise quickly and

without warning. At the same time, unprecedented

opportunities for economic growth and positive change

are emerging and must be harnessed for the future of

humanity.

38Communities

80Initiatives on topics ranging from health to youth unemployment to competitiveness

550Staff from more than 60 countries1,500 Partner and Member companies
http://www.twitter.com/davoshttp://www.twitter.com/WEFhttp://www.weforum.org/http://www.twitter.com/WEFhttp://www.twitter.com/davos


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May/June 2014 21

DAVID M. LEVINSON holds the Richard P.

Braun Center for Transportation Studies Chairin Transportation Engineering at the University

of Minnesota and is a co-author, with WilliamGarrison, of The Transportation Experience.

Motor CompanysModel T was thebest-selling car inAmerica. And for a

century to come,the limitations Edison recited largelykept electric vehicles off the road.

Yet electric vehicles have a majorinherent advantage over gasoline-poweredones: they use less energy to drive agiven number o miles. The internalcombustion engine wastes around 70percent o its fuel on generating heat

rather than thrust, whereas electric motorscan waste as little as ten percent (althoughsignificantly more than that is wastedwhen one includes generating electricityback at the power plant and transmittingit). Moreover, because they can plug intothe grid, electric vehicles can draw frommultiple sources o power, includingrenewable energy. Switching from gasto electricity for transportation offers thepotential to dramatically reduce carbonemissions, especially i the original energysource is clean.

And now, more than a century afterthe internal combustion engine won thebattle to power transportation, the fightis starting up in earnest once again. Inthe last decade and a half, hybrid-electricvehicles have found their way onto the

market and gained a small, i devoted,following. Because they rely on both aninternal combustion engine and a battery,hybrid-electric vehicles have overcomethe range problem that had plaguedvehicles powered by only electricity.Such cars as the Honda Insight andthe Toyota Prius, both released in theUnited States around 2000, tapped into

consumers desire to broadcast theirconcern for the environment or theirtechnological progressiveness. Some U.S.

Electric Avenue

How to Make Zero-

Emissions Cars Go

Mainstream

David M. Levinson

I

n 1896, a 33-year-old engineer

working for the Detroit branch oThomas Edisons Edison IlluminatingCompany traveled to New York for thefirms annual convention. The automobilewas the obvious technology o the futureby then, but it wasnt yet clear what wouldpropel it: steam, electricity, or gasoline.Edison had been tinkering with batteriesthat could power a car, so he was inter-ested to hear that the engineer fromDetroit had invented a two-cylindergasoline vehicle. After hearing a descrip-tion o the car, Edison immediatelyrecognized its superiority.

Young man, thats the thing; you haveit, Edison told the inventor. Keep at it!Electric cars must keep near to powerstations. The storage battery is too heavy.Steam cars wont do either, for they

have to have a boiler and a fire. Yourcar is self-containedit carries its ownpower plantno fire, no boiler, no smoke,and no steam. You have the thing. Keepat it.

The engineers name was Henry Ford,and he did keep at it. By 1908, the Ford

CAR

BY

JOHA

NVICTOR

NILSSONFROMTHE

NOUN

PROJECT,MODIFIEDBY

NICHOLASDITMORE



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David M. Levinson

22

states rewarded the owners o hybridswith access to high-occupancy-vehiclelanes, and the federal government offeredthem a tax credit o up to $3,400.

Companies soon began selling vehiclesthat burned even less gasoline. In 2010,General Motors reentered the electricvehicle market with a hybrid-electricvehicle called the Chevy Volt (the com-pany famously killed its first attempt, theEV1, in the 1990s). The Volt is a plug-inhybrid-electric vehicle, meaning that itgets most o its energy from electricity,

not gas. Unlike simple hybrid-electricvehicles, in which the internal combus-tion engine charges the battery, plug-inelectric vehicles charge their batteriesfrom the electricity grid.

Around this time, the Nissan Leaand the Honda Fit EV, both o whichare fully electric, also came on the market.All-electric vehicles are remarkablyefficient. The Fit EV, for example, uses

just 18 kilowatts per 100 kilometers odrivingthe equivalent o 118 miles pergallon, according to the EnvironmentalProtection Agency. It can travel 82 mileson a single charge. Newer companies,meanwhile, are building high-end electriccars. In 2012, Tesla Motors, founded bythe entrepreneur Elon Musk, sold morethan 2,500 o its Model S cars. These

start at $70,000 and boast a range o upto 265 miles.

Yet last year, Americans boughtonly around 490,000 traditional hybrids,49,000 plug-in hybrid vehicles, and 48,000all-electric vehiclesa tiny fraction o thesome 14 million cars and light truckssold in the country every year. Electricvehicles serve mostly as status symbols.

In order for the market to reach a sizethat makes a real difference to total carbonemissions, they will have to appeal to

more than just green and technophilicdrivers; they will need to make economicsense to the average buyer.

The good news is that advances in

batteries, fuel cells, lightweight cars, andcharging networks are making electricvehicles look more promising than everbefore. To accelerate the economies oscale necessary for the widespread adop-tion o electric vehicles, the governmentcurrently subsidizes the production andconsumption o such cars. But in theabsence o major technological improve-

ments, these policies have proved insuf-ficient. I policymakers took the politicallyunpopular step o taxing people for thecarbon their cars emit, electric vehicleswould capture a larger market share.

DRIVING RANGE

The key challenge with electric vehiclesinvolves figuring out how to store moreenergy in less massin other words,increasing what is known as energydensityand how to make the result-ing battery affordable. Although it ispossible that some breakthrough willchange everything, at current rates oimprovement in the battery market,it is likely to take another decade ortwo before electric vehicles can matchthe range and cost per distance o

gas-powered cars. Moores law, whichpredicts a doubling o computingpower every two years or so, doesntapply to batteries.

Still, energy density is getting better,doubling every ten years or so. Over thelast six decades, the maximum energydensity o rechargeable batteries increasedfrom 25 watt-hours per kilogram to 210.

At that rate, by 2030, the figure shouldreach 500 watt-hours per kilogramthepoint at which the range for battery-


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Electric Avenue

May/June 2014 23

In many places, liquid biofuelsgenerated from biomass such as corn,sugar cane, algae, switchgrass, and woodare already used for transportation. InMinnesota, for instance, E10, a fuel thatis ten percent corn-based ethanol and90 percent gasoline, is standard, and E22,comprised o 22 percent sugar cane, iscommon in Brazil. When filled with 100percent ethanol, flexible-fuel vehicles,which can use a wide range o mixesof ethanol and gasoline, are typically

20 percent less fuel-efficient than whenfilled with gasoline. But over the longrun, cars using only ethanol approachthe point o being carbon neutral, sincethe carbon emitted through burningbiofuels is reabsorbed by plants, whichcan again be turned into fuel. That said,such fuels entail the not insignificantcosts o planting, growing, harvesting,

and shipping.As the shale boom takes hold, trucksare increasingly running on natural gas,

powered cars will be comparable to thatfor gas-powered cars.

Onboard batteries are only onepossible technology for powering electricvehicles. Ultracapacitors, which storeenergy in electric fields, charge anddischarge quickly, thereby enablingvehicles to accelerate faster and capturemore energy from braking. Ultra-capacitors, however, have a shorter lifespan than batteries and dont store asmuch energy. But new materials may

overcome these restrictions. Besides,cars could use both batteries and ultra-capacitors, a combination that mightprove better than either on its own.

Fuel cells, which convert suchchemicals as hydrogen into electricity,could also propel cars. In the late 1990s,excitement surrounding hydrogen fuelcells peaked. But although their cost

has fallen, fuel cells have yet to be costeffective in comparison with batteries,much less internal combustion engines.

Plug and play: the Chevy Volt, Detroit, January 2009

REUTERS

/MARK

BLINCH


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David M. Levinson

24

are not conducive to bicycling, anddrivers may be reluctant to downsizetoo much, in part due to concernsabout safety. Until self-driving vehicles

alleviate most safety risks, Americancars will remain big.

The range problem for electric vehiclescould also be solved by the constructiono a comprehensive network o chargingstations. First, however, the automotiveindustry needs to agree on a standard,just as it did for the size o fuel-pumpnozzles. Currently, different plug-in cars

use different charging devices, althoughthe industry is making progress on stan-dardization. It is also working on tech-nology that charges batteries quickly, butso-called fast-charging stations are fastonly compared to conventional charging.They still take upward o 30 minutesfor an 80 percent charge, much longerthan it takes to fill up at the pump.

Designs that allow empty batteriesto be quickly swapped out for chargedones may help, too. The idea dates backto 1900, and it was revived in 2007 bythe Israeli entrepreneur Shai Agassi,whose company hoped to develop anetwork o battery-exchange centersbefore it went bankrupt in 2013. In orderfor quick-swap batteries to take hold,batteries will have to be standardized so

that the economies o scale kick in. Untilautomakers converge on an interchange-able standard for batteries or one firmcomes to dominate the industry, driversarriving at exchange centers will riskfinding out that their battery type is notin stock. Although that happens withother car parts, such as tires, the differ-ence is that garages dont promise to

replace tires in a matter o minutes.Another way to make electric carspractical is even more speculative: a

which emits less pollution and carbondioxide than conventional gasoline.When liquefied or compressed, naturalgas can be transported easily. Across the

United States, companies are construct-ing networks o liquefied natural gasfueling stations for long-distance truck-ing. For the moment, given the lack odistribution points, liquefied naturalgas makes more sense for fleet vehicles,which return to their bases every day,providing a convenient fueling place.Natural gas can also be produced from

biomass, such as manure and cropwaste. When purified into a gas calledbiomethane, it has an even lowercarbon impact.

One solution to electric vehiclesrange problem is to simply move lessmass and therefore consume less energy.It doesnt make sense to push two tonso metal and plastic just to transport oneor two people, and some automakers areminiaturizing their offerings. Weighingin at just 1,600 pounds, the Smart Fortwois one o the smallest mass-producedcars on the market. Although the vehiclehasnt quite caught on in the UnitedStates, where sales have been below1,000 per month, it has in Europe, wherespace is at a premium and governmentpolicy discourages the use o cars.

Two-wheel electric vehicles, whichweigh even less, are enormously popu-lar in developing countries, where theyfill the gap between bicycles and auto-mobiles. But they have not yet gainedtraction in the developed world, wherethe same infrastructure there that sup-ports bicyclesbike lanes, bike-sharingnetworks, and so oncould be adapted

for electric bikes. Electric bicycles areunlikely to catch on in the United Statesanytime soon. Land-use patterns there

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