Oil prospects

Let’s be realistic about plans to jump-start oil and gas production in North Carolina.

November 15, 2012 

That daily barometer of world energy prices – the number ending in .9 at the gas station – has been trending down. Self-serve regular, which seemed likely to top $4 a gallon this summer, can be found in the $3.20s. Good news for drivers, even if the lower price is tied to a slowing global economy, which dampens demand for this world-priced commodity.

Long-term, it looks as if more and more of the oil we burn will be our own. A new report says the United States will overtake Saudi Arabia as the world’s leading oil producer in about five years. We’re rapidly gaining in natural gas production too, and with an assist from conservation the country also will increase its self-sufficiency in fuels.

Credit fracking – horizontal drilling coupled with hydraulic fracturing of hydrocarbon-rich underground rock formations – for the spike in U.S. oil and natural gas fortunes. Fracking has real drawbacks but equally real benefits. The most consequential will be if the natural gas it produces serves as a practical, economical path away from burning coal for power generation and toward a greener energy future.

Meantime, with fracking for natural gas booming in places such as Pennsylvania, and shale oil, also released by fracking, overflowing in North Dakota, the United States is seemingly awash in home-grown energy. Into this happy picture steps ... North Carolina?

That’s the plan, or at least strong hope, of freshly victorious Republican Pat McCrory. The governor-elect favors pressing ahead, presumably with appropriate safeguards, on both fracking for natural gas onshore and exploring for oil and gas off the Outer Banks.

“We’re going to get North Carolina into the energy business like other states have done in the past five to six years,” McCrory said recently. He’s also said oil and gas production will add jobs and boost state revenues, perhaps allowing North Carolina to cut tax rates.

The governor’s interest is understandable. Fracking is, at least in the crudest sense, paying off for newly energy-rich states. In places there’s an old-time boom on – money and jobs a-plenty. It may be messy, but many people might well want to see some of that here.

There are practical difficulties, however. One is fundamental: we simply don’t know whether there are “commercial” – large, accessible, exploitable – quantities of oil and natural gas under our state’s soil or waters.

Almost as important are several impediments to production, such as the cost of creating an energy infrastructure from scratch, or the demands fracking places on scarce water supplies, or any ill effects that offshore wells in the stormy Atlantic might have on coastal tourism.

And then there’s this. Advanced drilling techniques and deepwater wells are hugely expensive. Making money depends on getting a profitable price for the energy produced. As nationwide output climbs and as conservation cuts into consumption, that gets harder.

In other words, that daily barometer on the sign at the gas station can’t fall too low. If it does, the boom becomes a bust.

In natural gas, hard times have hit production companies and their stockholders due to a glut of natural gas (although prices have picked up some lately). For North Caroline, ample production in other states – that rosy energy scenario cited above – could actually hinder development of a robust oil and/or gas future here. McCrory, for all his understandable enthusiasm for a lucrative energy sector, will have to base his budgets on hard realities, not on a whiff of hydrocarbon revenues in the air.

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