U.S. inches to energy independence

  • Article by: CLIFFORD KRAUSS and ERIC LIPTON , New York Times
  • Updated: March 22, 2012 - 11:53 PM

Amid an oil boom and less demand at the pump, the U.S. is weaning itself from foreign energy sources.

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President Obama on Thursday ordered the fast-tracking of an Oklahoma pipeline at the TransCanada Stillwater Pipe Yard in Cushing, Okla.

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MIDLAND, TEXAS - Across the country, the oil and gas industry is vastly increasing production, reversing two decades of decline. Using new technology and spurred by rising oil prices since the mid-2000s, the industry is extracting millions of barrels more a week, from the deepest waters of the Gulf of Mexico to the prairies of North Dakota.

At the same time, Americans are pumping significantly less gasoline. While that is partly a result of the recession and higher gasoline prices, people are also driving fewer miles and replacing older cars with more fuel-efficient vehicles at a greater clip, federal data show.

Taken together, the increasing production and declining consumption have unexpectedly brought the United States markedly closer to a goal that has tantalized presidents since Richard Nixon: independence from foreign energy sources, a milestone that could reconfigure U.S. foreign policy, the economy and more. In 2011, the country imported just 45 percent of the liquid fuels it used, down from a record high of 60 percent in 2005.

"There is no question that many national security policymakers will believe they have much more flexibility and will think about the world differently if the United States is importing a lot less oil," said Michael Levi, an energy and environmental senior fellow at the Council on Foreign Relations.

How the country made the turnabout is a story of industry-friendly policies started by President George W. Bush and largely continued by President Obama -- many over environmentalists' objections -- as well as advances that have allowed the extraction of oil and gas once considered too difficult and too expensive to reach. But mainly it is a story of the complex economics of energy, which sometimes seems to operate by its own rules of supply and demand.

Unmistakable trends

Simple economics suggests that if the nation is producing more energy, prices should be falling. But crude oil -- and gasoline and diesel made from it -- are global commodities whose prices are affected by factors around the world.

But the domestic trends are unmistakable. Not only has the U.S. reduced oil imports from members of the Organization of the Petroleum Exporting Countries by more than 20 percent in the past three years, it has become a net exporter of refined petroleum products like gasoline for the first time since the Truman presidency.

The natural gas industry, which less than a decade ago feared running out of domestic gas, is suddenly dealing with a glut so vast that import facilities are applying for licenses to export gas to Europe and Asia.

This surge is hardly without consequences. Some areas of intense drilling activity, including northeastern Utah and central Wyoming, have experienced air quality problems. The drilling technique called hydraulic fracturing, or fracking, which uses highly pressurized water, sand and chemical lubricants that help force more oil and gas from rock formations, has also been blamed for wastewater problems. Wildlife experts also warn that expanded drilling is threatening habitats of rare or endangered species.

For as long as roughnecks have worked the desolate stretch of West Texas desert known as the Permian Basin, they have mostly focused on relatively shallow zones of easily accessible, oil-soaked sandstone and silt. But after 80 years of pumping, those regions were running dry.

So in 2003, oilman Jim Henry tried a bold experiment. Borrowing an idea from a fellow engineer, his team at Henry Petroleum drilled deep using a refinement of fracking. By blasting millions of gallons of water into the limestone, they created fissures that allowed oil to break free, a technique that had previously been successful in extracting gas from shale. The test produced 150 barrels of oil a day, three times more than normal. "We knew we had the biggest discovery in over 50 years in the Permian Basin," Henry recalled.

There was just one problem: At $30 a barrel, the price of oil was about half of what was needed to make drilling that deep really profitable.

But the drillers had important allies in Washington. Bush grew up in Midland and spent 11 years as a West Texas oilman before entering politics. Vice President Dick Cheney had been chief executive of the oil field contractor Halliburton. The Bush administration worked from the start on finding ways to unlock the nation's energy reserves.

"Ramping up production was a high priority," said Gale Norton, secretary of the Interior at the time. "We hated being at the mercy of other countries, and we were determined to change that."

The task force's work helped produce the Energy Policy Act of 2005. It prohibited the Environmental Protection Agency from regulating fracking under the Safe Drinking Water Act, eliminating a potential impediment to wide use of the technique. The legislation also offered the industry billions of dollars in new tax breaks.

Separately, the Interior Department was granted the power to issue drilling permits on millions of acres of federal lands without extensive environmental impact studies. The Bush administration also opened large swaths of the Gulf of Mexico and the waters off Alaska to exploration. These measures primed the pump for the burst in drilling that began once oil prices started rising sharply in 2005 and 2006 as the world economy hummed.

A move toward technology

If the Permian Basin exemplifies the rise in production, car-obsessed San Diego is a prime example of the other big factor in the decline in the nation's reliance on foreign oil.

Just since 2007, U.S. consumption of all liquid fuels, including diesel, jet fuel and heating oil, has dropped about 9 percent, the Energy Department said. Gasoline use fell 6 to 12 percent, estimated Tom Kloza, chief oil analyst at the Oil Price Information Service.

Although Southern California's love affair with muscle cars and the open road persists, driving habits have changed in subtle but important ways.

Take Tory Girten, who works as an emergency medical technician and part-time lifeguard in the San Diego area. He switched from driving a Ford minivan to a more fuel-efficient Dodge Caliber. He also moved twice recently to be closer to the city center, cutting his daily commute.

"I would rather pay a little more monthly for rent than for just filling up my tank with gas," he said.

The surge in gas prices nationwide has contributed to the shift toward more fuel-efficient cars. But a bigger factor is rising federal fuel economy standards. After a long freeze, the miles-per-gallon mandate has been increased several times in recent years, with the Obama administration now pushing automakers to hit 54.5 mpg by 2025.

As Americans replace their older cars -- they have bought an average of 1.25 million new cars and light trucks a month this year -- new technologies mean they usually end up with a more efficient vehicle.

Longer-term social and economic factors are also reducing miles driven -- like the rise in Internet shopping and telecommuting and the tendency of baby boomers to drive less as they age. The recession has also contributed, as job losses have meant fewer daily commutes and falling home prices have allowed some people to afford to move closer to work.

The trend of lower consumption, when combined with higher energy production, has profound implications, said Bill White, former deputy energy secretary in the Clinton administration. "Energy independence has always been a race between depletion and technologies to produce more and use energy more efficiently," he said. "Depletion was winning for decades, and now technology is starting to overtake its lead."

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