SMITHERMAN SEES N. AMERICAN ENERGY INDEPENDENCE

10/04/2011

Development of the massive Eagle Ford Shale play in South Texas and approval of a controversial oil sands pipeline from Canada could free the United States from its dependence on two politically hostile oil suppliers, a top Texas energy official said Tuesday.

Not only does North America have the potential to gain energy independence from unfriendly countries like Iran and Venezuela, but an abundance of shale gas could turn the United States into an energy exporter in the next decade, Texas Railroad Commissioner Barry T. Smitherman told members of the Gulf Coast Power Association at its annual meeting in Austin.

Smitherman, recently appointed by Gov. Rick Perry to the petroleum-regulating Railroad Commission after chairing the Texas Public Utility Commission, said production from the Eagle Ford is estimated to climb to 800,000 barrels a day by 2015 and to 1 million barrels a day thereafter.

“The ability to find and extract and deliver this product out of the Eagle Ford Shale has the opportunity to completely change global energy dynamics, including potentially one day exporting natural gas from America,” he said.

Another million barrels of oil could eventually land at Texas Gulf Coast refineries if the U.S. Department of State approves the proposed Keystone XL Pipeline, Smitherman said.

“That’s a big number. It makes a big difference in my goal of energy independence,” he said.

The pipeline would deliver heavy crude from Canadian oil sands to Texas, but the project has drawn intense environmental opposition.  Republican-dominated Nebraska also fears the pipeline could endanger its critical water supply from the Ogallala Aquifer.

Smitherman said a combination of emerging shale plays – the Barnett in North Texas, Marcellus in Pennsylvania, Bakken in North Dakota and Eagle Ford in South Texas – holds the promise of freeing North America from its dependence on OPEC oil production. The United States currently consumes about 7.5 million barrels a day produced domestically versus nearly 5 million from OPEC and nearly 5 million from Canada and Mexico combined. Other non-OPEC oil supplies another 2.7 million barrels a day.

While Saudi Arabia produces about one-third of OPEC’s oil, the other large producers include Iran (10-12 percent) and Venezuela (about 8 percent).

“I don’t know about you, but those three really don’t give me a warm and fuzzy feeling,” Smitherman said, noting that Venezuelan President Hugo Chavez “has called our president the devil” and Iranian President Mahmoud Ahmadinejad has also demonized the United States.

“I think we are well positioned to be in a spot where we have some degree of control over our own destiny,” he said. “The amount we get from Iran could probably be made up from the import capability we get from the Keystone project. Clearly with the continued development of the Eagle Ford Shale, we could eliminate our need to import from Venezuela or Iran.”

Smitherman told Texas Energy Report that the United States could even become an energy exporter of liquid natural gas (LNG) within 10 years, perhaps to developed countries such as Japan or Germany, which is retiring its nuclear plants early. He said companies that built LNG importing facilities along the Gulf Coast could retrofit those for a few more billion dollars into exporting facilities instead.

That’s not to say obstacles don’t or won’t stand in the way of Smitherman’s optimistic energy future, he said in response to questions from the audience.

“None of this happens without hydraulic fracturing,” he said. “If for some reason that stops, the ability to economically recover this resource stops as well.”

He said the U.S. Environmental Protection Agency is currently conducting an investigation into the impact of fracking on water supplies. That includes a few locations in North Texas’ Wise County “where perhaps there were some underlying circumstances that make that not a typical candidate for examining,” he said, noting that there have been cases of poor completions or where a well was not cased correctly.

“That’s not a fracking issue,” he added. “That’s a well completion issue. So, we’re urging them to look more broadly.”

By Polly Ross Hughes

Copyright October 04, 2011, Harvey Kronberg, www.texasenergyreport.com, All rights are reserved

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Barry Smitherman is a fourth generation Texan appointed by Gov. Rick Perry to the Railroad Commission of Texas on July 8, 2011. Before serving at the Railroad Commission, Smitherman served on the Public Utility Commission for seven years, four of those as Chairman. In addition, he is a past ex-officio board member of the Electric Reliability Council of Texas (ERCOT). He currently serves on the Department of Energy’s Electricity Advisory Committee (EAC) and is a member of the State Bar of Texas. He also serves as Vice Chairman of the Governor’s Advisory panel on Federal Environmental Regulation and is a member of the Interstate Oil and Gas Compact Commission (IOGCC), the National Association of Regulatory Utility Commissions (NARUC) Board of Directors, and the Committee on Energy Resources and the Environment (ERE).