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Inching toward energy independence in America

MIDLAND, Texas >> The desolate stretch of West Texas desert known as the Permian Basin is still the lonely domain of scurrying roadrunners by day and howling coyotes by night. But the roar of scores of new oil rigs and the distinctive acrid fumes of drilling equipment are unmistakable signs that crude is gushing again.

And not just here. 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 A. Levi, an energy and environmental senior fellow at the Council on Foreign Relations.

How the country made this turnabout is a story of industry-friendly policies started by President George W. Bush and largely continued by President Barack Obama — many over the objections of environmental advocates — 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.

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.

Greater energy independence is “a prize that has long been eyed by oil insiders and policy strategists that can bring many economic and national security benefits,” said Jay Hakes, a senior official at the Energy Department during the Clinton administration. “But we will have to work through the environmental issues, which are a definite challenge.”


For as long as roughnecks have worked 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, Jim Henry, a West Texas oilman, tried a bold experiment. Borrowing an idea from a fellow engineer, his team at Henry Petroleum drilled deep into a hard limestone formation using a refinement of fracking. By blasting millions of gallons of water into the limestone, they created tiny 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 in Texas 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, with Cheney leading a White House energy task force.

“Ramping up production was a high priority,” said Gale Norton, a member of the task force and the 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 for individual projects. 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. With the world economy humming — and China, India and other developing nations posting astonishing growth — demand for oil began outpacing the easily accessible supplies.

Oil reserves once too difficult and expensive to extract — including Henry’s limestone fields — had become more attractive.

If money was the motivation, fracking became the favored means of extraction.

While fracking itself had been around for years, natural gas drillers in the 1980s and 1990s began combining high-pressure fracking with drilling wells horizontally, not just vertically. They found it unlocked gas from layers of shale previously seen as near worthless.

Fracking for oil, which is made of larger molecules than natural gas, took longer to develop. But eventually, it opened new oil fields in Colorado, Kansas, North Dakota, south Texas, Wyoming and, most recently, Ohio. Meanwhile, technological advances were making deeper oil drilling possible in the Gulf of Mexico.

As the industry’s confidence — and profits — grew, so did criticism. Amid concerns about global warming and gasoline prices that averaged a record $4.11 a gallon in July 2008 ($4.30 in today’s dollars), Obama campaigned on a pledge to shift toward renewable energy and away from fossil fuels.

His administration initially canceled some oil and gas leases on federal land awarded during the Bush administration and required more environmental review. But in a world where crucial oil suppliers like Venezuela and Libya were unstable and high energy prices could be a drag on a weak economy, he soon acted to promote more drilling. Despite a drilling hiatus after the 2010 explosion of the Deepwater Horizon, he has proposed expansion of oil production both on land and offshore.

“Our dependence on foreign oil is down is because of policies put in place by our administration, but also our predecessor’s administration,” Obama said during a campaign appearance this month, a few weeks after opening 38 million more acres in the Gulf for oil and gas exploration. “And whoever succeeds me is going to have to keep it up.”


The last time the Permian Basin oil fields enjoyed a boom — nearly three decades ago — Rolls-Royce opened a showroom in the desert, Champagne was poured from cowboy boots, and the local airport could not accommodate all the Lear jets taking off for Las Vegas on weekends.

But when crude prices fell in the mid-1980s, oil companies pulled out and the Rolls dealership was replaced by a tortilla factory.

“One day we were rolling in oil,” recalled Jim Foreman, the general manager of the Midland BMW dealership, “and the next day geologists were flipping burgers at McDonald’s.”

The burger-flipping days are definitely over. Today, more than 475 rigs — roughly a quarter of all rigs operating in the U.S. — are smashing through tight rocks across the Permian in West Texas and southeastern New Mexico. Those areas are already producing nearly 1 million barrels a day, or 17 percent more than two years ago.

“We’re having a revolution,” said G. Steven Farris, chief executive of Apache Corp., one of the basin’s most active producers. “And we’re just scratching the surface.”

The newfound wealth is spreading beyond the fields. In nearby towns, petroleum companies are buying so many pickup trucks that dealers are leasing parking lots the size of city blocks to stock their inventory. Housing is in such short supply that drillers are importing contractors from Houston and hotels are leased out before they are even built.

If there is a loser in this boom, it is the environment. Water experts say aquifers in the desert area could run dry if fracking continues expanding, and oil executives concede they need to reduce water consumption. Yet environmental concerns, from polluted air to greenhouse gas emissions, have gained little traction in the Permian Basin or other outposts of the energy expansion.

On the front lines in opposition is Jay Lininger, a 36-year-old ecologist who drives through the Permian in an old Toyota Tacoma with a hard hat tilted on his head and a federal land map at the ready.

A former national park firefighter, he says he is now battling a wildfire of a different sort — the oil industry.

Nationally, environmentalists have challenged drilling with mixed results. Efforts to stop or slow fracking have succeeded in New York state and some localities in other states, but it is spreading across the country.

In the Permian, Lininger said, few people openly object to the foul-smelling air of the oil fields. Ranchers are more than happy to sell what water they have to the oil companies for fracking.

Lininger and his group are trying to slow the expansion of drilling by appealing to the U.S. Fish and Wildlife Service to protect several animal species, including the 5-inch dunes sagebrush lizard.

“It’s a pathetic little lizard in an ugly desert, but life needs to be protected,” he said. “Every day we burn fossil fuel makes it harder for our planet to recover from our energy addiction.”


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, consumption of all liquid fuels in the U.S., including diesel, jet fuel and heating oil, has dropped about 9 percent, according to the Energy Department. Gasoline use fell 6-12 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 decidedly smaller and more fuel-efficient Dodge Caliber. Fed up with high gasoline prices, he also moved twice recently to be closer to the city center, cutting his daily commute considerably.

“I would rather pay a little more monthly for rent than for just filling up my tank with gas,” he said, after pulling into a local gas station to fill up.

The surge in gasoline 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, even if they buy a model of similar size and power.

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 and former mayor of Houston.

“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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