What If The US Had Banned Fracking?
Spoiler Alert: It Would Have Been A Disaster.
Let’s set the stage by telling a tale of both energy dependence and sabotage.
On Sep 26, 2022, the world watched in shock as water boiled up in the Baltic Sea as pressurized gases escaped from the ruptured Nordstream gas pipeline system. Three of the 4 Nordstream pipelines were damaged and it soon became very clear that this was a deliberate act of sabotage directly linked to the ongoing war in Ukraine.
Despite decades of Europe’s ‘energy’ transition, Europe relies heavily on fossil fuels for heating, transportation, electrical generation, and industrial feed-stocks. In 2021, (the last year before Russia invaded Ukraine) natural gas supplied 25% of Europe’s total energy needs. That same year, renewables (excluding hydro) supplied only 12%. Even then, a portion of those ‘renewables’ came from burning wood and other biomass.
Long ago, Europe shifted from relying on domestic coal, oil, and natural gas. Instead, it opted to import wind and solar generator components to build a ‘green’ future, supplemented by some legacy nuclear and a large dose of imported natural gas. Russia provided nearly 1/3 of Europe’s total gas supply (both by pipeline and LNG). By 2021, imports covered ~63% of Europe’s gas supplies. And as for ‘domestic’ production, the majority of that came from Norway (~20% of overall supply).
And with Europe so dependent on imported energy, the destruction of the Nordstream pipeline was a major blow.
Almost immediately after the explosions, fingers started pointing. Very soon, it seemed that everyone knew who was to blame: all that was left to do was to find evidence, some evidence, -any shred of direct evidence- to prove it.
Some blamed Russia. After all, in the summer of 2022, Russia reduced gas shipments to Europe. Russia also issued a Force Majeure saying that it could no longer honor its long-term gas delivery contracts. Germany, of course, rejected that notion and demanded that Russia still deliver the gas.
While this was going on, Europe played a high-stakes game of energy chicken with Russia. Unfortunately, Europe’s leaders apparently slept through their classes on negotiations 101: the person that can walk away from the table is in a stronger position than the person who can’t. And Europe was in no position to lose that Russian fuel. Yet, the west tried to force Russia to sell fuel at a discount.
Here is the timeline in the final days leading up to the explosions:
Sep 2, 2022.
The G7 agrees to impose a price cap on Russian Oil.
Sep 2, 2022
Gazprom warns that the Nordstream 1 will be turned off ‘indefinitely’
Sep 7, 2022.
Russian President Putin warned that he would let Europe “Freeze” in response to the price cap
Sep 26, 2022.
Mysteriously, the Nordstream pipelines blow up. See the map below (Credit: FactsWithoutBias1).
While some pointed fingers at Russia, others blamed the West.
Here on Substack Seymour Hersh published an article in early 2023. According to him, the US and Norway used a NATO military exercise as cover to plant explosives in a highly sophisticated operation relying on cutting-edge technology. Just from a narrative perspective, Hersh’s work would make an exciting spy thriller.
Yet, Hersh’s story centers around an anonymous source(s) that supposedly provided detailed, inside information. And the story contains LOTS of details- down to ship details and the mix of gases the divers used while setting the explosives.
In fact, Hersh provided so many details that Oliver Alexander attempted to corroborate those details with public, independent data. And his analysis raised serious questions to the validity of the tale told by Hersh’s heavily-relied-upon anonymous source.
It didn’t help that during this time, western intelligence agencies would not or could not (publicly) answer “Who done it?”
Yet by 2023, details emerged, pointing to a group of suspects who rented a 50-foot yacht, the Andromeda and sailed it near the location of the explosions. Reuters reported “Germany has been investigating the yacht (because it) had been rented in a way to ‘hide the identity of the real charterer.’” And, according to the AP, investigators found traces of explosives on the vessel.
More details trickled out as the Wall Street Journal reported in August 2024 that:
“Ukrainian President Volodymyr Zelensky initially approved the plan (to destroy the pipelines)… But later, when the CIA learned of it and asked the Ukrainian president to pull the plug, he ordered a halt, those people said.
Yet, Zelensky’s commander in chief…nonetheless forged ahead.
The Journal spoke to four senior Ukrainian…officials who either participated in or had direct knowledge of the plot. All of them said the pipelines were a legitimate target in Ukraine’s war of defense against Russia. Portions of their account were corroborated by a nearly two-year German police investigation into the attack, which has obtained evidence including email, mobile and satellite phones communications, as well as fingerprints and DNA samples from the alleged sabotage team.”
Earlier this year, rather quietly, Germany issued an arrest warrant for Volodymyr Z, a Ukrainian diving instructor, now one of the prime suspects in the sabotage.
What is shocking (if the reports are true) is the sheer asymmetry of the attack. According to the WSJ, the entire operation only cost ~US$300,000. Yet the explosions knocked billions of Euros worth of pipelines out of operations.
Why Fracking? It’s All About the Rock
While the story of sabotage captures our attention, an underlying story is how U.S. and Canadian fracking supplied the oil and natural gas needed to keep Europe’s lights on in the wake of the Russia/Ukraine war.
For those not familiar, rocks matter in the oil and gas business. ‘Conventional’ oil and gas resources tend to be in rocks that look like a sponge. Now the rock is not squishy like a sponge. But if we looked under a microscope, the rock has lots of connected spaces, spaces big enough to allow oil and gas to seep through. All you have to do with a conventional oil resource is drill down and - effectively - stick a straw in it.
However, there’s a lot of oil and gas in rocks that don’t have as many connected spaces. To get that oil and gas out, you need precision drilling and fracking.
Over the past decades, we’ve seen leaps and bounds in technological advancements for underground mapping and the ability to steer a drill bit that is 15,000 or 20,000 feet away with enough precision to hit a layer of rock that might only be 20 or 30 feet thick. And, there’s fracking. Fracking forces water, chemicals, and sand into the tight rocks to fracture them open, allowing tiny pathways for the oil and gas to flow.
Without those technologies and the ability to frack, the US oil and gas business would be a tiny shell of itself. Yes, there are some conventional oil plays, but not that much compared to the vast unconventional resources. In September of 2022, nearly 79% of US natural gas came from shale basins where fracking is essential for virtually all new wells.
Without access to unlock that vast resource, the US wouldn’t have had a chance of supporting Europe with natural gas. In fact, before the shale revolution, the US built LNG import capacity because it couldn’t produce enough gas for domestic needs, let alone enough to spare some for a friend.
LNG Basics
Natural Gas has a problem: it likes to escape. You can’t just put it in a barrel and hope it’ll be there the next day. So it has to be shipped compressed or chilled.
Shipping natural gas across oceans requires freezing the gas -260 Degrees F to liquefy it. That unbelievably cold gas is put on specialized ships to keep gas cold for a trans-ocean voyage. Once the ship reaches it’s destination, more specialized equipment is needed to re-gasify the freezing liquid.
The US LNG Lifeline To Europe
In the wake of Russia’s invasion, Europe desperately needed US natural gas. While Europe for years was blind to the massive risk of relying on Russian gas, once the war started, the “chickens came home to roost.” Europe started stocking up on gas just in case something happened with Russian supply. In 2022, the US shipped vast amounts of gas to Europe, accounting for 44% of Europe’s imported LNG that year.
As US and Canadian gas (shipped through the US) supplied the LNG export terminals, US gas prices rose. Yet global prices skyrocketed significantly higher. Dutch (TTF) and Japanese (JKM) customers paid roughly 6 or 7 times the US price for gas (Henry Hub). Notice the difference in price between a nation that fracks for its own gas vs places that relied on gas fracked by others.
But What If The US Banned Fracking?
Just a few short years before Russia invaded Ukraine, banning fracking was all the rage in some political circles. Multiple European countries outright banned fracking. And in the US, many left-leaning politicians think that “Keeping up with the Joneses Europeans” is what’s best.
Reasons varied from ‘fighting climate change’ to some legitimate concerns over localized environmental risks. For example, the US Geological Survey reported that
“In Oklahoma, which has the most induced earthquakes in the United States, 2% of earthquakes can be linked to hydraulic fracturing operations…The remaining (induced) earthquakes are induced by wastewater disposal. The largest earthquake known to be induced by hydraulic fracturing in the United States was a magnitude 4.0 earthquake that occurred in 2018 in Texas.”
The main issue is figuring out what to do with will all the salty water that is produced with oil and gas and that saltwater production continues long after the fracking is completed. It’s mainly a waste water handling problem. Injecting loads of wastewater into a poor rock formation with lots of preexisting natural faults can cause some shifts, leading to quakes.
It is essential to find solutions to address this wastewater disposal problem to reduce localized harms and legal liability. (And perhaps a compelling investment opportunity for those with the right solutions.)
But simple solutions that solve the ‘wrong’ problems tend to get the most political traction.
Back in 2019 and 2020, as Democrats vied for the 2020 Presidential nomination, multiple Democrats pledged to ban fracking. At that time, then Senator Harris stated:
“There’s no question I’m in favor of banning fracking, and starting with what we can do on Day 1 around public lands.”
Of course, she didn’t win the Democrat Nomination (at that time). However, she was selected to be Biden’s vice presidential running mate. And as the Presidential candidate, Biden made it clear that he would not ban fracking and Harris fell inline.
Now in 2024, she is running for President again. This time, she has not proposed banning fracking while stating:
“I think the most important and most significant aspect of my policy perspective and decisions is my values have not changed….I have always believed – and I have worked on it – that the climate crisis is real, that it is an urgent matter to which we should apply metrics that include holding ourselves to deadlines around time.”
There is no shame in updating ones positions as one learns more (hopefully we all have the wisdom to do that). If I could ask VP Harris just a few questions, I’d ask:
Why did you change your position on fracking?
Do you now fully support US fracking as essential to national security while working with the industry to reasonably mitigate localized environmental risks?
What would have happened to both Europe and America if the US had banned fracking?
If VP Harris were to answer those questions, I’d be very interested to hear what she has to say!
Killing fracking would have killed most US oil and gas drilling. If we banned fracking early enough, instead of exporting LNG to Europe, the US might have been in a bidding war with Europe, competing for some of the same scarce LNG. Imagine the impact to the average American just trying to keep the lights on.
Before we close, here’s a shout-out to all the roughnecks, geologists, entrepreneurs, those willing to continue financing drilling, and all of the skilled professionals working in North America’s oil and gas business in places like Alberta, Texas, Oklahoma, and Pennsylvania. If it wasn’t for your hard work, North America would probably be in a similar energy boat as Europe. Thank you!
That’s all for now! Thanks for reading!
Great piece, if Europe would remove the restrictions on fracking, they would go a long way towards serving their own energy needs. Of course theat would also impact the market for LNG.
Great description of why we need to keep searching for as much energy as possible