The Federal Role in Hydraulic Fracturing Technology Success
Christopher Clavin, IDA Science & Technology Policy Institute, 202-419-5416,
Susannah V. Howieson, IDA Science & Technology Policy Institute, 202-419-5412,
Overview
Increases in natural gas production from 2008-2012 from domestic unconventional resources, including shale resources, are the result of decades of sustained research and development efforts from both the private and public sector. The U.S. Federal government’s early investments in hydraulic fracturing, microseismic mapping, and drilling technologies are among the critical components of decades of research commitment to developing technologies for unconventional fossil resources. Research tools utilized by the Department of Energy during the early development of hydraulic fracturing included the use of direct basic science research through universities and the National Laboratory system, applied research through joint public-private research partnerships, such as the Eastern Gas Shales Project, and technology transfer from agencies and Labs, supporting the dissemination of research findings into industry and enabling workforce development. Other government mechanisms, such as tax credits and Federal land leaseshave also had an impact. These investments into hydraulic fracturing technology and recent increases in production provide a unique case study to explore the research and development tools that have been deployed by the Federal government and the commercial outcomes that result, often years or decades later. Hydraulic fracturing technology development experienced a non-linear technology development process, with key research developments coming from sectors outside of the energy production industry. We take these findings on the success of unconventional natural gas technology development tools and analyze the applicability of the methods for achieving policy goals of developing and deploying nascent renewable energy technology.
Methods
Perform a literature review of leading publications in the fields of oil & gas, technology innovation, technology transfer, Federal research administration, as well as review Federal program documentation. Conduct interviews with expertFederal scientists (e.g. current or previous National Energy Laboratory staff, Department of Energy staff) and industry representatives to identify the key Federal activities related to unconventional natural gas technology and collect expert opinion as to significance. Examine the scope of Federal government investments through research grants, public-private partnerships, and tax credits. Identify pertinent modern technologies (e.g. renewable energy generation technology) in the applied research or early comercalization phase and conduct a comparative analysisof research policies and the commercal context underpinning potential technology development.
Results
We developed a technology development pathway matrix that identifies specific inputs (e.g. nonconventional source production tax credit lasting from 1981 to 2008, demonstration-scale field tests) and outputs (e.g. commercially available 4D seismic technology) from each stage in the research process leading up to the broad commercial use of hydraulic fracturing. We also describe policy characteristics that played a role in the success of each mechanism and how these may be applied (or should have been applied) to current Federal energy technology development activities. For example, unconventional natural gas producers benefited from a sustained tax credit over decades, while wind production has faltered each time the production tax credit expires.
Research inputs utilized by the Federal government to support the commercialization of hydraulic fracturing technology use and the devlopment of unconventional natural gas resources supported the overall technology development process. Federal research investments combined with long-term private sector deployment activity and commercial conditions that relied upon sustained fossil fuel development combined to provide the foundation for this unique technology development success story. It is unclear if similar research and policy inputs to support the development of nascent renewable energy technologies would result in similar levels of commercial success that unconventional natural gas development technologies have experienced. Nascent renewable energy technologies that substitute for existing energy resources face vastly different commercial conditions than unconventional gas development technologies during their development process.
Conclusions
Sustained Federal support for research tools, such as public-private applied research partnerships and technology transfer from National Laboratories,combined with sustained private sector research and deployment activities led to an active unconventional natural gas commercial environment and associated commercial technology outcomes. We find that the sustained research portfolio over several decades, the Federal commitment to research via multiple technology development pathways, and favorable commercial conditions for increased natural gas production were primary contributing factors toward moving hydraulic fracturing from field scale demonstrations to broad commercial deployment. While lessons learned relating to individual policy characteristics may be applicable to renewable energy technology development, the overall policy strategy may not be. Unlike unconventional natural gas resources, nascent renewable energy technologies compete directly with commercialized energy resources. Absent major policy changes or market conditions supporting long-term private sector investments, it is unclear if the unconventional natural gas Federal research and tax incentive policy strategy will yield the same levels of technology commercialization success for renewable energy technologies.
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