American Oil and Gas Reporter - June 2014 - 46

notes that both the House and Senate
have approved the Water Resources Reform
and Development Act. The legislation,
which identifies and authorizes funding for
more than $12 billion worth of new water
infrastructure projects, proved to a battleground over the Obama administration's
National Ocean Policy (NOP) and its associated Coastal Marine Spatial Planning.
IPAA notes that it supported an amendment by Representative Bill Flores, R-Tx.,
that sought to prohibit funding for NOP,

adding that the association resisted an
amendment by Senator Sheldon Whitehouse that sought to create a funding
mechanism for regional partnership grants
to enact NOP.
"The conference report stripped out
Coastal Marine Spatial Planning/NOP
language from both Representative Flores
and Senator Whitehouse, D-R.I., but incudes a much more palatable provision that
directs the Army Corps of Engineers to do
a feasibility study on 'ocean and coastal

ecosystem resiliency,'" IPAA reports.
"The provision further limits the authority of federal agencies to conducting
projects only at the request of the impacted coastal state, and makes any such
projects subject to future appropriations,
thereby further limiting agencies from taking any action without congressionally directed appropriations for such projects."
NOIA notes that the water resources
bill is the first of its kind to pass since
2007.
❒

Gas Driving U.S. Industrial Expansion
WASHINGTON-The United States will
see a significant expansion of its industrial
production over the next 10-15 years as the
competitive advantage of low natural gas
prices provides a boost to that sector, the U.S.
Energy Information Administration projects.
In its Annual Energy Outlook 2014, the
agency says it sees greater upside potential in oil and natural gas production, with
higher production possibly spurring even
more industrial growth and decreasing petroleum imports.
Rising oil and gas supplies will continue to reshape the U.S. energy economy, the
Outlook predicts, largely from higher
production out of tight formations. However, it cautions that impacts could vary
substantially, based on expectations about
resources and technology.
The Outlook focuses on five primary
cases: a reference case projection that assumes business as usual with known technological and demographic trends; low and
high economic growth cases; and low and
high oil price cases.
Other EIA projections include:
* Evolving natural gas markets will
witness increased gas use for electricity
generation and transportation, as well as
expanding export opportunities.
* Expected gains in tight oil production will drive growth in total petroleum
and other liquids supply.
* Improved energy-use efficiencies
in the residential and transportation sectors,
and a shift away from more carbon-intensive fuels to generate electricity, will help
stabilize energy-related carbon dioxide
emissions.
Crude oil production from tight oil and
shale formations experienced a nearly
fourfold increase between 2008, when it
accounted for 12 percent of all U.S. crude
production, and 2012, when it contributed
35 percent, the EIA says.
Oil Production
By 2019, total projected U.S. crude oil
production in the Outlook's reference
46 THE AMERICAN OIL & GAS REPORTER

case will reach 9.6 million barrels a day,
3.1 MMbbl/d more than 2012 projections. Over the same period, tight oil
production is expected to grow by 2.5
MMbbl/d, to 4.8 MMbbl/d or 50 percent
of the national total, EIA predicts.
Under the reference case, tight oil
production begins to slow after 2021,
contributing to a decline in total U.S. oil
production through 2040. However, the
EIA points out, tight oil development
still is in an early stage, and its outlook remains uncertain. The agency says changes
in domestic oil output depend largely on
the degree to which technological advances
allow production to occur in potentially
high-yielding tight and shale formations,
as well as changes in well spacing and production patterns.
To address those uncertainties, EIA offers high and low oil resource cases. In the
high scenario, tight oil production reaches 8.5 MMbbl/d in 2035, compared with
3.7 MMbbl/d in the reference case, with
total domestic crude oil production reaching 13.3 MMbbl/d against the 7.8 MMbbl/d projection in the reference case.
The Outlook says comparing the reference and high oil resource cases demonstrates the significant impact technological developments and productivity gains
in tight oil plays could have on net imports
of crude oil and petroleum products. It
says:
* In the reference case, the share of net
crude oil and petroleum product imports
as a percentage of total U.S. products consumed declines from 41 percent in 2012
to 25 percent in 2016, and remains close
to that level for several years before increasing to 32 percent in 2040.
* In the high oil resource case, domestically produced crude oil displaces more
expensive imported crude at domestic refineries, and U.S. finished petroleum
products become more competitive worldwide. The share of total U.S. product consumed represented by net crude oil and petroleum product imports in this scenario

declines to 15 percent in 2020 and continues to fall through 2040. The United
States becomes a net crude oil and petroleum products exporter at the end of this
projection period.
Natural Gas Markets
The Outlook's reference case projects
robust growth in industrial production, with
U.S. manufacturers benefitting from abundant and relatively inexpensive natural gas,
especially in the projection's first 15
years. Industrial bulk chemical production,
which benefits from increased supplies of
hydrocarbon gas liquids, grows by 3.4 percent from 2012 to 2025 in the reference
case. After that, EIA says, the competitive
advantage diminishes and increased overseas competition slows U.S. output growth
after 2030 as domestic natural gas becomes
less cost-effective.
The higher industrial production level
leads to growth in gas consumption in the
U.S. industrial sector, jumping from 8.7
quadrillion Btu in 2012 to 10.6 quads in
2025 in the reference case. Most of that demand increase comes from the manufacturing sector, EIA says.
According to the agency's reference
case, by 2035, natural gas will surpass coal
as the nation's largest energy source for
generating electricity. In the projection's
first decade, growth in electric generation
from renewables tends to be largely policy driven. However, as reference case natural gas prices increase and the capital
costs of renewable technologies-particularly wind and solar-decrease, renewable generation becomes more competitive,
and EIA projects it will account for 16 percent of total electric generation in 2040.
However, barring a breakthrough in
electricity storage or related technologies,
EIA asserts renewable technologies cannot fully replace the base-load generation
lost through retiring coal and nuclear
plants. In a scenario based on accelerated
SEE EXPANSION PAGE 147

American Oil and Gas Reporter - June 2014

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