1. AAPG Distinguished Lecture Series Presents the J. Ben Carsey Lecture Energy Trends of the Future Matthew J. Telfer Border to Border Exploration, LLC Austin, Texas

2. Three Themes Getting Accurate Information Rapid Advances in Technology and Circumstances Environment, Politics and Economics

3. Oil and Gas Coal Hydro and Nuclear Wind, Solar, Biomass EIA 2010 2005 2040 100 50 0 Quadrillions of BTUs per Year – U.S.A. 200520102015 2035 2030 2025 2020 50 100

4. Oil and Gas Coal Hydro and Nuclear Wind, Solar, Biomass EIA 2010 2005 2040 50 0 Quadrillions of BTUs per Year – U.S.A. 200520102015 2035 2030 2025 2020 Oil - Liquid Fuels – (Ethanol) and Natural Gas ?? 100

5. AAPG Distinguished Lecture Series 1984 “In the oil business, every ten years, half of what you know is obsolete” Bob Weimer CSM

6. Environment Economics

7. Politics Cost vs. Benefit Republicans vs. Democrats Free Market Supply and Demand Cheap Commodities Lead to Inefficiency and Waste Cost Controls and Mandates Lessen Innovation and Motivation Polarization and Extremism, A Race to see who can Handout the Most to Build Their Constituencies

8. Politics Where’s the Balance?

9. CO World Emissions 29.7 Billion Tons/Year 2010 42.4 Billion Tons/Year 2035 2 7 Billion People on the Planet EIA 2010, National Geographic 2011

10. Source: EIA Energy-Related Carbon Dioxide Emissions May 2010 Coal Liquid Fuels Natural Gas World Energy-Related Carbon Dioxide Emissions By Fuel Type 1990-2035 Billion Metric Tons

11. International Energy Agency IEA – Forward View World Energy Outlook 2010 Kyoto Protocol – 1997, Copenhagen Accord – 2009 Objective set: Limit change in Earth Temperature to 2 degrees Celsius = CO 2 Concentration of 450 ppmv Keeling Curve 1960 2010 2011 2050 315 ppmv 385 391 450 ppmv Current Policy Scenario – 1.4 % Energy Growth New Policies Scenario – 1.2% Energy Growth (If present plans are implemented) 450 Scenario -.7% Energy Growth 450 Scenario would take: $18 Trillion between 2010-2035, “rate of technological transformation would be unprecedented“

12. What Will the Effects of CO 2 be on Climate? How Long Will the Increase in CO 2 Last? Need Answers – A Lot is at Stake

13. Wikipedia Sink 5 Sink 3 Sink 4 Sink 2 Sink 1

14. CO 2 Studies of Carbon Cycle from Pulsed Models Various Sinks Work at Different Rates, with Different Degrees of Effectiveness Higher Concentrations of Atmospheric CO2 are Dissolved into Ocean Surface Waters on the order of 200 to 2,000 years – BUT, Leave the Atmosphere with Elevated CO2 Levels. These are Drawn Down Further via Mixing with Deep Oceanic Waters and Dissolution of Minerals on Timescales of 3,000 to 10,000 Years. Paleocene-Eocene Climate Event: 150,000 years to Return to Pre-Event Levels Archer, et al 2009 Annual Review of Earth and Planetary Sciences

15. The Effects of CO2? Shifts in vegetative zones, Regional climate changes, Rise in sea levels, Stronger storms, Ocean acidification, Buffer to climatic change How Long Will the Increase in CO 2 Last? Thousands of Years What Can Be Done??? Or, Do We Have to Live With, and Adapt to Climate Change? 81,000,000 tons of CO 2 /day Perhaps 800,000 tons Removed by US Efforts

16. If the US Replaces 5 Quadrillion BTUs of Energy use with Renewables, out of 500 Quads used worldwide each year, 1% of worldwide output of is CO 2 Reduced 81,000,000 tons of CO 2 /day Perhaps 800,000 tons Removed by US Efforts Is That a Solution?

17. 2 2012 – Drew Shindell, et al of NASA 2007 - Mark Jacobson of Stanford Actual Global Warming – CO 2 48% Soot 16% Methane14% Halocarbons9.7% Ozone8.6% Nitrous Oxide4.6% US efforts controlling CO 2 less impactful on Global warming? Are Soot and Methane easier to contain?

18. Is The Quest to Prevent Climate Change? Is the Agenda to Replace Oil Companies? Is the Agenda to Provide Abundant Energy Is the Agenda to Get Funding for Research? Is the Agenda to Build Constituencies to Get Elected? Is the Agenda to Make Money?

19. Energy Sources Oil Natural Gas Natural Gas Liquids Coal Nuclear Hydropower Geothermal Biomass Wind Solar Renewables Renewable, But not CO2 Neutral

20. Electricity??? Electricity is not Energy Electricity only transports power that was generated elsewhere

21. Renewables Wind Solar Geothermal Hydropower Biomass/Ethanol**

22. Renewables Government-Backed 30 States have Enforceable Renewable Portfolio Standards (RPS) Producers Earn Renewable Energy Credits Sell to Energy Distribution Companies Paid for in the Rate Base or by Surcharges, and Federal Production Tax Credits - 1.1 – 2.2c/KwH American Jobs Creation Act (2004) - renewables Support Renewable Energy Act (2010) (DOE) Wikipedia, DOE website

23. Federal Government State Governments Environmental Protection Agency Private Industry Municipal Governments Rest of the World Environmental Concerns Economic Concerns Power to Promulgate Regulations and Enforce Them Based on Mandates and Authority Given to it by the Federal Government NOW – CO 2

24. Federal Government State Governments Environmental Protection Agency Private Industry Municipal Governments Rest of the World Environmental Concerns Economic Concerns Los Alamos, Bell Lab-style R&D Department of Energy Power to Promulgate Laws Based on Mandates and Authority Given to it by the Federal Government

25. Federal Government State Governments Environmental Protection Agency Private Industry Municipal Governments Rest of the World Environmental Concerns, including Global Warming Economic Concerns Power to Promulgate Laws Based on Mandates and Authority Given to it by the Federal Government JOBS Taxes Department of Energy

26. Wind Abundant Supply, Requires Significant Infrastructure, Including Redundancy Currently 1.9% of Electric Supply Government Mandates, Subsidies - Federal Production, Investment Tax Credits; Interest Free Financing (via Energy Bonds to Gov. Entities) and Loan Guarantees (Farmers, Ranchers and Rural Businesses)

27. Wind Turbine Locations – Wind Power and Renewable Portfolio Supply Demand Source: EIA

28. Solar Abundant Supply Applications: Thermal and Direct to Electric Lower Prices from Chinese Manufacturers Competitive Weakness Against Cheap Energy - Low Oil Price is Bad for Solar Government Mandates, Subsidies 3 Recent Bankruptcies = Culling High Cost Makers Solyndra, Evergreen and Spectrawatt

29. GeoThermal Better Plants at Existing Sites

30. Hydroelectric Best Sites in U.S. have been Developed More Foreign Sites Will Be Developed

31. Source: IEA Annual Energy Outlook 2011

32. Effect of Renewables By 2035, Only 5 to 10% of all of CO 2 Input from U.S. has Been Diminished Is That a Solution to the Problem of CO 2 ?

33. Biomass Corn to Ethanol Cellulose to Ethanol Wood Products Used in Electric CoGen* * Not CO 2 Neutral, Based on Long Atmospheric Residence Times

34. Federal EPA Clean Air Act, 1970, as amended - RFG reformulated gasoline - RVP Reid Vapor Pressure (Summer) - Winter Oxygenated Fuel (CO control) Energy Independence and Security Act 2007 - EISA - Fuel Pathways to Provide “Appropriate Greenhouse Gas Reductions” - RFS 1 7.5 B Gallons by 2005 - RFS 2 36 B Gallons by 2022 (21 B Gallons non-corn starch) - Expanded to include Diesel 2009 - Application by GrowthEnergy to increase E10 to E15 Granted October 2010 for model years 2001 and younger Allows a Significant Expansion of Ethanol for Motor Fuel

35. Ethanol Explosive Growth Industry Located in Rural America 600,000 BEPD

36. Renewable Fuels Association 10% of Current Gasoline Market Gearing up to Export Ethanol 70,000 Direct Jobs Worldwide Asset Base is Rich and Complex RFS – Renewable Fuel Standards - Mandates by 2022 21 B Gallons of the 36 B Gallons of Renewable Fuels use be from non-corn starch Feedstocks Grasses, Woody Biomass, Garbage and Algae Volumetric Ethanol Excise Tax Credit (VEETC) -.45c/Gallon – 1 Year Extension 2011 = $6 B Agriculture Subsidies Counted? Tariffs on Brazilian Ethanol -.54c/Gallon 2.3 Units of LIQUID Energy per 1 Unit Energy Input Renewable Fuel Association Website

37. GrowthEnergy – Driver Behind Ethanol Goal: Replace 90% of US Gasoline Usage with Ethanol Ethanol Boost Direct Engine (EBDE) “Live Green, Go Yellow” Well Organized, Politically Savvy Spokesman: General Wesley Clark USDA, Energy Department, Navy - $510 MM Drop-in Aviation and Marine Biofuels White House Rural Council GrowthEnergy.Org 2011

38. Source: GrowthEnergy.org 20 years Ethanol = Liquid Energy

39. Coal (US) 6 Trillion Tons in Place Recoverable US Reserves – 260 B Tons 222 Years Supply at Present Rate DOE, US Mining Association

40. American Coal Foundation Website

41. US – 260 Bn sTons - 222 Years at Current Production Levels

42. A Critical Resource

43. Nuclear Siting Plants is Critical Fukushima Earthquake and Tsunami Refocused on Risk of Natural Disasters: Earthquakes, Hurricanes, Tornados, Terrorism Also, Radioactive Waste Products = No Significant Additions

44. Recessions Nafta Net Manufacturing Employment 1994-2007 -3,654,000 - Wikipedia

45. Energy Sources for Electrical Production Trends of the Past give us Perspective for the Future Petroleum Nuclear Coal Nat. Gas Rural Electrification Hydro Wind

46. Source: NaturalGas.Org

47. Our Products Oil Natural Gas Natural Gas Liquids

48. Production Stream Gas Condensate Well Porous Rock Formation Dew Point Pipeline Gas Oil Refinery Processing Plant Pipeline Quality Gas - Methane Natural Gas Liquids Burnertip Fractionation Plant Ethane Butane Propane Pentane Gasoline, Petrochemicals

49. Oil 99% of all Transportation Runs on Oil Liquid Energy

50. Oil Petrochemicals Detergents, Fertilizers, Medicine, Paints, Synthetic Fibers, Rubber, Asphalt, Lubricants, Roofing Compounds, Tars, Creosotes, High Viscosity Liquids…………………………………………………….

51. Natural Gas Energy in a Vapor 900 out of the next 1,000 Power Plants Huge New Supplies Transportation???

52. Natural Gas Liquids Ethane – Plastics Butane – Liquid Fuel Propane – Liquid Fuel Pentane – Solvents, Organic Compounds Hexane – Solvents, Gasoline

53. UPDATE: Halliburton Profit Surges 54% On North America Growth

55. The Five Reservoir Fluids Black Oils Volatile Oils Retrograde Gases (Gas Condensates) Wet Gases Dry Gases McCain, 1990 The Properties of Petroleum Fluids

56. The Five Reservoir Fluids Volatile Oils McCain, 1990 The Properties of Petroleum Fluids Pressure Drop in the Reservoir, Bubble Point is Reached, Drive Mechanism results from Gas Expansion Relatively Low Recoveries

57. The Five Reservoir Fluids Retrograde Gases (Gas Condensates) McCain, 1990 The Properties of Petroleum Fluids Initially – Fluid is in a gas phase in the reservoir As pressure decreases – Volumetric Expansion, Liquid condenses in the reservoir Initial Gas to Oil Ratios of 3,300 to 50,000 scf/STB 40 to 60 gravity API

58. The Five Reservoir Fluids Wet Gases McCain, 1990 The Properties of Petroleum Fluids Initially – Fluid is in a gas phase in the reservoir As pressure decreases - Liquid DOES NOT condense in the reservoir Volumetric Expansion High Gravity Liquids at Surface

59. All Reservoir Drive Mechanisms are the Result of Pressure Drops The Further the Distance from the Pressure Drop, the More Likely there will be a Barrier to Flow = Less Recovery

60. Horizontal Drilling With Hydraulic Fracturing Distributes the Pressure Drop Effectively over Many Times the Volumes of Reservoir Reached by Other Methods Truly a “ BlockBuster ” Technology

61. Energy from Shale.org

62. Porosity, Permeability and Drive Mechanisms - Hydrocarbon Phase is Just as Important Shale Reservoirs with Gas-Condensate Phases are Being Exploited Now = OIL Gas

63. Source: NaturalGas.Org; from EIA 2011 Thought it was Over for Gas Tight Gas Conventional Gas Offshore

64. Source: NaturalGas.Org; from EIA 2011 Thought it was Over for Gas

66. Marcellus Shale Reserve Estimates 84 TCFG 3.4 BBO mean 144 TCFG 6.2 BBL high side Other Estimates – 516 TCFG USGS; Engeler, Penn State

67. EIA

68. Northeastern Pennsylvania Drilling Results Cabot Petroleum 13 MCFGPD 10 BCFG per well AVERAGE!!? 3,189 Drillsites (400 acre spacing) = 32 TCFG – 2 Counties

69. Utica Shale Partly in the Wet Gas and Gas/Condensate Hydrocarbon Phases Probably, the Entire Eastern Half of Ohio will be an Oil/Gas Field. 12,000 Square Miles 160 acre spacing 48,000 wells 1,000,000 BOPD?

70. Source: Chesapeake

71. Source: EnergyIndustryPhotos.com

72. Bakken Dolomitic Siltstone and Shale Play, Along with Underlying Three Forks North Dakota, Montana and Canada Continental Resources Estimates 24 B BO Recoverable Continuous Over-Pressured Accumulation 1,000,000 BOPD? “Guess and Guess Often” – Jack Stark

76. Eagle Ford Horizontal Play South Texas Massive Continuous Accumulation All Hydrocarbon Phases Represented Estimated to Reach 750,000 BOPD

77. Energy Tomorrow

78. Canadian Bitumen and Heavy Oil Plays 1.7 Trillion BO in Place Projected to Reach 5,000,000 BOPD Pipeline Dependent – Keystone XL to Gulf Coast Gateway – Oil to Asia IHS CERA, WEA

79. Canadian Bitumen and Heavy Oil Plays Becoming More Environmentally Friendly with “ A Wave of Technological Advances” In-Situ Recovery Steam Assisted Gravity Drainage SAGD – 60% Recovery

80. Source: Wikipedia

81. Shell Oil Company

82. Deep Water Gulf of Mexico Eocene (Wilcox-age) Sands New Discoveries and Extensions Midcontinent, Permian Basin Exploitation with Horizontal Drilling Oil Shales Piceance, Unita and Green River Basins 4.24 Trillion Barrels of Oil in Place USGS

83. The region encompasses about 12 million square miles—just 6% of the earth's land mass. But it is estimated to contain the oil and natural-gas equivalent of 412 billion barrels of oil, about 22% of the world's undiscovered oil and gas. “More recently, thinning ice has made it easier to work in some parts of the Arctic. And the persistently high price of oil,...” Arctic Riches Lure Explorers Exxon, Rosneft, Shell Set to Pour Billions Into Potentially Huge, Risky Prospects Polar Oil Rush

85. Gas – Alaska, Canada Oil - Canada, North Dakota Ethanol Condensate - Utica, Marcellus Eagle Ford Wind Oil - Mexico Oil – Deep Water Gulf of Mexico

87. Conclusions On One Hand, We Have Lost On the Other Hand We Have Won

88. Conclusions 1.CO 2, is a Difficult Issue. We are Going to Have to Live with Climate Change. If Climate Change Happens at the Current Level of CO 2, We can Only Expect More. 2.We are Using Precious Resources of Time and Capital to Fight CO 2 – Are we Better Off Using that Capital Elsewhere and Let Economics Dictate Energy Use - ?

89. Conclusions 4. North America can be Energy Independent. - Just have to Include our most Strategic Trading Partners in the Box. 5. Would Create a Huge Geopolitical Shift Away from US Dependency on the Middle East and Reverse the Connection to Global Markets. 6. This Creates a Major Strategic Advantage: Economic Energy Allows for the Competitive Re-Industrialization of the U.S. and Real Solutions will be Found out of a Position of Economic Strength

90. Conclusions The Stronger We Make Our Economy the Faster We Solve Energy Issues

92. How are Sources of Energy Used??? To Generate Electricity Electricity and Natural Gas are Used: Industry, Residential, Commercial Liquid Fuels are Used: Transportation Electricity, Heat or Transportation

96. Undiscovered Oil Billions of Barrels >10 1-10 <1

98. Source: Wikipedia

102. Natural Gas Liquids Ethane Butane Propane Pentane Hexane

104. Highly Over-Pressured Oil Shales Pressure Drop Allows Oil to Migrate Out Bakken Shales In the Williston Basin

105. How is Energy Measured? BTU = heat energy Watt = power Power is energy expended through time, the rate it is transferred 1 Kilowatt = 3,412 BTU/hr

106. How is Energy Measured? 302 GigaWatts = 1 BCFG

107. How is Energy Measured? 1,000 Watts = Kilowatt 1,000 Kilowatts = Megawatt 1,000,000 Kilowatts = Gigawatt 301 Kilowatts = 1 MCFG 1 Gigawatt = 3,311 MCFG

108. Figure 4. Schematic representing various steps included in a Structured Decision Making process. Modified from U.S. Fish and Wildlife Service (2008). Structured Decision Making

109. Source: Wikipedia Final Volumes for 2011 Actual VolumeEthanol Equivalent Volume Cellulosic biofuel6.6 mill gal6.0 mill gal Biomass-based diesel0.80 bill gal1.20 bill gal Advanced biofuel1.35 bill gal Renewable fuel13.95 bill gal = 393,000,000 Barrels of Ethanol? 600,000 Barrels of Ethanol per day = less than numbers above 219 MM BE Still a Lot!!

110. Public Perception How Can This be Changed? What do we Change it to and How? Appreciation of Value, Conservation and Efficiency Change in Consumption Habits

112. USEPA, IPCC