The Heat Beat
A Historic Downturn Meets Historic Opportunity: Geothermal Development Will Save Oil and Gas Jobs
Geothermal uses many of the same services, technologies and personnel as the oil and gas sector. In the midst of this historically impactful oil and gas downturn, there is a unique opportunity to quickly leverage oil and gas capabilities and technologies into the geothermal sector while preserving jobs and regional economic viability, and ensuring US energy sector vitality. It’s exciting to see this concept rise to the fore in public, political and industry dialog – but let’s dig into the details of the impact near term action could have for both clean energy development in the US, and saving jobs in the oil and gas industry - and importantly - what steps the federal government should take now to support and enable on both fronts. It’s a unique value proposition; retained jobs and clean energy, and importantly it’s about people and families, not just corporations.
Current stimulus-related efforts for oil and gas include a production restriction agreement involving Saudi and Russia; storing up to 27 MMBO oil in the strategic petroleum reserve (SPR); the CARES Act economic stimulus available to individuals and small businesses. But far less attention is being given to the service sector, compared to producers and refiners. Rigs, frack and pumping crews, seismic and geophysical contractors and wireline/logging companies, are just a few examples of the companies involved, and overall the service sector employs more people than the upstream oil and gas sector. When we speak of oil service companies, the job risk is not focused on the Schlumberger, Baker Hughes and Halliburton types, though even some majors have also begun announcing layoffs. There are large numbers of medium and small companies in this sector –the ‘mom and pop’ shops of oil and gas that employ thousands of individuals. The survival of many of these entities is at risk currently, and once these jobs and entities are gone, it will take years for the industry to recover them, if they ever return. The oil and gas sector overall accounts for over 5% of US employment and 8% of GDP – it’s a huge impactful industry in terms of jobs in the US.
Regional energy economies being impacted in the here and now are Wyoming, Utah, Colorado, Texas, New Mexico, Louisiana, Pennsylvania, Ohio, West Virginia, Oklahoma, Alaska, Kansas, California, North Dakota. There are suppliers in all 50 states; it is not just a Texas issue. At the same time, geothermal-rich states which are reeling from disruption to their economic foundations include Nevada, Oregon, Idaho and Utah. A solution therefore benefits multiple constituencies while also bolstering the US clean energy portfolio.
I was a manager in Wyoming for an oil and gas major during the 1985-1986 oil and gas downturn. We laid off 50% of our staff, reduced from eight rigs to one, and cut benefits and salaries. At the same time, we went out of our way to ensure that the service sector remained viable, with multiple companies active in order to maintain competition. We knew then, and this was further confirmed later, that equipment and crews which are idled for long periods of time never return. The majority of people who left the industry at that time, eventually moved on to other jobs – they did not return to the energy sector. The same pattern has persisted in other oil and gas downturns since that time. This has immediate relevance to long term US competitiveness and energy independence. It is therefore imperative that these crews and services be viable and retained. Oil and gas layoffs lead to permanent skills and workforce loss, an increase in unemployment benefits utilized, lessened competitiveness, and a permanently weakened sector. Regardless of one’s perspective on the future mix of energy sources, the reality is that the US continues to rely on fossil energy for 80% of its total energy use. We need to act to save industry jobs – now.
This is a ‘eureka’ moment for geothermal energy development. A unique confluence of events has positioned the oil and gas industry to aim idle or underutilized resources toward geothermal projects. The economic multiplier for oil and gas is around 3; that means that each oil and gas job supports or creates an additional 3 jobs – so this concept is a win for clean energy, oil and gas, and also preserving large numbers of jobs.
Immediate action is important. 2021 is too late. So what should we do?
1. Quickly establish funding for the use of modern oil and gas sector services (rigs, logging etc.) for test and definition drilling in the geothermal sector. Each well and services can employ dozens of individuals in high paying jobs. This would serve both to identify more geothermal resources which can quickly be developed and connected to the grid, and would utilize otherwise unemployed professionals from the service sector. This needs to be done before people permanently leave the sector; the target date for 1st drilling should be summer 2020.
2. Provide significant funding through the office of Fossil Energy at DOE, for material oil and gas tech and capability transfer to the geothermal sector.
3. Concurrently, deploy currently underutilized federal staff (BLM permit managers etc.) to fast track and streamline geothermal permitting and approvals. If they’re not working on oil and gas wells and permits, they need to be used for current needs. Concurrently, ensure an engaged and comprehensive process whereby BLM takes a complete and regional review of projects and ensures that this is done with an eye towards other projects and approvals in the que.
4. Remove roadblocks to geothermal pertaining to PTC/ITC barriers, loan office practices, 45Q and MLP provisions and 1603 fund availability. Make it an “all hands on deck” moment.
5. Ensure that ARPA-E has dedicated and immediate funds to commence new highly innovative R&D programs for geothermal technologies.
6. Quickly establish funding for additional FORGE EGS/Closed Loop System test sites (2-4) which would immediately become both regional R&D centers, and also employ service sector skills.
7. Build a major federal collaboration to push forward next generation geothermal energy research and development to streamline and accelerate the development of the geothermal energy economy. Appoint a "czar" to coordinate and streamline across multiple federal agencies.
Doug Hollett is former Acting Assistant Secretary of Fossil Energy, Deputy Assistant Secretary for Renewable Power, and Director of the Geothermal Technologies Office at the US Department of Energy. Doug is also a 30-year veteran of the oil and gas industry, where he last served in executive roles at Marathon Oil.