At the Colorado Oil & Gas Association's annual Energy Epicenter, held in Denver in August, Halliburton chairman, president and chief executive David Lesar gave the luncheon audience a true-or-false test about unconventional resources. While the COGA audience no doubt could pass with flying colors, Lesar's quiz provided a prep for a final exam that has proven much harder—explaining unconventional resources to the public.

The topic of unconventional-resource development elicits many opinions, and sometimes emotional responses, Lesar said.

"We need to address head on whether these responses are true or not true."

He held out an enticing prize for a perfect score: A specific frac date, an increasingly elusive grail for E&Ps as service capacity tightens.

On to the quiz:

There are no industries in the U.S. creating good jobs currently. Not true, Lesar said, citing the thousands of jobs created by oil and gas development and the significant capital being deployed. Further, these are good-paying jobs, he said. A three-to-five-year frac supervisor, with just a high-school education, can make as much as $125,000 annually. The average salary in the industry is $94,000.

The industry keeps all the economic benefits for itself. Again, false. In 2011, the energy industry will create more than $1 trillion of GDP, said Lesar. It will spend $154 billion just on drilling and completion costs, and pay $100 million in taxes at the corporate level. Halliburton's U.S. employees will pay $72 million in state and federal taxes. And the company plans a $3-billion capital spend this year, with plenty tagged for goods made in the U.S., by American companies.

Unconventional resources are a major part of the global energy solution. This one's sort of like getting 250 points for putting your name on your SAT test.

But 10 years ago, the answer would have been false, and five years ago, could have been argued, noted Lesar. Today, it's true. Some 53% of natural gas produced in the U.S. is from unconventional resources; shale gas now is producing 17% of U.S. needs.

The U.S. has 25% of global gas reserves and 12% of shale reserves, but more than 75% of hydraulic horsepower. The rest of the world is beginning to demand more equipment, which will keep the market tight.

Unconventional wells require hydraulic fracturing. Definitely true, said Lesar. "If producers can't frac unconventional wells, the industry might as well turn out the lights on the North American drilling story." Environmentally friendly and responsible methods must be used, he stressed.

Unconventional resources are being developed in an environmentally responsible way. Absolutely true, said the CEO. "There have been no documented cases of hydraulic fracturing affecting the water table, but there certainly have been ample propaganda or outright false statements in the media on this topic."

As for frac chemicals, Lesar said the industry is moving beyond disclosure. He summoned Halliburton Western Hemisphere president Jim Brown to the podium to drink some of the company's CleanStim frac fluid, sourced from ingredients used in the food industry. "This is Dave's idea of succession planning," joked Brown.

Drilling unconventional wells is using too much fresh water. Not true. "We do use a lot of water but so do other industries," said Lesar. The industry's total water use in one day is as much as the citizens of New York City use in 12 hours; as that used to irrigate only 1% of the U.S. corn crop for one day; or to irrigate less than 20% of the golf courses in the U.S.

All unconventional resources are different. True, said Lesar. Coalbed methane, tight gas, shale gas—each requires different drilling or completion solutions. Each must be evaluated for geology, market and infrastructure, and technology. If all three don't line up, the resource will not get developed.

All unconventional resources are alike. Also true, in terms of the processes developed to bring resources quickly to market, at economic prices. "This is the intellectual storehouse the industry has developed through the years," said Lesar. This expertise is what non-U.S. operators covet. And some companies are missing a "big opportunity" to play in unconventional resource development internationally.

The epicenter of unconventional resources is still uncertain. True. While Houston decades ago cemented its image as the headquarters for energy firms, Lesar said the race is ongoing for the unconventional epicenter. "There are a lot of cities that want to be that capital. And not all are in the U.S."

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