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Energy Blog

Sean Hackbarth An oil pump jack near Corpus Christi, Texas.Photo credit: Eddie Seal/Bloomberg.

The Wall Street Journal's Holman Jenkins recently speculated that without hydraulic fracturing and the energy boom it has driven, "Western economies would likely be in free fall. The grudging U.S. recovery would be in retreat."

We've seen a dramatic shift in how we look at energy. When once we worried about ever-increasing oil imports from unfriendly regions of the world, we now have begun discussing the efficacy of exporting U.S. crude oil.

It might be helpful to take a look at the state of American petroleum development with a few charts.

1. The U.S. is the King of Hydrocarbons.

The Energy Information Administration concludes that for the third-straight year, the United States produced more oil and natural gas than any other country in the world.

eia_toppetroleum_producers_2014.jpg  Top petroleum-producing countries in 2014.EIA: Top petroleum-producing countries in 2014.Source: Energy Information Administration. 2. 2014 Was a Record Year in U.S. Oil Production Growth.

U.S. oil production rose by 1.2 million barrels per day (mbb/d) to 8.7 mbb/d, the most since records began being kept in 1900.

eia_annualchangefieldproduction_crudeoil_1960-2014.png  Change in U.S. field production of crude oil (1960-2014).EIA: Change in U.S. field production of crude oil (1960-2014).Source: Energy Information Administration. 3. The States Ranked by Oil Production.

The top five oil producers are Texas, North Dakota, California, Alaska, and Oklahoma. 

state-oil-production-2014-amount_chartbuilder.png State oil production in 2014 State oil production in 2014

If the federal offshore areas in the Gulf of Mexico were counted at its own state it would rank #2 (1396 Mbb/d).

4. Hydraulic Fracturing is Getting More Efficient.

In most of the major shale plays, the amount of oil and natural gas produced per rig is rising. Energy producers are improving hydraulic fracturing techniques and using new technologies to get more energy out of the ground.

eia_oil_natgas_productivity_2014.jpg  Oil and natural gas rig productivity.EIA: Oil and natural gas rig productivity.

At the same time, we are getting more energy with a reduced environmental impact. As natural gas production has increased, methane leakage from natural gas rigs--a brickbat of hydraulic fracturing opponents--has fallen

5. Faster Job Growth in the Energy Sector.

Besides more energy for consumers, the most tangible benefit from the shale boom has been job creation. The oil and natural gas industry supports 9.8 million jobs, and job growth in the sector has been faster than the economy as a whole.

api_oilnatgas_jobgrowth_800px.jpg  Job growth in the energy sector.American Petroleum Institute: Job growth in the energy sector.

All this is happening with an administration that refuses to embrace the domestic energy wealth we have. Imagine what can be accomplished if we have better energy policies in place? Like avoiding duplicative federal regulations on hydraulic fracturing or expanding offshore energy development.

We've only scratched the surface of what America's energy renaissance can be.

Sean Hackbarth Pack Ice on the Chukchi Sea.Pack Ice on the Chukchi Sea. Photo credit: Don Henise.

Arctic energy development is about being farsighted about America's energy needs in the decades ahead.

A recent National Petroleum Council (NPC) report on the energy development potential of the Arctic, states that the region contains 525 billion barrels of oil equivalent (BBOE).  Thirty-four billion barrels of oil lie beneath the United States' share of the Arctic. According to the NPC report "this represents about 15 years of current U.S. net oil imports."

npc_arctic_energy_potential_800px.jpg National Petroleum Council chart on Arctic energy resources.National Petroleum Council chart on Arctic energy resources.

But as Rex Tillerson, ExxonMobil's CEO, told the AP's Jonathan Fahey developing that energy safely will take decades:

Anytime you are dealing in these frontier areas where you are really driven by technology, these are very long time frames, multi-decade time frames.

The second element is just the enormity of the energy demand in the world. It's between 85 and 90 million barrels of oil per day today. That takes huge resources to supply that in a reliable way.

...

This will be what's needed next. If we start today it'll take 20, 30, 40 years for those to come on.

This NPC chart walks you through the time line for Arctic energy development, from lease sales to year-round production.

npc_arctic_project_cycles_800px.jpg National Petroleum Council time line on Arctic energy projects.National Petroleum Council time line on Arctic energy projects.

Tillerson went on to explain why these resources will need to be tapped:

Oil demand is going to continue to grow as population grows. If you look out 25 years from now we are going to have another couple of billion people on the planet, we're going to be at 9 billion people. Something like 3 billion people are going to move from poverty into middle class status. When they do that, the energy demand goes up enormously.

As we move out into the middle of this century our outlook shows you are going to need those resources even with a lot of other alternative forms of energy continuing at a fairly aggressive growth rate.

Also, as Gary Litman, vice president for International Strategic Initiatives at the U.S. Chamber reminds us in RealClearPolitics populations both near and far from the Arctic will benefit from responsible energy development:

Oil and gas hidden under the Arctic ice, and the infrastructure that private investment in these fields will bring, are a viable solution to the growing development needs of the northern populations. These are local resources that will contribute tremendously to the local economies. 

Like nurturing the successful shale boom, advancing Arctic energy development is about embracing America's energy abundance. Doing that will enhance our nation's energy security.

Sean Hackbarth EPA Administrator Gina McCarthy.

While EPA Administrator Gina McCarthy said that the Keystone XL pipeline will not doom the environment, she doesn’t paint the full picture:

“No, I don’t think that any one issue is a disaster for the climate, nor do I think there is one solution for the climate change challenge that we have,” McCarthy said during an interview with POLITICO’s Mike Allen.

Keystone critics have long alleged that the pipeline, if approved, would greatly exacerbate climate change.

Not only wouldn’t the pipeline be a disaster, the State Department’s analysis finds that not building it would result in more greenhouse gas emissions.

StateDepartment_KeystoneXL_Alternatives.png Impacts of Keystone XL alternatives [table]Impacts of Keystone XL alternatives [table]

While there are significant job and economic benefits from the pipeline, President Obama has made greenhouse gas emissions a major criteria for his decision. Based on his own State Department’s conclusions, he should approve it.

Sean Hackbarth Oil drilling platform being transported to the Gulf of Mexico.Oil drilling platform being transported to the Gulf of Mexico. Photo credit: Eddie Seal/Bloomberg.

Eighty-six percent of offshore energy is off limits from development, and the Interior Department’s proposed offshore leasing plan does little to change that.

While the draft plan opens a sliver of the Atlantic coast to development, it’s only one lease sale, and there’s no guarantee [subscription required] we’ll even see it happen, as Interior Secretary Sally Jewell told a House committee:

“So you guarantee that the Atlantic will be part of final version?” [Rep. Doug] Lamborn asked during a hearing of the House Natural Resources Committee, which went on despite the snow falling on D.C.

“No, I can’t guarantee anything,” Jewell responded. “We are in the draft proposed plan phase and we are taking public comment as is required of us by law.”

Today is the deadline to submit comments on Interior’s 2017-2022 plan.

The governors of North Carolina, South Carolina, and Virginia are on board with expanding offshore energy exploration. For these states, along with Florida and Georgia, new Atlantic leases will mean jobs, economic growth, and greater state tax revenue.

The plan isn’t any better when you look beyond the Atlantic coast. It closes off large chunks of Alaska’s coast and continues to seal off the Pacific Coast and the Eastern Gulf of Mexico to new leases.

Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy, has said this plan is a “disconnect between our economy’s energy needs and the administration’s misguided attempts to meet those needs.”

She’s right. Unless someone invents some magical new source of energy, oil and natural gas demand will continue for decades. Taking large swaths of the outer continental shelf off the table is simply bad energy policy.  This plan is nowhere near the one needed to meet the needs of America’s energy-intensive economy.

Tell the Bureau of Ocean Energy Management we need a better plan.

Sean Hackbarth An oil drilling rig outside Williston, N.D.An oil drilling rig outside Williston, N.D. Photo credit: Daniel Acker/Bloomberg.

On the value of the Interior Department’s redundant hydraulic fracturing regulations, National Review writes that it boils down to this: Who should regulate hydraulic fracturing? State regulators who understand the unique geographies of their states and have shown they can effectively do it; or bureaucrats tucked away in offices in Washington, DC?

For the Left, regulation that does not come from Washington is substandard. Politico cites environmentalists who dismiss the current arrangement as a “patchwork.” Vox calls current regulation “patchy and inconsistent” and frets that rules “vary from state to state.” Vox, which boasts that it is guided by evidence and empiricism, never even bothers to ask whether it might in fact be preferable to have rules that vary from locality to locality since — this also apparently is beneath consideration — the underlying geology varies from locality to locality, too. West Texas is not very much like Pennsylvania or the southern tier of New York, a petroleum-rich and economically depressed area in which modern techniques of gas extraction are categorically banned by edict of Governor Andrew Cuomo, another Democrat willing to hamstring the economy in the service of courting ill-informed environmentalists.

Experience has shown — in Texas, in Pennsylvania, in South Dakota, and beyond — that state regulators are very much up to the task, and that they are much better positioned to take account of local conditions than are bureaucrats at the BLM or the EPA, who are mainly interested in local conditions in the District of Columbia.

This same trust in states is shared by former EPA Administrator Lisa Jackson:

States are stepping up and doing a good job. It doesn’t have to be EPA that regulates the 10,000 wells that might go in.

It’s also the opinion of the White House Council of Economic Advisers:

The regulatory structure for addressing local environmental concerns, especially around land and water use, exists primarily at the state and local level.

(They should chat with the Interior Department.)

And as this Congressional report shows, states have successfully regulated hydraulic fracturing for decades.

While National Review's editors make good points, they miss a major one. It's not state OR federal regulations; it's state AND federal regulations. The Interior Department spells this out [emphasis mine]:

Operators with leases on Federal lands must comply with both the BLM’s regulations and with state operating requirements, including state permitting and notice requirements to the extent they do not conflict with BLM regulations.

The new regulations do not alleviate an energy developer's ‎existing responsibility to the state, but it will duplicate its efforts for federal regulators. 

Americans are saving billions of dollars each year because of shale energy boom. What they don’t need are duplicative federal regulations that will squelch these gains.

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