U.S. CHAMBER OF COMMERCE

Energy Blog

Energy Blog

US Chamber of Commerce Blog

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.

Sean Hackbarth Dollar billsPhoto credit: Scott Eells/Bloomberg.

The New Republic is no fan of hydraulic fracturing. However, they published a piece by staff writer Danny Vinik making the case that the energy production technology is “good for American consumers.”

Vinick writes about a Brookings Institution paper by economists Catherine Hausman and Ryan Kellogg that found the shale boom drove natural gas prices down 47%. This had led to significant increases in consumer welfare:

They found that “the shale gas revolution led to an increase in welfare for natural gas consumers and producers of $48 billion per year.” That’s equal to about one-third of 1 percent of GDP, or $150 per capita. “If that doesn’t convince you [that it’s a lot],” said one participant made anonymous under Chatham House rules, “use Washington accounting and call it half a trillion dollars over 10 years.”

For instance, Hausman and Kellogg found that “residential consumer gas bills have dropped $13 billion per year” because of hydraulic fracturing.

brookings_shalegas_prices.jpg Brookings Institutions chart shows that as hydraulic fracturing grows, natural gas prices fall.Brookings Institutions chart shows that as hydraulic fracturing grows, natural gas prices fall.

The Hausman and Kellogg determined what parts of the country have benefited the most:

Looking specifically at regional effects, one would expect colder states that use natural gas for space heating to be the area to benefit most from shale gas. Yet the authors find that the area to reap the most gain is West South Central (Arkansas, Louisiana, Oklahoma and Texas) at $432 per person in consumer benefits, followed by East North Central (Illinois, Indiana, Michigan, Ohio, and Wisconsin) with $259 per person in benefits. The area to gain the least is the Pacific (California, Oregon and Washington), but consumers there still benefited to the tune of $181 per year.

They also find that American manufacturing has been helped:

[T]hey find that gas-intensive manufacturing has indeed experienced an expansion of activity as a result of the shale boom, with the most pronounced effect in fertilizer manufacturing – the most gas-intensive sector of all.

Investors Business Daily takes its analysis of the Brookings paper a step further by linking it to other related research:

Another study by John Harpole of Mercator Energy in Colorado finds that because the poor spend far more on utility bills than do the rich as a share of their incomes, "the poor benefit far more than the rich from the shale oil and gas boom."

Harpole finds in his study that the fall in natural gas prices from 2007-12 translated to gains to poor households multiple times larger than the value of the $1 billion a year the feds throw at the Low Income Home Energy Assistance Program. In other words, the best way to keep the less fortunate warm in the winter is by allowing shale oil and gas drilling.

Both these analyses put the Interior Department’s newly proposed hydraulic fracturing regulations on federal lands into context. As Mark Green from Energy Tomorrow writes:

The reality is that state regulatory regimes and the officials who oversee energy development in the respective states are doing a good job – as was noted by former EPA Administrator Lisa Jackson when she was still in the administration. These regimes are tailored for each state’s geology, hydrology and other physical characteristics. Overlaying them with a federal rule could mean duplicative regulatory hoops for operators to hop through, unnecessarily delaying operations and driving up costs.  

The result of these redundant rules will be an unnecessary slowdown of the shale boom which Americans will notice with their emptier wallets.