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.
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.
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.
Here’s a link to the letter from Senate Majority Leader Mitch McConnell (R-Ky.) to every state governor urging them to not submit state plans that adhere to EPA’s carbon regulations—its “Clean Power Plan” (CPP). This letter has gotten leaders like Gov. Jerry Brown (D-Ca.) into a tizzy.
Here are some excerpts:1. The CPP doesn’t conform to the law
Some have recently suggested that failing to comply with the EPA’s requirements would be to disregard the law. But the fact is, it is the EPA that is failing to comply with the law here. By requiring states to submit a plan aimed at achieving a lower emissions target based upon four so-called “building blocks” — (1) improved power plant efficiencies, (2) switching electricity generation sources, (3) building new generation and transmission, and (4) reducing demand — the EPA is overreaching, as its authority under the Clean Air Act extends only to the first building block related to source specific energy efficiency upgrades.2. EPA’s plan runs into a legal wall
As Professor [Lawrence] Tribe has noted, the Clean Air Act not only fails to authorize the EPA’s plan, it forbids it. Professor Tribe recently called the EPA’s plan “constitutionally reckless”, saying it “usurp[s] the prerogatives of the States, Congress and the Federal Courts — all at once.”3. The CPP would be especially costly to those who can least afford it
The CPP would impose the greatest hardship on low-income families, including those with a fixed income and those dependent on Social Security. A recent study by National Economic Research Associates (NERA) found that under the EPA’s proposed plan, double-digit electricity rate increases are projected for 43 states, and the costs could total nearly $479 billion over 15 years nationwide.4. EPA's massive regulation will have no effect on the problem it claims to solve
The EPA’s stated rationale for attempting to shut down America’s coal-fired power plants is to combat global climate change. Yet, this costly effort is largely symbolic unless and until other major nations impose similar requirements on their own economies. Even then, the EPA admits that the “climate” benefits of the CPP cannot be quantified and has refused to estimate the impact it would have on global temperature or sea levels.5. EPA wants to rush the CPP through
As others have suggested, the EPA’s deadlines were very likely designed to force states to develop and submit implementation plans before the courts can decide on the legality of the CPP. Their hope is that states will commit to these plans before serious legal questions are resolved. This in itself should be a sufficiently compelling reason to deny the EPA’s request. Given the dubious legal rationale behind the EPA’s demands, rather than submitting plans now, states should allow the courts to rule on the merits of the CPP.6. Submitting a plan will expand EPA’s authority over state resources and leave them vulnerable to lawsuits and “sue and settle” agreements
[S]ubmitting a plan exposes states to the real danger— allowing the EPA to wrest control of a state’s energy policy if they or any other federal agency becomes dissatisfied with a state’s progress in reaching federal emissions goals. As both the EPA and other environmental groups have noted, a state plan must be “federally enforceable.” The meaning of this language is clear: as the EPA sees it, a state-issued plan would give the agency broad new authority to control that state’s energy future — not to mention the ability to place the blame for future consequences squarely on the state itself.
EPA's carbon regulations are a bad idea. It will mean higher electricity rates, fewer jobs, and a less-reliable power grid.
In the last few years, we’ve seen innovative companies combine old and new technologies to tap into shale deposits that were once unreachable. The resulting shale energy boom has made the United States the world’s top oil and natural gas producer while creating jobs and improving the nation’s energy security.
Now that we’ve moved from an age of energy scarcity to one of abundance, the Obama administration wants to add another layer of bureaucracy on energy producers.
The Interior Department released its long-awaited proposed regulations on hydraulic fracturing on federal lands, and on page 12 is this nugget:
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.
Federal regulators aren’t known for being speedy, as Katie Tubb and Nicolas Loris of the Heritage Foundation explain:
The [Bureau of Land Management] estimates that it took an average of 227 days simply to complete a drill application—just one step in the approval process to harvest oil and gas resources on federal lands. This is compared to 154 days in 2005 and the average 30 days it takes state governments to do the same.
As a result, the number of acres of federal lands leased for energy development has been declining.blm_onshore_acres_leased.png BLM data of onshore acres of federal land leased.Acres leased on all federal onshore land. Data source: Bureau of Land Management.
Now, don’t think states are failing to regulate hydraulic fracturing. If Pennsylvania is any indication, it’s far from the truth. Check out my favorite scene from the documentary Fracknation:Fracking Permits Required
“There are numerous permits you have to get before doing anything” on the Marcellus Shale, Range Resources’ Tony Gaudlip said.
The only thing these duplicative, redundant federal regulations will do is ensure less of our energy abundance is available for our energy-hungry economy.
EPA claims its Clean Power Plan gives states flexibility—Administrator Gina McCarthy used that word eight times when announcing the plan—and is a “collaboration between the state and federal government.”
Recently Senate Majority Leader Mitch McConnell (R-Ky.) advised states to “think twice before submitting a state plan — which could lock you in to federal enforcement and expose you to lawsuits.”
While activists backing EPA’s carbon regulations howled, Dan Byers, Senior Director of Policy, US Chamber’s Institute for 21st Century Energy, explains that Senator McConnell has a point. States who submit plans to EPA open themselves up to lawsuits from environmental groups using the nefarious “sue-and-settle” tactic:
Sue-and-settle agreements are increasingly understood to be one of EPA’s favorite regulatory tools. Typically, these environmentalist “citizen suits” brought against EPA based on any number of grounds (such as missed deadlines or enforcement disputes) are met with a lackluster defense and ultimate agreement by EPA. The system allows EPA to circumvent key transparency and accountability protocols and promulgate more regulations on pro-EPA terms. As the Chamber noted in a recent report on sue-and-settle agreements, EPA chose not to defend itself in lawsuits brought by environmental groups at least 60 times between 2009 and 2012, and those settlements led to EPA publishing more than 100 regulations costing tens of billions of dollars.
[A]nything a state commits to as part of its compliance plan effectively comes under federal control, and enforcement and compliance actions on state energy efficiency or renewable energy programs can be imposed at the whim of an -EPA agreement. Even states acting in good faith could be subject to the sue-and-settle hammer as a result of factors entirely beyond their control. For example, in states that encounter unique circumstances or unexpected challenges that force deviation from their state plan—be it unexpected demand increases, renewable project delays, or something as minor as a modified monitoring and verification procedures—environmentalists will have a shiny new vehicle with which to drive states to Federal court (either directly or indirectly through a suit against EPA).
Byers notes that environmental groups took notice of a mention of “citizen suits” in a footnote of EPA’s carbon regulations. The “dirty” secret of EPA’s proposed carbon regulations is environmental groups using sue-and-settle “will have open season to file lawsuits on any aspect of a state plan.”
States will be wary of cooperating with EPA under that kind of threat and having to endure that legal headache.
ConocoPhillips Chairman and CEO Ryan Lance has witnessed firsthand the evolution of his industry – from rough-necking to hard science.
He began his career in the trenches and now leads a team on the cutting edge of innovation – working to protect the environment and America’s energy independence. Technicians for the world giant in independent exploration and production can direct drill heads to pinpoint spots miles below the surface. The industry advances have brought results.
“Over the last two years alone, 40 percent of the U.S. GDP growth came from oil and gas,” Lance says, before adding: “And we did this through technology. Yes, oil is a high-tech business.”
Lance, during a visit to the U.S. Chamber of Commerce last week, sat down to give us an exclusive look at his tenure and how he sees the oil and gas industry today – and tomorrow.