US Chamber of Commerce Blog
There's been plenty of pixels spilled on America's oil and natural gas boom--led by hydraulic fracturing. It even has its own reality show, Boomtowners, filmed in North Dakota.
A few years ago, it looked the U.S. would rely on imports for decades to come. Now, there's serious talk about lifting the 40-year-old oil export ban.
But as Lachlan Markay at the Washington Free Beacon reports, there's one place the boom has missed--federal lands:
The Congressional Research Service found that oil production on federal land declined by 10 percent from 2010 to 2014 while production on private land increased by nearly 90 percent.
Gas production on federal land decreased by 31 percent during the same period, while production on private land increased by 21 percent.u-s-oil-production-barrels-per-day-federal-lands-non-federal-lands_800px.png Facebook TweetChart: U.S. oil production on federal and non-federal lands
The lengthy permitting process plays a role. The CRS report finds that the average time it took the Bureau of Land Management (BLM) to process a permit to drill rose from 127 days in fiscal year 2006 to 133 days in fiscal year 2014. In contrast, the Interior Department's Inspector General found that state regulators took only took 80 days to approve permits.
And with new, redundant regulations on hydraulic fracturing from the Interior Department, don't expect the situation to turn around.u-s-natural-gas-production-billion-cubic-feet-federal-lands-non-federal-lands_800px.png Facebook TweetChart: U.S. natural gas production on federal and non-federal lands
Long permitting times add costs for energy developers. We shouldn't be surprised to see declining production on federal lands.
The 40-year-old oil export ban has hit a mid-life crisis. The prohibition on U.S. oil exports was born in 1975, a time of decreasing domestic oil production, the fallout from Arab oil embargos, and high oil prices.
Today's energy environment is much different, Encana President and CEO Doug Suttles told the audience at the U.S. Chamber of Commerce Foundation's CEO Leadership Series:
American oil production has almost doubled from a low of 5 million barrels a day in 2008, back to the peak attained in 1970.
"Today, largely because of the export ban, a barrel of American crude oil sells for about $10 less than the global oil price," Suttles explained, "It is absurd that other countries can sell their crude into U.S. markets while U.S. crude is essentially locked out of global markets."
The outdated oil export ban is an ill fit for "our new energy abundant reality." Here are Suttles' four reasons for ending it:1. It Will Lower Price of Gas
The price at the pump is tied to the global price of crude, because refined products are traded globally. Adding U.S. crude oil to the global oil market would help to increase global supply, putting downward pressure on global prices while simultaneously increasing the price the United States receives for its crude.
Several independent economic studies, including one from the U.S. Government Accountability Office, agree that repealing the export ban will put downward pressure on gasoline prices. Global consultancy ICF International suggests this may save an average of up to $5.8 billion per year between 2015 and 2035. Meaning Americans pay less at the pump while state and federal tax revenues go up.
Adam Sieminski, administrator of the U.S. Energy Information Administration, came to a similar conclusion, telling Platts Energy Week TV, "Preliminary evidence suggests that gasoline prices get set in the global markets."2. We Will See an Increase in Tax Receipts, Jobs and Investment
If we closed the $10 differential between the U.S. and global oil price, about half could be collected through Federal and State taxes and royalty owners - helping finance schools, roads and public services. It's anticipated that the industry would reinvest to increase production, create more high paying jobs across the country and ultimately generate more tax revenue. It's an economic win for all Americans.
Economic consulting firm IHS Energy believes ending the ban would add $751 billion of investment in the upstream E&P sector; increase crude production, create an additional 394,000 jobs, add $86 billion to annual GDP and add $239 per year of disposable income, per American household.
The IHS study estimates that through 2030, $1.3 trillion will be added to government treasuries if the export ban is lifted.3. Global Supply Will Be Stabilized
Increased oil production from the U.S. would stabilize global supply, providing some insulation against future volatile global prices caused by unpredictable production from other producing countries. It would enhance America's energy security, amplify the effectiveness of sanctions, boost U.S. geo-political standing and create opportunities to develop new energy trading relationships with allies around the world.
Bloomberg reports that if the ban is lifted, as much as 2.4 million barrels of oil a day could be exported, making "the U.S. the fourth-largest oil exporter, behind Saudi Arabia, Russia and the United Arab Emirates."4. It's Widely Recognized as Sound Policy by Leading Thinkers
Economists, national security and foreign policy experts are in favor of it. Polls show that two-thirds of American voters support the sale of U.S. crude oil to our trading partners and believe it would create jobs, lower gasoline prices, shrink the trade deficit and strengthen America's global strategic position.
"Liberalizing the crude oil export regime would advance U.S. foreign policy," writes Blake Clayton at the Council for Foreign Relations, "It would demonstrate Washington's commitment to free and fair trade."
Suttles joined the growing number of voices from inside the industry and out calling to end the oil export ban. In March, ConocoPhillips chairman and CEO Ryan Lance, made the case for lifting it at the U.S. Chamber.
Opposing the Keystone XL pipeline isn't enough for 30 environmental groups. They're taking their anti-energy fight west with a report opposing "proposals for pipelines, tankers and rail facilities" to transport oil sands from Canada to West Coast refineries.
This Chicken Little cry of "invasion" is a fine example of the "build-absolutely-nothing-anywhere-near-anything (BANANAs) mentality" that U.S. Chamber and CEO Tom Donohue noted in his commentary, today.
Apparently these groups watch too much South Park--"Blame Canada!" But it's disingenuous to gripe about Canadian oil sands while practically ignoring comparable California crude.
Let me explain. Oil was discovered in the Kern River field near Bakersfield, California, in 1899. Today, there are over 9,000 oil rigs in the area. Driving around, you'll see fields sprouting with oil jacks as far as the eye can see. As of 2006, the Kern River was California's third-largest oil field, having produced nearly 2 billion barrels of oil, and had estimated reserves of 476 million barrels. [h/t The Oil Drum]
You wouldn't know it from the NRDC's blog post, but what's coming out of the ground there and in other California fields is a type of oil that--from a greenhouse gas emissions perspective--is similar to Canadian oil sands.
As this Canadian Association of Petroleum Producers chart shows, when measuring the carbon dioxide generated from production to combustion (well-to-wheels), Kern River crude is as carbon intense as Canadian oil sands.capp_ghg_emissions_2012.jpg Chart: Tull cycle GHG emissions oil sands and other crude oils.Source: Canadian Association of Petroleum Producers.
The NDRC and its allies say that pointing out this gaping logic hole is a "red herring" because California oil production is declining. Ok, but then it begs a question that Tom Huffaker, Vice-President, Canadian Association of Petroleum Producers, asked in a 2009 op-ed, "Where are Californians going to get the oil they need?"
While it's true that demand for gasoline is expected to decline, according to a 2010 California Energy Commission forecast, demand for diesel fuel will rise by as much as 42%, and demand for jet fuel will rise by as much as 67% by 2030. In addition, California refiners supply all of Nevada and much of Arizona's petroleum demand.
California may be the number three oil producing state in the U.S., but it only produces 40% of the crude oil it consumes. The rest has to be imported from Alaska, North Dakota, Colorado, Texas, and even Canada. If refiners don't have reliable crude oil supplies, consumers will see already high fuel prices go higher.
Apparently the NRDC and its friends would rather sing South Park songs than worry about that.