Along with lots of oil, North Dakota’s shale boom has also produced a lot of natural gas. Unfortunately the state doesn’t have the necessary pipelines to transport the gas. Instead, it’s being burned or flared. This flaring can been seen from space.
State regulators and the energy industry want to reduce flaring—potential revenue is literally burning up—by building pipelines. However, the federal government’s cumbersome infrastructure permitting process is keeping them from fixing the problem, Reuters reports:
Energy companies have been preparing since June for the deadline requiring them to capture 74 percent of natural gas extracted alongside crude oil from thousands of wells. The standards get tougher in January.
But the energy industry and state officials say they are bound to fall short of the goal through 2015, flaring gas in excess of targets and consequently having to trim oil production to comply with penalties built into the new standards.
The main reason, according to Reuters interviews and reviews of regulations, is simple: a Byzantine web of state and federal agencies who must sign off on new pipelines.
The pipelines are caught between state officials whose top energy policy goal is to cut flaring, and federal agencies, which weigh historical and ecological issues, including protection of habitats for rare plants and animals.
The federal holdups are "a major disappointment," said Lynn Helms, head of the North Dakota Department of Mineral Resources. "It will make it harder to meet that 74-percent goal."
Rob Port at North Dakota’s SayAnythingBlog.com observes, “The fixes for those problems are made almost impossible by bureaucratic red tape.”
The Institute for 21st Century Energy’s Energy Works for Us report explains how improving our energy infrastructure a modernized permitting process:
New infrastructure is needed to expand and modernize aging systems and to take advantage of new sources of energy, particularly shale gas, shale oil, oil sands from Canada, and renewables, but an unpredictable regulation impedes investment in energy projects of all types. For all forms of energy, regulatory and fiscal policies need to be more predictable to accelerate capital investment.
Instead of being a barrier, the federal permitting process need better coordination and streamlining to speed up the construction of energy infrastructure projects like natural gas pipelines.
A key federal agency gave the go-ahead for Dominion Resources to build a liquefied natural gas (LNG) export facility in Maryland:”
Federal officials approved a Maryland liquefied natural gas export terminal late Monday, a move that opposition groups said they would fight.
Dominion Resources secured approval from the Federal Energy Regulatory Commission [FERC] to build the $3.8 billion Cove Point terminal on the Chesapeake Bay, which will be ready to ship up to 0.82 billion cubic feet per day of natural gas beginning in 2017.
"We are pleased to receive this final approval that allows us to start constructing this important project that offers significant economic, environmental and geopolitical benefits," Dominion Energy President Diane Leopold said.
Construction of the Cove Point facility will create 3,000 jobs and add $45 million annually on average to the local economy.
What was originally built to import LNG will, after spending $3.8 billion to retrofit, export natural gas produced from the Marcellus and Utica Shales. Now, the facility will help America feed hungry global energy markets.
Exporting natural gas can create jobs and generate economic growth. An Energy Department-sponsored study found that “the U.S. was projected to gain net economic benefits from allowing LNG exports.”
However, a tedious approval process has become a barrier to this opportunity. Twenty-six LNG export applications are awaiting federal approval. “By the time US export projects are ready, the world may no longer be waiting,” warns Natalie Regoli and Brian Polle of Baker & McKenzie.
In May, FERC concluded that Cove Point would not have major environmental impacts. In 2013, Cove Point received conditional permission from the Energy Department to export LNG to non-free trade agreement countries like Japan and India and is awaiting final authorization.
The International Energy Agency confirms what we’ve known for a while: The United States is the world’s top petroleum producer. The American Interest’s Walter Russell Mead quotes from a Financial Times story [subscription required]:
US production of oil and related liquids such as ethane and propane was neck-and-neck with Saudi Arabia in June and again in August at about 11.5m barrels a day, according to the International Energy Agency, the watchdog backed by rich countries.
With US production continuing to boom, its output is set to exceed Saudi Arabia’s this month or next for the first time since 1991. [...]
Rising oil and gas production has caused the US trade deficit in energy to shrink, and prompted a wave of investment in petrochemicals and other related industries. [...] It is also having an impact on global security. Imports are expected to provide just 21 per cent of US liquid fuel consumption next year, down from 60 per cent in 2005.
America’s energy situation has been transformed by the shale boom. According to Energy Information Administration (EIA) data, in 2006, Saudi Arabia produced 2.4 million barrels per day (bpd) more petroleum than the United States. Now, thanks to American innovation--combining horizontal drilling with hydraulic fracturing—the United States is out-producing the Middle East oil giant by more than 2.4 million bpd.Total petroleum production: Saudi Arabia versus United States: January 1994 to June 2014Source: Mark Perry.
The shale boom has also fueled significant job creation. As I noted last week, the shale energy supply chain alone supports over 500,000 jobs. Earlier this year, the Wall Street Journal reported on how the construction industry will be winners from the boom. And according to a report for the U.S. Chamber’s Institute for 21st Century Energy, by 2025 shale energy will support 3.9 million jobs all along the value chain—from producing oil and natural gas to transforming it into products we use every day.
With the success we’ve seen, let’s be wary when federal agencies like EPA want to impose duplicative regulations on hydraulic fracturing when states have had a long track record of successful regulation. Shale energy has put the United States in a great position economically and geopolitically. With the right policies this success will continue.
In the PR blitz for this new reality television show On the Menu, celebrity chef Emeril Lagasse went BAM! on the struggles restaurateurs face in this economy, The Week reported. “I have nowhere to really go other than broke,” he said and continued:
It's becoming a very challenging industry to become a very successful average restaurateur. I can't charge $300 a person in my restaurant or I would not be in business. Am I using any different ingredients? Not really. Am I using any caliber of service staff? I don't think so. I think our service is as good or better than most places.
And then you add all the Obama nonsense to what it's become in the last several years. I don't have anything against Mr. Obama. I'm just saying the way that, you know... the government should stay out of things.
A Wall Street Journal story quoted him as saying:
The margins are becoming very difficult, where there are a lot of months that I don’t have margin.
It’s not that I’m a bad operator. It’s just the economics of the way that things are happening—the way that it’s been stacked up.
While Lagasse didn’t mention any specifics, here are four policy areas where federal officials have made it harder for restaurateurs—and other small business owners--to succeed.1. Obamacare
Obamacare’s employer mandate reduced full-time employment from its traditional 40-hours-per-week definition down to 30-hours-per-week. This forces “employers [like restaurants] to restructure their workforce by reducing their employees’ hours to alleviate the burden of compliance.” For Boise, ID restaurant owner Kevin Settles, this meant he had to “put raises and expansion plans on hold as he figured out the cost and logistics of making the changes.”2. Overregulation
Entrepreneurs told John Dearie, executive vice president at the Financial Services Forum and co-author of Where the Jobs Are: Entrepreneurship and the Soul of the American Economy, that one of their biggest frustrations is overregulation: “One recurring message is that regulatory burden, complexity, and uncertainty is undermining entrepreneurs’ ability to successfully launch new businesses, expand, and create jobs.” A recent Gallup poll found that nearly half of Americans (49%) agree that there is too much regulation. “[R]egulation is not free, or without consequence. Regulation imposes costs—costs borne principally by businesses,” Dearie writes.3. Minimum Wage Increase
President Obama and Members of Congress have argued that the minimum wage should be increased—bad idea. That would add additional burdens on restaurant owners and other small business. My colleague Sheryll Poe wrote about how that would hurt one Alexandria, VA cupcake baker:
Jody Manor, owner of Bittersweet Café and the new Waterfront Market and Café in Alexandria, Virginia was on FoxBusiness News to talk about President Obama’s State of the Union.
Manor, who notes that he started his restaurant career as a dishwasher when he was 14 years old, said the president’s plan to increase the minimum wage to $10.10 an hour would mean he’d have to “raise prices to pay those wages.”4. Energy
Opening a restaurant is risky enough (as is any business). Government policy shouldn’t worsen those odds.
To maintain this momentum, it’s time to end the 40-year old ban on oil exports. If companies can sell on the global market, they will have a greater incentive to develop more American energy.
The Washington Post’s Robert Samuelson makes the case for lifting the ban:
If you want companies to search for oil, you have to provide them with a viable market where they might profitably sell it. As output has increased, this has become a bigger issue. Here’s why.
The new oil consists mostly of “sweet, light” crudes, meaning they have a low sulfur content and are less dense than “sour, heavy” crudes. The trouble is that many U.S. refineries have been designed to process heavy, sour crudes and, therefore, aren’t suitable for the new oil. At the end of 2013, the United States had 115 oil refineries capable of processing about 18 mbd, according to a report from the Congressional Research Service. About half were fitted for sour and heavy crudes. That’s especially true along the Gulf of Mexico coast, where more than half of U.S. refining capacity is located.
The result is that more and more new oil is chasing less and less usable refining capacity. Refineries’ bargaining power rises. Producers have to accept price discounts to sell their oil.
He goes on to point out that by maintaining the export ban, “producers will be discouraged by an oil market that seems rigged against them. They will react by slowing — or possibly stopping — new exploration. The oil boom will ebb or end.” And with it will go the jobs and economic growth.
Research supports the argument that allowing American oil to be exported will mean more jobs and investment. As I wrote in May:
A study by IHS concludes that opening markets for U.S. crude would spur domestic investments oil production. From 2016-2030 an additional $746 billion would be invested and an additional 1.2 million barrels per day of oil would be produced per year. This would translate into an additional 394,000 jobs per year with a peak of 964,000 in 2018.
We’ve gone from worrying about energy scarcity and rising oil imports to supporting America’s energy abundance. Times have changed, and policies must follow.