U.S. CHAMBER OF COMMERCE

Energy Blog

Energy Blog

US Chamber of Commerce Blog

Sean Hackbarth An Anadarko oil rig in Fort Lupton, Colo. An Anadarko oil rig in Fort Lupton, Colo. Photo credit: Jamie Schwaberow/Bloomberg.

The United States continues to reap benefits from hydraulic fracturing. For the third year in a row, energy security has improved, according to The Institute for 21st Century Energy’s U.S. Energy Security Risk Index. Much of that improvement comes from the shale energy boom.

The boom has helped “reduced net imports, and put downward pressure on energy costs and expenditures, all of which to contributed to lower energy security risk,” the report states.

Domestic oil production rose 17% in 2014, while domestic natural gas production increased for the eighth-consecutive year to a record high.

Increased production has pushed down imports. In 2005, the U.S. imported 30% of its energy demand; that’s now down to below 10%.

us_energy_imports_1950-2040.jpg  1950-2040 U.S. imports as share of energy demand: 1950-2040Source: Institute for 21st Century Energy.


“More homegrown energy production reduces our overall risk and puts downward pressure on costs,” said Karen Harbert, president and CEO of the Energy Institute. “It is now possible to foresee a world in which America produces more energy than we consume.”

Because of the shale boom the U.S. is now in a situation where it can export some of this energy. Now that the oil export ban has been lifted, oil-laden tankers are leaving U.S. ports and liquefied natural gas facilities are coming online or are under construction.

However, needless federal regulations could reverse the energy security improvements, the Energy Institute warns.

Duplicative regulations on hydraulic fracturing—the technology that made the shale boom possible--will put a damper on investment at a time when domestic energy producers are contending with low energy prices.

Another challenge is EPA’s attack on coal-fired power plants. Mercury and carbon regulations have forced reliable generating capacity to shut down, both decreasing generating diversity and increasing U.S. energy security risk.

The U.S. should see continued energy security improvements, if the federal government resists the temptation of harmful regulations.

Sean Hackbarth President Barack Obama speaks at the White House with Vice President Joe Biden Secretary of State John KerryPhotographer: Andrew Harrer/Bloomberg.

If you thought the Keystone XL pipeline story would be dormant until a new president came into office, think again.

Two months after President Barack Obama rejected the pipeline, TransCanada, the company proposing to build the pipeline, filed a federal lawsuit and will file a complaint that the decision violated international trade law.

TransCanada contends that symbolic politics--not merits or facts--were what led the president to reject the Keystone XL pipeline.

“The delay and the ultimate decision to deny the permit were politically-driven, directly contrary to the findings of the Administration’s own studies, and not based on the merits of Keystone’s application,” TransCanada said in its filing that the pipeline’s rejection violates the North American Free Trade Agreement (NAFTA).

TransCanada argues the decision violates NAFTA because the administration approved pipelines that carry domestic oil but rejected Keystone XL for moving Canadian oil—for the record and our benefit, it will also move Bakken oil from North Dakota and Montana.

The company explains that while the federal government issued a permit for the original Keystone pipeline in 2008—which has safely moved over one billion barrels of oil since 2010—and a permit for the Alberta Clipper pipeline in 2009, the permit application for Keystone XL (which would move the same oil) was dragged out to seven years before being rejected. Other pipelines also exist that carry Canadian crude and which received presidential permits in the past.

The only thing that changed since the last approved permit was the political environment. Anti-energy activists glommed onto a mundane issue about an energy infrastructure project and stoked it into a political bonfire:

As the controversy over the pipeline intensified, however, the Administration began to stall for time. For more than seven years, it made use of every conceivable excuse to delay a decision. It cited ongoing state-level litigation, claimed the U.S. Congress was exerting undue political pressure, and continually asserted the need for more technical work and analysis. Meanwhile, the political controversy built to a fever pitch. Environmental activists turned the pipeline into a campaign issue in Congressional elections, and politicians on both sides of the issue continued to fight over the disposition of the application.

Pipeline opponents harping on carbon emissions ignored the facts about the project.

The State Department’s environmental analysis concluded that not building the Keystone XL pipeline would mean higher carbon emissions, because Canadian and Bakken oil intended to travel through the pipeline would to get to market by some other, less efficient method. Nevertheless, opponents spouted that the pipeline would deliver a “crushing blow” to our climate.

The facts didn’t matter to the Obama administration either, because it was preoccupied with making a deal at climate change talks in Paris in December 2015. Before the talks, the administration felt the need make a symbolic gesture about reducing carbon emissions—apparently damaging the reliability of the U.S. power grid by way of EPA’s carbon regulations wouldn’t be enough. The long-delayed pipeline was put on the chopping block:

Secretary Kerry stated that the “decision [to deny the permit] could not be made solely on the numbers.” Indeed, it was not, as the numbers would have led to the conclusion that the pipeline should have been approved. In the very press statement where Secretary Kerry announced the denial of the permit, he also stated that “[t]he proposed project by itself is unlikely to significantly impact the level of crude extraction or the continued demand for heavy crude oil at refineries in the United States.”

The Administration concluded that the denial was necessary to demonstrate U.S. leadership on climate change, even though the Administration concluded multiple times that the pipeline would have no significant impact on climate change. The Administration sought to explain this perverse decision by saying that the pipeline was perceived to be bad for the environment, and the Administration had to appease those in the international community who held that (false) belief.

Along with ignoring the science surrounding it, President Obama also ignored the economic benefits his own administration projected will come from the Keystone XL pipeline:

$3.4 billion added to U.S. GDP. $55.6 million in annual property taxes generated in the first year of operation alone. 42,000 new direct and indirect jobs created.

There's also the human toll: The president chose to ignore the people living along the pipeline’s route who saw economic opportunity yanked away by fiat.

When it came to the Keystone XL pipeline perceptions and symbolism trumped facts and reality. That may be acceptable in politics, but it’s unacceptable when using (abusing) constitutional regulatory authority. The federal government can’t just make edicts that one project can go forward while another can’t. It must offer good reasons. Satisfying loud domestic and international political constituencies doesn’t cut it.

Sean Hackbarth Pipelines in Cushing, Ok.Pipelines in Cushing, Ok. Photo credit: Daniel Acker/Bloomberg.

The struggle over building energy infrastructure didn’t end with President Barack Obama rejecting the Keystone XL pipeline in 2015. In fact, the president emboldened ideologues to fight against abundant and useful fossil fuels by going after energy infrastructure.

As this Washington Post story shows, these activists are so driven by ideology that they want to shut down an oil pipeline running under the Great Lakes that has been safely transporting oil for 50 years:

Each day, some 540,000 barrels of light crude oil and natural gas liquids roar through en route from the shale oil wells of Alberta to refineries in Detroit and Sarnia, Ontario.

The pipes, known as Line 5, are 20 inches in diameter, with one-inch-thick walls. On that line, they have never had a spill, a rupture or, to hear its Calgary, Alberta-based owner Enbridge tell it, even a repair. It also wasn’t a secret: The state of Michigan granted the underwater easement in 1953, and a few old-timers here even remember helping build and install it.

Facts and history don’t register well for some. One local resident opposed to the pipeline told The Post, “They need to reroute this because they cannot prove to us they can continue to safely pump oil through this area.” Apparently 50 years of safe operation isn’t proof enough.

Attacks on energy infrastructure are part of a multi-level strategy by anti-energy activists. If they can’t stop oil, natural gas, or coal from being developed—the “keep it in the ground” strategy--then they do what they did to the Keystone XL pipeline: Demonize infrastructure projects to keep energy from getting to consumers.

We saw a taste of this in 2014 when hydraulic fracturing opponents dubbed their fight against a liquefied natural gas terminal under construction in Maryland as “the Keystone fight of the east.” Thankfully, they didn’t stop the federal government from approving the project.

Whether it’s in the Southeast with the proposed Atlantic Coast Pipeline or in the Midwest with the Sandpiper Pipeline, fossil fuel opponents see the Keystone XL fight as their model.

Opposition to #pipelines not justified economically or environmentally, says @BmtEnterprise https://t.co/C4xDLtPeyR pic.twitter.com/1TNSbjndS3

— Energy Institute (@Energy21) December 18, 2015

Pro-energy supporters aren’t taking this lying down. In his State of American Energy speech, American Petroleum Institute President and CEO Jack Gerard pushed back against anti-fossil fuel activists:

The demonization of the Keystone XL pipeline remains a powerful cautionary tale of the dangers of energy policy driven by ideology rather than economic reality and has a chilling effect on expansion efforts for our nation’s energy infrastructure. That’s not just bad national energy policy. It is also bad news for our nation’s economy.

According to an IHS study, the amount of energy sector infrastructure needed through the middle of the next decade could spur $1.15 trillion in private capital investment. IHS also projects that infrastructure investment could support more than 1.1 million jobs nationally, contribute $120 billion to U.S. gross domestic product and increase revenues to government by more than $27 billion through 2025.

Gerard noted how inadequate infrastructure is already hurting energy users in the Northeast:

The [Energy Information Administration] estimated that New England residents paid up to 69 percent more for their electricity than the national average last winter, and that the industrial sector paid up to 90 percent more for its electricity than the national average – in part because of infrastructure limitations.

One of many facts ignored by activists is that fossil fuels will be used for decades to come. The Energy Information Administration projects that by 2040 oil, natural gas, and coal will provide 80% of America’s energy needs—barely changing from 81% in 2013.

We possess abundant vast quantities of energy. Through innovation and entrepreneurship, the U.S. energy conversation now emphasizes abundance instead of scarcity. But we won’t be able to take full advantage of that blessing if fact-barren fanatics block energy infrastructure projects that keep American energy from going to where it’s needed.