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Energy Blog

US Chamber of Commerce Blog

Sean Hackbarth Sunset on the horizon in the Chukchi Sea.Sunset on the horizon in the Chukchi Sea. Photo credit: NASA Goddard Space Flight Center.

Good news for Arctic energy development:

The Interior Department's offshore-drilling branch on Monday offered a preliminary green light for Shell's plans to drill exploration wells this summer in the Chukchi Sea, a region that regulators estimate could hold more than 15 billion barrels of recoverable oil, and large natural-gas resources too.

Shell is not in the clear yet. The company would still have to obtain specific drilling permits, receive authorizations under the Marine Mammal Protection Act, and clear other regulatory hurdles before it could commence with multiyear plans to eventually drill up to six wells in relatively shallow waters about 70 miles offshore.

"This decision by the Department of Interior is a positive step toward further development of the vast resources in the Arctic region," said Matt Koch with the Institute for 21st Century Energy. "The announcement is a clear nod of recognition that Shell is meeting safety requirements and is an acknowledgement that the abundant Arctic resources can be developed safely."

This is a big deal. Why? This chart from a National Petroleum Council (NPC) report on the Arctic's energy potential explains the potential payoff.

npc_arctic_energy_potential_800px.jpg National Petroleum Council chart on Arctic energy resources.National Petroleum Council chart on Arctic energy resources.

The U.S. portion of the Arctic holds 34 billion barrels of technically recoverable oil or "about 15 years of current U.S. net oil imports." It also holds 60 billion barrels equivalents of natural gas.

This administration's record on appreciating American's energy abundance has been mixed. Earlier this year, it announced that large chunks of Alaska's Arctic coast would be closed off to energy development. Nevertheless, the Interior Department's announcement is good news.

It's a better attitude toward domestic energy development than the anti-energy "kayactivists" in Seattle who are trying to block two oil rigs from parking at their port before going to Alaska. I wonder how many of them hauled their kayaks on top of their gas-powered SUVs?

Sean Hackbarth A natural gas drilling rig in Bradford County, Penn.A natural gas drilling rig in Bradford County, Penn. Photo credit: Daniel Acker/Bloomberg.

Good public policy matters. That's plainly seen along the New York-Pennsylvania Border. On the Keystone State's side, hydraulic fracturing is permitted, while Governor Cuomo banned it in the Empire State last December.

On the New York side of the border, restaurant owner Marian Szarejko told The Daily Signal she's calling it quits and closing her pizza shop:

"There are no jobs here," Szarejko said. "Business has gone down so much that I am dipping into my savings just to keep this afloat."

Szarejko's decision echoes a common theme that has plagued the southern tier of upstate New York for years--a lack of economic development.

"If I owned a place in Pennsylvania, I wouldn't be thinking of closing. I would be thinking about expanding," Szarejko said. "The difference is they did fracking."

While across the border in Bradford County, Pennsylvania, county board chairman Doug McLinko, expounded on the gains from natural gas development:

"We are the most drilled on county in the Marcellus Shale," McLinko said. "We flow the most gas in the state. The last eight to ten years has been the most incredible boom of prosperity I have ever witnessed in my life."

According to a 2014 report published by The Center for Rural Pennsylvania, Bradford County saw a 19 percent increase in taxable income from 2007 to 2010, providing additional revenue for investment in the county.

"We have seen 200 million dollars in market value go into our county," McLinko said. "The ripple effects are we have cut taxes and eliminated out county debt."

"When I look across the border to New York State, once again it is bad policy affecting awfully good people up there."

Pennsylvania ranks third in natural gas production. An Institute for 21st Century Energy study found that by 2020, shale energy development will support over 220,000 jobs there.

Frustration with New York's hydraulic fracturing ban has driven some communities to consider breaking off and joining Pennsylvania.

This isn't to say that Pennsylvania couldn't mess with the good thing it has going by passing Governor Tom Wolf's proposed severance tax on natural gas drilling.

Nevertheless, New Yorkers want to see the economic benefits in their communities that Pennsylvania has seen from embracing its energy abundance.

"I want to help see New York grow and to thrive," Szarejko said.

The Valley of Missed Opportunity: One Town's Fight for Economic Revival
Sean Hackbarth  Matthew Staver/Bloomberg.An oil pump jack stands outside of Watford City, North Dakota. Photographer: Matthew Staver/Bloomberg.

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  U.S. oil production on federal and non-federal lands Chart: 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  U.S. natural gas production on federal and non-federal lands Chart: 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.

Policymakers can reverse this troublesome trend by improving the federal permitting process, avoiding duplicative regulations, and opening more offshore areas to energy exploration.