Government Barriers to a Secure Energy Future

Mark Green
Posted August 24, 2015

Two items from the weekend help sharpen the focus a strategic choice before Americans as they look to the future: Which energy path will we take?

One path leads to increased domestic energy development. It’s typified by safe and responsible oil and natural gas production that harnesses America’s energy wealth to create jobs, grow the economy and make the U.S. more secure in the world.

Another path likely would lead to very little of the above. It’s characterized by unnecessary regulation and self-limiting policies that hinder or block domestic development. America would be less secure, economically and in the world, and our allies, too.

The two paths, two very different futures – for American energy and America.

Part of a pro-development energy strategy is ending America’s 1970s-era ban on exporting domestic crude oil. Over the weekend U.S. House Speaker John Boehner added his voice to those of others calling for lifting the ban. In an op-ed for the Pittsburgh Tribune-Review, Boehner writes that surging U.S. energy production is providing an opportunity to “reset the foundation of our economy for generations to come” and that oil exports would help allies abroad become less dependent on those who wield energy as a political cudgel. Boehner:

… for all its success, this energy boom is currently running into a brick wall in the form of other federal government policies that date back to the 1970s. Even as the Obama administration seeks to lift sanctions on Iran's oil exports, the law is still keeping our own producers from exporting crude oil. … By lifting the ban, we can create about a million more jobs at home. We can increase household incomes and lower prices at the pump even further. And we can help our allies, including Israel, which imports much of its oil from Russia. With all the potential here, I hope the administration will work with us in the coming months to lift the oil export ban once and for all.

The lingering export ban is part of an approach to energy that would deny to America the benefits of engaging in trade. Study after study has attested to the economic and consumer gains that could be realized if the United States allows its oil to reach the global crude marketplace. Ending the ban is one of the action items in a pro-development path identified by a recent Wood Mackenzie study – a path that could lead to more energy, jobs, economic growth, revenue for government and income to American households:

On the same chart, in red, are corresponding negative impacts Wood Mackenzie projects from an energy strategy marked by policy and regulatory constraint. Keeping the outdated, anti-competitive export ban is one feature of that approach. Another is unnecessary regulation – none more unnecessary that EPA’s recently proposed rules on methane emissions from natural gas production.

We’ve discussed the methane proposal a number of times in recent weeks, chiefly because the regulation would ignore a couple of very significant trend lines, depicted in this chart:

The red line is methane emissions from natural gas development, falling steadily since 2005, according to EPA data. The blue bars reflect steadily rising natural gas production, rising steadily – even as less and less methane was being emitted from that production. Specifically, methane from hydraulically fractured natural gas wells fell 79 percent from 2005 to 2013. It’s a credit to a technology, know-how and an industry that’s highly motivated to capture a commodity that can be supplied to customers.

No matter. There’s a regulatory wave emanating from this administration, aimed at the energy sector. The Wall Street Journal editorializes:

… the Administration is waging a war of regulatory attrition to raise drilling costs and reduce its competitive advantage over wind and solar power. … The rule follows new ozone limits proposed by the EPA last November, new limits issued in March on hydraulic fracturing on public lands, new moratoriums on drilling in and around Alaska, and a potential rule cracking down on greenhouse gas emissions from drilling on federal lands. Keep in mind the states already regulate natural-gas drilling, and they’ve done it well enough to avoid major accidents.

The Journal notes that an array of technologies to prevent methane from leaking already has been deployed and that industry continues to work on improving them. The editorial cites a study showing that the methane rule’s climate contribution would measure just 0.002 degrees Celsius, while damaging energy development:

The rule will nonetheless do immediate harm to a drilling industry that is already under pressure from falling global energy prices. The shale gas revolution has created hundreds of thousands of jobs, reduced costs for U.S. manufacturers, raised millions in taxes and royalties for government, and increased U.S. energy security. The new costs will reduce the marginal return on drilling, which means fewer new wells.

It’s a political agenda, not sound energy policy that’s focused on what’s best for America. API President and CEO Jack Gerard:

“Over the last decade, the energy landscape has undergone a transformational shift. … But this unique American moment is not set in stone. It represents a crossroads, and our next president – as well as those who occupy Congress, governors and state legislators – will be called on to decide between two paths. We can pursue an American future of energy abundance, self-determination and global leadership or take a step back to an era of scarcity, dependence and uncertainty. … We’ve seen the mission creep of federal agencies on full display under this administration. Thousands of pages of new roadblocks and mandates are making their way through the regulatory pipeline. We cannot afford for our next president to be blinded to the opportunities in front of us by a stale mindset of 70s-era scarcity. That is why those who seek to represent us must go beyond the talking points and outline a clear vision for energy that will advance our nation’s economy, security, and standard of living.”