Americans are Big Winners With Natural Gas and Oil Development

Mark Green
Posted December 9, 2020

Let’s discuss the value of natural gas and oil to all Americans – the fundamental worth of abundant, affordable and reliable energy to modern, daily life, the economy and our nation’s security – which gets lost in two U.S. senators’ proposal to make producing energy on federal lands more costly.

U.S. Sens. Chuck Grassley of Iowa and Tom Udall of New Mexico want to increase the royalty rate for production on federal lands, which would discourage that critical production. We’ll get to that point down below. First, let’s zero in on the issue of fundamental value.

In a New York Times op-ed, Grassley and Udall call the American public “the big loser” under the current royalty arrangement. In doing so, the senators are so preoccupied with percentages they inadvertently make an afterthought of what current natural gas and oil production on federal lands means for U.S. economic growth, global leadership, strengthened security at home and significant environmental progress.

These are broad, consequential benefits to Americans from the development of public energy reserves. Production on federal lands – 22% of total U.S. oil production and 12% of natural gas production in 2019 – is a key part of the domestic energy revolution that changed America’s energy narrative from scarcity and dependence to abundance and increased self-sufficiency. The value of that sea-change is incalculable. Americans are big winners, not losers.

Now, about the disincentive the senators’ proposal would pose to safe and responsible natural gas and oil development on federal lands and waters across top-producing states. This production is sorely needed for the nation’s immediate economic recovery. Given volatility in the global marketplace, the senators’ proposal could weaken our nation’s ability to weather the ongoing economic crisis and secure its energy future.

Remember, natural gas and oil supply about two-thirds of the energy Americans use. Thanks to domestic oil production, net imports of crude fell more than 62% from 2004 to 2019.

Meanwhile, increased use of affordable natural gas in the U.S. power sector is the main reason U.S. energy-related carbon dioxide emissions are at their lowest levels in a generation. Indeed, no other country has reduced CO₂ emissions as much as the U.S. since 2000. Abundant natural gas is the key factor. Fuel switching from coal to natural gas accounted for about 61% of reduced CO₂ emissions from the U.S. power sector since 2005.

The senators’ proposal would impact these and other positive energy trends – again, progress that’s extremely valuable to Americans. API President and CEO Mike Sommers:

“Our industry is proud to deliver environmental progress and economic opportunities, as well as funding for education, conservation and public services in the communities in which we operate. The changes the senators propose could not only jeopardize U.S. energy leadership achieved over the past decade – they could undermine the nation’s geopolitical strength and economic stability.”