Let American Energy Lead

Mark Green
Posted February 9, 2022

It must be awkward for the White House fielding questions about American natural gas and oil production as global energy demand continues to outpace supply, with significant impacts on American families and businesses.

The White House is in a tough spot, trying to explain to Americans why, amid the energy demand-supply imbalance, the administration has found it easier to ask OPEC+ – an oil cartel of foreign producers that includes Russia – to increase its crude oil output instead of being more supportive of more American production.

White House Press Secretary Jen Psaki was asked this week whether the administration would reverse or remove certain policies or regulatory actions to encourage more American production, which in recent years put downward pressure on global crude oil costs. Psaki deflected the question, pointing to crude oil releases from the Strategic Petroleum Reserve, and she mentioned the administration’s engagement with OPEC. The question is how many Americans believe going to OPEC, hat in hand, is a good idea – especially since Russia is one of the biggest beneficiaries every time OPEC boosts production.

Pressed on the original question, Psaki shifted instead to earnings by U.S. producers in the current high-price environment – again, driven by demand outpacing supply. She also said American natural gas and oil companies have not used all of the federal land leases at their disposal. A couple of points:

First, after months of begging OPEC+ to close the gap between global oil supply and demand, the administration hasn’t explained why it looks first to foreign oil suppliers for more production instead of American producers.

U.S. Energy Secretary Jennifer Granholm told the National Petroleum Council in December the administration wasn’t standing in the way of more American production, but its policies – including a pause in new federal leasing most of last year, restricting access to resources, canceled infrastructure and consideration of tax hikes targeting the industry – have not helped at a time when American energy leadership is needed.

At a U.S. House Oversight and Reform Committee hearing this week – during which some members of the president’s party called for ending American natural gas and oil production – the Heritage Foundation’s Katie Tubb discussed the impacts of administration energy policies:

“The way out of high demand and accompanying high prices is increased supply. However, this is precisely what the Biden administration’s energy and climate policies are trying to prevent by hampering production, markets, delivery and future consumption of the coal, oil and natural gas, which supply Americans’ energy for power, heat and transportation. Less obvious to the average American are the scores of regulations that will increase the cost of energy-consuming products they use every day: cars, kitchen ranges and ovens, washing machines and dryers, water heaters, light bulbs, ceiling fans, dehumidifiers, dishwashers, and I could go on.

“If that is the future this administration is working towards, it's no wonder that American energy companies are hesitant to invest hundreds of thousands to billions of dollars in exploration equipment and employees. Regardless of the administration's aspirations, EIA's International Energy Outlook projects no scenario in which global demand for oil and natural gas do not increase through 2050. We should recommit to energy policy, informed by principles of reliability, affordability, open competition and consumer protection. Then step back and allow engineers and entrepreneurs to lead the way.”

Second, under pressure as Americans bear the brunt of the demand/supply mismatch, the administration has continued trying to vilify the sector that could provide solutions to the problem.

On recent earning reports, API’s chief economist, Dr. Dean Foreman, recently explained that earnings add value to the broader economy, serving as engines of employment, economic growth and innovation. They also benefit millions of American savers and retirees who are invested in energy companies. And they help pay for new energy investment and development to keep the economy growing and strengthen U.S. energy security.

On the myth of unused federal leases, some facts:

• “Use it or lose it” already is the law on leases. If companies don’t produce oil or natural gas on leases, the leases must be returned to the government.
• A federal lease terminates if a company isn’t performing diligent drilling operations during the primary term, which generally spans five to 10 years.
• Companies acquiring leases make a significant investment at the beginning of the lease in the form of a non-refundable bonus bid.
• For federal onshore, the Mineral Leasing Act prevents any one company from locking up unproductive excessive federal acreage.
• Developing a lease takes years and significant investment to determine whether the underlying geology contains commercial quantities of oil and natural gas. The lengthy process often is extended by administrative and legal challenges at every step of the process.

API President and CEO Mike Sommers, at the 2022 State of American Energy event:

“Our nation has the resources and expertise it takes to meet our energy needs, support millions of jobs, continue to address the risks of climate change, and keep America free from the dangers of dependence on unreliable foreign sources. … When policy signals prevent energy leadership here at home, there are going to be consequences. U.S. policies that restrict domestic production force our country to seek relief from OPEC, undermining our energy independence. America should not be in the position of asking for foreign energy supplies, especially when we have abundant resources produced to standards that are among the highest in the world, right here at home. Instead, we should be leading, as the world’s top producer of natural gas and oil.”