Pandering on Price

Marita Noon

2/7/2013 12:01:00 AM

 
The rising price of gasoline is in the news again. Consumersknow that more oil means lower prices at the pump and they are hoping for somegood news on the supply. We got some encouragement in January: Iraq’s oil exports climbed above 2.3 million barrels per day--leaving observers looking toward that country’s increased oilproduction to trigger lower global oil prices. Welcome news for an energy-hungry world: Iraq is hoping to export as much as 6 million barrels aday by 2017.

But the news is even better here in America, where home grown technology is finding and producing more and more crude oil and natural gasfrom deep rock formations right under our feet.

Sensor technologies, computer modeling, horizontal drilling,and hydraulic fracturing—developed in the United States—have created our newabundance in oil and natural gas. The US Energy Information Administration(EIA) reports domestic oil production increased more in 2012 than in any other single year in the industry’s history—and is projected to continue expanding this year.

As more domestic oil and gas are produced, the US becomesless dependent on foreign energy sources, ushering a new age of energy security and lower prices. The US National Intelligence Council states “energy independence is not unrealistic for the US in as short a period of 10-20years.”

The oil and gas boom cannot be attributed to governmentpolicies—it is in spite of them. The Obama Administration has taken myriad actions that have discouraged the development of traditional and dependable energy supplies. Rather, the growth is occurring as a result of the innovation and perseverance of geologists, engineers, drillers, and many others who have the visionto see the potential of America’s shale formations—the free market at work.

What started in the Texas Barnett Shale region and spread tothe Haynesville, Fayetteville, Bakken, Marcellus, Eagle Ford, and other shalef ormations is continuing to reap benefits as more shale beds are identified and the technology evolves. In California, drillers are marveling at the Monterey Shale, believed to hold as many as 400 billion barrels of oil of which 15 billion arelikely to be recoverable with today’s technologies. One energy analyst calls itthe “big kahuna.”

The Tuscaloosa Marine Shale formation, stretching acrossLouisiana and extending into Mississippi on the east and Texas on the west, isbelieved to contain 7 billion barrels of oil,according to LSU-Basin Research Institute. The New Albany Shale, alreadyin production in Indiana and Kentucky, could hold promise in Illinois, where exploration is in the early stages. Similarly, the Michigan Basin, wheremore than a billion barrels of oil have been produced, also contains  shale deposits believed to be rich in oil and natural gas liquids.

Meanwhile, drillers are returning to oil and gas formationswhere production had decreased to a trickle using older methodologies. Chief among them is the Permian Basin in West Texas and its Spraberry Field where some 10 billion barrels have been recovered since the 1950s. With today’s technologies, drillers are exploring the Basin’s Cline Shale whichcould hold 3.6 million barrels of oil per square mile, amounting to reserves ofmore than 30 billion barrels.

New estimates for recoverable natural gas are equallyimpressive. The International Energy Agency predicts the US will surpass Russia as the world’s largestnatural gas producer by 2015.

What does this good news mean for the average American?Secure supplies of energy, a robust oil and gas industry creating jobs without stimulus funds, the advent of a manufacturing renaissance based on affordable domestic energy, continued US technological superiority, and a geopoliticaltransformation that some have called a “tectonic shift.” As former U.S. energysecretaries Bill Richardson and Spencer Abraham wrote in the Financial Times recently, U.S. gas exports “wouldfill a vital role for its allies in Europe and Asia…Reliance on Russian Gas inUkraine and the EU would be likely to diminish….”

American consumers also are benefitting from the domesticoil and gas boom. IHS Global Insightestimates that American families saved about $1,000 on average in lower energycosts in 2012 and could save up to $2,000 a year by 2035. Plus, the increaseduse of natural gas has helped to lower carbon dioxide emissions to 1992 levels. 

Increased domestic oil and gas production also generatesgovernment revenues which could help to reduce the budget deficit. Today theoil and gas industry sends more than $86 million per day to the federalgovernment in royalties, bonus bids, taxes and other payments.

Only one obstacle is standing in the way of the expansion ofshale development and true energy self-sufficiency in North America: politics. Fearmongering by environmental groups led the president to create a task force toconsider new and unnecessary federal rules on hydraulic fracturing—which hasbeen effectively regulated by the states for decades.

Political considerations prompted the White House to onceagain delay a decision on the construction of the Keystone XL pipeline,preventing the creation of 20,000 construction and manufacturing jobs. Within the next 15 years, this project could createanother 100,000 jobs, provide additional price stabilization, and increasedexports

Political pandering to the gang green also is leading to the misguided spending of taxpayers’ dollars. The Fiscal Cliff Deal contained an extension of the Production Tax Credit (PTC) for wind energy—the subsidy demonstrates that despiteyears of taxpayer support, it still can’t complete in the marketplace. Evenwith the subsidy, it still more expensive than coal or natural gas fueledelectricity. The Joint Committee on Taxation estimated the PTC’s cost to be $12.1 billion in 2013. 

By failing to recognize shale’s potential and the ability ofthe petroleum industry to create jobs, the Administration is clinging to an obsoletegreen agenda. If climate change is truly a major concern, it would encouragenatural gas development. If paying down the deficit and putting people back towork really a priority, it would expedite permitting and open more federal landto energy development. If providing employment for unions nationwide—such assteelworkers and the construction industry—approving the Keystone pipelinewould have already happened.

Success is within our grasp. If the Obama Administration seizesthe opportunity to lead American to energy security, increased employment andadditional revenues, and lower energy costs, it sends a signal to the world: Americais still the global leader.