American Energy – A Clear Choice

Mark Green
Posted June 6, 2014

America has a clear choice on energy. An historic American energy revolution is in progress -- thanks to vast shale reserves safely developed with advanced drilling technologies, industry innovation and leadership. This revolution is creating jobs, strengthening our economy and making our country more secure and muscular in the world. With the right energy choices the revolution can continue and grow.

Yet, somehow, Washington is conflicted. While the Obama administration embraces the shale revolution as integral to its all-of-the-above energy strategy, it advances policies fraught with the potential to needlessly hinder it. Instead of taking actions to enhance America’s energy renaissance, the administration is engaged in a regulatory march that quite likely could diminish it. Sustaining this energy revolution should be a no-brainer – not the brain-bender the administration is fostering with muddled vision and contradictory statements.

During a conference call with reporters this week, API President and CEO Jack Gerard discussed conflicts between what top administration officials say about U.S. energy development and what the agencies under them are doing to U.S. energy development:

“America’s energy revolution has changed the global landscape. We are the No. 1 producer of natural gas and are on course to become the No. 1 producer of oil. Instead of importing liquefied natural gas (LNG) to supply our own power needs, we’re now moving to support our allies overseas as an exporter of LNG and possibly even crude oil. The administration recognizes this success and has been vocal in its support for natural gas. But the administration’s public commitment to natural gas and embrace of our industry’s economic and environmental benefits stands in stark contrast to their broader energy policy.”

Gerard noted the White House’s recent release of a report on its all-of-the-above energy strategy, which takes credit for the jobs created by unconventional development and lauds shrinking U.S. net imports of petroleum. Then he listed facts, actions and policies that could threaten the energy successes the administration celebrates:

• Oil and natural gas production on federally controlled lands fell significantly from 2009 to 2013, according to the Congressional Research Service. Even so, the U.S. Bureau of Land Management is crafting new regulations that would discourage unconventional development on federal lands. In areas under federal control, Gerard said, “we’re going in the wrong direction.”
• EPA’s new plan for emissions from existing power plants depends on continued development of U.S. natural gas, yet the agency and its inspector general are putting together reports to justify ever-higher restrictions on natural gas production from hydraulic fracturing.
• The Energy Department continues to “slow walk” permits to export LNG. A recently announced change in the way DOE considers LNG export applications may or may not slow permits, dampen investment and economic development.
• At least 12 different agencies are involved in some kind of review or rulemaking that could negatively impact hydraulic fracturing.

Instead of working to harness America’s shale energy wealth, Gerard said the administration risks fumbling away the golden opportunity provided by abundant natural gas and growing oil production -- to add jobs, boost the economy and reduce our trade deficit while advancing environmental objectives.

Take natural gas exports. Studies show significant economic benefits to the United States would result from exporting LNG to friendly buyers overseas. Thanks to advanced fracking and horizontal drilling, we have ample reserves to meet domestic needs and supply customers abroad. Yet, administration policy has been to dribble out approvals for LNG export projects to non-free trade agreement countries. While the Energy Department has OK’d seven applications over the past year and a half, more than 20 projects remain on hold.

These facts can get lost in the rhetoric. Certainly, it was good hearing President Obama talk about free trade and natural gas exports this week in Poland, suggesting both could help ease Europe’s energy vulnerabilities that have been underscored by the recent Russia-Ukraine standoff:

“For our part, the United States has already approved licenses for natural gas exports, which will increase global supplies and thereby benefit partners here in Europe. I also mentioned to the Prime Minister the importance of the Transatlantic Trade and Investment Partnership … And I indicated to him one of the benefits of a strong trade agreement is that it is much easier for me to approve natural gas exports to countries with which we already have a free trade agreement.”

But there’s a disconnect between the president’s rallying for natural gas exports and what his administration is doing. The real chokepoint on LNG exports is the administration. In cases involving countries with which we have free trade agreements, export approvals are swift, almost automatic. Go to this DOE site and click on the links in the “FTA Applications” column. Approvals take about a month. Now check the “Non-FTA Applications” column. All but seven are on hold, under DOE review.

What the president didn’t say in Poland is that for a multi-billion-dollar LNG export project to be economically feasible, it must be planned to serve the global market – buyers in FTA countries as well as those in non-FTA countries. An LNG export facility won’t get off the drawing board without government approval to serve customers in both. Gerard:

“Our view generally is they (DOE) should move expeditiously to approve these permits and let the market sort out what gets built or what doesn’t get built. I can guarantee you from a business perspective they’re not going to go build a facility that doesn’t have contracts to export product. These are multi-billion-dollar investments. The (last) thing we need right now is for the government to send a message to the marketplace that we’re going to go slow on these, we’re going to try to find a sweet spot, the right number of exports. Let the market sort that out.”

More Gerard:

“… from a governmental standpoint, do your job of saying you’ve met the environmental standards, approve the permits and let the market decide which ones get built. We have competitors on a global scale. … I can’t tell you how many times the Australians have come by to talk to me and say how quick do you think this is going to happen in the United States, because we’re trying to get that market just as quickly as we can. And there are others around the globe who are doing the same thing. And what are we doing? We’ve got governmental regulatory activity trying to find ‘sweet spots’ in the market. Turn our people loose, let our people compete. We can meet the environmental standards, we can meet the permitting processes, but quit creating artificial delays and chilling effects on this process.”

Gerard said U.S. LNG exports could help advance the administration’s emissions goals:

DOE “should focus on putting that as a comprehensive piece of this broader climate strategy on a global scale. It puts our people to work here at home, it allows us to receive the benefits from the exports and it helps the climate challenge on a global scale. We can’t have these pieces disconnected. It must be part of a broader vision. … Let’s allow for (exports), which would help those around the globe achieve what independent studies have shown would be a very significant reduction in lifecycle emissions of 43 to 52 percent.”

Here’s the main point: Because of surging domestic production of oil and natural gas, America has a generational opportunity to secure its present and its future – in terms of energy and broader security in the world. But Americans must choose to harness that opportunity and communicate that choice to policymakers. They’re trying. Poll after poll shows the public understands the link between safe domestic energy development, economic strength and national security. Gerard said the politicizing of energy needs to end:

“It’s hindering our ability to really achieve our full potential. This is an American opportunity, a unique American opportunity. It’s not about Democrats, it’s not about Republicans. We need to get over those messages of the past, the somehow perceived view that these issues are polarizing. … We need as a country to come together under this new opportunity, driven primarily by these technological advances and seize the moment”

America’s energy, America’s clear choice.