Take the Path to U.S. Energy Prosperity

Mark Green
Posted February 4, 2016

With the president scheduled to put forward his last budget next week, here’s a short list of principles that should guide energy policy – because all will help sustain and grow the ongoing U.S. energy revolution:

• Reliance on industry innovation that has been the driving force behind America’s energy renaissance – innovation that launched the surge in shale energy production, prompting increased natural gas use and resulting in lower carbon emissions.
• Embracing the successful, free-market approach to energy and economic growth while lowering emissions by basing decisions on sound science.
• Allowing more opportunities for energy exploration and development.

Erik Milito, API’s director of upstream and industry operations, talked about the policy pathway to energy growth and American prosperity during a conference call with reporters.

Milito said the U.S. shale resurgence is a uniquely American story – a combination of engineering and ingenuity, production and transportation infrastructure, private mineral ownership, the sanctity of contracts and regulatory certainty. It’s a free-market model that works, whose future largely depends on choosing the right policies. According to the U.S. Energy Information Administration, oil and natural gas will supply about 60 percent of the energy Americans use for decades going forward – a future the U.S. can meet confidently because we have abundant, reliable and affordable supplies of oil and gas. Milito:

“[W]e must not miss this opportunity of a lifetime to strengthen our national security and help our allies abroad. The industry is certainly experiencing challenging times, but this makes smart energy policy all the more important to fully realize our energy potential.”

The opportunity Milito refers to is based on successes so far. The U.S. has become the world’s leading producer of oil and natural gas. The surge in natural gas production and use has helped reduce carbon emissions and lower costs to consumers – a new report calling natural gas a main driver in lowering retail electric rates last year. The report:

Average retail electricity rates across the country remain 5.8% below the recent peak (2008) in real terms, in part due to cheap generation from natural gas.

At the same time, methane emissions from hydraulically fractured wells decreased by about 80 percent (2005-2013), Milito said, as advanced technologies and targeted actions to reduce emissions have allowed companies to capture more and more methane (the main component in natural gas) for delivery to consumers.

Yet, potential challenges loom. Mostly, we’re talking about policy choices that would hinder, complicate and frustrate domestic production. Milito talked about regulation and government processes that restrict access to domestic oil and natural gas reserves.

EPA and the Bureau of Land Management (BLM) both are moving to regulate methane – despite the progress noted above. These proposals overlap, Milito said, and would duplicate state regulations already in place. The federal agency that manages offshore resources is pushing ahead with a well control rule that goes well beyond the scope of an existing industry standard and could “create unintended safety consequences and lead to a decline in offshore oil production,” he said. Milito:

“Rather than a rush to regulate, the government should drive to innovate.  The prescriptive types of regulations being advanced by EPA, BLM and BSEE could stifle innovation by locking in specific types of technologies through the regulatory process.”  

Other examples of potential obstacles to the U.S. energy revolution:

• Hydraulic fracturing – Although EPA spent five years and $31 million dollars on a study that found fracking has not led to “widespread, systemic” impacts on drinking water, the agency’s science advisors are trying to get the conclusion changed. Milito said those arguments “ignore the credible and abundant science demonstrating that hydraulic fracturing is safe.”
• Offshore – While federal officials have said they intend to move forward with permitting to allow seismic surveys in the Atlantic, no permits have yet been issued. Milito noted that the government’s own offshore chief environmental officer has said there has been “no documented scientific evidence” of harm to animal populations from air guns used in seismic testing and that permits should be granted. Meanwhile, 87 percent of all federally controlled acreage remains off-limits to energy development.
• Onshore – Milito said the number of drilling permits issued on federally controlled areas dropped 43 percent from 2008-2014. Crude oil production on federal lands was flat between 2009 and 2014, while natural gas production declined 35 percent. On private and state lands, production increased 88 percent for crude and 43 percent for natural gas.

Some of these issues are addressed in broad, bipartisan energy legislation now being debated in the U.S. Senate.  Certainly, ensuring the permitting of needed natural gas pipelines, streamlining the process for approving liquefied natural gas export projects and other items would help fuel the proven success of the U.S. energy model. Milito:

“Smart energy policy is imperative for the continued success of this market-based model. Our model doesn’t stifle American investment with overregulation or a one-size-fits-all approach to federal rulemaking. Instead, it allows for the free market and innovation to thrive. Let’s allow these proven market-driven initiatives to continue reducing carbon emissions without risking our economy and American jobs.”