The People of America's Oil and Natural Gas Indusry

Our Energy Today

Energy is fundamental to our society. Our ability to responsibly produce, safely distribute, store and efficiently consume the energy we need to maintain our standard of living while lessening the impact on the environment is crucial to our shared goal of a better future for the next generation.

Energy Revolution

Lowered Consumer Costs facebook twitter

Energy is the foundation upon which our modern society rests. Today, our nation is the world’s leading producer of oil and natural gas.

The 21st century energy revolution – brought about by advances in the decades-old technology of hydraulic fracturing and innovations in horizontal drilling – has positively touched the lives of all Americans. Whether through increased economic opportunity, enhanced national security or the abundance of affordable North American oil and natural gas, this revolution is the driving factor in a cleaner environment and lower energy costs for the average American consumer.

For example, according to a 2016 estimate from AAA, America’s drivers, on average, saved more than $550 on gasoline in 2015 due to increased production from hydraulic fracturing and horizontal drilling. And an analysis by EIA shows that since 2008, roughly the start of the energy renaissance, average annual energy costs per household in the United States have dropped by more than 14 percent.

It is important to remember that American energy policy has consequences beyond our borders. American energy leadership could help improve the lives of millions of families in countries and continents thousands of miles away, by providing an affordable and cleaner-burning fuel to heat their homes and cook their meals. The International Energy Agency estimates that more than 1.2 billion people, or 14 percent of the world’s population, lack access to electricity, and twice that many, 2.6 billion, live without clean cooking facilities.

In fact, according to a 2013 study in The Lancet, roughly 3.5 million people, mostly women and children, die every year from respiratory illness as a result of indoor air pollution created by wood and other biomass stoves. American global energy leadership could help significantly increase the number of families with access to the clean, affordable energy they need to live healthier and more productive lives.

None of this progress or the potential of America’s enormous energy resources are guaranteed to continue. If lawmakers pursue energy policies that constrain domestic oil and natural gas production, particularly from hydraulic fracturing and horizontal drilling, they could consign future generations of Americans and millions of people around the world to a less prosperous and productive future, because those energy production technologies account for the bulk of our nation’s increased energy production.

1.2 Billion People in Developing Nations Without Access to Electricity

Electricity Access in 2014 - Regional Aggregates
Source: IEA World Energy Outlook 2015

Africa India
634 MILLION Without Electricity 244 MILLION Without Electricity
Electrification Rate: 45% Electrification Rate: 81%
Urban Electrification Rate: 71% Urban Electrification Rate: 96%
Rural Electrification Rate: 28% Rural Electrification Rate: 74%

Today, according to EIA, two-thirds of America’s natural gas comes from a hydraulically fractured well.

Policies that hinder this decades-old, proven method of energy production could result in higher energy costs for America’s consumers, by reducing supply at a time of growing demand for energy from all sources.

Chart: Total US Energy Consumption by Fuel

America’s energy revolution allows our nation to play an important role in meeting the world’s future energy needs. There is little doubt that we need more energy far into the future. It is clear, based on the consensus opinion of most experts, including the EIA, that it is unrealistic to suggest that we can meet our future energy needs without fossil fuels. The reality is that, while renewable fuels are an important part of our nation’s energy equation, the high-growth renewables remain intermittent and therefore unable to provide a consistent and reliable base for electricity generation. Conversely, natural gas provides a steady, reliable and cost-effective base that lowers costs for consumers and also provides flexibility that makes the use of more intermittent sources of energy feasible.

Energy Brief: American Energy Drives American Competitiveness

The American energy revolution has done more than just provide record amounts of oil and natural gas to fuel our transportation needs or generate electricity and heat our homes, schools and businesses. Increased American energy production has lowered the cost of energy and manufacturing feedstocks, which helps to cut energy and materials costs for American manufacturers, particularly producers of steel, chemicals, refined fuels, plastics, fertilizers and numerous consumer products. U.S. industrial electricity costs are 30 to 50 percent lower than those of our foreign competitors, according to a 2015 study from the Boston Consulting Group (BCG). American manufacturing costs are now 10 to 20 percent lower than those in Europe and could be 2 to 3 percent lower than China’s by 2018. Lower energy prices give U.S. industries a crucial competitive edge and are attracting more business investment back to the U.S.

America’s energy advantage translates, via lower product costs, into the household savings mentioned previously, and it also helps generate economic growth and jobs. According to the American Chemistry Council, chemical production grew 3.6 percent in 2015 and is projected to continue to increase through 2020 as new capacity from 266 new, announced projects and over $164 billion of investment comes on line. Further, BCG found that lower electricity and natural gas fuel costs are “beginning to drive investments such as new iron and steel plants and plastics processing.” Crude oil and natural gas are the building blocks of many everyday medicines such as antihistamines. They are essential to modern fertilizers that ensure plentiful supply of affordable and safe food, and also provide the feedstocks that make modern agriculture possible. In short, oil and natural gas not only provide the power our nation and the world needs, they also help feed people. All of which means that we’ll need more energy, from all sources, with oil and natural gas as the base, for decades to come. In fact, the EIA projects that global energy consumption will increase 48 percent by 2040, largely due to expanding economic opportunities in developing nations. Further, 78 percent of global energy needs will be met by fossil fuels.

In the United States, oil and natural gas will supply 68 percent of energy needs by 2040, even under the most optimistic scenarios for renewable energy growth. In less than a decade, our nation’s energy reality has changed from scarcity, uncertainty and dependency to abundance, security and global energy leadership. Today the United States is the No. 1 producer of oil and natural gas on the planet, thanks largely to innovations in the decades-old technique of hydraulic fracturing coupled with advances in horizontal drilling and the dedication of millions of women and men in the oil and natural gas industry.

Fueling America's Economy facebook twitter

A strong U.S. refining sector is essential to our nation’s economic growth.

Our nation’s refineries provide us with high-quality fuels used for transportation, energy for heat and light, and petrochemicals needed to manufacture the products we use every day.

Chart: US Crude Oil Distillation Capacity

With an annual salary that, on average, is more than twice the national average, U.S. refiners support $98 billion in wages and benefits annually, and support more than 1.2 million jobs all along the skills continuum. Every year U.S. refineries contribute approximately 1.8 percent to the U.S. GDP

Our nation’s world-class refineries provide fuels and petrochemical feedstocks needed to manufacture thousands of everyday products, such as plastics, pharmaceuticals, fertilizers and more. Today, U.S. refining capacity exceeds 18 million barrels per day, its highest level in 35 years, and domestic refiners are upgrading their operations to produce cleaner fuels and meet the needs of the American consumer. In fact, they spent $154 billion between 1990 and 2014 on producing cleaner-burning fuels.

Energy Brief: Renewable Fuel Standard

Renewable fuels have been mandated under federal law for over a decade, since the passage of the Renewable Fuel Standard (RFS), and current RFS policy is broken, outdated and ineffective. The RFS constrains free market forces, supports uneconomic activity and limits consumer choice. It is based on both supply and demand assumptions that have proven false over the past decade, and sets aspirational goals that have proven unachievable; the RFS must be repealed or significantly reformed.

Today’s gasoline demand is 10 percent lower than EIA’s outlook at the time of the passage of the RFS. And, as a result of technologies that spurred an energy renaissance, crude oil and natural gas resources are more than 63 percent higher than EIA projections at the time of the passge of the RFS. As we approach the 10 percent ethanol threshold in our fuel mix, which could mean substantial economic harm to American consumers, it is imperative that Congress revisit this broken RFS policy.

When the RFS was first implemented about a decade ago, our nation’s energy policy was focused on addressing long-term scarcity and increased energy dependence. America’s 21st century energy renaissance has transformed our nation’s energy trajectory to one of abundance and energy security, which undercuts the basic premise of the RFS. Further, purely aspirational volume goals have been promoted that bare little reality to market conditions.

API proposes limiting the volume of mandated ethanol to avoid breaching the blend wall, emphasizing free market principles that protect American consumers and the automobiles that we drive.

Fueling Our Future

The combination of cleaner gasoline and diesel fuels, modernized equipment and facilities and more fuel-efficient vehicles has helped reduce U.S. air pollutants by 70 percent between 1970 and 2014 even as vehicle miles traveled increased by more than 174 percent, according to the U.S. Environmental Protection Agency.

chart: US distillate supply: ultra low sulfur

Refiners have dramatically changed fuel formulations across the country and continue to enable significant reductions in vehicle tailpipe emissions. Gasoline produced today has reduced levels of sulfur, toxics and summer vapor pressure, improving air quality. Further reductions in sulfur will continue to build on these improvements in 2020 and beyond as Tier 3 fuels and vehicles are phased in and the vehicle fleet turns over. Ultra-low sulfur diesel fuel has 99.7 percent less sulfur – and is now produced for all highway and non-road uses, allowing for dramatically reduced nitrogen oxide emissions in newer diesel engines.

The progress we’ve made is undeniable - national average peak ozone concentrations have dropped by 17 percent since 2000.

The U.S. oil and natural gas industry is spending billions of dollars developing new advanced energy technologies to reduce greenhouse gas emissions and meet future energy needs. Between 2000 and 2014, the oil and natural gas industry directly invested approximately $90 billion in zero- and low-emissions technologies. This represents about 30 percent of the more than $303 billion spent by all U.S. industries and the federal government combined.

These large investments are critical to provide the low-carbon energy we will need in the years ahead. Domestic U.S. oil and natural gas companies are pioneers in developing alternatives and expanding America’s use of virtually every form of energy – from geothermal to wind, from solar to biofuels, from hydrogen power to the lithium ion battery for next-generation cars.

Emissions Reductions facebook twitter

The benefits of abundant American energy extend beyond a family’s budget or a business’ bottom line.

The plentiful supply of domestically produced natural gas has also reduced our nation’s greenhouse gas emissions and criteria air pollutant emissions chiefly from electricity generation.

President Trump, members of Congress and state and local elected leaders will decide whether our nation’s energy revolution continues for decades to come. Unlike their predecessors of just a few years ago, they will inherit a country that leads the world in energy production with a growing population, an expanding economy and a cleaner environment, thanks to natural gas and its impact on declining emissions of criteria air pollutants. The natural gas industry has supplied the growth in natural gas use that fueled the expanding economy and made these emissions reductions possible, all while reducing its own emissions.

Chart: Emissions are falling while Natural Gas production rises

Energy Brief: Ozone Standards

In 2015, the EPA promulgated the strictest ozone standards ever, which are expected to have, at best, negligible health benefits, but could impose significant costs on consumers and the economy.

Additional time to implement these standards is imperative to avoid the most significant impacts on consumers and our economy. Without additional time, these standards are so severe that even pristine areas with little or no industrial activity, such as national parks, would fail to meet the standards. The unintended consequence is that communities could find it more difficult, if not impossible, to improve aging infrastructure. Local businesses would be unable to expand, constraining job creation and economic growth, all with little benefit to public health.

The EPA’s 2015 rulemaking, which set the new ozone standards at 70 parts per billion, could quadruple the number of counties defined as being in non-attainment to 958. This has the potential to effectively shut down most new economic activity. Businesses of all sizes could be forced to navigate additional layers of bureaucracy and red tape to satisfy additional permitting requirements.

The new administration and Congress should take note of the progress made by the market and continue to build, not hinder, the development of our nation’s enormous supply of oil and natural gas resources, rather than pursue policies that either restrict production or add unnecessary regulatory regimes that limit the use of hydraulic fracturing and horizontal drilling.

Map: projected 8-hour ozone non-attainment areas in US

America’s energy revolution has disproved the long-held assumption that increased energy production creates higher emissions.

The fact is that even while production has significantly increased, total criteria air pollutants and greenhouse gas emissions have fallen, in large part due to expanded use of abundant, affordable natural gas in electricity generation.

Between 2000 and 2014, the oil and natural gas industry directly invested approximately $90 billion in zero- and low-emissions technologies. Many of these investments are in technologies that reduce leaks, capture emissions and improve energy efficiency. As a result, our nation’s environment continues to improve. In fact, the United States is already one-third of the way to the emissions reductions target sought by the Paris Climate agreement. Under the Paris agreement, the United States is expected to cut its carbon emission levels between 26 percent and 28 percent below 2005 levels by 2025. According to the EPA’s 2016 Inventory of Greenhouse Gases and Sinks: 1990-2014, U.S. carbon emissions were 9 percent below 2005 levels, even as the U.S. economy continued to grow.

Further, an Independent System Operator New England study illustrates how the increased use of natural gas in power generation, transportation and other areas is reducing emissions. According to the study, regional emissions dropped 65 percent for nitrogen oxide, 92 percent for sulfur dioxide and 35 percent for carbon dioxide between 2005 and 2014.

“The decline in emissions during this period reflects shifts in the regional fuel mix,” the report states, “with increasing natural gas generation offsetting decreases in coal and oil-fired generation.”

The plentiful, affordable and dependable supply of U.S. natural gas, coupled with the fuel’s environmental advantages, makes it a logical alternative, because it achieves what were once thought to be mutually exclusive goals: providing more energy with a smaller impact on our environment.

To date, CO2 emissions from power generation, the largest source of greenhouse gas emissions in the U.S., have fallen 17 percent since 2000. Even without an emissions reduction requirement in place, API modeling projects natural gas will continue to drive emissions reductions in the power sector, due to fuel switching.

CO2 emissions from power generation are projected to decrease by as much as 30 percent from 2005 levels by 2030, based on the continued increased use of natural gas for power generation.

The oil and natural gas industry is also focused on how to meet national and global energy needs as efficiently as possible. A long-standing example is the use of excess heat from normal operations to convert steam to electricity in order to power a cogeneration plant. This has the ability to lower not only greenhouse gas emissions but also water use, because water requirements for cogeneration are often less than those for the same power generated by coal-fired boilers or steam-condensing turbines. For example, a 525 megawatt cogeneration unit at a refinery might require 6 million gallons per day (MGD) of water intake, while a similar 525 megawatt coal-fired boiler could use more than 14 MGD. Using half the water to create the same amount of electricity is a valuable savings for the environment, the consumer and the refinery.

Chart: Electric Power CO<sub>2</sub> Reduction

Industry Leadership Through Responsible Development

Safety Standards facebook twitter

Safety is the No. 1 priority for the petroleum and natural gas industry.

For almost a century, the industry has advanced workforce safety and operational efficiency primarily through the American Petroleum Institute’s standard-setting program. As part of API’s Global Industry Services (GIS), API now maintains almost 700 standards covering all segments of the petroleum and natural gas industry. API standards also add to the ever-growing body of knowledge of industry best practices and lessons learned, which continues to deliver significant improvements in system integrity, reliability and integrated safety.

API’s standards are referenced in federal regulations because they are recognized to represent industry best practices based on today’s best available science and research. For example, the Bureau of Safety and Environmental Enforcement (BSEE) references 95 API standards in its offshore regulations. Overall, more than 130 API standards are referenced in more than 430 citations by government agencies, including the Coast Guard, the Environmental Protection Agency, the Federal Trade Commission, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration and the Occupational Safety and Health Administration, as well as BSEE. Additionally, API’s standards are the most widely referenced petroleum industry standards used by state regulators, with over 240 API standards cited over 4,130 times in state regulations.

These standards are developed in an open, third-party accredited process with subject matter experts from a wide range of disciplines, including academia, government regulators and industry experts, who all come together with one goal: to improve and advance the safety of energy development. This decades-long, demonstrated commitment to safety is at the heart of the industry’s credibility and ability to safely deliver the energy our nation and the world need from some of the harshest and most unforgiving environments on the planet.

On the production side, high-quality industry standards promote safe and proven engineering practices both onshore and offshore in the design, fabrication, installation and operation of materials and equipment. These standards also improve safety and environmental performance, help reduce engineering costs and improve equipment interchangeability and product quality.

Industry’s commitment to improving the safety of offshore operations goes beyond setting globally accepted standards. To accelerate the creation and implementation of best practices that reduce risk and improve the safety of offshore operations, the industry established the Center for Offshore Safety. It has become the focal point for safe offshore energy development, through ongoing collaboration between all stakeholders.

The fundamental mission of the Center for Offshore Safety is to promote continuous improvement in offshore drilling, completions and operations through effective leadership, collaboration, communication, teamwork, disciplined management systems, independent third-party auditing and certification, with a focus on company Safety and Environmental Management Systems.

The center is a clear demonstration of the oil and natural gas industry’s commitment to safe operations and understanding that when it comes to safety, there is no room for second best.

Energy Brief: API Publication 1509 Protecting Consumers

API standards help protect the American consumer. API Publication 1509, the “Engine Oil Licensing and Certification System,” sets the performance standards for passenger vehicle engine oil and includes rigorous testing and quality requirements. This API standard is referenced by every major U.S. auto manufacturer as acceptable for use in their engines.

API conducts a voluntary certification program of engine oils that licenses approved oils to bear the API “seal of approval.” Consumers know that if a product bears the API seal of approval, then that product has been rigorously tested to meet their needs.

Energy Security

Reliable Power facebook twitter

Market forces, federal and state legislatures, and environmental policy are driving the ongoing shift in our nation’s power generation mix.

Natural gas use in the electricity market has grown by 86 percent since 2000, driven by these forces. Administrators of regional electricity markets and balancing authorities are charged with ensuring that our nation’s electricity grid is reliable. Environmental and electricity policy must coexist in the states, where regulators are also charged with protecting consumers. States are interested in providing consumers with a generation mix that is clean, reliable and affordable, and natural gas plays a critical role in meeting all three goals.

Natural gas generation is capable of providing on-demand “dispatchable” power, ramping up quickly and following real-time changes in electrical load. This means natural gas generation can replace traditional coal and nuclear power that are no longer economic, as well as support intermittent renewable power. Natural gas generation keeps the power on and grid stable when the sun doesn’t shine and the wind doesn’t blow.

To sustain a clean, reliable and affordable power supply, federal, regional and state regulators need to recognize that a market-driven diversity of attributes, not an arbitrary, government-mandated fuel mix, will lead to the lowest cost and most reliable power for consumers. It is a matter of fact that within our borders, our nation has enormous energy resources.

What is in question is whether the oil and natural gas industry will be given access and the opportunity to develop those resources to meet our nation’s and the world’s energy needs. Today, there remains a stark difference between energy development trends on federal land compared to those on private and state land.

Between 2010 and 2015, the percentage of the nation’s crude oil produced on federal land decreased from 35.7 percent to 21.0 percent. And according to the Bureau of Land Management, the number of drilling permits issued on federally controlled onshore land dropped by 47 percent from 2008 to 2015. Further, federal data show crude oil production remained flat between 2010 and 2015 on federally controlled land, while natural gas production declined 27 percent. In contrast, on private and state lands, where drilling typically does not require federal approval, production increased 115 percent for crude and 66 percent for natural gas from 2008 to 2015. The stark difference between production on federal land and state and private land is not just due to ineffective and inefficient national energy policy; it’s also bad federal fiscal policy. If production on federal lands had grown at the same rate as overall U.S. production, from 2009 through 2015, total royalties would have been 31 percent higher, with an additional $20 billion in royalties collected by the federal government. If our nation is to continue to be a world leader in energy production, that difference has to decrease, if not disappear.

Case Study: Alaska's Restricted Access to Energy Resources

Alaska‘s North Slope accounted for 25 percent of U.S. domestic oil and natural gas production in 1988, but production has plummeted because the U.S. government has largely prevented exploration for new resources in the state both onshore and offshore. Total North Slope production fell to approximately 465,000 barrels per day in 2015, a 76 percent decrease from 1988.

The U.S. Geological Survey (USGS) estimates that the National Petroleum Reserve – Alaska, which encompasses about 23 million acres and is the largest single block of federally managed land in the U.S., holds 896 million barrels of oil and 53 trillion cubic feet of natural gas. In 1923, the reserve was set aside as an emergency oil supply for the U.S. Navy and today is open to “oil and gas leasing, exploration and operations.”

Map: Arctic energy Security

In 2013, the federal government announced roughly half of the reserve would be put off-limits to oil and gas development, and to date no commercial drilling for oil and natural gas has occurred. In 1980, Area 1002 was set aside for oil and natural gas production within the Arctic National Wildlife Refuge. Today energy development in Area 1002, as in much of the Arctic, remains prohibited by restrictive federal policies, which puts at risk our nation’s long-term energy security and ability to meet the nation and the world’s energy needs.

Restricting this nation’s access to the energy resources in the Arctic, at a time when other nations are actively exploring the region, could inhibit our access to important energy resources in the future.

Infrastructure facebook twitter

American consumers’ growing energy appetite means greater demands on our nation’s energy infrastructure, including pipelines, railroads, highways, waterways and ports.

A robust infrastructure system that is safe, efficient and properly maintained can help lower the costs of supplying oil and gas and its products for consumers, by reducing congestion, maximizing efficiency and preventing accidents.

The country’s energy infrastructure system was originally built to move oil and gas from the coasts, where it was delivered by ship, to the refining centers and populations inland. Today, the U.S. energy renaissance is driven by the enormous amount of energy resources found in inland formations, including the Eagle Ford and Barnett in Texas, the Woodford in Oklahoma, the Bakken in North Dakota and Marcellus under the states of Pennsylvania, New York, Ohio, Maryland and West Virginia. To reach America’s full energy potential, we need to maintain our existing infrastructure and invest in new infrastructure that will move U.S. resources from these inland formations to refineries and, ultimately, consumers.

Pipelines are a modern, safe and efficient way to move oil and natural gas from where it is produced to where it is refined and processed to where it is used. In 2014, 500,000 miles of liquid and natural gas transmission pipelines transported 16.2 billion barrels of crude oil and petroleum products and 27.3 trillion cubic feet of natural gas throughout the country at a safety rate of 99.99 percent. The U.S. will need more pipelines to keep pace with growing production and consumer demand. The current lack of energy infrastructure negatively affects consumers. For example, because of infrastructure bottlenecks in the Northeast, New England’s household energy prices are among the highest in the nation – with all six states ranking in the top 10 for the highest cost of energy. In 2015, New England families paid on average 53 percent more for their electricity than the rest of the nation. Specifically, with the exception of Maine and Pennsylvania, consumers in the Northeast in 2015 have paid between 30 percent to 70 percent more for their energy than the national average.

Since 2010, transportation of crude oil by rail in North America has grown significantly from 23.8 million barrels to 318.8 million barrels in 2015. In 2015, railroads transported approximately 8 percent of U.S. oil production, with a safety record of 99.99 percent.

The global trade of oil and natural gas is dependent on our nation’s ports and waterways to move crude oil to our nation’s refineries, export refined products and natural gas to markets abroad and move products domestically on our vast inland waterway system. These waterways are still the backbone of the freight network, carrying the equivalent of about 51 million truck trips of goods each year. These marine highways are a crucial way to carry large amounts of cargo, including oil and natural gas, which would otherwise travel by longer and more costly means. As impressive as our nation’s energy infrastructure is, it is in need of expansion to keep pace with a growing population, demand for goods and services and energy needs. Investing in our nation’s infrastructure will not only allow the oil and natural gas industry to keep pace with energy demand, it will also help keep energy affordable for the consumer, while creating wellpaying jobs, giving U.S. manufacturers a competitive advantage through lower energy and raw material costs and providing revenue to local, state and federal governments.

The private sector is responding by investing millions in our nation’s energy infrastructure. Between 2010 and 2013, capital spending in the infrastructure that moves and transforms oil and gas into everyday products has increased by 60 percent. IHS estimates that investments in building, maintaining and updating the oil and natural gas industry’s transportation and storage infrastructure could contribute, on average, $120 billion to the economy per year.

Increased capital investment in energy infrastructure will also lead to more revenue and output among supplier industries, such as steel, machinery and engineering services. This capital investment, in turn, could trigger an estimated $45 billion per year throughout the extended supply chain. To sustain our nation’s positive energy trajectory and position as a global energy leader, the new administration and Congress should work with the private sector to enable the expansion of our nation’s energy infrastructure through consistent regulation and efficient processes.

Infographic: The benefits of marine transportation