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Thursday, May 26, 2011

Issa Challenges the White House on Energy

It's refreshing when elected officials directly confront bad policymaking. That was the case in the House of Representatives' Oversight and Government Reform Committee on May 24.

Chairman Darrell Issa (R-CA) led a hearing and highlighted a new report from the committee focused on the Obama administration's undermining of U.S. domestic energy production.

In a statement, the Chairman noted that the White House's emphasis on "green" energy technologies has clearly come at the expense of the development of much-needed carbon-based energy. In addition, EPA and Interior regulations "are having a detrimental impact on independent energy producers." Issa added, "Viewed in tandem with Obama Administration efforts to slow production from the Gulf of Mexico, block ‘fracking' a technology that would increase domestic oil production by 40 percent in only five years, and stifle production on public lands, this can be seen as nothing less than a concerted campaign to raise the price of energy as a means to force the issue of green alternatives. Today's hearing exposed the many ways the government is limiting access to our vast natural resources. With this understanding, Congress can enact policies that support American businesses and consumers, rather than give more reasons to look overseas for economic opportunities and more favorable regulatory climates."

For anyone concerned about domestic energy production, the committee's 42-page report, "Rising Energy Costs: The Intentional Result of Government Action," is must reading. It lays out key details about the nation's energy resources, the changes in technology that have expanded the discovery of and access to those resources, and the many governmental obstacles and problems that limit domestic energy production.

In terms of U.S. energy resources and the industry, the report highlights the following:

• "America's combined energy resources are the largest on earth. They eclipse Saudi Arabia (3rd), China (4th) and Canada (6th) combined - and that's without including America's shale oil deposits. U.S. proven reserves of oil total 19.1 billion barrels, reserves of natural gas total 244.7 trillion cubic feet, and natural gas liquids reserves of 9.3 billion barrels. ... Undiscovered technically recoverable oil in the United States is 145.5 billion barrels, and undiscovered technically recoverable natural gas is 1,162.7 trillion cubic feet."

• "The shale gas reserves of Appalachia are a game changer for the future of American energy security. The United States has 2,552 trillion cubic feet (TCf) of potential natural gas resources, enough to last 110 years at current usage rates. Almost one-third of these resources are from shale gas -- considered uneconomical to extract until just a few years ago. Newly recoverable shale reserves, both oil and gas, have revitalized the oil and gas industry in Appalachia and across the United States - from North Dakota to south Texas to California. The Marcellus Shale formation lies below many of the Appalachian states and extends up to New York. In 2002, the U.S. Geological Survey estimated the Marcellus held 1.9 TCF of natural gas. In 2009, the Department of Energy estimated the Marcellus holds 262 TCF of recoverable natural gas."

• As for Alaska: "A National Energy Technology Laboratory study estimates that this region has the potential for the exploration and development of as much as 28 billion barrels of economically recoverable oil and 125 trillion cubic feet of economically recoverable gas through 2050."

• "The exploration and production portion of the industry employs about 500,000 workers at a wage rate over 50 percent higher than the average of all manufacturing."

Meanwhile, among the hurdles and costs imposed by the Obama administration, the committee reports the following:

• "In its FY2012 budget, the Obama Administration requests over $60 billion in direct tax and fee increases (over ten years) on American energy production."

• "Despite the success of fracking, federal agencies appear to be in a race to see which one can regulate it first. The Department of Interior announced last November that it will consider regulating fracking on federal lands. The EPA, which concluded seven years ago that fracking ‘poses little or no threat' to drinking water supplies, is revisiting the issue. Having found no evidence that fracking chemicals reach drinking water, EPA now wants to study the entire lifecycle of the water used... Federal regulation by EPA, DOE, and DOI would cause needless delay and uncertainty along with multiple additional layers of red tape. Ultimately, federal intervention will chill investment and decrease energy independence."

• President George W. Bush and a Democrat-led Congress allowed a federal moratorium on energy exploration and development over most offshore areas to expire at the end of September 2008. "This opened 500 million additional acres for new energy production that contain an estimated 14 billion barrels of oil and 55 trillion cubic feet of natural gas. However, the promise of expanded access to the OCS and the accompanying increase in domestic supplies of energy was short lived."

As noted later, while billed as being pro-energy development, at the end of March 2010, the Obama administration issued "a significant retraction from the 2008 decision to lift the moratorium. Under the Obama plan, the majority of the areas open for drilling were once again closed, cutting off access to all of the Pacific Coast, the Northeastern Atlantic and Bristol Bay in Alaska, which put 13.14 billion barrels of oil and 41.49 trillion cubic feet of natural gas back under lock and key."

• After the BP oil spill, the Obama administration imposed a moratorium on deepwater drilling in the Gulf of Mexico. After that first moratorium was invalidated in the courts, a second moratorium was imposed, which amounted to "a post hoc rationalization of the original moratorium." It is important to note: "However, according to testimony of Rebecca M. Blank, Under Secretary for U.S. Economic Affairs at the Department of Commerce, the Administration never once conducted a study of the economic impact the moratorium would have on the Gulf Coast economy and on oil production."

While it was announced that the moratorium ended in October of last year, "The moratorium in the Gulf of Mexico was replaced by a ‘permitorium' - whereby drilling activity remained at a standstill not by operation of law - but because of inaction on the part of BOEMRE" (Bureau of Energy Management, Regulation and Enforcement), in terms of issuing permits.

• As for new regulations: "As a result of the BP Oil Spill, BOEMRE promulgated a series of regulations that coincided with the entire reorganization of the agency from the former MMS. These reforms are some of the most aggressive changes to offshore oil and gas production in U.S. history and range from new rules covering safety, oversight, and environmental protection for permitting, drilling, and development processes for oil and gas operations. In some cases, these new regulations apply to both offshore operations themselves as well as the businesses that deal directly with offshore rigs - many of which are small businesses."

• And in terms of onshore obstacles to development, the Oversight report notes a decline in new leases in 2009 and 2010, the deferral of lease parcels, failures in terms of unissued and withdrawn leases, and project approval delays.

• The EPA also has overstepped its bounds as regulator in Texas, including coordinating its actions with environmental activists.

• For good measure, the Fish and Wildlife Service has used its Endangered Species List power to threaten "oil and gas production in the Permian Basin of west Texas - which currently produces nearly 20% of the country's crude oil."

This Oversight Committee report serves a crucial purpose. It allows us to get past political rhetoric that sounds pro-energy, and exposes the reality of the Obama administration's anti-domestic energy agenda.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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