Energy Success Story for the Economy

Sometimes one just needs to step back to gain, or regain, perspective.

We hear about how the Marcellus Shale natural gas field, covering parts of Ohio, Pennsylvania, West Virginia and New York, has changed the energy equation in the U.S.  A look at the latest numbers and projections drives home the point.

In an August 5 Associated Press story, it was noted, “In 2008, Marcellus production barely registered on national energy reports. In July, the combined output from Pennsylvania and West Virginia wells was about 7.4 billion cubic feet per day, according to Kyle Martinez, an analyst at Bentek Energy. That's more than double the 3.6 billion cubic feet from last April, and represents over 25 percent of national shale gas production.”

The report goes on to note that experts estimate that Marcellus has passed the Haynesville region in Arkansas and Texas as the top natural gas producing region.

For good measure, there are plans for Shell Oil to “build a petrochemical plant to turn Marcellus gas into other consumer and industrial products including plastics,” and several pipeline expansions in the region will allow for increased production and easier transport of gas to other parts of the northeast.

That’s good news for the region’s economy, as well as for energy costs. The AP noted: “The current wholesale price of natural gas is about $3 here, but $12 or more in Europe and Japan.”

And the U.S. Energy Information Administration (EIA) points out, “Of the natural gas consumed in the United States in 2011, about 94% was produced domestically; thus, the supply of natural gas is not as dependent on foreign producers as is the supply of crude oil, and the delivery system is less subject to interruption. The availability of large quantities of shale gas should enable the United States to consume a predominantly domestic supply of gas for many years and produce more natural gas than it consumes.”

Indeed, looking ahead, the EIA “projects U.S. natural gas production to increase from 21.6 trillion cubic feet in 2010 to 27.9 trillion cubic feet in 2035, a 29% increase. Almost all of this increase in domestic natural gas production is due to projected growth in shale gas production, which grows from 5.0 trillion cubic feet in 2010 to 13.6 trillion cubic feet in 2035.” Also, keep in mind that, as the EIA points out, “Many shale formations, particularly the Marcellus, are so large that only a limited portion of the entire formation has been extensively production-tested.”

What about the impact on the economy, industries and jobs? In a March 2012 report, API summed up: “Development of shale resources supported 600,000 jobs in 2010. The number of direct and indirect jobs is constantly increasing. Affordable, domestic natural gas is essential to rejuvenating the chemical, manufacturing, and steel industries. The American Chemistry Council determined that a 25 percent increase in the supply of ethane (a liquid derived from shale gas) could add over 400,000 jobs across the economy, provide over $4.4 billion annually in federal, state, and local tax revenue, and spur $16.2 billion in capital investment by the chemical industry. They also note that the relatively low price of ethane would give U.S. manufacturers an essential advantage over many global competitors. Similarly, the National Association of Manufacturers estimated that high recovery of shale gas and lower natural gas prices will help U.S. manufacturers employ 1,000,000 workers by 2025 while lower feedstock and energy costs could help them reduce natural gas expenditures by as much as 11.6 billion by 2025. America’s Natural Gas Association (ANGA) estimates that lower gas prices will add an additional $926 of disposable household income annually between 2012 and 2015, and that the amount could increase to $2,000 by 2035.”

Small businesses across industries, obviously, benefit from enhanced economic growth and lower natural gas costs. But the small business role in specific energy industries should be noted as well.

For example, according to the latest Census Bureau data, 55% of employer firms in the “pipeline transportation of natural gas” industry had fewer than 20 employees, and 69% less than 500 workers.

In the “natural gas liquid extraction” industry, 53% of firms had less than 20 workers, and 70% fewer than 500 employees.

And among “natural gas distribution” firms, 65% had less than 20 workers, and 84% fewer than 500 employees.

So, the natural gas business is, to a significant degree, about small businesses.

The recent, dramatic and beneficial change in shale gas production has been due to advancements in technology, specifically, the combination of horizontal drilling with hydraulic fracturing.

Of course, though, environmental activists who do not like the use of any kind of carbon-based energy have opposed expanded natural gas production. It is important that policymakers in the states and at the federal level keep their focus on regulations that are rooted in sound science, rather than based on mere assertions, and that do not impose unnecessary burdens.

For example, questions loom large on the regulatory situation in New York. Consider the following points made by the Independent Oil & Gas Association of New York: “The New York Times published an article on June 13 quoting a senior official within the Department of Environmental Conservation (DEC), who said Governor Cuomo’s administration planned to limit the initial permitting of horizontal gas wells to select communities in the Southern Tier. Further, the article noted that local municipalities would initially have control over whether to allow natural gas development within their communities.” The New York IOGA has said that “any progress is a positive step forward. And while we stand by that position to a certain degree, we also have an obligation to share the viewpoint that such limitations, which are not based on scientific data, is inappropriate and not in the best interest of our members, the Southern Tier economy and the entire state.”

The New York IOGA added, “The administration, including the DEC, is well aware that we will accept reasonable regulations and permit guidelines, but we also want state leaders to understand that a plan such as the one outlined in various follow-up reports is unsustainable on a large scale.” Quite simply, the IOGA was spot on in pointing out that developers “will not invest in a state where there is: regulatory uncertainty; an inconsistent patchwork of local laws; and unreasonable and expensive obstacles.”

That warning applies to New York, to other states and to the nation. The U.S. – particularly at the federal level – has done a great deal to undermine domestic energy production. Such misguided policymaking needs to be avoided. That goes for all production, from offshore oil drilling to natural gas production in areas like the Marcellus Shale.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

Keystone XL Needed Now More than Ever

The American people understand the benefits of the Keystone XL Pipeline. Unfortunately, the Obama administration continues to play politics with this important energy project.

On the positive side, the southern portion of the pipeline project – running from Cushing, Oklahoma, to the Gulf of Mexico (now being called the Gulf Coast Project) – finally received its final permit to move ahead.

In a statement, Russ Girling, TransCanada's president and chief executive officer, said, “Receiving this final, key Army Corps permit for the Gulf Coast Project is very positive news. TransCanada is now poised to put approximately 4,000 Americans to work constructing the $2.3-billion pipeline that will be built in three distinct 'spreads' or sections. The Gulf Coast Project will contribute millions in property taxes to counties in Oklahoma and Texas, money that can be used to build roads, schools and hospitals.”

But the real news remains that TransCanada is still waiting on the Obama administration to make another decision on the 1,179-mile part of the pipeline project that would run from Hardisty, Alberta to Steele City, Nebraska. This would bring both Canadian and North Dakota crude oil to Gulf Coast refineries.

Recall that President Obama rejected the project in January, siding with green extremists who oppose all carbon-based energy and also happen to be part of the President’s political base. At the same time, so as to not alienate another part of his base, i.e., labor unions that support the project, the White House invited TransCanada to reapply for approval with a slightly altered path. TransCanada did reapply in May.

This project should be a no-brainer. Multiple years of review by the State Department gave a thumbs up on the environmental front. The project would generate significant jobs – as noted above by the TransCanada CEO. Estimates put the boost in U.S. employment from the 80,000 jobs supported by existing oil sands projects in 2010 to 179,000 jobs in 2035, with a potential for as many as 600,000 by 2035. For good measure, this means expanded oil for U.S. refineries, and an increase in oil supplies from reliable sources.

As noted by API Refining Manager Cindy Schild, “There is no reason to further delay this critical jobs and national security project. With high unemployment and continued instability in the Middle East – approval of this pipeline will help our economy and help put our energy future back into our own hands.”

In a statement, TransCanada added: “The pipeline will transport growing supplies of U.S. crude oil to meet refinery demand in Texas. Gulf Coast refineries will be able to access lower-cost domestic production and avoid paying a premium to foreign oil producers, reducing cost and the United States' dependence on foreign crude oil.”

The American people understand the potential benefits. A Washington Post poll released on July 1 asked if the U.S. government should approve the pipeline project. Among adults in general, 59% said yes and 18% no, and among registered voters, it was 62% in the yes column and, again, 18% no.

Small business owners, perhaps more so than anyone else, understand the need for affordable, reliable energy, as they struggle in a tough economy while figuring out how to wrestle with high and uncertain energy costs.  In an April 2012 survey conducted by SBE Council, 72% of small business owners said high energy prices were impacting their firms – a shocking 43% said if gas prices remained high or shot higher the survivability of their business was at stake.

It’s time for the Obama White House to push aside the politics, and do something positive for the U.S. economy by approving the Keystone XL Pipeline project.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

Obama War on Coal Inflicts Long-Term Damage

Coal is a key energy source for the U.S. economy. Nearly half of our electricity is produced from coal, and the U.S. has enough coal to last more than 200 years at current consumption levels, according to the Energy Information Administration.

The EIA summed up: “The United States has more than 1,400 coal-fired electricity generating units in operation at more than 600 plants across the country. Together, these power plants generate almost half of the electricity produced in the United States and consume about one billion short tons of coal per year. The share of our electricity generated from coal is expected to decrease by 2035. However, our growing demand for electricity is expected to lead to an increase in the actual amount of coal used…”

On the international stage, the World Coal Association reports that coal provides 29.6 percent of global primary energy needs and supplies 42 percent of global electricity. In addition: “At current production levels, proven coal reserves are estimated to last 118 years, with recoverable reserves in around 70 countries.”

The bottom line is that coal is a plentiful and affordable source of energy. But the Obama administration has been anything but friendly towards coal. And that point was made loud and clear at the 33rd annual conference of the Eastern Coal Council, held in Kingsport, Tennessee, on March 20 and 21.

A key point was the hostility of the Obama EPA towards coal. A May 22 TimesNews.net report opened: “Speakers at the Eastern Coal Council’s annual conference charged Monday that President Obama’s Environmental Protection Agency is at war with the coal industry and killing the economy with burdensome regulations.”

The report quoted U.S. Rep. Morgan Griffith (R-VA) noting, “It is, in fact, a war on all fossil fuels. ... Coal just happens to be the first one in a long list… Coal is taking the brunt of the hit right now from the current administration and its (EPA) administrator, Lisa Jackson.”

U.S. Chamber of Commerce Senior Vice President Bill Kovacs said, “The regulatory process has become so out of whack in the last several years. ... The regulations are so broad and so sweeping and Congress literally has no ability to control it. No one is getting out of this alive. If we want jobs, we have to get control of the regulatory system.” For good measure, it’s reported: “The Sierra Club, said Kovacs, has taken credit for retiring more than 100 coal-fired power plants and preventing another 150 from being built.”

An International Business Times report quoted Evan Tracey, a spokesman for the American Coalition for Clean Coal Electricity, saying, “America has centuries of a coal - a proven energy source - yet the EPA has spent the past three years enacting heavy-handed regulations that are attacking the coal industry, destroying jobs and increasing the cost of electricity for millions of American families and businesses.”

What can be done? Well, it’s obviously all about changing the minds and actions of our elected officials and their appointees.

But in another TimesNews.net story, energy analyst Dan Roling warned, “We heard yesterday there’s a war on against coal and actually all fossil fuels... This (Obama) administration is governing via regulations and guidance. If they cannot get the legislation passed, they will issue regulations and guidance to achieve their goal. It’s very difficult to fight that.”

In fact, according to a HispanicBusiness.com report, U.S. Sen. Bob Corker, R-Tenn., speaking during the morning keynote session, added, “My worry is that if we move down this path for three or four or five more years that we'll do so much damage to the industry that this is going to be hard to overcome.” That’s extremely troubling.

Policy matters, and that has been very clear on the energy front in recent years. If we want affordable energy, then the regulatory assault on fossil fuels, including coal, must be stopped. If not, energy uncertainty and increased costs will plague consumers, entrepreneurship, small businesses, and overall economic and employment growth.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

Keystone XL Round Two

TransCanada Corporation reapplied to the Obama administration on May 4 for its Keystone XL pipeline project.

Russ Girling, TransCanada’s president and chief executive officer, said, “The multi-billion dollar Keystone XL pipeline project will reduce the United States' dependence on foreign oil and support job growth by putting thousands of Americans to work. Keystone XL will transport U.S. crude oil from the very large Bakken supply basin in Montana and North Dakota, along with Canadian oil, to U.S. refineries. Our application for a Presidential Permit builds on more than three years of environmental review already conducted for Keystone XL.”

Recall that President Obama rejected the project in January. In order to avoid angering a key constituency, the President wanted to avoid making a decision until after the November 2012 election. Congress, however, passed legislation requiring an earlier decision, and Mr. Obama wound up siding with extreme environmental groups that effectively oppose any production of carbon-based energy.

At the same time, so as to not alienate labor union backers, the President invited TransCanada to reapply. The company has worked with lawmakers and regulators in Nebraska to shift the pipeline around the state’s Sandhills, which was the often-emphasized environmental issue pushed by the opposition.

As the firm reports: “The application includes the already reviewed route in Montana and South Dakota. In April, legislation was passed in Nebraska and signed into law by Governor Heineman that enabled TransCanada to re-engage with Nebraska's Department of Environmental Quality (DEQ), allowing the company to continue to work collaboratively in determining an alternative route for Keystone XL that avoids the Sandhills. Alternative routing corridors and a preferred corridor were submitted to the DEQ April 18. The DEQ will now help determine a specific route and oversee the public comment and review process. Once a route is finalized, it will be submitted as part of the Presidential Permit application.”

In terms of the firm’s desired schedule, The Wall Street Journal noted, “TransCanada expects to begin construction of Keystone XL in the first quarter of next year, with completion slated for as early as late 2014, if approved. TransCanada has said it will move ahead with a shorter segment of the line—from Cushing, Okla., to the U.S. Gulf Coast—which doesn't need Washington approval. That segment should start pumping by late next year, the company said.”

Now, it once again is up to the Obama administration. Will the President choose to delay after years of reviews, and despite the substantial economic benefits from this project?

As noted in previous SBE Council Energy & Entrepreneurs analyses, the Canadian Energy Research Institute has estimated that the Keystone pipeline would boost U.S. employment from the 80,000 jobs supported by existing oil sands projects in 2010 to 179,000 jobs in 2035. If the full oil sands projects were to move ahead in Canada, then new U.S.-related jobs would rise to 600,000 by 2035.

Also, based on the latest Census Bureau data (2009), 98.7% of employer firms involved in supporting oil and gas operations have fewer than 500 workers, and 83.3% less than 20 employees. As for firms in the oil and gas pipeline construction industry, 94.9% have less than 500 employees, and 61.1% fewer than 20 workers.

Indeed, the Keystone project is good for the economy, good for small business in the energy industry and as energy consumers, and good for jobs. Let’s hope the President gets it right this time around, and without any further delay.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

Inhofe Stands Up to EPA's Regulatory Hostility

The regulatory assault on U.S. businesses has been relentless over the past few years. But one member of the U.S. Senate i.e., Jim Inhofe, a Republican from Oklahoma, has stood firmly against such misguided activity, particularly when it comes to the EPA’s regulatory hostility against energy firms.

Most recently, Inhofe played a key role in revealing the outrageous declarations by Alfredo Juan “Al” Armendariz — who had served as EPA administrator for the region covering Texas, Arkansas, Louisiana, New Mexico and Oklahoma – that led to Armendariz resigning his position.

In 2010, Armendariz spoke of the need to “crucify” oil and gas businesses. He said, “But as I said, oil and gas is an enforcement priority [...] I was in a meeting once and I gave an analogy to my staff about my philosophy of enforcement, and I think it was probably a little crude and maybe not appropriate for the meeting but I'll go ahead and tell you what I said.  It was kind of like how the Romans used to conquer little villages in the Mediterranean.  They'd go into a little Turkish town somewhere, they'd find the first five guys they saw and they would crucify them.  And then you know that town was really easy to manage for the next few years [...] So, that's our general philosophy.”

In a statement responding to the resignation, Inhofe declared, “After his revelation that EPA's 'general philosophy' is to 'crucify' oil and gas companies, it was only right for Administrator Armendariz to resign today - but his resignation in no way solves the problem of President Obama and his EPA's crucifixion philosophy. In his letter to Administrator Jackson, Armendariz again pointed to his 'poor choice of words' as the reason for his resignation - but Armendariz was just being honest: his choice of words revealed the truth about the war that EPA has been waging on American energy producers under President Obama.”

Indeed, Senator Inhofe deserves enormous credit for challenging the administration’s misguided efforts on energy on various fronts.

Consider an April 19 recent statement from the minority on the Senate Committee on Environment and Public Works, under Inhofe’s leadership, that noted on a newly released government assessment from the U.S. Geological Survey (USGS). The statement pointed out: “this assessment confirms that America’s technically recoverable conventional oil resources are 26 percent of the world's supply, and this doesn't begin to include our enormous oil shale, tight oil and heavy oil resources.  Moreover, it shows that the United States holds almost 30 percent of the world's technically recoverable conventional natural gas resources, without including our massive supply of shale gas.”

In challenging President Obama’s political assertions on energy available in the U.S., Inhofe commented: “The President's own administration released a report which reveals that the United States has 26 percent of the world's technically recoverable conventional oil resources, and that's not including our enormous oil shale, tight oil, and heavy oil resources.  This report from the U.S. Geological Survey is vindication for anyone who thought that President Obama's claims - that we 'only have 2 percent of the world's proven oil reserves,' and that 'Even if we drilled every square inch of this country right now, we'd still have to rely disproportionately on other countries for their oil' - are less than honest.  This report comes on the heels of the non-partisan Congressional Research Service finding that America has the largest endowment of oil, gas, and coal resources of any country in the world.  President Obama may wish that we only had 2 percent of the world's oil so that he could force us into his policies of energy austerity, but the truth is clear: we could end our reliance on the Middle East if we could just stop President Obama's war on fossil fuels and develop our wealth of resources.”

Inhofe has been challenging the EPA on unwarranted and costly regulations impacting hydraulic fracturing, which, by the way, is expanding U.S. natural gas production, and thereby creating jobs and reducing energy costs.

On April 18, 2012, for example in reaction to EPA issuing federal air rules for natural gas wells that are hydraulically fractured, Inhofe noted, “It's no secret that EPA has been trying hard to manufacture a correlation between groundwater contamination and hydraulic fracturing, but in each case, they were unable to find sound scientific evidence to make this link.  So now, they're attempting to usurp control through air regulations. EPA has given us few details about the rule, and while I look forward to seeing it in full, I have serious concerns about its potential impacts, particularly on smaller producers.”

It should be noted that in late March, Inhofe introduced the Fracturing Regulations are Effective in State Hands Act (FRESH Act), which would make sure that the states, not the federal government, hold regulatory authority over hydraulic fracturing within their state boundaries.

Inhofe also has been at the forefront of challenging the Obama EPA’s effort to impose a costly cap-and-trade regime through regulation that would jack up energy costs for U.S. consumers, entrepreneurs and businesses, doing serious damage to competitiveness, investment, jobs and economic growth.

On March 27, for example, Inhofe directly took on the administration for its effort to impose cap-and-trade through regulation. At an Environment and Public Works Subcommittee hearing on EPA regulations on power plants, Inhofe, said: “So much for President Obama's claims to be for an 'all-of-the-above' approach - these regulations are designed specifically to kill coal in American electricity generation, which will significantly raise energy prices on American families. This plan is the most devastating installment in the Obama administration's war on affordable energy: it achieves their cap-and-trade agenda through regulation instead of legislation.  Today, Americans can be certain that the President is going forward to fulfill his campaign promise that under his plan of a cap-and-trade system electricity prices would 'necessarily skyrocket.'”

To redress the entire EPA effort to impose a cap-and-trade system, Inhofe introduced the Energy Tax Prevention Act of 2011 (S.482). As described in the legislative summary, S.482: “Amends the Clean Air Act to prohibit the Administrator of the Environmental Protection Agency (EPA) from promulgating any regulation concerning, taking action relating to, or taking into consideration the emission of a greenhouse gas (GHG) to address climate change. Excludes GHGs from the definition of ‘air pollutant’ for purposes of addressing climate change.”

This is common sense, important legislation that places the responsibility regarding such a draconian regulatory scheme where it should be, with elected officials, not political appointees and bureaucrats. Of course, our elected representatives from both political parties have refused to pass legislation imposing any kind of cap-and-trade regulation, or any kind of carbon tax.

Are the efforts of a Senator Inhofe making a difference?

Well, consider the following from an editorial in the liberal Washington Post (May 3) regarding the Armendariz case: “The most reasonable interpretation is also among the most disturbing - that Mr. Armendariz preferred to exact harsh punishments on an arbitrary number of firms to scare others into cooperating. This sort of talk isn't merely unjust and threatening to investors in energy projects. It hurts the EPA. Mr. Armendariz was right to resign this week, while EPA Administrator Lisa P. Jackson denied that his comments reflected the agency's approach. Yet the question will remain: Is an aggressive attitude like the one Mr. Armendariz described common among EPA officials?”

Good question, indeed, not just for the EPA, but for the entire Obama administration. And it is a question that Senator Inhofe is making sure is being asked, and noted by the media, by Congress and by the American people.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

Small Businesses Getting Slammed by Rising Gas Prices

Results of a survey released by the Small Business & Entrepreneurship Council (SBE Council) find that high gas prices are taking their toll on the nation's small business owners. In the group's most recent "Entrepreneurs & the Economy: Trends, Issues and Outlook" survey, 72 percent of respondents say that higher gas prices are impacting their business.

"The fragile economy is being undermined by high gas prices. The weak recovery and policy uncertainties are already weighing on the confidence and minds of small business owners. Now they must find a way to cope with higher fuel costs. Unfortunately, their choices are limited," said SBE Council President & CEO Karen Kerrigan.

The survey, fielded between February 21 and March 2, 2012 by TechnoMetrica, polled 304 small business owners (overall margin of error +/- 5.4 percentage points at the 95 percentage level). During the course of the survey and following its completion, gas prices continued to increase. For example, according to the Energy Information Administration, the weekly average price for regular gasoline climbed from $3.641 per gallon as of February 27 to $3.747 per gallon as of March 12.

Small business owners are dealing with these higher costs by cutting employee hours and raising prices - two options that hurt their competitiveness and the health of the overall economy, according to SBE Council. When asked about their responses to higher gas prices:

• 41 percent of small business owners said higher prices were affecting their plans to hire.
• 22 percent of small business owners have cut back on employee hours.
• 40 percent of small business owners have raised their prices.

Astonishingly, 43 percent of respondents agreed with the following statement: "My business will not survive if energy prices continue to remain high or increase further." (23 percent strongly agreed with the statement.)

SBE Council chief economist Ray Keating noted, "Very few businesses are immune from the negative effects of rising energy costs. As a result, entrepreneurs and managers have to make tough decisions, none of which are positive for their businesses, for workers seeking employment or worried about their current jobs, or for the economy in general."

According to the survey, there is intense dissatisfaction with the overall direction of federal policies meant to help the economy in general: 61 percent of small business owners are not satisfied with economic policies from Washington. Only 6 percent are "very satisfied" while 30 percent are "somewhat satisfied."

In terms of stress levels related to their business finances, 46 percent of small business owners are feeling the same level of stress today as in the past three months, 38 percent say they are more stressed, while 14 percent feel less stressed. Despite this, 42 percent believe their financial conditions will get better. However, 42 percent say they will remain the same, while 13 percent believe their finances will get worse.

Keating added, "While prices at the pump are affected by various factors and events, including political risks in the Middle East and U.S. monetary policy, the President and the Congress play key roles as well by either erecting or removing obstacles to domestic energy production."

Kerrigan added: "The surge in gas prices underscores the need for the Administration to move without haste on advancing pro-energy policies, including the approval of the Keystone XL pipeline. The U.S. cannot allow world events, supply disruptions and global demand surges to control the fate of our economy or global competitiveness. We must take full advantage of the natural resources we have been blessed with as a nation and move forward on a genuine 'all-of-the-above' energy strategy."

Governors and Energy: Economics and Politics

Apparently, federal energy policy is frustrating at least a couple of governors.

When politics mixes with anything in the economics realm, including energy and energy policy, one can never be quite sure as to what the outcome will be.

For example, after a lengthy process that dated back to the previous administration, President Obama wound up rejecting the proposed Keystone XL pipeline project, which would boost U.S. economic growth, employment, and energy affordability and security. The unmistakable political desire was to push the decision beyond the 2012 elections. For good measure, the Obama administration has been slowing or stopping offshore and onshore oil production, pushing increased taxes on domestic energy producers, and proceeding with EPA regulation of emissions.

Two governors spoke out recently on energy policy emanating from the nation's capital.

According to a February 26 report in TheHill.com, Indiana Governor Mitch Daniels, a Republican, provided an interesting reminder on what the objective of the Obama administration's policies seems to be. The article noted:

"‘Let's give the president credit for one domestic policy that works. He wanted higher gas prices and he got them,' said Daniels on Fox News Sunday. ‘Secretary Chu said $8 are about what they pay in Europe. It would be great. Secretary Salazar said $10 and it still wouldn't be for drilling in the places where we know there's an awful lot of domestic production. And so, they have gotten the doubling of gas prices and perhaps worse, it's a conscious policy of this administration. Maybe the one thing they set out to do and actually accomplished.' he said."

TheHill.com went on to explain, "Republicans have leaped on comments from Energy Secretary Steven Chu to the Wall Street Journal in September 2008 saying that government needed to ‘figure out how to boost the price of gasoline to the levels in Europe.'"

Daniels added, "When you have environmental regulations that are going to raise the price of refining gas, possibly put some of our scarce refineries out of business, guess what? You are going to get higher gas prices."

While as a Republican, Daniels obviously wants to score political points, his basic economics are undeniable.

Meanwhile, a Democratic governor is none too pleased as well. In a February 23 report by The Canadian Press, Montana's Brian Schweitzer criticized the politics swirling around the Keystone pipeline. But he did so in a rather unique fashion.

Schweitzer is a big supporter of the project. The most interesting aspect of the article was the following:

"Mr. Schweitzer said Keystone runs through Montana more than it does any other state and would be a boon for oil producers. Oil activity in Montana and North Dakota has picked up, he said, but the oil has to be transported to its destinations by rail. ‘Rail is not safe, it's not environmentally sound and it costs $20 [U.S.] to $30 a barrel more to get to market, so our producers are taking deep discounts because we don't have pipeline capacity and we've negotiated that with TransCanada."

That, of course, just adds more value to the project.

As for his criticisms, Schweitzer got colorful in pinning blame on Washington, D.C. But his wrath was not directed at the administration's political games. Instead, it was directed at Keystone supporters.

The Canadian Press quoted Schweitzer saying, ""Blah, blah, blah, Washington, D.C., politics. If you want to get something a) not done and b) cussed and discussed, send it to Washington, D.C. It's going to get built. Ninety per cent of these jackasses that are complaining about the Keystone pipeline in Washington, D.C., one year ago wouldn't have even known where the Keystone was. While we were doing the heavy lifting here in Montana and in South Dakota and in Kansas and Oklahoma ... in Washington, D.C. ... all these great defenders had never heard of Keystone before."

Hmmm. Why would a Keystone supporter go out of his way to take his Keystone allies to task? Well, while Schweitzer apparently gets the economic benefits of the project, he apparently cannot turn off the politics on the issue. So, he ignores that his fellow Democrats in the White House are the problem, and instead, highlights a point, whether accurate or not, that is meaningless in terms of the substance of the issue.

Like I said, when politics mix with economic policy, especially energy, you never quite know what the outcome will be.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

Keystone XL: What Can Congress Do?

President Obama was split on energy production during his State of the Union address - at least when it came to carbon-based energy. On non-economic energy, such as wind and solar, Mr. Obama's commitment to provide continuing taxpayer handouts remained undaunted.

Regarding oil and gas, for example, on the one hand, he spoke proudly of increased U.S. oil and natural gas production. On the other hand, Mr. Obama called for higher taxes on oil firms, which, of course, means reduced incentives and resources for exploration and production.

But all of that is just rhetoric for a president facing re-election in November. The rubber hits the road in actual policymaking. And the biggest recent policy decision made by President Obama was to reject the Keystone XL pipeline project.

That project would transport Canadian sands crude oil to refineries on the Gulf Coast, and thereby enhance energy security, boost U.S. GDP, create new opportunities for firms of all sizes in the energy sector, and generate tens of thousands of new jobs.

How could President Obama reject such a project, particularly since, as the government itself made clear in its research, no real environmental risks exist? That question essentially was asked by U.S. Rep. John Sullivan (R-OK) after the State of the Union: "Let's not forget that just last week, President Obama turned his back on 20,000 new private sector jobs and our energy security by rejecting the Keystone XL pipeline. What logical reason could there be to say no to 20,000 new private sector jobs - potentially 100,000 indirect jobs - while our national unemployment rate remains close to 9 percent?"

Joe Oliver, the Minister of Natural Resources in Canada, actually provided the answer recently. As noted by The Wall Street Journal, Oliver observed that the green movement's "goal is to stop any major project no matter what the cost to Canadian families in lost jobs and economic growth. No forestry. No mining. No oil. No gas. No more hydroelectric dams." In particular, any carbon-based energy production must be opposed.

The Obama administration graciously said, however, that TransCanada, the pipeline owner and operator, could reapply. How nice.

Can Congress do anything to reverse the administration's decision?

Well, as widely reported, the Congressional Research Service issued an analysis that under its powers to regulate foreign commerce, Congress could approve this cross-border project.

In a recent op-ed on the issue, U.S. Rep. Ed Whitfield (R-KY), chairman of the House Subcommittee on Energy and Power, wrote: "So we are going to make every effort to see to it that this pipeline is built. That may require giving the Federal Energy Regulatory Commission, the federal agency responsible for domestic pipeline siting, the limited authority to make the final decision on the permit of the Keystone XL pipeline."

As reported by Reuters, U.S. Representative Fred Upton, chairman of House Committee on Energy and Commerce, "expressed his desire to again try to force the construction of Keystone by attaching legislation to the next payroll tax cut bill... Representative Lee Terry, whose home state of Nebraska would host part of the pipeline, told reporters that a highway construction funding bill Congress is likely to consider this year is one of the other measures that Republicans are thinking of using to target for Keystone."

Rep. Lee also has sponsored legislation to transfer authority of the pipeline to the FERC.

On January 26, testifying before the House Subcommittee on Energy and Power, Assistant Secretary of State Kerri-Ann Jones asserted that the pipeline application was not rejected on the merits, but simply because the State Department did not have enough time under the recently imposed deadline imposed in legislation signed by the President in December. But it is important to note that TransCanada already agreed to the re-routing of the pipeline around the Nebraska Sandhills, thereby answering one of the prominent environmental questions, and the legislation signed into law allowed for TransCanada, the state of Nebraska and the State Department to reach an accord to re-route part of the pipeline in that state.

Of course, even if the House passes legislation to advance the pipeline, it would have to pass the Senate as well and be signed into law by President Obama himself. That's not going to happen. But passing such legislation and debating the issue is important so that American businesses and the people can better understand who exactly is obstructing energy production, security and jobs.

In the meantime, it's more delays and mere hope that the U.S. is not simply eliminated from the Canadian sands crude oil equation altogether. As AP reported: "TransCanada has said it will submit a new application once an alternative route for the pipeline is established. Company chief Russ Girling said a proposed route could be made public in a few weeks." But the option also exists for a pipeline from Alberta to British Columbia, with petroleum then exported to Asia.

Environmental opposition to the Keystone pipeline is not about Nebraska Sandhills. Instead, it's all about hard core, unwavering greens who oppose any and all efforts to expand carbon-based energy, especially oil (and, of course, coal). Unfortunately, the President has chosen to align himself with such groups, rather than doing what's right for U.S. consumers, businesses and the overall economy.

As U.S. Rep. Cathy McMorris Rodgers (R-WA) put it after the State of the Union: "As we saw with the recent Keystone decision and tonight's speech, the President has decided that while jobs can wait, his campaign cannot." That's bad economics that just might turn out to be bad politics as well.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

Playing Politics on Keystone XL

President Obama continues to play politics with the economy and jobs. That was evident, once again, when it was announced on January 18 that the administration rejected the extension and expansion of the Keystone XL pipeline, which would transport Canadian sands crude oil to refineries on the Gulf Coast.

In order to avoid offending one of his key political constituencies - unions support the project while hard core environmental activists oppose it - the President wanted to put off deciding whether to approve the project or not until after the 2012 election. But legislation signed into law last month required a decision on the pipeline by February 21. So, the Obama White House sided with the environmental activists, and against the unions, not to mention against small business as well.

It's important to understand that opposition to this project stands solely on efforts by extreme green groups to stop the use of carbon-based energy. As TheHill.com summed up: "Environmentalists, who have made stopping Keystone a top priority, oppose it due to greenhouse gas emissions from Alberta's massive oil sands projects and other ecological concerns."

Meanwhile, supporting the project should have been obvious to anyone else, given the reality that the U.S., along with the rest of the world, needs to be able to access affordable, reliable sources of energy.

The global aspect of this need was made clear by comments from Canadian Prime Minister Stephen Harper on January 16. Harper made two critical points. The first was on the instability of oil coming from the Middle East, as exhibited of late with threats emanating from Iran. The second was that Canada has other options than bringing Canadian sands crude oil to the U.S.

Reuters quoted Harper observing the following on the Iran issue: "I think it's pretty obvious what the right decision is ... not just from an economic and environmental standpoint, but from an energy security standpoint... When you look at the Iranians threatening to block the Strait of Hormuz, I think that just illustrates how critical it is that supply for the United States be North American."

Various experts claim that Iran would not block the strait, as it would hurt itself and other oil producing nations in the region financially. That, of course, assumes Iranian leaders are acting and would act rationally - a dicey assumption. And it's not like we have not seen upheaval in that part of the world before.

As for other options, Harper noted the possibility of exporting oil to Asia, with a pipeline project from Alberta to British Colombia in the mix. As noted by TheHill.com, Harper was asked if the Asia markets would be under consideration if the Keystone project had already been approved. The prime minister said, "I think what's happened around the Keystone [pipeline] is a wake-up call [to] the degree to which we are dependent, or possibly held hostage, to the decisions in the United States and especially decisions that may be made for very bad political reasons."

There was nothing but upside for the U.S. on the Keystone pipeline project. We would have access to more secure sources of energy, boost our economy, generate tens of thousands of new jobs, improve energy affordability, and open new opportunities for small businesses in energy-related fields. Keep in mind, for example, that based on the latest Census Bureau data (2009), 98.7% of employer firms involved in supporting oil and gas operations have fewer than 500 workers, and 83.3% less than 20 employees. As for firms in the oil and gas pipeline construction industry, 94.9% have less than 500 employees, and 61.1% fewer than 20 workers.

Prime Minister Harper was spot on. The President's decision was all about bad politics, which translate into bad economics. No one should blame the Canadians if they now choose to go a different route because Mr. Obama chose to continue playing politics. Unfortunately, the Obama decision offers no alternative for U.S. consumers and businesses in need of affordable energy, and the firms and employees in the energy field seeking work.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

Governor Perry's Energy Plan

There's no real secret about what's needed on the policy front to expand domestic energy production and make energy more affordable and reliable for consumers and the business community. Namely, we need to remove barriers to energy exploration and development; reduce government imposed costs; and let market incentives drive investment, innovation, entrepreneurship and production.

Unfortunately, too many in the political arena feel the need or desire to manipulate energy markets according to political preferences.

Therefore, it's rare indeed to come across an energy plan from an elected official that illustrates an understanding of the basic economics of energy. That's exactly what has been supplied by Governor Rick Perry's presidential campaign.

First, the Perry plan ably identifies a variety of problems with current energy policy. For example, during the Obama years in the Gulf of Mexico, "the median days pending approval for combined deepwater exploration and development plans has increased by more than 400 percent, while deepwater exploration and development plan approvals have dropped by nearly 80 percent."

In addition, Environmental Protection Agency (EPA) regulations threaten lost output and jobs. Consider that assorted Obama EPA regulations "would lead to net employment losses of 183,000 jobs per year, with 1.65 million jobs lost by 2020, and would increase average U.S. electricity prices by 6.5% (with 30 states facing peak year cost increases over 10%)."

To its credit, the Perry plan is comprehensive. As Perry writes in the introduction: "I believe in an ‘all of the above' energy plan that encourages the development of all our conventional and renewable sources. I will not tolerate the federal bureaucracy's war on natural gas and coal generation - which are responsible for two-thirds of American electricity generation - because America needs all forms of energy to keep prices stable and meet the demand of our growing population."

So, on domestic energy development, the Perry plan calls for returning to pre-Obama levels of permitting in the Gulf of Mexico as well as "making more of the Gulf available for energy production"; allowing development in the ANWR Coastal Plain, National Petroleum Reserve Alaska, and the Alaskan OCS (Beaufort and Chukchi Seas); opening Southern Atlantic OCS offshore resources to exploration and production; approving the Keystone XL Pipeline; and expanding onshore development in Utah, Colorado, North Dakota, Montana, New Mexico, and Wyoming.

As for electricity generation, the Perry plan focuses on suspending and reconsidering the assorted new, costly Clean Air Act regulations; repealing EPA authority over greenhouse gases; eliminating "all current and planned EPA programs to restrict carbon dioxide emissions (including taxes or cap and trade schemes)"; and opposing national Renewable Portfolio Standards.

The plan also calls for dramatic, and much-needed, reform of the EPA. This would include a moratorium on new regulations; applying rigorous cost-benefit analysis to existing regulations; dismantling the current EPA and rebuilding the agency as "an organization that addresses issues requiring national or regional solutions rather than state-specific issues" with a budget reduced by 60%.

In addition, permitting reform would be undertaken to stop costly bureaucratic delays; legal reform would redress lawsuit and consent decree abuses; and tax reforms would be undertaken to "eliminate subsidies and mandates that punish consumers and skew the energy marketplace, leveling the playing field for all energy industries."

It's hard to find much wrong with this agenda. The essence is to free up U.S. businesses and entrepreneurs so they can help serve the energy needs of American consumers and industry, with the market open to any and all competitive sources of energy.

In the end, no matter who is elected president in November 2012, this should be the nation's energy agenda.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

The Realities of Wind Power

It's unfortunate. But the game of politics too often does not play by the laws of economics.

That has been glaringly the case when it comes to energy. Many politicians and their appointees talk glowingly, even movingly, about the use of renewable energy. Indeed, renewable energy has taken on the air of a crusade.

As a result, speeches and declarations can be made by elected officials or their appointees that simply ignore, or wish away, the real world of energy economics.

Consider an October 11 speech made by Interior Secretary Ken Salazar. The secretary spoke glowingly of a future with wind power, but failed to weigh down his airy presentation with any kind of serious look at the high costs and non-competitive status of wind energy.

Salazar, of course, presented a situation whereby if you're for renewables then you're for American leadership and know how; if not, you simply lack faith in this nation. He declared: "We as Americans face a clear choice today: We can listen to those in Congress who don't think we can lead the world in renewable energy technologies, or who say it's too risky or too difficult. They seem to think America doesn't have what it takes to innovate, create, and lead. So we can sit on the sidelines and fall behind in the international race to build a clean energy economy. Or, we can invest in our people, invest in our ideas, and invest in our companies that have the audacity to change the way our nation gets its energy."

But that's a false choice or scenario. Those of us that raise questions about renewables, including wind power, are not against such forms of energy. We simply would like to deal with economic reality.

And in terms of wind power, for example, those realities are quite costly. When compared to electricity produced via coal or natural gas, for example, wind energy costs range between 40% and 190% higher.

Why? As noted in a June 2010 report on wind energy, the U.S. Energy Information Administration (EIA) pointed out that "capital investment costs are significant," and since wind is intermittent, "a wind plant will generate less electricity than a conventional thermal or hydroelectric plant of the same size and over the same period of time." Indeed, since the wind fails to blow all the time, wind power requires back up facilities fueled by fossil fuels.

So, does Salazar seriously address these issues? Of course not. But he does allude to them vaguely. For example, he announces what he wishes for: "We need to overcome the roadblocks associated with installation, operations and grid connection."

That's nice. But how exactly is that accomplished? Salazar's predictable answer is to throw around taxpayer money in the hopes that his wish will be fulfilled.

So, he highlighted the use of public lands for wind farms, and noted $50 million being spent by the Department of Energy on "research and development" that is "strategically targeted at developing technologies that can lower the relatively high cost of offshore wind energy." I'm sure those resources are being spent well.

Of course, according to Salazar, more government employees are critical as well: "A few years ago, I elevated the Renewable Energy Program at the Bureau to reflect its priority status for the Department and for President Obama. The office now reports directly to the Office of the Director. Less than five years ago this office had 5 people working in it - and now there are more than 25 on board working full-time to make offshore wind a reality." Does he seriously believe that more government bureaucrats will help fulfill his wishes?

And don't forget about tax breaks. Salazar declared, "We need to keep the pressure on Congress to implement policy that makes for a long-term, sustainable wind industry. This includes an extension of the Investment Tax Credit and Production Tax Credit for wind energy, so there's financial certainty and so that we don't face the boom and bust that we saw in the 1970s with solar power."

It would be great if wind power became truly cost effective some day. But that moment is nowhere in sight, and wasting taxpayer dollars on wind power subsidies are not about to make that happen.

The Obama administration needs to reverse its energy policy that has been anti-fossil-fuel, while wasting resources on non-economic renewable ventures.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

Global Energy Outlook: 10 Takeaways and Policy Implications

Politicians love to talk about and legislate on energy. Why? Not only because energy production and consumption are central to our economy, national security and everyday life, but also because of the environmental movement's push against carbon-based energy and push for renewables, as well as populist pandering on issues like oil and gas prices and profits.

Indeed, the Obama administration's agenda on energy has focused on subsidizing non-economic renewable sources of energy, while trying to demonize, raising taxes and impose costly regulations on carbon-based energy, such as oil and coal.

Unfortunately, this is not exactly new political terrain. Populists have been railing against so-called "Big Oil" for more than a century, and the environmental movement's ignorance of economics have guided too much policymaking for over four decades now.

Interestingly, though, despite all of the grandiose political claims regarding a future dominated by renewable energy, more sober assessments tell a very different story, showing that economics cannot be completely replaced by political fantasies.

Consider the following 10 key takeaway points from the U.S. Energy Information Administration's just-released "International Energy Outlook 2011."

1) "In the IEO2011 Reference case, which does not incorporate prospective legislation or policies that might affect energy markets, world marketed energy consumption grows by 53 percent from 2008 to 2035... Much of the growth in energy consumption occurs in countries outside the Organization for Economic Cooperation and Development (non-OECD nations), where demand is driven by strong long-term economic growth. Energy use in non-OECD nations increases by 85 percent in the Reference case, as compared with an increase of 18 percent for the OECD economies."

2) "Fossil fuels are expected to continue supplying much of the energy used worldwide."

3) "Although liquid fuels-mostly petroleum based-remain the largest source of energy, the liquids share of world marketed energy consumption falls from 34 percent in 2008 to 29 percent in 2035, as projected high world oil prices lead many energy users to switch away from liquid fuels when feasible."

4) "World natural gas consumption increases by 52 percent in the Reference case, from 111 trillion cubic feet in 2008 to 169 trillion cubic feet in 2035... Natural gas continues to be the fuel of choice for many regions of the world in the electric power and industrial sectors, in part because its relatively low carbon intensity compared with oil and coal makes it an attractive option for nations interested in reducing greenhouse gas emissions. In the power sector, low capital costs and fuel efficiency also favor natural gas."

5) "In the absence of national policies and/or binding international agreements that would limit or reduce greenhouse gas emissions, world coal consumption is projected to increase from 139 quadrillion Btu in 2008 to 209 quadrillion Btu in 2035, at an average annual rate of 1.5 percent."

6) "Strong economic growth and large domestic coal reserves in China and India lead to a substantial increase in their coal use for electric power and industrial processes. Installed coal-fired generating capacity in China nearly doubles in the Reference case from 2008 to 2035, and coal use in China's industrial sector grows by 67 percent."

7) "World net electricity generation increases by 84 percent in the IEO2011 Reference case, from 19.1 trillion kilowatthours in 2008 to 25.5 trillion kilowatthours in 2020 and 35.2 trillion kilowatthours in 2035."

8) "In many parts of the world, concerns about security of energy supplies and the environmental consequences of greenhouse gas emissions have spurred government policies that support a projected increase in renewable energy sources. As a result, renewable energy sources are the fastest growing sources of electricity generation in the IEO2011 Reference case at 3.1 percent per year from 2008 to 2035"

9) "Future generation from renewables, natural gas, and to a lesser extent nuclear power largely displaces coal-fired generation, although coal remains the largest source of world electricity through 2035."

10) "High construction costs can make the total cost to build and operate renewable generators higher than those for conventional plants. The intermittence of wind and solar, in particular, can further hinder the economic competitiveness of those resources, as they are not operator-controlled and are not necessarily available when they would be of greatest value to the system."

Despite the anti-carbon-based fuel agenda, the EIA analysis, once again, makes clear that carbon-based fuels will continue to energize most of the economy for the foreseeable future.

The problem for U.S. entrepreneurs, businesses, employees and consumers will develop if policymakers try to - or continue to try to - overrule sound economics with misguided politics. Consider, for example, the implications if Mr. Obama's EPA were to succeed in imposing carbon-dioxide caps on the U.S. economy.

Energy costs would skyrocket, as the cost of carbon-based fuels would have to increase to reduce usage, being replaced by far more costly renewable sources. Meanwhile, as cheaper forms of energy are used elsewhere in the world, including China and India, for example, U.S. competitiveness would be diminished dramatically - driving investment, businesses and jobs overseas.

Economic reality is not subject to unrealistic dreaming by politicians. If the U.S. policymakers impose an anti-carbon-based energy agenda, U.S. investment, business and jobs will suffer accordingly.

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

Romney On Target on Energy ... for the Most Part

In his pursuit of the presidency, Mitt Romney has a variety of obstacles to overcome, most notably his own RomneyCare established in Massachusetts being a big government forerunner to ObamaCare at the national level. But on energy policy, Mr. Romney has struck the right tone in his economic plan, for the most part.

On the day he released his agenda, Romney had an op-ed summing things up in USA Today. On energy policy, Romney wrote: "The Obama administration has severely restricted domestic energy production. I will ensure we utilize to the fullest extent our nation's nuclear know-how and immense reserves in oil, gas and coal. By rationalizing and streamlining regulation, we will harness these resources everywhere it can be done safely, taking into account local concerns. A huge number of jobs are at stake. So, too, is the price of energy, which strongly influences economic growth. We are an energy-rich country that, thanks to environmental extremism, has chosen to live like an energy-poor country. That has to end."

Sounds good. What does his energy plan offer specifically? He offers a nine-point agenda:

First, Romney wants to streamline the regulatory process: "Toward that end, all permits and approvals for exploration and development should be issued according to fixed timelines with the availability of fast-track processes. Procedures for issuing permits should be consolidated so that businesses have a one-stop shop for approval of common activities." That, of course, would be a welcome change from the Obama delays and moratoria.

Second, Romney proposes to overhaul outdated laws that "trigger prolonged regulatory scrutiny and years of spurious litigation." This effort would include stopping the EPA's current effort to use the Clean Air Act to impose a costly cap-and-trade system on the U.S. economy. It is declared in the plan: "Romney will work to amend the Act and remove carbon dioxide from its purview." Indeed, the EPA's agenda, including imposing CO2 emission caps, threatens to hike energy costs dramatically, and severely undermine U.S. entrepreneurship, business, competitiveness and jobs.

Third, Mr. Romney proposes updating the inventory of U.S. energy resources. In the plan, it's pointed out: "Surveys and inventories of resource deposits are decades out of date-when they have even been done at all. As a result, we have only a partial picture of the opportunities available to us. A Romney administration will conduct a comprehensive survey of our untapped resources so that policymakers and developers have a full picture from which to work." This is common sense, and the fact that it has not occurred, and is not updated regularly, is a glaring, shameful example of unwarranted influence by radical environmentalists over policymaking.

Along these lines, fourth, the Romney plan would "permit drilling wherever it can be done safely, taking into account local concerns. This includes the Gulf of Mexico, both the Atlantic and Pacific Outer Continental Shelves, Western lands, the Arctic National Wildlife Refuge, and off the Alaska coast. And it includes not only conventional reserves, but more recently discovered shale oil deposits as well." This dramatic shift in policy would be a clear positive for U.S. businesses and consumers in terms of energy prices and reliability, not to mention new business and job creation in the energy sector.

Fifth, the Romney plan calls for working closely with Canada and Mexico to develop energy resources, including "ensuring rapid progress on the Keystone XL Pipeline," and paving "the way for the construction of additional pipelines that can accommodate the expected growth in Canadian supply of oil and natural gas in the coming years." Again, a smart step that would present tremendous benefits for the U.S. economy.

Sixth, the Romney plan notes the enormous recent finds in natural gas in the U.S., the importance of "fracking" to extract those resources, and that "states have carefully and effectively regulated the process for decades." Here is another critical difference compared to current energy policymaking. For example, it is stated in the Romney plan: "While fracking requires regulation just like any other energy-extraction practice, the EPA in a Romney administration will not pursue overly aggressive interventions designed to discourage fracking altogether."

Unfortunately, the Romney plan cannot resist the temptation to spend tax dollars on energy subsidies. Typically, the case for subsidies is dressed up as long term investments, and that is the case in this plan as well.

So, point seven on the Romney energy plan declares: "Government funding should be focused on research and development of new energy technologies and on initial demonstration projects that establish the feasibility of discoveries."

And the final point adds that "the main line of policy should be directed toward technologies that will replace imported oil with domestically produced fuels or electric power," and that funding should come from "non-political sources." Of course, in the end, all spending by government is political, and no sound economic reason exists that government should be involved in subsidizing such speculative ventures. It's nothing more than a waste of taxpayer dollars, as the free market is more than capable of research, inventing and innovating.

In the end, though, especially compared to current policies, the Romney plan would be a dramatic improvement in U.S. energy policy.

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

Pipeline Project: Good for Energy Production, Economy and Small Business

The U.S. State Department recently took a step forward in the approval process for the extension and expansion of TransCanada Corp.’s Keystone XL pipeline.

The 1,300-mile Keystone pipeline transports Canadian sands crude oil from Alberta to Cushing, Oklahoma. TransCanada wants to expand the pipeline’s capacity, and extend it to Gulf Coast.

This project has been under review since 2008. The State Department issued its environment impact statement on August 26, which found that the pipeline would have no significant impact on the environment.

A number of news reports have labeled this project as “controversial.” But in reality, there’s nothing controversial about it. In fact, it’s only a small group of vocal hard-core environmentalists who have ginned up controversy. But these are the groups that oppose any efforts to expand the development and use of fossil fuels.

The State Department still has additional reviews regarding the project’s potential impact on the economy, energy security and foreign policy. A final decision is expected by year end. But with the environmental aspect of the review done, it’s hard to see how the State Department could view this project negatively according to the remaining criteria.

After all, from a foreign policy standpoint, we hardly have a better friend on the world stage than Canada. Indeed, our neighbor to the north is our biggest trading partner.

In addition, in terms of where we import oil from, Canada ranks number one. If we want to boost our energy security, increased imports from Canada can only be a plus.

Finally, the analyses done in terms of this project’s impact on our economy have all been positive. It was pointed out in an API statement, “By 2035, Canada's oil sands alone could generate close to $775 billion in GDP for the U.S. and support 600,000 American jobs, according to the latest report from the Canadian Energy Research Institute.”

API Refining Manager Cindy Schild added, “The nation’s quintessential shovel-ready project is a step closer to reality. That's good news for tens of thousands of Americans who stand to find new jobs when this pipeline project is finally approved. If the State Department gives the final okay, hiring could begin immediately in hundreds of American companies in the Midwest and across the country.”

And this means increased opportunities for small businesses. Consider, for example, that according to the latest Census Bureau data (2008), 98.6% of firms involved in supporting oil and gas operations have fewer than 500 workers, and 83.1% have less than 20 employees.

As for firms in the oil and gas pipeline construction industry, 94.7% have less than 500 employees, and 60.3% have fewer than 20 workers.

In the end, the Keystone XL pipeline project would be a big plus for energy security, the economy, jobs and small business. The State Department should move ahead with its final approval, as this project has been delayed for far too long.

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

House Action on the Keystone Pipeline

Giving the okay to extend and expand TransCanada Corp.'s Keystone XL pipeline should be a no-brainer. After all, do we want to expand the supply of affordable, reliable energy or not?

The 1,300-mile Keystone pipeline transports crude oil from Alberta to Cushing, Oklahoma. TransCanada wants to expand the pipeline's capacity, and extend it to Gulf Coast. This requires approval from the U.S. State Department, which has been dragging its feet.

Keep in mind that approval was first requested three years ago, during the Bush administration, according to the Houston Chronicle. The paper also explained: "The $13 billion project would let up to 1.29 million barrels of oil sands crude flow into Midwest and Gulf Coast refineries - a 700,000 barrel-per-day increase over existing capacity."

The benefits from such a massive investment are clear, including, as estimated by the Canadian Economic Research Institute, a $521 billion boost over 25 years in U.S. GDP and growth in U.S. jobs from 21,000 jobs in 2010 to 465,000 jobs in 2035.

API Executive Vice President Marty Durbin observed: "Adding Canada's oil sands resources to U.S. reserves, North America is now the strongest growing non-OPEC region for oil production. It's puzzling, therefore to see our government urging OPEC to produce more crude and tapping our emergency supply from the Strategic Petroleum Reserve while delaying this critical pipeline."

On July 26, the U.S. House of Representatives approved the North American Made Energy Security (NAMES) Act (H.R. 1938), which would impose a decision deadline on the administration, by a bipartisan vote of 279-147. Forty-seven Democrats joined Republicans in approving the measure, with only three GOPers voting against.

In a press release from the office of U.S. Rep. Terry Lee (R-NE), who sponsored the legislation, it also was noted, "In June, the International Brotherhood of Teamsters, the Laborers' International Union of North America, the International Union of Operating Engineers, and the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the U.S. and Canada wrote a letter urging the passage of the bill."

Approval of the Keystone pipeline expansion makes sense from a U.S. energy perspective, with Republicans, Democrats, business and labor unions in support. It's time for the Obama administration to give approval.

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

Jobs and Affordable Energy

There's a lot of political talk about the need to boost domestic energy production, not to mention a desire for more jobs to be created. Unfortunately, the reality too often points to government policies creating obstacles to, or outright stopping such development. That has been the case, for example, when it comes to oil and natural gas development in the Gulf of Mexico.

Consider the findings from a new study ("United States Gulf of Mexico Oil and Natural Gas Industry Economic Impact Analysis") conducted by Quest Offshore for the American Petroleum Institute (API) and the National Ocean Industries Association.

The study points out that, in 2010, "over 30 percent of the oil and 11 percent of the natural gas produced in the United States was produced in the Gulf of Mexico (GoM)." However, from 2008 to 2010, capital expenditures and operational spending by the oil and natural gas industry in the Gulf fell due to the recession, along with "the establishment of a moratorium on deepwater drilling and subsequent slowdown of permit issuance in both GoM deep and shallow waters in 2010 and into 2011."

The study estimates "the near term potential of the offshore GoM oil and natural gas industry to create jobs, boost GDP and generate tax revenues at all levels of government - if the government pursues a balanced regulatory approach that allows for the timely development of the backlog of GoM projects in an environmentally responsible manner."

If offshore activity returned to the levels before the Obama moratorium, the Quest study points to:

• Total domestic spending levels would rise from the 2010 level of $24.2 billion to $41.4 billion by 2013, a 71 percent increase, and capital expenditures up by 141 percent by 2013 to reach $15.7 billion.

• "Total contribution to U.S. GDP is expected to reach $44.5 billion by 2013, a 70% increase over the 2010 level."

• As for jobs: "In 2013, employment is projected to reach its highest level in the study period at 430 thousand jobs which is a 20 percent increase on the 2012 level and a 77 percent increase over the 2010 level."

API President and CEO Jack Gerard summed up: "The slow pace of Gulf development since the accident has cost jobs, revenue and energy production. The study shows what could be accomplished on jobs if project approvals and permits could get back to a normal pace. We've done the necessary work raising the bar on safety. We cannot continue to delay developing energy and hiring people in the Gulf. The disappointing unemployment numbers from the government last week make this more important than ever."

From a small business perspective, the benefits from getting back to a balanced, pro-development policy stance on offshore drilling would mean a more affordable and reliable energy supply, and increased opportunity for small firms within and those serving the energy sector.

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

Keystone Pipeline: Hollywood vs. Small Business?

Why is Hollywood actor Danny Glover against affordable, reliable energy for small businesses and consumers?

Glover and a variety of activists have announced that they are planning protests at the White House in August against the expansion of TransCanada Corp.’s Keystone XL pipeline.

The 1,300-mile Keystone pipeline transports crude oil from Alberta to Cushing, Oklahoma. TransCanada wants to expand the pipeline’s capacity, and extend it to Gulf Coast. The company’s proposal is before the U.S. State Department for approval.

A study published by the Canadian Economic Research Institute assessed the economic impact of investment in and production from the Canadian oil sands. CERI’s findings include:

• “For every two jobs created in Canada, one job will be created in the US.”

• “Total GDP impact of oil sands investment and operations over a 25-year period is estimated to be $521 billion for the US.”

• “Employment in the United States (direct, indirect, induced) as a result of new oil sands investments is expected to grow from 21,000 jobs in 2010 to 465,000 jobs in 2035.”

• “The states that benefit most from Alberta oil sands industry differ in investment and operation phases of the oil sands projects. States like California, Illinois, Texas, and New York, with big economies and large manufacturing sectors, receive the most benefit from oil sands projects in the investment phase.”

• “States like Illinois, Texas, Wisconsin, Washington, Ohio, Michigan, and Pennsylvania which are closely involved with Canadian oil sands trade, refining, services incidental to refining, and storage or transportation of oil sands – receive the most benefit from the Alberta’s oil sands industry at the operation phase.”

Expanding the Keystone pipeline would be a clear positive for the U.S. Nonetheless, activists will protest, and many believe that the State Department is dragging its feet.

In response, on June 23, the House Energy and Commerce Committee passed legislation by a vote of 33-13 requiring that the State Department reach a decision on the proposal by November 1. Among those voting in favor, by the way, were six Democrats – Reps. John Dingell (MI), Gene Green (TX), Mike Doyle (PN), Mike Ross (AR), Jim Matheson (UT) and John Barrow (GA).

Let’s hope the State Department and Obama administration in general ignore the likes of Danny Glover, and approve a project that will boost U.S. consumers, businesses, growth and jobs.

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

Expanding Domestic Energy Production

The U.S. House of Representatives approved Jobs and Energy Permitting Act (H.R. 2021) by a vote of 253-166 on June 22. This was a vote in favor of domestic energy production, and it deserves approval by the Senate and the signature of President Obama.

The legislation would clarify, streamline and provide certainty for obtaining air quality permits for oil and gas exploration and drilling in the nation's Outer Continental Shelf (OCS).

Specifically, HR 2021 would requite that Environmental Protection Agency (EPA) approve or deny applications for drilling on the OCS within six months. In addition, the bill would remove the EPA's Environmental Appeals Board from the permitting process.

As Reuters reported, "That appeals board scuttled Royal Dutch Shell's plans to drill in the Beaufort Sea this year, when it revoked a key air permit. The board's decision was the latest in a series of setbacks Shell has encountered since it began picking up significant offshore Alaska leases in 2005."

On June 17, Senator Lisa Murkowski (R-AK) announced the introduction of a companion bill in the Senate. Murkowski observed: "We need to end the practice of outside groups using the appeals board to veto offshore energy development in Alaska and elsewhere. The EPA plays an important role in protecting the environment. It must be allowed to fulfill that role without having its decisions second guessed through a flawed appeals process... We have companies that have spent more than five years and billions of dollars attempting to conduct offshore exploration and production in Alaska, but have been unable to secure the necessary permits from EPA. It's clear that this process is not just overly costly and time-consuming, but simply does not work."

According to release from Murkowski's office, the bipartisan Offshore Energy and Jobs Permitting Act "is cosponsored by Sens. James Inhofe, R-OK; John Barrasso, R-WY; Rob Portman, R-OH; John Hoeven, R-ND; John Cornyn, R-TX; Roy Blunt, R-MO; Dan Coats, R-IN; Kay Bailey Hutchison, R-TX; Bob Corker, R-TN; John Thune, R-SD; Richard Lugar, R-IN; Mark Begich, D-AK; and Mary Landrieu, D-LA."

OCS areas like the Chukchi and Beaufort Seas north of Alaska have been estimated by the U.S. Geological Survey to contain up to 27 billion barrels of oil and 132 trillion cubic feet of natural gas.

Unfortunately, the Senate measure faces an uphill climb, and the Obama White House has declared its opposition. Again, the Obama administration continues to push an energy policy agenda that seems specifically designed to raise costs for U.S. consumers and businesses, to make U.S. industry and our economy less competitive, and to diminish domestic energy production and thereby increase reliance on foreign sources of energy.

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

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.

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