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May 29, 2014

ICYMI: U.S. Has Surplus of Energy Resources

May 29, 2014
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Institute for Energy Research President Thomas Pyle recently published an op-ed with the Washington Examiner titled “U.S. has surplus of energy resources”. Below is the text of the op-ed:

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The Washington Examiner
“U.S. has surplus of energy resources”
By Thomas Pyle

Americans have been led to believe that the United States has limited energy resources. But the reality is that the U.S. has the world’s largest combined natural gasoil and coal resources. In fact, we are currently the world’s largest natural gas producer — and by next year, we will be the world’s largest oil producer.

Not only do we have vast energy resources, but also energy production is booming. Over the last five years, domestic oil production increased 53 percent, and natural gas production increased 15 percent. These increases reversed nearly 40 years of declining production.

If we have such vast energy resources, why has it taken 40 years to reverse course? The reason is simple. The United States does not lack for energy resources — it lacks for policies that allow those resources to be developed.

For 40 years, U.S. energy policy has been predicated on a belief that we either did not have enough energy resources or that those resources would soon run out. For example, in 1971, even before the Arab oil embargo, President Richard Nixon imposed price controls on oil. Similarly, during his “Sweater Speech” in 1977, President Jimmy Carter said that America had to “balance our energy with our rapidly shrinking resources.”

Not only did many people buy the theory of peak oil, but also a belief started to grow that energy production and use was irresponsible. During the cold-fusion craze in the 1980s, ecological doomsayer Paul Ehrlich said that abundant and cheap energy would be “like giving a machine gun to an idiot child.”

Sadly, many people, including the Obama administration, subscribe to Ehrlich’s position that giving Americans access to abundant, inexpensive energy would somehow be harmful to humanity. Hence, the administration treats us like Erlich’s idiot child and limits our access to energy resources.

For example, although much of America’s vast natural gas, oil and coal resources are found on federal lands, the Obama administration limits energy production on these lands. Since 2009, oil production on federal lands has fallen by 6 percent, while oil production on non-federal lands has increased by 61 percent. Likewise, natural gas production on federal lands decreased by 28 percent between fiscal year 2009 and fiscal year 2013, while natural gas production on non-federal lands increased by 33 percent.

One reason for this decline is that the federal government imposes onerous requirements for companies producing natural gas and oil on federal lands. The average time it takes the Obama administration to process a permit to drill has increased 18 percent to 242 days, compared to 205 days during the George W. Bush administration.

The Obama administration and the Bush administration are laggards when it comes to processing permits. While it took more than 200 days for both administrations to process a permit to drill, it takes North Dakota less than 30 days and Texas less than a week.

The Obama administration has also put the clamps on the number of permits issued. The average number of onshore leases issued by the Bureau of Land Management is currently more than 50 percent less than the average number issued by the Clinton administration and more than a third less than those issued by the Bush administration.

On federal lands, not only are fewer permits being issued, but the federal government leases very few areas for energy resources. Obama refuses to lease areas offshore in the Atlantic, the eastern Gulf of Mexico or off the coast of California, and allows very limited development off theAlaskan coast. As a result, only 3 percent of the federal estate is leased for energy production.

So what would happen if Americans had access to the energy resources on federal lands? The Institute for Energy Research, of which I’m president, commissioned a study last year to find out. It turns out that if we opened the federal lands that are currently closed for energy development, it would lead to an increase in GDP of $127 billion over the next seven years and a cumulative $14 trillion increase over the next 40 years. More than 500,000 jobs would be created each of the next seven years, and wages would increase by $32 billion during the same period.

A few years ago, if we had made these claims, people would have laughed us out of the room. After all, everyone knew that natural gas and oil production was falling, and interest groups like the corn lobby and the peak oilers were clamoring for a switch to renewable fuels like ethanoland lobbying for building facilities to import natural gas. However, no one counted on high-tech innovation in the oil and gas sector to revolutionize energy production in the United States.

American oil and natural gas companies brought about this revolution by combining hydraulic fracturing with horizontal drilling and subsurface imaging technologies. Learning how to combine these technologies in innovative ways occurred on private and state lands because of the excessive red tape required to drill on federal lands.

The result is that millions of gallons of oil are produced every day from areas that had bleak production prospects only a few years ago. The best example of this high-tech production is North Dakota.

Today, North Dakota produces nearly one million barrels of oil a day. This is a 400 percent increase over the last five years. Furthermore, this massive increase has driven down unemployment in North Dakota to a measly 2.6 percent — the best in the country. By contrast, the national unemployment rate is 6.7 percent.

North Dakota is also leading the nation in personal income growth. According to the Bureau of Economic Analysis, average personal income growth in the U.S. slowed to 2.6 percent in 2013, while in North Dakota, personal income grew by 7.6 percent.

Actually, the oil boom is creating jobs in North Dakota and beyond. The number of new jobs in the oil and gas industry increased by about 270,000 between 2003 and 2012 — an increase of around 92 percent — while the number of new jobs in the economy as a whole only increased by 3 percent over the same period.

According to the Energy Information Administration, all of this new domestic oil production is helping to stabilize world oil prices. Because more oil is produced in stable countries like the U.S. and Canada, the world has more spare capacity to mitigate impacts when trouble develops in other oil producing regions.

Natural gas and oil production technologies have improved greatly during the past several decades. These high-tech innovations have allowed energy producers to thrive on state and private lands, catapulting the U.S. into an oil and natural gas powerhouse. And yet, there is still much more that we could do to unleash America’s massive energy potential.

For starters, our government must get out of its 1970s-era mindset and reverse decades-old policies that restrict ability to produce and export our vast energy resources. We must also continue to push back against the outright hostility of the Obama administration against natural gas and oil production on federal lands. Finally, states must resist federal efforts to override their regulation and control of natural gas and oil production on private and state lands.

Ironically, no president in history has benefitted more from the production of our vast energy resources than Barack Obama. The energy industry has been the one bright spot in this protracted recession. Imagine how much better off America’s economy would be if our president would embrace the current oil and gas boom instead of standing squarely in the way.

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