Institute for Energy Research Founder and CEO Robert Bradley published an op-ed this week on Forbes.com. The text of the op-ed follows:
Federal Lands Deserve an Energy Boom Too
By Robert Bradley Jr.
July 21, 2014
Newly-confirmed head of the Office of Management and Budget, Shaun Donovan, has pledged to reduce the half-trillion dollar annual federal deficit without sacrificing what is seen as important investments. His goal isn’t as farfetched as many in Washington believe if you consider the revenue side.
But don’t think taxes; think about the federal government’s most prized asset, oil and gas in the public domain.
In the last few years, domestic oil and gas have driven job creation and economic growth. But while oil and gas development on state and private lands has grown remarkably, production on federal lands (including offshore) has actually fallen. By refusing to develop these assets, leaders in Washington are ignoring an historic opportunity to strengthen our economy and shrink the federal budget gap.
By not painlessly reducing the debt, the Administration is leaving debt whose interest payments add to deficit. American consumers need oil and gas, and the same qua taxpayers desire fiscal prudence. Obama gets a failing grade on both with static, even regressive, policy.
Few could have anticipated our nation’s current energy revolution. Before the widespread adoption of new drilling techniques like hydraulic fracturing, domestic petroleum production had been in decline for more than twenty years. In less than ten years, however, the United States has become the world’s leading producer of petroleum and natural gas, besting energy-rich countries like Saudi Arabia and Russia.
Not surprisingly, the energy sector is now a significant source of economic growth. According to a recent White House report, in 2012 and again in 2013, increases in oil and gas production added more than 0.2 percentage points to the nation’s economic growth rate.
The real benefits to average Americans have been even more dramatic. In 2012, the newly-vibrant oil and gas industry supported more than two million jobs. And by next year, advances in oil and gas exploration are expected to raise the average household income by more than $2,000.
As the Obama Administration recently noted, the “historic transformation” of the energy sector “has provided key support to the recovery from the Great Recession.” But while the president is quick to extol the benefits of domestic oil and gas development, his administration has made sure that federal lands and offshore areas remain insulated from the energy boom.
In fiscal year 2013, for instance, crude oil production on state and private lands rose by 21 percent. Natural gas production jumped by three percent. In the same year, however, federal lands and offshore areas saw oil production increase by only one percent and drop by one percent, respectively, while natural gas extraction was down by 10 percent.
These declines are due, in part, to the inefficient approval process for drilling on federal lands — an administrative bottleneck that, today, amounts to a prohibition on energy exploration in these areas. Between 2006 and 2011, for instance, the waiting time for a drilling permit, or APD, rose by 41 percent.
According to a new report from the Department of the Interior’s inspector general, there is now a backlog of 3,500 applications for drilling on federal lands. “Target dates for completion of individual APDs are rarely set and enforced,” the inspector general writes, “and consequently, the review may continue indefinitely.”
As permit applications languish, valuable energy resources continue to go undeveloped. Consider the 1.76 billion-acre Outer Continental Shelf (OCS). This federally-owned offshore area contains an estimated 86 billion barrels of recoverable oil, and another 420 trillion cubic feet of natural gas according to the Bureau of Ocean Energy Management. And yet, 97 percent of this offshore area hasn’t been leased for energy production.
The federal government is missing an historic opportunity to bolster the economy and create jobs. According to an analysis of federal data by my own organization, the Institute for Energy Research, expanding the amount of federal land available to oil and gas exploration would increase GDP by $127 billion over the next seven years.
Expanding energy exploration on federal lands could also play a pivotal role in addressing the nation’s budget deficit. Over thirty years, new drilling projects could generate $99 billion in annual government revenue. And as entitlement and healthcare spending continues to strain federal finances in the coming years, lawmakers could even choose to privatize some of the underlying energy assets on federal lands, boosting revenue even further.
At a time when lawmakers either are or will cut real services red meat from everything from defense spending to medical research funding in the name of deficit reduction, it’s high time to liberate federal-land subsoil wealth for government revenue. After all, the federal domain belongs to taxpayers.
It is a modest, noncontroversial call for public policy to liberate the public domain. Just watch–future years may well bring calls for privatization to tame the budget deficit. Perhaps the mineral income streams from federal onshore and offshore lands will be privatized by a one-time sale. Or privatization could encompass the sale of public lands, with the surface area going to the high bidder (an environmental group?) and subsoil rights to the high bidder (development companies).
For now, the answer is easy. Washington leaders need to put locked-up resources into play to improve the economy and help put the fiscal house in order.
To read the op-ed on Forbes.com, click here.
