There is a revolution occurring in U.S. domestic energy production.
Are the “green jobs” so heavily subsidized by the Obama administration finally coming to fruition? Maybe it is ethanol-based fuels that benefit from huge tax breaks? Is it a solar panel breakthrough from companies like Solyndra that received a half-billion-dollar loan guarantee from the federal government?
You may be surprised to learn that it is none of the above. The revolution in American domestic energy production comes from old-fashioned fossil fuels. That’s right, oil and gas exploration and production is on the upswing here in America. This is despite the “cold war” against fossil fuels.
Just to recap, this administration has hindered exploration in the Gulf of Mexico, set the EPA on a jihad against the industry, championed removal of energy tax incentives that would still be available to non-energy companies, and heavily subsidized alternative energy sources.
Wind and solar power may very well be the answer to America’s energy needs in the coming decades, but for those of us living now, oil and gas are essential to provide for our energy needs for the foreseeable future.
Oil and gas production in the U.S. has risen modestly for the last few years as imports have moderated. More importantly, proven reserves are increasing dramatically, scrambling predictions just a few short years ago of a coming energy shortage.
The U.S. is also benefitting from access to additional reserves from “friendly” sources in Canada, Columbia, Brazil, and Australia to name a few. Our dependence on oil from the Middle East is diminishing at a pace few could have envisioned less than a decade ago.
This surge, not surprisingly, has been driven by free-market forces of supply and demand and innovation. World oil prices averaging $80 per barrel for the last year and $60 for the past five years have made oil and gas extraction feasible in disparate places such as in oil sands in Canada, shale fields in the U.S., and deep-water areas around the world.
Enhanced extraction technologies such as hydraulic fracturing (“fracking”), shooting a mixture of water, sand and chemicals into rock formations to extract more oil and natural gas, and horizontal drilling, allow far more oil and gas to be taken from every well drilled.
As always, federal and state government policies are critical to continuing the growth of domestic energy reserves and production. EPA must not bring new extraction technologies to a halt. The U.S. government should approve a new pipeline from Alberta, Canada, to the Gulf of Mexico to transport synthetic fuel taken from Canadian oil sands.
Jack Gerard, President and CEO of the American Petroleum Institute, notes that a new study estimates that by 2025 access to areas currently off-limits because of government policies could create over 500,000 new jobs, increase tax and royalty payments to the government by $150 billion, and boost domestic production by 4 million barrels of oil equivalent per day.
The “Supercommittee” struggling to reduce the federal deficit over the next 10 years would readily welcome revenue numbers like these to help them reach their goal.
The states also have a key role to play. North Dakota will soon pass California in oil production because of the huge discovery of the Bakken Field, but also because Gov. Jerry Brown’s administration has been slow to issue new drilling permits.
Texas, Louisiana, and Virginia continue to embrace deep-water drilling offshore, but California and Florida do not. Pennsylvania has endorsed new extraction technologies such as fracking to take advantage of their huge shale gas reserves while New York and Maryland have not.
In addition to Pennsylvania, Michigan and Ohio are poised to become major gas producers because of progressive and flexible regulatory environments.
If ideology doesn’t get in the way, U.S. energy independence is an attainable goal. Not surprisingly, market forces, not government-directed investments, are leading the way.
Frank Donatelli is Chairman of GOPAC, the center for educating and electing a new generation of Republican leaders.
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