This interview with Dan Kish, Senior Vice President of the Institute for Energy Research in Washington, DC, reveals that regardless of abundance and necessity, the Obama administration continues to justify new regulations that restrict access to America’s oil and gas reserves.
Larry Bell: Dan, it wasn’t so very long ago, back in June 2010, when President Obama said: “With only 2% of the world’s oil reserves, we can’t just drill our way to lower gas prices…Not when we consume 20% of the world’s oil.” Yet according to government data compiled by the Institute for Energy Research, North America’s land areas contain twice the combined proved oil reserves of all OPEC nations, and enough natural gas to provide for our electricity needs at current usage rates for more than 500 years.
So how has the Obama administration’s energy policy changed since we now appear to have the advantage of that enormous abundance?
Dan Kish: Larry, the policy hasn’t really changed at all. In fact, the U.S. Treasury Department makes it very clear that they now regard oil and gas production as a problem. In each of the annual budget proposals they have sent to Congress, the Treasury Department calls for higher taxes on domestic oil gas and coal. Their remarkable reasoning is that unless taxes are raised, it will encourage the overproduction of oil gas and coal! For suffering motorists and families and businesses struggling to pay their energy bills, this is a cruel policy.
It’s very apparent that the real intent is to make oil and gas more expensive in order to make the heavily subsidized, unreliable and costly ”renewable” energy programs they are pushing more cost-competitive. This is the Tonya Harding approach to energy… break your opponent’s kneecap if you can’t win fair and square.
This blatant playing-field-tipping strategy, where government picks winners and losers, permeates virtually all aspects of the Obama administration’s energy policy. We don’t have an energy problem, Larry. We have a government problem … a government that is deliberately, and by its own admission, striving to make energy much more expensive for American citizens and job-producing industries.
Larry: What tactics are the various agencies applying to implement this policy?
Dan: There are many, and they are distributed among many government agencies. For example, in attacking coal, a new EPA regulation will ban the construction of any new coal plants. Other regulatory rulings being contemplated will effectively close most or all of the existing coal plants in the United States. The U.S. coal industry is already under great economic pressure from abundant and inexpensive natural gas which will continue to replace coal for power and heating. Enormous shale gas resources that are being developed in places like the Barnett in Texas and the Marcellus in Pennsylvania are having a huge impact, but that does not mean our nation, with the largest supplies of coal in the world, should deny ourselves its use and become overly reliant on one energy source that the government could then regulate out of business. That is, in a word, stupid.
Larry: Hydraulic fracturing, or “fracking”, has dramatically changed the economic picture in many regions of the country. While individual states are supposed to have regulatory control over these processes, the EPA and other agencies seem determined to leverage authority on the basis of water safety issues through various regulatory devices. Please comment on this situation.
Dan: Based upon factual evidence that has been accrued over 60 years involving more than one million U.S. wells, this makes no sense. Even former EPA Administrator Lisa Jackson admitted that there’s never been a proven case of groundwater contamination caused by fracking.
Larry, as a Texan and frequent writer on this topic who is familiar with the oil and gas business, I’m sure you know that today’s practices are even much better than those 60 years ago. Yet people in Washington still attempt to conjure up a problem that hasn’t been evidenced in six decades to justify seizures of more powers from local and state governments. Agencies are looking at everything from groundwater pollution to earthquakes risks, trying to figure out a creative new way to squeeze the federal government’s camel nose under the tent of a world-changing energy revolution.
Fracking is largely responsible for a new natural gas miracle. But if the federal government is successful in these power grabs, that miracle will likely end, representing a disastrous loss of economic and job opportunities, not only for the states containing that great resource treasure, but for the entire nation.
The Department of Interior which controls permits for drilling on federal onshore lands and the Outer Continental Shelf (OCS) is also exerting a big influence upon fracking operations. To give you an idea how difficult it is to get federal government land permitting approval versus states, consider the difference in time schedules. Under the Obama administration, the time required for a permit has doubled to 307 days, while in North Dakota, where booming oil shale fracking has effectively wiped out unemployment, permitting currently takes only 10 days.
There should be no wonder that all of the states that regulate permitting are fighting efforts of the government to interfere.
Texas, for example, which has permitted more wells than any other state, has more real knowledge about the geology, hydrology, and impacts of oil and gas development than the federal government will ever gain.
Larry: President Obama made a big pitch during his January 24, 2012 State of the Union Address that oil production was at the highest point in eight years. I’ll bet that you will have some comments to offer on that!
Dan: Yes, that claim certainly deserves some serious scrutiny.
Even though the federal government, between its onshore and offshore lands, owns more acreage than all private and state lands in the U.S. combined, last August the Congressional Research Service found that 96% of the increased production in oil over the last five years came from those private and state lands. Thanks to current government policies, only the very largest companies can survive the bureaucratic and legal hassles of operating on federal lands. Although they belong to taxpayers, regulators behave as if they are the king’s lands and waters, which no one dare touch.
Larry: So all that good news about energy abundance isn’t being received as joyously by the Obama administration and its regulatory bureaucracies as we might have hoped?
Dan: From all available evidence, that doesn’t seem to be the case. The President is quick to take credit for an increase in oil and gas production that is happening everywhere but on his lands, but accepts no responsibility for those areas where he has any control. In those areas the record is abysmal.
Citibank, in its most recent assessment of U.S. energy, concluded that production has already had a major impact on world oil prices, which will be even more profound effect this year. Last year the U.S. increased oil production faster than at any time since the first oil well was drilled in 1859 …. That was prior to the Civil War. Yet while this year’s estimated increase will be larger, chances are that production on government lands will continue to fall. If that isn’t positive proof that the government is holding back U.S. economic growth, then I don’t know what is.
The reality that the Obama administration takes credit for a rise in oil production that runs counter to its energy policy should come as no surprise to anyone. The only surprise is the way the president gets away with so deftly avoiding facts when discussing energy. America is growing energy supplies…but only thanks to private lands, private property, private enterprise and state authority. If Washington gains more control, as it is trying to do, we will see a disastrous reversal in our energy progress and national fortunes.
Larry: Given the fact that the U.S… we Americans… presently owe going on $17 trillion dollars, with deficits accumulating at about $1 trillion more each year, wouldn’t it be logical for federal government leadership to realize that this policy makes absolutely no economic sense?
Dan: Of course it makes no sense! This circumstance not only discourages oil production, but also inhibits the creation and growth of other industries that provide good jobs and generate government revenues. In fact, annual revenue collections for sales and leases, royalties, and rentals on federal government lands are down over $12 billion per year since 2008. And that is just the direct revenue. It doesn’t include revenues from increased economic activity. If the government would just allow further exploration on federally-controlled lands and waters, that would add somewhere between $24 billion to $85 billion more per year.
A recent Louisiana State University and Wharton study conducted for the Institute for Energy Research estimated that simply allowing access to these areas would create between 552,000 and nearly 2 million additional jobs over the next 37 years. It would also generate an estimated $2.7 trillion in additional revenue over that same time period.
More energy, more jobs, more economic growth and more revenue.… All would occur, were it not for government obstruction. A pro-growth approach would spin-off revenues that would dwarf those the government is seeking from increased energy taxes. Yet the present administration always seems to turn to taxes as a solution to chronic economic shortfalls … a failed strategy with exactly opposite consequences.
Larry: Then, with regard to North American oil, there is the huge question regarding whether or not Obama and his State Department will authorize approval of the Keystone XL pipeline. What does your crystal ball have to say about that?
Dan: The whole issue of the Keystone XL pipeline is stunning, because it shows how a few squeaky voices armed only with emotions and devoid of facts, can disrupt vast opportunities for new economic activity.
The U.S. now has over 2 million miles of energy pipelines, which are the safest, most efficient and most environmentally sound way of moving energy from place to place. In fact, the State Department has already undertaken three studies, all of which found that the pipeline could be constructed safely. Still, the president and his State Department, now going into a fourth year since the original permit was applied for, continue to delay a decision regarding whether oil can be transported from Canada by the safest means possible.
This uncertainty is a direct affront to our friend and ally Canada, and one that is beginning to cost them dearly. Their oil market prices have been dropping like a rock due to an inability to export product.
It’s ironic that while Keystone XL opponents state that their chief concern revolves around carbon dioxide emissions from Canadian oil, current Obama administration indecision and stonewalling is likely to drive Canadians to sell that oil to China where their people and industries will burn all they can get. That certainly isn’t going to help reduce global carbon emissions, if that indeed truly matters.
What really does matter, however, is that at least 20,000 American “shovel-ready jobs” that the president has been talking about, are riding on that Keystone decision. It also matters that those additional supplies of oil would displace purchases of imports from the Middle East and Venezuela.
I have never heard the term “ no-brainer” used so often in reference to an energy project as in the case of the Keystone XL pipeline. To hesitate over a decision to increase our national security, our employment, our national wealth, and relations with our closest ally, is totally inexplicable. It represents a profound and unacceptable failure of U.S. leadership.
Larry: Well Dan, there we are. First we were told that America faced a national security crisis because we depended upon imports oil from unstable countries headed by despots who hate us and our way of life. Now, those same leaders seem ready to turn down an opportunity to obtain that resource from our closest neighboring ally so that they might be inclined not to like us very much either.
While initial Obama administration energy policies were premised upon a supply shortage, now that the scarcity scenario has changed to abundance, its policy is now bent upon reducing supply. This is being accomplished by federal overreach that attempts to preempt state and private land rights; permitting complexities , delays and uncertainties on federal lands which discourage enterprise; an unending assault of new regulatory restrictions; and punitive taxes on fossil industries penalties which raise fuel and electricity costs for everyone, including those who can least afford the added burdens. Meanwhile, government has less revenue due to lost business and employment opportunities, forcing them to tax even more.
Does this pretty much sum up the picture?
Dan: Yes. That’s how it looks.
Larry: So then, what do we really have to worry about?
Dan Kish has more than 25 years of legislative and policy experience on Capitol Hill. He has been directly involved in all major energy issues before the Congress, including the comprehensive Energy Policy Acts of 1992 and 2005. Dan served for six years as the Chief of Staff on the Resources Committee of the U.S. House of Representatives, and in senior energy policy positions in both House and Senate committees, including co-directing the Speaker’s Task Force on Affordable Natural Gas.
Reprinted with permission from Forbes online, March 3, 2013.