WASHINGTON D.C. — The Obama administration released today a draft of new Interior Department regulations regarding hydraulic fracturing that are designed to impose yet another layer of bureaucratic obstruction to full-scale development of America’s oil and natural gas resources. Additionally, the administration released a plan to close public lands in Western states to oil shale development, effectively limiting access to a region that contain more than 1.5 trillion barrels of recoverable oil.

IER President Thomas Pyle released the following statement in response to the administration’s actions:

“The new rules appear to run counter to President Obama’s recent State of the Union address, in which he pledged to “take every possible action” to increase production on public lands. The damaging effects that these new rules will have on job creation and robust domestic energy development cannot be overstated.

On the one hand, the administration wants to take credit for increased production on state and private lands and for offshore lease sales that were scheduled five years ago. On the other hand, the administration continues an ideologically-driven quest to stifle job creation in the energy sector and to raise the cost of energy through more regulation, more mandates, and more restrictions on affordable sources. At best, this administration is suffering from acute energy schizophrenia. At worst, the administration is using brute administrative force to hurt the oil and gas industries and reward its green energy cronies.

“It is hard to believe the administration’s rhetoric about greater energy independence when its every action continues to lead America further away from that goal. And with record job creation now happening in the traditional energy sector, this latest tranche of regulations demonstrates just how willing the President is to kill the goose that’s laying the golden egg.”

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A recent WSJ article reports on the new trend:

Big Oil is redrawing the energy map.

For decades, its main stomping grounds were in the developing world—exotic locales like the Persian Gulf and the desert sands of North Africa, the Niger Delta and the Caspian Sea. But in recent years, that geographical focus has undergone a radical change. Western energy giants are increasingly hunting for supplies in rich, developed countries—a shift that could have profound implications for the industry, global politics and consumers.

Driving the change is the boom in unconventionals—the tough kinds of hydrocarbons like shale gas and oil sands that were once considered too difficult and expensive to extract and are now being exploited on an unprecedented scale from Australia to Canada.

At this point, some readers may hang their heads in disappointment. “Aww, too bad,” they might think. “It looks like Australia and Canada are doing well for themselves, but the U.S. is still in a crisis.”

Yet hold on. The WSJ article continues:

The U.S. is at the forefront of the unconventionals revolution. By 2020, shale sources will make up about a third of total U.S. oil and gas production, according to PFC Energy, a Washington-based consultancy. By that time, the U.S. will be the top global oil and gas producer, surpassing Russia and Saudi Arabia, PFC predicts. [Bold added.]

This prediction might shock some readers, who have bought into the myth that the U.S. is an energy-starved country. Yet right now the U.S. is the third-largest oil producer in the world, behind Russia and Saudi Arabia. The reason we still import so much oil is that the U.S. is (by far) the largest consumer of oil. This isn’t a reason to fret, incidentally; it reflects our high standard of living, and the fact that Americans are much more dispersed geographically than, say, the Europeans.

IER’s new report on the fossil fuel inventory of North America shows that the new technological advances in unconventional extraction will soon make this continent the breadbasket to the world of energy supplies. Here are just some highlights of the new report:

• The government’s own reports show that the United States’ combined recoverable oil, natural gas, and coal endowment is the largest on Earth.

• The amount of oil that is technically recoverable in the United States is more than 1.4 trillion barrels. Total recoverable oil in North America exceeds 1.7 trillion barrels. (That is more than the world has used since the first oil well was drilled over 150 years ago in Titusville, Pennsylvania.) To put this in context, Saudi Arabia has about 260 billion barrels of oil in proved reserves. For comparative purposes, the technically recoverable oil in North America could fuel the present needs in the United States (seven billion barrels per year) for around 250 years.

• The government estimates that the United States has 272.5 trillion cubic feet of proved reserves of natural gas. The total amount of natural gas that is recoverable in North America is approximately 4.2 quadrillion (4,244 trillion) cubic feet, enough (at current rates of consumption) to last the United States for over 175 years.

• North American recoverable coal could provide enough electricity for the United States for about 500 years at current levels of consumption.

This energy abundance is hardly the image most Americans have been presented in their schooling and through watching the mainstream media. Instead they have been taught the “fact” that the United States is an energy hog, gobbling up dwindling resources and pushing the planet to the edge of catastrophe.

The new inventory report shows just how wrong this common view is. Looking just at the United States but especially if we include our neighbors to the north and south, there are literally centuries’ worth of fossil fuel resources right here at home.

Conclusion

There is nothing wrong with importing oil or other goods from foreign countries. Economically, it is most efficient for countries to specialize in their “comparative advantage” and trade with each other to maximize per capita living standards of all people.

Yet many alarmists are claiming that the U.S. government must intervene in energy markets in order to wean Americans from their alleged “addiction” to fossil fuels. The new inventory report shows just how foolish and unnecessary this government intervention is. There is plenty of accessible energy even within this continent, if only the government would get out of the way and let private businesses do their jobs.

New oil finds in Colorado should produce about $50 million per year in severance taxes to state and local governments, with more revenues being generated through property and sales taxes.  New drilling jobs would be generated through 2012, and for each drilling job, an estimated 3.3 jobs in related industries such as pipeline construction and trucking would be created.  And these are not low-paying jobs either.  In fact, oil and gas jobs in Colorado pay an average of $103,000, including benefits.[ii]

Colorado’s Oil and Natural Gas Boom

Shale discoveries on non-federal lands are beginning to fundamentally transform America’s energy outlook in ways thought inconceivable just a few short years ago.  In Colorado, these oil and natural gas resources are locked in a shale formation called the Niobrara, which is a 90-million-year-old oil bed that has become economic due to hydraulic fracturing and horizontal drilling technology.[iii]  Some experts predict that the Niobrara shale could have greater potential than the Eagle Ford Shale in Texas, where drilling is rapidly expanding.  The potential  exists for Niobrara to mirror the Bakken Shale in North Dakota as a major oil field.

Image credit: http://en.wikipedia.org/wiki/File:GasWellDenverBasinCO.jpg

Anadarko, the company drilling in the Wattenberg field in the Niobrara, has drilled 11 horizontal wells so far to test the field’s potential. Initial production from one well showed high rates of 1,100 barrels of oil and 2.4 million cubic feet of natural gas per day. By the end of this year, Anadarko will have about 40 horizontal wells drilled in the Wattenberg field, and the company is planning to drill 160 wells next year. Ultimately, Anadarko estimates that it will drill between 1,200 and 2,700 horizontal wells in the Wattenberg field.[iv]

The Wattenberg field is expected to yield 1 to 2 billion barrels of oil equivalent composed of 70 percent oil and 30 percent natural gas.  Finding a billion barrel field is extremely rare, and only a few such fields have ever been found in the United States. The Wattenberg field, discovered in 1970, is one of the 20 largest oil and gas fields in the United States.[v]  Anadarko holds 350,000 acres in the Wattenberg field and estimates a potential output of 55 million barrels per year.[vi]

That level of production has caught the eye of other oil companies (e.g. Conoco Philips) that are now obtaining lease holdings in the Niobrara with hopes to gain some of the benefits that Anadarko has found. In the end, crude production in the Niobrara could increase to about 286,000 barrels a day by 2020, according to The Western Energy Alliance.[vii]

Conclusion

Technology and American ingenuity have again found energy that is economic in today’s markets, providing good-paying jobs and more government revenues in the meantime. American energy resources are vast, but U.S. companies need access to them. Studies have shown that the United States could be almost free of overseas oil if the U.S. government would re-open development on federal lands and waters and allow greater access to Canadian resources.[viii]  Why should we pour millions into green energy when American entrepreneurship can provide domestic resources that are secure, abundant, and economic?

FOR IMMEDIATE RELEASE
September 22, 2008
CONTACT
Brian Kennedy (202) 346-8826

IER Continues Energy Education Ad Campaign:
Only 9 More Days Until Congressional Bans on Offshore and Oil Shale Energy Expire

Washington, DC – The Institute for Energy Research (IER) continues its energy education ad campaign this week with two new radio spots, “Same Failed Policies” and “Drill More, Tax Less.”  Building on its August print and radio education campaign, IER’s new ads  will run starting today in Alaska, Georgia, South Dakota, Louisiana and Tennessee.  IER president Thomas Pyle issued the following statement:

“The continuation of our energy education campaign reminds Americans about one critical energy fact – as taxpayers, they own the federal lands and the energy resources that lie beneath them.  As such, Americans should be asking themselves why they are being subjected to an energy embargo from Washington.  By banning energy production on federal lands for the last few decades, American supplies have been restricted, contributing greatly to the energy crunch American consumers are enduring today.”

“Unfortunately, policymakers seem incapable of grasping that simple supply and demand equation.  Federal lands and their energy resources don’t belong to the government – they belong to the people.  Lifting the  bans on domestic energy production will put taxpayer-owned energy resources to work for us for a change. Our families and our economy need more American energy, not less.”

Text of the “Same Failed Policies” ad follows, and it can be heard by clicking here:

With rising gas and home heating costs – you would think that our leaders would want to help our families who are struggling to make ends meet.  But as usual – Washington has it backwards.  Some lawmakers are pushing more of the same failed policies that have led to record high energy prices.

While most Americans are calling for expanding exploration, some Washington leaders want to permanently ban exploration on most of our energy rich off-shore locations.  There is a better way to improve our lagging economy and put America back on its feet.

Opening up ALL of our taxpayer-owned offshore oil resources will make us less dependent on foreign imports from unstable nations, help grow our economy, and most importantly assist in making gas and home heating bills affordable again for American families.

A sound energy policy is one that allows for more energy, not LESS.

Text of “Drill Now, Tax Less” ad follows, and it can be heard by clicking here:

America’s energy problem is hurting our families.  With prices at the pump near historic highs, Washington is doing little to reduce our reliance on imports from unstable regions like Venezuela, Nigeria and the Middle East.

Instead of solving our energy problems, some leaders in Washington are actually trying to raise taxes on domestic energy production.  Raising energy taxes would cost America more than 600,000 jobs and do virtually nothing to decrease our reliance on foreign oil from unstable nations.

Washington needs to open our taxpayer owned land for exploration and production, but some policymakers want to permanently lock up nearly all of our energy-rich outer continental shelf.  Permanent bans on drilling and increased energy taxes mean higher energy costs for our families.

We need new American energy and lower prices, not increased taxes and empty promises on drilling.

The Institute for Energy Research (IER) is a not-for-profit public foundation that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets.  Founded in 1989, IER is funded entirely by tax deductible contributions from individuals, foundations and corporations. No financial support is sought or accepted from government (taxpayers).

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www.InstituteforEnergyResearch.org

The Top Five Steps Your Federal Government Can Take to Increase Supplies and Lower Prices:

1. Lift the Presidential and Congressional moratoria on deepwater outer-continental shelf (OCS) energy exploration and production. The US is the only developed country in the world that restricts access to its offshore resources. Currently, 97% of America’s 2 billion acres of OCS are not being used for their energy potential. The U.S. Minerals Management Service (MMS) estimates that the outer continental shelf contains nearly 86 billion barrels of oil and 420 trillion cubic feet of natural gas. (The U.S. consumes roughly 7.5 billion barrels of oil and 23 trillion cubic feet of natural gas annually)  The MMS estimates are conservative due to the fact that “true knowledge of the actual volume of oil and natural gas resources can only come through the drilling of wells,” and in many places in the US, exploratory wells have not been allowed to be drilled. Simply put, the government does not know exactly how much energy lies beneath the OCS because it has been illegal to look.According to MMS, it has been more than twenty years since any exploration activity has been conducted on the Alaska and Atlantic OCS, and “no meaningful” exploration offshore Central and Northern California, offshore Oregon and Washington and the South Florida Basin, has been conducted since the 1960’s.
   
   
2. Repeal the Congressional prohibition precluding the production of oil shale leases on taxpayer-owned federal lands.As part of the Energy Policy Act of 2005, Congress directed the U.S. Secretary of Interior to develop a program to enable the production of America’s oil shale resources – the largest oil supply in the world – for American consumers.The United States has 2 trillion barrels of oil shale. This is more than 7 the amount of crude oil reserves found in Saudi Arabia, and is enough to meet current U.S. demand for over 250 years. According to the U.S Department of Energy (DOE):
   
   “Once developed, U.S. oil shale resources will be similar in extent and energy potential to Alberta’s tar sand reserves. When oil shale and tar sands are considered together, the United States and Canada will be able to claim the largest oil reserves in the world.”However, in 2007, Congress adopted a rider that prohibited the Department of Interior from completing the task it was assigned in 2005. Consequently, the United States is still without a program to bring this massive resource to market for American consumers.
3. Open the “1002 Area” of the Arctic National Wildlife Refuge (ANWR) for oil and natural gas development. In 1980, President Jimmy Carter and the Congress set aside 1.5 million of ANWR’s 19 million acres for potential oil development, subject to Congressional approval. This area is often called the “1002 Area” because it was set aside in Section 1002 of the law. It is located on Alaska’s Northern Coastal Plain. According to U.S. government estimates, the mean estimate of the oil beneath ANWR’s northern coastal plain is 10.4 billion barrels, or, nearly half of the total proven reserves of the entire United States. At peak production, ANWR could produce approximately 1 million barrels of oil per day, which is roughly equal to the amount the entire state of Texas produces each day, and about as much as we currently import from Nigeria. Moreover, the Congressional Research Service (CRS) recently estimated that ANWR energy production would generate about $180 billion in federal tax and royalty revenue.If approved by Congress, ANWR would be the single largest producing oil field in America and the entire Northern Hemisphere.
4. Appoint the U.S. Commission on North American Energy Freedom as mandated by the Energy Policy Act of 2005 (Sections 1421-1424). As part of the federal government’s national energy policy, Congress established the 16-member Commission on North American Energy Security, and directed the President to appoint representatives from the United States. The President has failed to do so. North America’s energy resource base is enormous. It includes the world’s largest oil shale deposits, the world’s largest coal deposits, and the world’s largest oil sands reserves. Combined, these resources are sufficient to power North America for centuries, giving us plenty of time to transition to new energy sources as they become affordable. Meanwhile, all of North America would benefit from more indigenous energy production. A coordinated effort between the United States, Canada and Mexico – as envisioned by the law – would facilitate the development of a comprehensive North American energy policy that seeks to achieve energy self-sufficiency by 2025 within the three contiguous North American nation areas of Canada, Mexico, and the United States.
   
   
5. Repeal Section 526 of the Energy Independence and Security Act of 2007 which prohibits federal contracting for “nonconventional” sources of petroleum. Section 526 of the Energy Independence and Security Act of 2007 prohibited U.S. federal agencies from contracting to procure non-conventional or alternative fuels that may emit higher levels of greenhouse gas emissions than ‘conventional petroleum sources.’ Investment in non-conventional fuels will play a critical role in reducing America’s dependence on foreign sources of energy. Advanced fuel technologies, including coal-to-liquids, natural gas-to-liquids, fuel from oil shale, an fuel from Canadian tar sands are specifically targeted by Section 526. Strategically, Section 526 was especially unwise, given America’s massive coal and oil shale resources, and the fact that Canada is America’s largest supplier of imported oil. Arbitrarily preventing the U.S. Government from procuring advanced non-conventional fuels could have negative impacts on the military, and therefore, our security. In the event of a national emergency, the U.S. military could be forced to obtain a greater percentage of petroleum from unstable regions of the world.