The Obama administration is dragging its feet regarding oil drilling in areas previously under moratoria. Because of high gasoline prices during the summer of 2008, the Bush administration reversed the Executive Order prohibiting offshore drilling in areas under moratoria, and Congress let the ban against such drilling expire. The Bush administration then set its Department of Interior to fast-track such drilling, by speeding up the process that allows the areas to be leased. However, Obama’s Department of Interior, led by Secretary Ken Salazar, slowed the process to the point that none of those potential sources are currently being leased, nor is there a firm future date when these leases might be expected for purchase.
So, what is this doing to the U.S. economy, potential future jobs, and energy prices? The National Association of Regulatory Utility Commissioners (NARUC) has just released a study that looks at what these additional oil and natural gas resources would accomplish in those areas.[i] NARUC commissioned Science Applications International Corp. (a consulting and modeling company) and the Gas Technology Institute (a natural gas consulting group) to perform the study.[ii] Although the study was sponsored by electric utilities and oil and natural gas companies,[iii] its reviewers included administration officials in the Department of Energy, the Energy Information Administration, the Federal Energy Regulatory Commission, and the Bureau of Land Management.[iv]
What Did the Study Find?
If the Federal government never allows access to the lands previously under moratoria, the study projects, there will be fewer jobs, lower economic output, higher energy prices, more oil and natural gas imports, and larger outlays to the Organization of Petroleum Exporters (OPEC). Gross Domestic Product (GDP) will be $2.36 trillion less between 2009 and 2030, the study’s time horizon. That amounts to an average decrease of 0.52 percent annually in GDP.[v] Employment in energy intensive industries is projected to be almost 13 million jobs lower,[vi] at a time when we desperately need jobs in the United States to spur economic growth and consumer spending.
Average annual energy prices for our critical fuels are expected to be higher: natural gas by 17 percent, electricity by 5 percent, and motor gasoline by 3 percent.[vii] Owing to lower average crude oil production (by almost 15 percent annually) and average natural gas production (by about 9 percent annually), imports of these fuels would have to be higher. Oil imports from OPEC are projected to be 4.1 billion barrels higher, an average annual increase of nearly 19 percent, resulting in increased cumulative payments to OPEC of $607 billion. Natural gas imports are projected to be 15.7 trillion cubic feet higher, an average annual increase of almost 75 percent.[viii] All these cost increases result in increased cumulative energy costs to consumers of $2.35 trillion ($3,700 per person), an average annual increase of 5 percent.[ix]
How Did the Study Reach Its Conclusions?
If the lands previously under moratoria were allowed to be leased, the offshore oil resource base would increase by 37 billion barrels and the onshore oil resource base would increase by 6 billion barrels, the latter entirely in the Arctic National Wildlife Refuge in Alaska. For natural gas, the resource base would be 132 trillion cubic feet higher for onshore resources and 154 trillion cubic feet higher for offshore resources.[x] These resources were added to the resource base assumed in the 2009 Annual Energy Outlook version[xi] of the National Energy Modeling System[xii] maintained by the Energy Information Administration, an independent agency of the U.S. Department of Energy. As a result of this calculation, the natural gas resource based was increased from 1748 trillion cubic feet to 2034 trillion cubic feet, and the oil resource base was increased from 186 billion barrels of oil to 229 billion barrels of oil.[xiii] The consultants then projected impacts using the difference between the two scenarios modeled—one with the increased resource base numbers and one without them.
How Much Oil and Gas Do These Resource Numbers Represent?
The U.S. consumed 6.8 billion barrels of oil in 2009[xiv] and 23.2 trillion cubic feet of natural gas in 2008[xv] (the last year of complete data). The 43 billion barrels of oil would add over 6 years of consumption, assuming all the oil consumed is produced domestically, and almost 17 additional years of consumption if we continue importing oil at current levels. The 286 trillion cubic feet of natural gas would provide more than 12 additional years of consumption, assuming no imports of natural gas, and almost 15 years if we continue importing at current levels.
What Is the Obama Administration Doing?
The Obama administration is looking to green energy to stimulate our economy and increase jobs. So far, even though the Obama administration—with Congressional approval—has poured millions of stimulus dollars into green energy, we are no closer to solving our unemployment problems. That’s because the largest employment component of green jobs is in the manufacture of the component parts of the green technologies,[xvi] and these jobs are largely going offshore, where labor costs are lower. The American Wind Energy Association reported that the U.S. wind industry had gained about 2,000 installation and maintenance jobs in 2009 by constructing and maintaining a record addition of almost 10,000 megawatts of new capacity.[xvii] But wind power manufacturing lost just as many jobs to offshore developers.[xviii] Further, a recent study by the Investigative Reporting Workshop of American University has found that almost 80 percent of the stimulus funds awarded to renewable energy technologies have gone to foreign firms.[xix]
Also, the Department of Interior, led by Ken Salazar, has slowed the progress made by the Bush administration in accelerating oil leases on lands previously under moratoria. Less than a month after taking office, the Obama administration decided that they needed 6 additional months to hear from the American people on this issue,[xx] even though the Bush administration had already solicited comments.
In December of 2009, newly elected Virginia Gov. Bob McDonnell wrote a letter to Interior Secretary Ken Salazar urging him not to obstruct offshore drilling projects. McDonnell was planning on future income for his state in the form of taxes that it would receive from oil and gas companies drilling off its shore. The Bush administration’s offshore plan called for leasing 3 million acres about 50 miles from the Virginia shoreline in November 2011. But the Minerals Management Survey of the U.S. Interior Department recently announced its plan to wait until at least 2012 to issue any oil and gas drilling leases off the Virginia coast, claiming that more time was needed to evaluate what environmental impact offshore drilling would have.[xxi]
The American public indicated their support for offshore drilling back in 2008 when oil and gasoline prices were very high,[xxii] and rece
ntly reconfirmed it.[xxiii] They recognize that energy is important not only to our daily lives, but also to our economic growth. The Obama administration, however, wants to rely on green energy, which studies have shown are not contributing much to employment in the United States. Following through with leasing areas under moratoria could result in nearly 13 million jobs between now and 2030, while keeping our energy costs here in the U.S. lower, and providing OPEC with fewer U.S. dollars. The decision appears to be a “no brainer.”
[ii] Greenwire, OIL AND GAS: Federal production curbs taking big bite out of economy – study, February 15, 2010, http://www.eenews.net/Greenwire/2010/02/15/archive/8?terms=AND+GAS%3A+Federal+production+curbs+taking+big+bite+out+of+economy+%E2%80%93+study%2C+
[iii]In addition to NARUC, the study was also sponsored by several other large companies, including the American Chemistry Council, the American Gas Association, the American Petroleum Institute, BP America Production, Shell Exploration and Production Co., the Edison Electric Institute, and the National Petrochemical and Refiners Association.
[iv] The Wall Street Journal, Regulators' Report Warns Of Econ Harm From US Oil Ban, February15, 2010, http://online.wsj.com/article/BT-CO-20100215-706458.html?mod=WSJ_latestheadlines
[vi] Consumer Energy Alliance, NEW STUDY REVEALS ECONOMIC CONSEQUENCES OF PRESERVING STATUS QUO ON ENERGY, February 15, 2010, http://consumerenergyalliance.org/2010/02/cea-new-study-reveals-economic-consequences-of-continued-inaction-on-american-energy-exploration/
[xi] Energy Information Administration, Assumptions to the Annual Energy Outlook 2009, http://www.eia.doe.gov/oiaf/aeo/assumption/oil_gas.html
[xii] Energy Information Administration, National Energy Modeling System: An Overview 2009, http://www.eia.doe.gov/oiaf/aeo/overview/index.html
[xiv] Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec3_3.pdf
[xv] Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec4_3.pdf
[xvii] American Wind Energy Association, http://www.awea.org/newsroom/releases/01-26-10_AWEA_Q4_and_Year-End_Report_Release.html
[xviii] Los Angeles Times, Wind energy job growth isn’t blowing anyone away, February 2, 2010, http://www.latimes.com/business/la-fi-green-jobs2-2010feb02,0,6156904.story
[xx] The Washington Times, Obama Blocks Offshore Drilling, February 11, 2009, http://www.washingtontimes.com/news/2009/feb/11/drilling-ban-revisited/
[xxi] Greenwire, OFFSHORE DRILLING: Leases off Va. coast delayed until at least 2012, January 27, 2010 http://www.eenews.net/Greenwire/2010/01/27/archive/8?terms=OFFSHORE+DRILLING%3A+Leases+off+Va.+coast+delayed+until+at+least+2012