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Energy Today - June 10, 2011

Rayola Dougher

Rayola Dougher
Posted June 10, 2011

The Wall Street Journal: A Gulf Drilling Revival: Exxon Mobil Corp.'s huge new oil discovery in the Gulf of Mexico is good news for domestic energy production, but it's even better news as a sign that last year's panic over the BP spill won't continue to cripple American offshore oil exploration. Every so often, reality triumphs over politics. Exxon had been ready to drill on the site last year before the Obama Administration shut down all deepwater drilling in the wake of the BP spill. The Interior Department is still issuing very few permits, only 15 for new wells since it lifted its moratorium in October, but Exxon received one of them and struck black gold at 7,000 feet below sea level and some 230 miles at sea...Private companies must innovate to survive, and they have the profit incentive to do so, while government cash is usually steered to politically favored companies that may or may not know what they're doing. If you live off federal grants, you need to work the corridors of power more than the technology...The Exxon discovery is a display of the animal spirits that still live in the U.S. energy industry, notwithstanding the political efforts to stifle them. As much as Washington tries, the U.S. economy is hard to keep down. The Salt Lake Tribune: Gas Wells, Jobs May Soar in Eastern Utah: A major Uinta Basin natural gas proposal overcame a years-long environmental roadblock Thursday, easing the way for thousands of new jobs and 3,675 new wells. That increase would nearly match Utah's current 4,005 gas wells operating on Bureau of Land Management and Forest Service lands, though thousands more are in various stages of permitting. The project still needs final Environmental Protection Agency approval and then a BLM permit, with that review scheduled for completion by year's end...The eastern Utah gas field, according to the agency, could create up to 4,000 jobs during peak construction

Fuel Fix Blog: Frivolous Partisan Politicking Costs U.S. 2 Million Barrels of Domestic Oil Production Daily: Demand for gasoline today is lower than it has been in the last 5 or 6 years; yet, prices at the pump are $1 a gallon higher than they were this time last year. Crude oil prices are about $30 higher than market forces would dictate. And little is being done in D.C. to push for fundamental restructuring of decades-old energy policies and regulations that impose unnecessary costs on the refining industry. Domestic oil production stands a little over 5 million barrels a day but could have been higher. (Just this week Exxon discovered three new sites in the Gulf estimated to hold the equivalent of 700 million barrels of recoverable oil.) With a positive and realistic energy policy the ground work could be in place to increase production by around 2 million barrels a day before the end of this decade. Instead, permitting for the Gulf and parts of Alaska are proceeding at the speed of a glacier. The Alaskan pipeline with a capacity of 2 million barrels and day is moving less than half of that. The low volume of throughput can cause serious operating and technical problems. If companies are not allowed to move ahead with exploration and production in promising areas of Alaska soon, the pipeline will likely be shut down and then dismantled according to existing law. The people in Alaska want the benefits of developing their oil resources but are being thwarted by political orthodoxy.

Pennlive.com: What We Can Learn from Texas' Barnett Shale: One recent study prepared for the Fort Worth Chamber of Commerce found that drilling and production activity in the Barnett was supporting, directly and indirectly, more than 110,000 jobs across the region. And a study by this author a few years ago calculated that Barnett wells and related equipment had added $6 billion to the local property tax base. In south Texas, where new oil wells are being drilled in the Eagle Ford shale, the unemployment rate has fallen to half the state average while sales tax receipts have jumped 70 percent. In terms of potential output and economic impact, the Barnett and Eagle Ford are dwarfed by the Marcellus Shale formation. Pennsylvania is already benefiting mightily from shale gas production, and several studies have recently documented the huge economic boost to the state in term of jobs, income and tax revenue. Indeed, one study found that nearly 48,000 jobs related to Marcellus Shale activity have been created in Pennsylvania during the last year. By contrast, New York State, with an effective moratorium on shale gas drilling, continues to hemorrhage jobs along its southern tier. The experience of Texas has shown that oil and gas extraction from shale formations can be accomplished with minimal environmental degradation while generating huge economic and fiscal benefits.

Additional Resources:

WPBF: Expert Offers Insight Into Rising Gas Prices

The Bellingham Herald: Big Oil Has Little to Do With Pump Prices

InsiderOnline: There Will Be Oil

The Daily Show: Canadian Oilverlords

ABOUT THE AUTHOR

Rayola Dougher is senior economist at The American Petroleum Institute (API), where she analyzes information, manages projects and develops briefing materials on energy markets and oil industry policy issues. She is the author or co-author of economic research studies covering a diverse range of topics including crude oil and petroleum product markets, gasoline taxes, energy conservation and competition in retail markets. In addition to testifying before federal and state legislators, she has participated in numerous newspaper, radio and television interviews on a wide range of issues affecting the oil industry, including crude oil and gasoline prices, industry taxes and earnings, exploration and production, and refining and marketing topics.

Prior to joining API, Rayola worked at the Institute for Energy Analysis where her research focused on carbon dioxide related issues and international energy demand and supply forecasts. Rayola holds a Masters degree in Economic Development and East Asian studies from the American University and a degree in History and Political Science from the State University of New York at Brockport.