Access and Safe Development of Oil and Natural Gas

Mark Green
Posted March 28, 2013

Americans heard President Obama talk about his “all-of-the-above” energy strategy during last year’s campaign. They heard him praise the revolution in natural gas production from shale while hailing the rise in oil production on his watch. The words were encouraging, but it’s time for action. Erik Milito, API’s group director for upstream and industry operations, outlined the stakes during a conference call with reporters:

“We hope the president will take actions to match the ‘all-of-the-above’ energy strategy that was a central theme in his re-election campaign. We’ve heard rhetorical support for oil and natural gas, but it will take the right policies to meet the administration’s own projections that show oil and natural gas will be critical to meeting America’s energy needs for decades to come.”

Milito identified examples of where energy action needs to match energy rhetoric:

• Access to new oil and natural gas reserves under federal control
• Approval of the full Keystone XL pipeline
• Expeditious approval of pending liquefied natural gas (LNG) export applications
• Federal leasing and permitting policies that foster safe and responsible energy development

Let’s start with access. Milito said increased access to reserves under federal control should include developing an airport-sized parcel in the vast Arctic National Wildlife Refuge (ANWR) and full development of the National Petroleum Reserve-Alaska (NPR-A)  – which, after all, was created for petroleum development.

Instead, the administration is limiting access. ANWR remains closed, and the administration has authorized only about half the acreage in the NPR-A for development. Milito noted that the president’s new Energy Security Trust Fund proposal won’t allow for oil and natural gas development in new areas to help support the fund, relying instead on existing oil and natural gas revenues now used to support other programs. So, while new access would lead to new development activity expanding the revenue pool for government, it appears this administration proposal would just stretch the existing revenue base across more programs.

Meanwhile, the administration recently announced it is sharply reducing the acreage in Colorado, Wyoming and Utah available for oil shale research projects. This could delay efforts to find economic ways to develop vast oil shale deposits that could hold up to 800 billion barrels of recoverable oil – almost three times Saudi Arabia’s proven oil reserves. Milito:

“We as a country put ourselves in a better position when we’re producing more oil and natural gas. We are more competitive globally when it comes to the global economy as well as to the overall energy and national energy security concerns that arise from potential volatility that occurs outside the U.S. … If we do it here we’re doing it in a place where we have strong regulations in place and we in the United States are getting the jobs, revenues and energy security.”

The Keystone XL pipeline is now in its fifth year of review by the administration. The full project, which would deliver upwards of 800,000 barrels of crude a day from Canada and the U.S. Bakken region to Gulf Coast refineries, should be approved by the president. Americans support the Keystone XL, and bipartisan majorities in the U.S. Senate and House (here and here) have supported it. It’s past time to approve the full project – to create new job growth, strengthen our energy partnership with Canada and increase our energy security.

On LNG exports, the U.S. has an abundance of natural gas, enough to supply domestic needs and demand from strategic allies overseas. But more than a dozen applications for licenses to build exporting facilities remain under review.Studies have shown natural gas export could result in job creation and economic growth here at home.

Another key to turning all-of-the-above energy rhetoric into reality is making sure federal leasing and permitting regimes are transparent and consistent. This is needed to foster energy investments that lead to safe and responsible development.

Unfortunately, current policies are discouraging, rather than encouraging development. Milito noted that in areas where the administration controls development, oil production was down 6 percent from 2009 through 2012, while natural gas production was down 21 percent, according to a recentCongressional Research Service report. On private and state lands, where development doesn’t need federal permission, oil production was up 31 percent and natural gas production was up 25 percent over the same period. Here are the report’s charts, for oil production:

And natural gas:

Milito:

“We need our leaders to ensure that oil and natural gas development is not just tolerated but encouraged. … We need to have leasing – leasing has gone down, way down. We need to have environmental reviews that don’t take seven, eight, nine, 10 years – where you have 3,000 wells that are being held up because of environmental review. We support the completion of these environmental impact statements but taking close to 10 years is way too long and thousands of wells are being held up that could be ultimately moving into production and generating the jobs  we’re talking about. And lastly we need to have permitting that goes at a much quicker pace than the 300-day average we’re now seeing.”

Safe and responsible development is the objective, reflected in a catalog of accredited industry standards that govern all aspects of oil and natural gas activity. For example, API soon will publish two new standards for well design and drilling operations that will join a standards program accredited by the American National Standards Institute, the authority on U.S. standards. Industry standards and guidelines, working in conjunction with federal and state regulatory systems, make oil and natural gas production as safe as possible for workers, communities and the environment.

America has energy wealth that affords our country tremendous opportunity for more stable energy supply, more jobs, sustainable economic stimulation and growth-based revenue sources for government – all from safe and responsible oil and natural gas development. The question is whether the words, “all-of-the-above,” will translate into action. Milito:

“The administration should embrace this opportunity. It needs to make a real commitment to safe and responsible access to new oil and natural gas prospects in federal areas, speedier permitting, and more sensible regulations that will both spur new oil and natural gas production and encourage a robust refining industry capable of producing the gasoline, diesel and other fuels that America will be demanding.”