The People of America's Oil and Natural Gas Indusry

America’s 21st Century Energy Story

Mark Green

Mark Green
Posted February 4, 2017

America’s energy renaissance is the story of domestic natural gas and oil production that’s making the country stronger economically and more secure while benefiting consumers and improving the environment. A pretty good tale, indeed.

Let’s start with energy production. The United States is the world’s leading oil and natural gas producer, thanks to vast shale energy reserves safely unlocked by advanced hydraulic fracturing and horizontal drilling. Here’s what the surge in domestic oil production looks like:

oil_production

And natural gas:

marketed_NG

These two charts form a picture, a United States transitioning from an era of energy scarcity and limited opportunity to one of energy abundance and expanded opportunity.

More specifically, we’re seeing economic growth and strengthened energy security. The U.S. is importing less oil – meaning less dependence on others – and is now exporting crude oil and liquefied natural gas (LNG) to allies abroad, reaping the broad benefits of trade. The U.S. Energy Information Administration (EIA) projects that within the next decade the United States will become a net energy exporter.

For consumers, the benefits of America’s energy renaissance are illustrated when they refuel their vehicles. The influx of U.S. oil in the global supply is putting downward pressure on the cost of crude, which is reflected in prices at the pump – last year, at their lowest level since 2009. In 2015, Americans saved, on average, more than $550 per licensed driver, according to AAA. At the same time, U.S. consumers saw an extra $1,337 in disposable income because of shale energy, one study found. Lower energy prices are helping to lower Americans’ cost of living, EIA reports.

These are significant benefits, to be sure. Yet, the story is even better when you consider the environmental benefits of the energy renaissance. Abundant, affordable, natural gas – which last year became the No. 1 fuel source for power generation – is the chief reason U.S. carbon emissions from the power sector have fallen to 25-year lows:

co2_emissions

This is big news, especially when you consider that historically, economic expansion and energy production growth have been accompanied by rising carbon emissions. America’s ongoing energy resurgence has decoupled those trend lines, and we’re all the beneficiaries. At the same time, cleaner fuels produced by our country’s world-class refining sector have helped make today’s cars and trucks 99 percent cleaner for common pollutants than their 1970s forebears.

Climate change is a serious issue, and industry is engaging constructively to address this complex global challenge. It is producing abundant volumes of cleaner-burning natural gas, spending $284 billion since 1990 to improve the environmental performance of its products and operations – refiners alone have spent more than $154 billion on environmental improvements. Our industry has invested about $90 billion in emissions-reducing technologies since 2000, which is nearly as much as the rest of U.S.-based private industries combined and more than double the amount invested by any of the next three industry sectors:

emissions_spending

According to 2016 poll, 80 percent of American voters support increased production of natural gas and oil. Indeed, these are the leading fuels for our economy and modern lifestyles, projected by EIA to supply more than 66 percent of our energy this year and 67 percent of it by 2040.

We count on oil and natural gas for safe, reliable fuel but also as the foundation for materials and products that make our lives more convenient, healthier and, frankly, simply better.

Now, to sustain and grow the U.S. energy resurgence, we need forward-looking energy policies that increase access to public reserves, onshore and offshore, a reasonable regulatory approach, sensible oversight of operations as companies engage and partner with nearby communities and more energy infrastructure, to safely transport natural gas and crude oil to transmission facilities and refineries and then to consumers and businesses. These are the bricks to the foundation of a sound energy approach for the future.

When we talk access, we start with the fact that 94 percent of the country’s offshore acreage under federal control is off limits to energy development. Key offshore areas – most of the Arctic, Atlantic, Pacific and Eastern Gulf of Mexico – remain closed to safe development. The Alaskan offshore could produce 10 billion barrels of oil and 15 trillion cubic feet of natural gas. The advanced technology and expertise already exist to responsibly develop these reserves. The U.S. should not keep this tremendous energy potential shelved while other nations are developing their Arctic reserves.

Onshore, we know that the energy renaissance is advancing largely because of development on state private lands, not federal acreage. A Congressional Research Service report found that from 2010 to 2015 federal onshore natural gas production was down 18 percent – while output on state and private land increased 55 percent. While oil production on federal land increased 57 percent over that period, that’s a relatively small share of the U.S. total. By contrast, production on state and private land, more than 15 times as large, increased 113 percent over the same period.

fed_vs_private

Policies that have created this reality have cost the country energy, jobs, economic growth and revenues to government treasuries. A set of analyses by Quest Offshore Resources found that opening areas in the Atlantic, Pacific and Eastern Gulf could lead to production of more than 3.5 million barrels of oil equivalent per day, while adding about 840,000 new jobs and generating more than $200 billion in cumulative revenue for government between 2017 and 2035.

In terms of regulation, our country needs an approach that matches the new energy reality created by the fracking-led production renaissance. Our industry is subject to federal and state regulation, as well as industry standards and best practices. A number of government and university studies have concluded that hydraulic fracturing is safe and doesn’t threaten groundwater. Industry is highly motivated to capture methane – the chief component in natural gas – for delivery to customers, and emissions of methane have fallen even as natural gas production has increased. Methane emissions from the oil and natural gas industry make up just 4 percent of total U.S. greenhouse gas emissions.

methane_emissions

To reach America’s full energy potential, existing infrastructure systems must be maintained and added to in the future. The U.S. needs more pipelines, transmission lines and processing and storage facilities. Pipelines are modern and efficient, delivering 99.999 percent of petroleum products safely.

There’s no better illustration of the lack of energy infrastructure than New England, where EIA figures show the region’s customers pay more for electricity than the rest of the country. This is largely due to natural gas supply constraints. Fortunately, the new administration and Congress are signaling that Washington will embrace new infrastructure projects, properly planned and carefully reviewed. A 2013 IHS study estimated that updating infrastructure could generate more than $1 trillion in capital investments out to 2025.

America possesses great energy wealth and an industry with the know-how and technological sophistication to safely harness that vast wealth. Policy is critically important. Market-based principles should guide policymakers away from top-down, government-mandated ventures such as the flawed Renewable Fuel Standard – which could force higher ethanol blend fuels into the national supply, potentially damaging vehicle engines and saddling consumers with repair costs. Likewise, Washington should reject tax increases that unfairly target our industry – which pays its fair compared to other S&P Industrial companies – that could chill future energy investment and production.

We have an opportunity, generational in nature, to turn America’s energy potential into greater economic growth, increased security and more individual prosperity. The choices we make as a nation today will frame our energy future. API President and CEO Jack Gerard at last month’s State of American Energy event:

“[T]he question we face in the future is not whether the United States of America has the natural resources, the talent and the technology to produce and refine the energy we need to grow and prosper. We clearly do. In the months and years ahead it is our hope that energy policy, at all levels of government, will be guided by a collective, bipartisan vision of an American energy future that generates the kinds of jobs, revenue to the government and economic opportunity that have been the hallmark of our industry since the very beginning. … As we look to the future, the oil and natural gas industry stands ready to offer solutions that help meet the energy needs of our nation and the world and to work with elected leaders at all levels of government to ensure that the American consumer continues to benefit from affordable and reliable domestic energy.”



ABOUT THE AUTHOR

Mark Green joins API after spending 16 years as national editorial writer in the Washington Bureau of The Oklahoman newspaper. In all, he has been a reporter and editor for more than 30 years, including six years as sports editor at The Washington Times. He lives in Occoquan, Virginia, with his wife Pamela. Mark graduated from the University of Oklahoma with a degree in journalism and earned a masters in journalism and public affairs at American University. He's currently working on a masters in history at George Mason University, where he also teaches as an adjunct professor in the Communication Department.