Thursday, August 04, 2011

Increasing U.S. Oil Production While Safeguarding The Environment

Aug 1: A new report from the group Securing America's Energy Future (SAFE) entitled, U.S. Oil Supply Post-Macondo, provides 9 technical and detailed recommendations for increasing U.S. oil production. SAFE is a nonpartisan organization that aims to reduce America's dependence on oil and improve U.S. energy security to bolster national security and strengthen the economy. SAFE, which does not accept funding from oil companies, advocates for expanded domestic production of our energy resources, continued improvement in fuel efficiency, and in the long-term, severing our reliance on oil through the electrification of the transportation sector. In 2006, SAFE joined with General P.X. Kelley (Ret.), 28th Commandant of the U.S. Marine Corps, and Frederick W. Smith, Chairman, President, and CEO of FedEx Corporation, to form the Energy Security Leadership Council (ESLC), a group of business and former military leaders committed to reducing U.S. oil dependence.
    According to a release, the report finds that high oil prices and innovative development techniques are combining to place substantial new resources on the table in the United States, with potentially game-changing consequences for economic and national security. The report makes a series of recommendations designed to safely expand the production of domestic oil resources, including a series of regulatory reforms.

    The report highlights a number of positive trends supporting future U.S. oil production growth, both onshore and offshore. However, the report also details a series of existing and emerging regulatory barriers facing the domestic industry. Among other things, the report finds that policymakers could do more to promote domestic oil production while safeguarding the environment, specifically through a series of pilot programs designed to leverage technology to minimize the industry's development footprint in frontier areas of the Outer Continental Shelf and the U.S. Arctic. The report argues that the current regulatory uncertainty surrounding hydraulic fracturing poses an emerging risk to production of both shale gas and shale liquids, and it calls on industry as well as state and federal regulators to provide a more comprehensive framework for development.

    Top among the reasons to boost domestic oil production are reasons of economic and national security. According to the report, "From a national security perspective, increased self-reliance would help minimize the exposure of the United States to a crippling disruption in oil supplies brought about by turbulence in the Middle East or any other oil-supplying region. With the U.S. trade deficit in crude oil and petroleum products on pace to surpass $300 billion in 2011, producing more domestic oil would also minimize the transfer of U.S. wealth abroad."

     General James Conway, former Commandant of the U.S. Marine Corps and member of SAFE's Energy Security Leadership Council said, "Without a question, it is in the United States' economic and national security interests to develop more of our own energy resources. For decades, our nation's energy policy has not been decided by Americans, but largely by state-owned oil exporting nations. Many of these countries are unstable, do not share our values, and in some cases, are outwardly hostile to the United States. It is time our leaders work in the short-term to develop more of our own oil resources as part of a comprehensive energy security strategy."

    According to the report, "Increased domestic oil production has clear economic and national security benefits. Recent domestic production increases aside, the United States still imports large volumes of crude oil and petroleum products. As oil prices have increased in recent years, U.S. imports have had a sharply negative impact on the current account deficit. Through the first 5 months of 2011 alone, the United States ran a $138.8 billion deficit in petroleum trade. To the extent that domestic oil production offsets the need for imports, it can help to minimize the transfer of U.S. wealth abroad. From a national security perspective, increased self reliance would help minimize the exposure of the United States to a crippling disruption in oil supplies brought about by turbulence in the Middle East or any other oil-supplying region.
    "Of course, greater energy security must be built on lessons learned. Public policy and private sector investment should be developed within a broad framework designed to accomplish at least three core objectives: increase economic security, bolster foreign policy, and safeguard natural resources. The 2010 Deepwater Horizon disaster in the Gulf of Mexico clearly illustrates that future policy must carefully balance each of these three core objectives -- achieving increased energy security while sacrificing
the environment is not an acceptable outcome. And yet, events around the world, from the rise of China to the Arab Spring, suggest that the U.S. economy will continue to be at risk in the absence of comprehensive energy reform, including a pathway to increased domestic production of oil and gas."
    The report makes 9 major recommendations including:
  • Initiate a pilot program in cooperation with the State of Alaska to demonstrate extended reach drilling in the 1002 Area of the Arctic National Wildlife Refuge (ANWR).
  • Implement comprehensive reform of the U.S. offshore regulatory approach, shifting from a rule-based to a goal-based approach.
  • Increase funding for BOEMRE to attract highly trained engineers and enable BOEMRE to engage with operators on equal footing.
  • Use the new regulatory approach to open frontier areas and use the experience of frontier areas to refine the new regulatory approach.
  • Implement distance-from-shore provisions designed to minimize the footprint of offshore oil and gas development in all frontier areas.
  • Initiate an "inventory-to-lease" program in frontier areas of the Outer Continental Shelf, subject to goal-based regulation.
  • Implement a system of progressive royalties for new OCS leases.
  • Create loan guarantees for the construction of CO2 pipelines from major economic and industrial centers to regions populated with oil and gas fields for use in EOR projects.
  • Establish a comprehensive approach to ensure regulatory stability for unconventional oil and gas production while also giving operators the certainty to move forward.
    U.S. Senator Lisa Murkowski (R-AK), Ranking Member of the Senate Energy and Natural Resources Committee commended the new report and particularly the recommendation for a pilot program to demonstrate extended reach drilling in the 1002 Area of ANWR. Senator Murkowski said, "This is a concept that I have long offered as a reasonable alternative to those who oppose conventional development of the 1002 Area. While I still favor responsible production within the coastal plain, this compromise allows us to access much of the resource without the same environmental risk, making it a commonsense solution that everyone should be able to embrace." Murkowski indicated that estimates are that 10.4 billion barrels of oil are contained in the non-wilderness portion of ANWR.
    She said, "The existence of the Point Thompson project so close to the 1002 Area provides an opportunity for the industry to use extended reach drilling to develop ANWR oil without establishing a surface presence in ANWR itself and without necessarily adding substantially to the existing industry footprint on state lands. In a recent Senate Energy and Natural Resources Committee hearing, a representative from Alaska's Department of Natural Resources suggested that extended reach drilling from Point Thompson into the 1002 Area could have a major impact on production." In a release she indicated that opening ANWR to production is expected to create roughly 70,000 American jobs and the Congressional Research Service estimates that federal revenues from ANWR development could total $152.9 billion at oil prices of $100 per barrel.
    Access a release from SAFE (click here). Access the complete 48-page report (click here). Access a release from Sen. Murkowski (click here). [#Energy/OilGas]