YES: It’s time to unlock America’s reserves of natural gas and crude.
By Andrew P. Morriss
Oil and gas resources in the U.S. are growing. Surprised? Many people are, because we usually think of oil and gas as fixed pools gradually being depleted. But the combination of new technology and higher prices are making reserves available that were previously unknown or uneconomic.
Unfortunately, many such resources are controlled by the federal government. Hostility to petroleum and natural gas production in the United States is preventing their development. It’s time to rethink the policies that hinder domestic energy production.
Any rational discussion of U.S. energy policy must begin by recognizing that our economy depends on oil and natural gas and will do so for the foreseeable future, regardless of how much money we pour into subsidies for alternatives.
Petroleum provides 37 percent of our energy, and 95 percent of the energy used in transportation. Natural gas provides 23.8 percent of our energy, including a third of the energy used for residential, commercial and industrial uses. Coal produces an additional 23 percent of our energy.
Renewable energy — including the large hydro power plants hated by environmentalists — provides just 7.3 percent of our energy. We have poured billions into subsidies for ethanol, wind and solar energy, yet these technologies remain uneconomical and provide a trivial amount of our energy needs.
The trucks we see on the highway are part of a vast logistical network that makes American factories and retailers efficient and enables us to have everything from books to groceries delivered to our door.
Our valuable infrastructure of roads, gas stations, pipelines, furnaces, industrial equipment, power plants and more in place today mean that changing to other forms of energy — even if they were available at competitive prices — will be a slow, expensive process that will take decades.
There are no magic technologies to end completely our dependence on energy sources from outside North America. But there are technologies available today that can be deployed on existing, known energy reserves and which will lead to additional improvements in technology and discovery of additional reserves.
The U.S. government estimates that there are 86 billion barrels of oil on the outer continental shelf. We consume about 7.6 billion barrels of oil per year. The government also estimates there are 420 trillion cubic feet of natural gas offshore — enough for about 14 years domestic use at current rates.
Onshore, shale oil and gas recoveries have grown rapidly. In North Dakota alone, oil production doubled between 2008 and 2010. Some industry experts estimate we could increase production by 2.5 million barrels per day just from shale oil and gas resources from the Gulf of Mexico.
That’s not enough to end our dependence on foreign sources, but it is enough to smooth price swings from political instability in the Middle East and restrain price increases. Both effects would boost the economy and increase employment. Because much of these resources are on federal property, increasing energy production would boost government revenues as well.
Increasing our domestic energy production won’t happen overnight. It takes time to identify reserves, drill wells and bring production on line.
We don’t know how vast our reserves are, in part because we’ve put huge areas off-limits to exploration. But waiting isn’t going to solve our problems.
We need to start exploring and developing our domestic oil and gas resources now, so the next time there is a crisis in a major oil-producing country, we don’t find ourselves in the same position we are today.
Andrew Morriss is the D. Paul Jones Jr. and Charlene A. Jones chair in law and professor of business at the University of Alabama.
NO: ‘Drill baby drill’ is a shrill, mistaken energy strategy.
By A. James Barnes
To borrow from Ronald Reagan, “There you go again.”
For the umpteenth time in the last 40 years, with every new crisis in — fill in the blank — the Middle East, Iraq, Iran, Libya, Nigeria, Venezuela or the Gulf of Mexico and a concomitant rise in the price of gasoline, we hear the shrill call to action of “drill baby drill.”
We have been talking about having a national energy strategy for 50 years. But each crisis has represented a missed opportunity — and has left our economic well-being more and more vulnerable.
How long will we continue to act like Charlie Brown trying to kick the football while hoping things will be different and not always ending up the same way? How many more muggings will we endure at the hands of unfriendly countries before we have had enough?
In February alone we sent more than $30 billion overseas to pay for oil. Think of what that money could do for our economy.
It is time finally to face the fact that we cannot drill ourselves to energy independence and isolate ourselves from the worldwide demand for oil.
America consumes 20.8 percent of the oil produced in the world each year and 20.9 percent of the natural gas production. But we only have about 1.6 percent of the proven oil reserves and only about 3.8 percent of the proven gas reserves. We could tap all our reserves and we would still be importing oil. And, at our current rate of consumption and importation, our reserves are estimated to last less than six years.
America ranks No. 1 in natural gas production and No. 3 in oil production. Since 1950, we have drilled 2.6 million oil and natural gas wells, and at the beginning of 2010, we had 824,847 producing wells.
We are drilling; 40,000 wells were drilled last year alone. As of the first week in February, there were 1,739 rotary drilling rigs operating in the United States, more than in any other country in the world.
Millions of acres of federal lands are already under lease — with no exploratory or production activity under way on a majority of those lands. Despite the claims that the government is thwarting oil and gas development, thousands of federal drilling permits held by oil and gas companies go unused.
While we are importing oil, we are exporting about 1.6 million barrels a week of U.S. refined petroleum products.
Increasing our domestic production, limited as it will be, does not guarantee lower prices at home. Oil is an international commodity, it goes where it can command the best price, and we pay the world price, whether it comes from Texas or Libya. Increased production in the United States may simply flow into the world market rather than increasing the supply available to us.
To secure our energy future, we need a comprehensive and aggressive energy policy that:
● Recognizes that we do not need oil to generate electricity, but do depend on it for transportation. In the short run we will need oil to meet those needs, but we must reduce that dependency by transitioning to natural gas, and ultimately to electricity for our major transport needs.
● Uses tax and financial incentives, and performance standards to promote energy efficiency.
● Places limits or taxes on greenhouse gas emissions that will stimulate investment in technology, efficiency and renewable energy.
Libya produces about 2 percent of the world’s oil, albeit a larger percentage of the desirable sweet crude. But if continued production from another more major producer such as Saudi Arabia becomes uncertain, we will, in the words of President George H.W. Bush, be in “deep doo-doo.”
That is not the energy future Americans want or deserve.
A. James Barnes is a professor of law and public and environmental affairs at Indiana University.
