Empire State Embodies Misinformed Energy Policy

Last week, Forbes published an op-ed written by Dan Eberhart, CEO of oilfield services firm Canary Energy, in which he discusses how Democrats are using the wrong strategy by stonewalling the oil and natural gas industry. He warns that this method will not bring the votes they hope for, and will instead further alienate those who could benefit from the jobs and economic productivity that oil and natural gas are bringing to this country.

“These presidential hopefuls will no doubt further the initial dog-pile we saw at the first round of Democratic debates by calling for the repeal of so-called ‘subsidies’ for conventional producers, even though what they really mean are tax incentives utilized by most manufacturing industries. They will continue to attack oil and natural gas as climate-change boogeyman, even though the United States’ shale boom has created a path to energy independence, driven carbon emission to record lows and is helping bring alternative fuels online.”

Eberhart specifically calls out Governor Andrew Cuomo, and the damage that his anti-energy views have wrought on the state of New York. Decisions like banning hydraulic fracturing and putting halts on pipeline projects have cost New York jobs, economic opportunities (which have gone instead to other states like Pennsylvania), and resulted in higher consumer costs. The Constitution Pipeline project, worth $683 million, was projected to provide natural gas to 3 million homes, generate 2,400 jobs, and bring in over $160 million in revenue. What happened? Andrew Cuomo denied the project a necessary water permit, pleasing his base at the cost of jobs and income for the rest of New York.

He goes on to list similar projects that Cuomo has halted, which also caused New York to miss out on jobs, revenue, and investment opportunities. Projects include Northeast Supply Enhancement, which could have generated $23.7 million in GDP, and the Northern Access Pipeline, which was projected to generate $735 million in investment and economic activity.

Eberhart concludes that Democrats should face the facts and admit that energy like oil and natural gas is promoting the US economy, and that we need these pipeline projects in order to sustain this economic growth.

“While Democrats may jump at the chance to beat up on oil and gas, their calls to end fossil fuels hardly deal in reality. Traditional fuels supply more than 80 percent of U.S. energy. Technological advances are making these resources safer, cleaner and more efficient, allowing for falling carbon emissions even while production – and economic growth – increase.

Shale development and robust infrastructure capabilities are helping to drive our economy, secure the country’s energy independence, reduce our carbon footprint and better protect our communities and the environment. Voters likely won’t hear that on stage during the forthcoming Democratic debates either. But if there is any reminder needed of where the candidates stand on ensuring affordable and reliable energy, all they need to do is look at the problems Gov. Cuomo has created in New York.”

Read the full article here.

Domestically Produced Natural Gas Powering U.S. Economy

New data from the U.S. Energy Information Administration shows that more than 90% of the natural gas consumed in the U.S. in 2018 was produced domestically. This dramatic reversal of fortunes comes less than a decade after many thought the U.S. was all but certain to be increasingly reliant on foreign imports to meet natural gas demand.

U.S. natural gas production hit a new record high of 89.6 billion cubic feet per day (Bcf/d) in 2018, an 11% increase from the year prior. The consecutive year-over-year increase was drive in part by the addition of new pipeline capacity in key producing regions, including the Marcellus and Utica shales in Ohio, Pennsylvania, and West Virginia as well as the Permian Basin in West Texas and southeastern New Mexico.

The benefits of increased natural gas production are clear with more and more Americans gaining access to clean, affordable energy resource. In fact, a recent study from the National Bureau of Economic Research found that declining heating costs resulting from abundant natural gas supplies has led to a decrease in winter mortality rates.

“We find that lower heating prices reduce mortality in winter months. The estimated effect size implies that the drop in natural gas prices in the late 2000s, induced largely by the boom in shale gas production, averted 11,000 winter deaths per year in the US. We also find that the effect does not just represent short-run hastening of mortality.” (emphasis added)

Greater use of natural gas is also empowering the U.S. to achieve meaningful reductions in greenhouse gas emissions. As the International Energy Agency noted in 2017:

“The US power sector has led the world in cutting CO2 emissions since 2008, thanks largely to natural gas displacing coal.”  

Ernst Moniz, the former U.S. Secretary of Energy under President Obama, echoed this point during a policy address at Columbia University’s Center on Global Energy Policy:

“First of all, it is a fact that in these last years the natural gas revolution shall we say has been a major contributor to reducing carbon emissions. The president has a goal as I mentioned at 17 percent by 2020. We are about halfway there and about half of that is because of the substitution of natural gas for coal in the power sector essentially driven by market forces.” (emphasis added)

It’s clear that natural gas will play an increasingly important role in meeting the energy needs of American households and businesses for decades to come.

Energy Security Depends on Pipeline Expansion

America has achieved the monumental – and not that long ago unthinkable – task of cementing itself as the preeminent leader in energy production. The solidification of this long running goal has delivered countless benefits, including long-term energy security and the opportunity to further interconnect North America’s energy markets with investments in pipeline infrastructure. This is precisely the message GAIN Coalition spokesman Craig Stevens sought to convey in a recent opinion piece published in Morning Consult.

Domestic production alone, though, doesn’t tell the full story when it comes to the American energy outlook. Energy is a global commodity, and the United States is — and will continue to be — an active participant in the global energy market. As domestic supply and production have expanded, the United States’ ability to export oil and gas has grown, sparking economic growth and driving an enhanced ability to boost allies and trading partners through the sale of energy resources.

One of those allies is Canada. The scale of our oil and gas trade with Canada speaks to the importance of the relationship: About 13 percent of all petroleum products exported by the United States go to our neighbors to the north, a total of almost a million barrels every single day.

American resources play an important role in Canada, but it’s far from a one-way street. Canada is also by far the United States’ single largest supplier of imported oil and gas. Forty-three percent of American oil and gas imports come from Canada. It’s an eye-catching number, but it should come as no surprise given our close trade partnership, geographic proximity and the simple fact that Canada boasts the third-largest crude reserves in the world.

North American energy security, in other words, is deeply interconnected. This is a very good thing for the United States, Canada and Mexico — another leading source of both imports and exports for American oil and gas. But this deeply beneficial interconnectedness also means that the challenges facing one nation’s energy sector are more than capable of impacting another’s energy outlook.

Stevens goes to highlight the irony of manufactured anti-pipeline protests in their failure to recognize that efforts to derail energy infrastructure investments degrade – not enhance – safety and environmental protection.

As always, the irony — or tragedy — of opposition to expanded pipeline infrastructure lies in the simple fact that modern pipelines represent the most economical, efficient and environmentally sound way to transport the resources that power our economy. As protests continue and projects lag, the tremendous advantages offered by North American energy dominance become increasingly more difficult to leverage.

Click here to read the full piece on MorningConsult.com

US LNG exports are higher than ever: so why are some Americans unable to access natural gas?

A new report published by credit rating agency Moody’s highlights how increased exports of US LNG (liquefied natural gas) can help keep domestic natural gas prices in an optimal range. Two main takeaways from the report are that US LNG exports are expected to surpass 7 billion cubic feet per day (Bcf/d) by early 2020, and that US natural gas production is increasingly able to meet demand around the world. As the report explains:

Even with a rapidly growing US export market, we see ample supply available for export without pushing prices above the range-bound territory where prices appear mired today. On the contrary, we believe the growing US export market will help maintain a floor under natural gas prices, without which prices could tumble, threatening production aggregates.

To the left is a chart compiled by S&P Global Platts, which compares LNG exports in 2018 vs 2019. Noteworthy increases can be seen in the destinations of France, Spain, Chile, and India. In May of 2019, gas deliveries from the top three LNG export plants in the country reached an all-time high, with a total of 4.47 Bcf/d being transported. The numbers don’t lie: the US has become a key player in LNG exports, and domestic production of natural gas is at an all-time high. And we’re increasingly able to support our allies around the world with American-produced natural gas.

The issue lies in the fact that we have abundant supplies of natural gas, but can’t seem to move any of it within our own borders. According to an article published by the Wall Street Journal, there is a huge natural gas distribution problem in the US. Gas customers are getting refused service in New York City due to a lack of supply lines, while consumers in western Texas have reached the point where they’ve resorted to simply burning off the surplus that can’t be transported to markets across the country. The amount they are burning each day equates to roughly enough gas to fuel the entire state of Texas. Meanwhile, a real estate developer in Westchester County, New York, couldn’t complete the sale of a 66 unit housing development, because Con Edison had announced that it couldn’t service any more clients in that area. The sale, of course, fell through, and the development will likely remain vacant.

The solution is quite clear: if some people don’t have enough gas, and some people have too much, why don’t we transfer the excess natural gas to the people who need it? Seems simple enough. However, to transport these energy resources, we need to invest in natural gas pipelines – the safest, most efficient means of carrying energy supplies. All too often, plans are drawn up to begin construction on a new pipeline, which would not only move gas, but also create jobs and add to the country’s infrastructure in the process – only for the plans to be stymied, either by protestors and apprehensive state governments, or bureaucratic red tape and legal challenges to issued permits.

Transporting gas to people who need it should not be a partisan issue; especially not when the situation has begun to impact individual homeowners and real estate developers. Americans should recognize the facts: we need more pipelines, and we need them now. GAIN continues to support the responsible, timely development of our nation’s energy infrastructure.

Another Milestone for America’s Domestic Energy Revolution

U.S. crude oil production reached a new all-time high in April 2019, averaging 12.2 million barrels per day (b/d), according to new data from the U.S. Energy Information Administration (EIA). This latest milestone marks the first time that monthly production volumes exceeded 12 million b/d and comes less than a year after domestic production surpassed 11 million b/d.

Driving this impressive growth is West Texas’ Permian Basin, which reached a record-breaking 4.97 million b/d in April. Per the EIA:

The Permian Basin in western Texas and eastern New Mexico continues to drive record national oil production growth. The Permian’s prolific tight oil plays with multiple layers—including the Bone Spring, Spraberry, and Wolfcamp—make it one of the lower-cost areas to develop. The Permian Basin accounts for about 63% of Texas and 96% of New Mexico crude oil production. From January 2018 to April 2019, Texas crude oil production increased by 1.1 million b/d (28%) and New Mexico production increased by 345,000 b/d (64%).

Continued production gains in the region underscore the importance of the nearly 1.5 million b/d of new pipeline takeaway capacity that is expected to come online before year’s end. Projects like Phillips 66’s 900,000 b/d Gray Oak pipeline and Plains All American’s 670,000 Cactus II pipeline will serve as vital links between this prolific production region and Gulf Coast refining and export hubs.

US Oil Imports Hit 30 Year Low

The U.S. Energy Information Administration (EIA) recently released a report highlighting the fact that monthly U.S. crude oil imports are at a thirty year low. The report evaluated U.S. imports from the Organization of the Petroleum Exporting Countries (OPEC) and found that U.S. imports for March of 2019 equaled 1.5 million barrels per day. Though that may seem like a lot of oil, it’s actually the lowest level of import we’ve seen since March of 1986, according to data from the EIA’s Petroleum Supply Monthly.

This is consistent with the trends we’ve been seeing over the last decade; US oil imports from OPEC have been falling for years. At the same time, domestic crude oil production has been on the rise.

As the chart shows, there’s been a clear decline in oil imports since 2008, and if trends continue, they’ll only keep going down. Additionally, oil prices are low and demand is high, meaning that domestic oil production can only be expected to increase as imports continue to decline.

While domestic oil production is increasing, the construction of additional pipeline projects is needed to transport those resources to end markets. Domestic oil production cannot hope to flourish without substantial additions to this country’s infrastructure in the form of pipelines that actually see the light of the day without being halted and postponed for years.

More domestic oil production means more jobs for Americans, and more stimulation for the American economy. If pipeline projects continue to be cancelled and delayed, we could see trends reverse and oil imports start to rise again. It’s important to put the American economy first – that means developing our infrastructure and focusing on domestic production of resources. Supporting domestic pipeline projects can accomplish both of those goals.

House Democrats Agree to Work in Bipartisan Fashion on Pipeline Safety Bill

House Democrats appeared to reach across the aisle with a promise that work on a draft for a pipeline reauthorization bill would move forward in a bipartisan fashion.

Energy and Commerce Chairman Frank Pallone, a Democrat from New Jersey, voiced his support for bipartisan talks at an Energy Subcommittee legislative hearing on public safety, relating, “I am committed to working in a bipartisan manner to update and improve this critical federal program so that we produce a final bill that we can all be proud of and support.”

Democrats have signaled that the draft presented to Republicans is nothing more than a beginning of negotiations. The presented draft serves to test the waters and pave the way for a future bill, which would have more Republican input. Bobby Rush (D-Ill), Energy Subcommittee Chairman, further insists that new pipeline legislation would be bipartisan, with input from those on both sides of the table:

As we have said on numerous occasions, both Chairman Pallone and I would like for this process to be transparent and open, and we look forward to working with members of the minority, PHMSA and other important stakeholders to ultimately draft legislation that will receive wide, bipartisan support.

At the end of the day, the GAIN Coalition encourages lawmakers to hold true to their promises to work together on oversight of the vital infrastructure projects that our country needs. The reauthorization of PHMSA will be a critical step forward for the safety of the energy industry – we look forward to elected officials on both sides of the aisle coming together in support of midstream infrastructure safety.

GAIN Expert Speaks at Washington Examiner Event on U.S. Infrastructure

On Wednesday, June 26th the GAIN Coalition took part in a Washington Examiner event hosted at the Heritage Foundation in Washington, D.C. The event focused on shortcomings of the current infrastructure system and featured discussions on the advancement of an Infrastructure Bill and the future of American infrastructure. The event comes at a pivotal time for policymakers as they face the failures of the FAST Act and the Highway Trust Fund. Yet at this event, featuring industry experts as well as the U.S. Secretary of Transportation Elaine Chao, it appears the fight for extensive infrastructure reform is far from over.

During the program, a panel discussion with Washington Council of Governments’ Hon. Marty Nohe and GAIN Strategic Advisor Brigham McCown addressed the many complexities of determining what an infrastructure bill should entail.  McCown explained, “Different jurisdictions have different requirements.” In order to make sustainable improvements to American infrastructure, McCown added these differences must be dealt with, as there “is a huge divide between urban and suburban and rural.”

While policymakers may agree that infrastructure is a bipartisan concern, McCown addressed the challenges of passing infrastructure reform at its core is full of partisan attitudes. According to McCown, “The issue has always been how are we going to pay for it and what’s the federal role versus what’s the state or local role.” In support of reducing the role of the federal government, McCown said, “Level that playing field, let everybody know what the rules are and then get out of the way.”

Funding is always a major point of contention in infrastructure debates. During the program, Tim Chapman, Executive Director of Heritage Action, stated that 75 to 78 percent of infrastructure money is raised and spent at the local level. In reference to this statistic, McCown expressed that he would like to increase that number to 85 percent, so that state and local governments shoulder even more of the funding burden. “We do need to move toward a user fee based system instead of a subsidized system because we are losing a lot of efficiency,” he argued. As McCown puts it, “If it’s not sustainable, it’s costing us money.”  Replacing current funding mechanisms with a user fee based system frees taxpayers from shouldering unnecessary burdens and helps set spending priorities for infrastructure improvements as determined by usage and demand.

At the end of the discussion, McCown urged for greater involvement from the private sector, encouraging public-private partnerships. He pointed out that at a time where the question of funding is paramount to moving forward with effective legislation, the lack of a stable and consistent regulatory environment for investment averts the private sector’s involvement. Secretary Chao echoed this sentiment, “[But] there are other ways to finance our public infrastructure, and that is through allowing the private sector to come in.” While there may be no need for debate over the necessity of reform, policymakers must make the right commitments and the right investments in order to pass effective legislation.

To view a full video of the event, click here.

Tanker Attacks Underscore Need for Energy Security

Last week, G-20 energy ministers meeting in Karuizawa, Japan voiced their concerns over oil tankers being attacked in the Gulf and the potential impact these assaults may have on access to energy resources. The ministers emphasized that energy security – especially during periods of uncertainty – is of the upmost importance, stating, “In light of recent developments highlighting concerns about energy security, the G20 Energy Ministers acknowledge energy security as one of the guiding principles for the transformation of energy systems.”

The statement came just two days after two more attacks against oil tankers in the Strait of Hormuz occurred; the latest in a string of repeated attacks that have been terrorizing oil tankers in the Strait since May of this year. In response to the recent aggression, shipping companies have begun pulling their ships out of the Strait of Hormuz, and there has been talk of tankers being assigned military escorts if conditions continue to worsen.

Saudi Arabian Energy Minister Khalid Al-Falih was quoted as saying that threats made to the energy supply must be met with a “rapid and decisive response.” Four of the tankers which have been hit so far belonged to the United Arab Emirates, and Al-Falih clarified that the attacks are being taken “very seriously.” He further maintained that the Kingdom of Saudi Arabia would use any means necessary to protect its oil infrastructure.

Japan’s Industry Minister Hiroshige Seko further affirmed that energy security should act as a guiding principle when it comes to transformation of energy systems, stating, “The most important thing was that we have shared an understanding among energy ministers that we need to work together to deal with the recent incidents from energy security point of view.”

Overall, the energy ministers have condemned the attacks, and insisted that the physical damage caused is paltry compared to the potential impact they could have on global confidence in energy supply security.

The U.S. can do its part to bolster energy access by continuing to produce domestic oil and gas resources – and facilitating the transportation of those resources through the expansion of midstream infrastructure such as underground pipelines. We need to stand together to protect our energy supply in order to assure global markets that their security is a top priority. Increasing American energy production – and exports to our allies around the world – can bolster international energy security amid rising concerns over incidents in the Strait of Hormuz.

Trans Mountain Pipeline Must Move Forward

Last week, Canadian Prime Minister Justin Trudeau approved a major expansion of the Trans Mountain Pipeline – nearly tripling the current capacity of the existing line and helping open new markets for crude processed from oil sands in Alberta. The $5.4 billion USD project will run some 700 miles from Alberta to Burnaby, B.C.

Opponents of the project continue to press on – despite Trudeau’s commitment that economic growth and strong environmental stewardship can go hand-in-hand. While a vocal minority has expressed opposition – the expansion’s approval was celebrated by many in Alberta – where oil-sand production of bitumen is a critical part of the local economy.

It was also recently reported that Canadian crude-by-rail exports surged 40 percent in April over the previous month. Once completed, the Trans Mountain Pipeline will help alleviate crowded rail routes by transporting oil to the United States. In fact, 99% of Canada’s oil is now shipped to the US. Pipelines are the safest, most efficient method of transporting oil products. In addition – it’s more expensive to transport oil by rail than by pipeline – a cost that often falls on American consumers.