News

On the back of news President Trump has decided to support a moratorium on offshore drilling off Florida, Georgia and South Carolina coasts as well as candidate Biden’s commitment to banning federal leasing practices the American Petroleum Institute has published a study analyzing the impacts of a federal leasing ban (which would halt offshore operations).

The skinny on the study is this: with a federal leasing ban progress in the American energy space would suffer dramatically, and as American Petroleum Institute CEO Mike Sommers noted would “return us to the days of relying on foreign energy sources hostile to American interests,” and is “ultimately a choice between American-made energy and foreign energy, a choice between American jobs and foreign jobs. It’s clear a federal leasing ban should be off the table – there’s far too much at stake for American workers, local economies and our nation’s energy security.”

Each year the Bureau of Land Management organizes lease auctions for access to federal lands. Energy companies then bid for these leases and the opportunity to access natural resources on those lands.

The Congressional Research Service has shown that 26% of the country’s crude oil reserves and 22% natural gas reserves are on federal land. Although production on nonfederal land has jumped in the past decade, federal leasing operations make up a significant portion of American energy and are essential to hopes of keeping the country a net energy exporter as well as preserving the many benefits that come along with that position.

The American Petroleum Institute sought out to quantify the costs of a ban on federal leasing. The report shows that a federal leasing ban today would result in the country spending a half trillion dollars to offset production cuts on federal lands by importing some 2 million barrels of oil a day from foreign sources.

As the coronavirus pandemic has shown, shocks to the energy industry ripple throughout the American economy.

A ban on federal leasing would mount to a similar shock and the Institute estimates that the GDP would fall by $700 billion through 2030 and government tax revenues would decrease by $9 billion. An important component of federal leasing is its tax generation, much of which is directed to fund Land and Water Conservation Fund, our nation’s largest conservation fund.

Because of the widespread reserves and operations nationwide American workers would suffer with Texas expected to lose 120,000 jobs, New Mexico an added 62,000, and Wyoming 33,000 jobs. The Institute suggests as many as 1 million jobs could be lost by 2022, especially in energy producing heavy states.

Lastly, it is important to consider the environmental progress afforded by natural gas. As a less carbon-intensive (and plentiful) resource, natural gas availability helps displace coal-fired energy and allows the country to reduce greenhouse gas emissions in the process.

How can the country continue to make environmental gains by hamstringing the very resource central to reducing emissions? Elected officials have left the question unanswered but it is clear that environmental progress would stall with a federal leasing ban.

By banning federal leasing practices the country will undermine and undo great progress in the energy industry towards energy security. In the process of becoming energy sufficient the economic successes (and availability of affordable energy) have uplifted many Americans – the story will be different without federal leasing.

Calls from environmentalists to shutdown pipelines like Dakota Access fail to shed light on the harsh unintended consequences of their opposition. Law360 recently reported eleven states have argued in an amicus brief how a DAPL shutdown could harm their food supply, raise food prices, and negatively impact the agriculture sector:

“In an amicus brief filed Wednesday, the states said that vacating an easement for the pipeline — which a lower court has ruled necessary for a thorough environmental review — would only cause hardship for American farmers. That’s because crude oil displaced from the pipeline would compete for rail space against the much less valuable cereal grain produced in Midwestern states, leading to rail congestion while the environmental impacts of the already-built pipeline are reevaluated.

The outcome of the review won’t cause the pipeline to be shut down forever, the states said. But it would cause immediate hardship and strain on the American food supply chain at a particularly vulnerable time, they said. “Particularly amidst a global pandemic, the risk of creating conditions for food insecurity in various pockets of the country — and of bankrupting farmers — makes vacatur inappropriate.”

With U.S. food supplies taking a hit throughout 2020, we cannot afford to hinder our nation’s food supply in any manner. During the onset of the pandemic, Forbes reported major grocery stores like Walmart and Harris Teeter struggled to restock shelves due to a lack of truck drivers and logistical concerns. With continued uncertainty surrounding COVID-19, shutting down DAPL could cause transit issues for food and cause unnecessary harm to the already-dwindling economies in many states.

Food security is not the only reason to be weary of a DAPL shutdown. The economic ramifications are significant. Even more workers in the oil and gas sector would be laid off and forced to find new jobs amidst a record national unemployment rate. State economies would suffer from a major cut in tax revenue supported by the pipeline – leading to funding cuts for state programs and other public works projects:

“In addition to the 11 states, North Dakota likewise filed an amicus brief on Wednesday, arguing that shutting down the pipeline would disrupt tax revenues and funding for specific special funds set up by the state legislature. Those include hundreds of millions of dollars that have been allocated for school funds, tribal government funds, tax relief funds and budget stabilization, the state said.”

The ball now lies in the D.C. Circuit’s court. A DAPL shutdown could lead to drastic consequences for a number of states and their consumers. We must carefully consider the big picture and potential unintended consequences, prioritizing facts rather than emotion and rhetoric, when it comes to shutting down much-needed pipelines.

This week, an audio news release is circulating radio in the state of Texas applauding Kinder Morgan for rerouting the Permian Highway Pipeline around the Blanco River. See below for the full Audio News Release:

Introduction: Earlier this month, pipeline builder Kinder Morgan announced a minor reroute of its Permian Highway Project around the Blanco River in Central Texas. The company announced the new route after consulting with the U.S. Army Corps of Engineers, the Texas Railroad Commission, and local landowners. 

Craig Stevens, spokesman of “Grow America’s Infrastructure Now” said:

“We applaud Kinder Morgan and the Permian Highway Pipeline engineers who worked with regulators, local leaders, and landowners to develop this route adjustment around the Blanco River. The natural gas and oil industry is leading in the development of energy resources in the Permian region, bringing jobs, economic prosperity, and tax revenues to the Lone Star State.

Once operational, the $2 billion dollar Permian Highway Pipeline will safely and reliably transport Permian natural gas to the Gulf Coast for use across the United States and around the world.”

Outro: For more information, visit gainnow.org.

Last week, the U.S. Department of Energy announced that they will be providing $33 million in funding to update 10 natural gas projects under the Advanced Research Projects Agency-Energy’s (ARPA-E) Rapid Encapsulation of Pipelines Avoiding Intensive Replacement (REPAIR) program. Teams working in the REPAIR program will develop natural gas transmission pipeline retrofitting technology to enhance the materials and structure of pipelines. This funding will help continue to support the transportation of natural gas and strengthen the U.S. energy network. Speaking of the REPAIR program, ARPA-E Director Lane Genatowski said:

“Natural gas is a crucial energy source for 75 million American households and businesses. REPAIR teams will develop technology that enables gas utilities to update their distribution systems at low cost and continue to reliably service commercial and residential gas delivery needs nationwide.”

Genatowski’s statement echoes the proven, well-known benefits of utilizing natural gas as an energy resource. According to the EIA, burning natural gas produces fewer emissions in air pollutants and CO2 than many alternative sources currently available. Additionally, natural gas is a reliable energy source as U.S. proved reserves have increased nearly every year since 2000, and it is an affordable option for consumers – saving households hundreds of dollars each year. Speaking of the new announcement, Under Secretary of Energy Mark W. Menezes said:

“Enhancing America’s energy infrastructure, particularly for our abundant, reliable and affordable natural gas, is one of the highest priorities of this Administration. The United States is now the world’s largest producer of oil and natural gas, and natural gas exports have quadrupled since President Trump took office. In order to keep up with this growing industry, it is imperative we modernize and build out infrastructure to safely and efficiently bring this product to market.”

The work of the REPAIR teams will help modernize and innovate our national energy infrastructure system on the path to renewable energy. Pipelines serve as the backbone of American energy – the safest, most efficient, and most environmentally-conscious method of transporting the energy that drives the American economy. We must continue to use natural gas to meet our energy needs as it has proven to be a safe, abundant, and affordable energy option for U.S. consumers. GAIN applauds the DOE for their new funding decision.

Bloomberg Law recently published an op-ed by GAIN strategic advisor and former Maryland Congressman Albert Wynn on municipal natural gas bans and the resulting economic strain. Wynn outlines the many merits of natural gas and encourages policymakers to follow the lead of states that have passed laws barring local governments from prohibiting new natural gas hookups. Wynn writes:

“According to the American Gas Association, households that use natural gas for heating, cooking, and clothes drying save an average of $874 per year compared to homes using electricity for those applications. Further, natural gas furnaces offer the greatest energy savings for customers, as oil furnaces, electric heat pumps, and electric resistance furnaces cost two to four times as much as the most efficient gas furnaces.”

Wynn goes on to note that Louisiana recently became the largest state to block municipal natural gas bans, joining Oklahoma, Tennessee, and Arizona; all approved similar measures earlier this year. Thankfully these states have reaped the rewards of natural gas, as Wynn continues:

“Despite these obvious economic benefits, several municipalities have either considered, introduced, or even implemented bans on new natural gas hookups in new buildings. Berkeley, Calif., last year became the first city to enact such a ban as part of a statewide push to lower carbon emissions and bolster renewables. Seattle, San Jose, Sacramento, and Los Angeles are considering similar bans.”

The city officials supporting these municipal bans might believe they are acting in the best interests of their constituents, but the reality is the opposite. They are depriving those constituents of a more affordable and environmentally friendly energy resource. Families are struggling in these tough economic times and the last thing they need is a higher energy bill.”

Hopefully city officials see the irreplaceable value of maintaining and continuing to allow natural gas hookups in their areas. For our nation want to maintain a bright energy future, we must allow natural gas to do its part in continuing to lower carbon emissions and provide affordable, reliable energy for Americans. Wynn’s full piece can be read here.

COVID-19 has drastically cut oil demand for the energy sector, leaving many companies in difficult spots as they consider what the industry will look like for the rest of 2020 and beyond. Despite these challenges, industry players have stepped up to support first responders and community organizations across the nation. Here are just a few examples:

              The Maritime Executive reports Cheniere has made donations to help cover food for those in need as well as supply provisions and equipment to benefit first responders and frontline healthcare workers in locations where the company has offices or facilities such as Louisiana, Texas, Oklahoma, Washington D.C., the U.K., and China.

              The Beaver County Times reported Energy Transfer, the parent company of the Revolution pipeline in Beaver County, PA, donated much-needed funds to local food bank Faith Restorations. The company also donated new technology to first responders in SE Pennsylvania to help them fight the spread of COVID-19.

              ExxonMobil is partnering with the Global Center for Medical Innovation (GCMI) to aid development of reusable personal protection equipment (PPE) for health care workers that are low in supply amid the pandemic. An article in WorldOil reports ExxonMobil will use its experience with polymer-based technologies to expedite third-party production of this equipment that can be worn and sterilized several times. The production of this equipment is crucial to saving lives.

              For an industry that is dealing with detrimental and unforeseen challenges, these acts of kindness are a big feat in helping to fight the pandemic.

OilPrice recently highlighted a century old law that limits oil and gas shipments known as the Jones Act (J.A.) may be having a negative impact on the American energy industry in light of COVID-19. The Jones Act regulates maritime commerce in the U.S. and “demands that vessels undertaking shipments between two U.S. ports be U.S.-built, U.S.- owned and U.S.-manned.”

The law was implemented to protect U.S. fleets after steep losses from World War I; however, the law actually limits oil and gas shipments within U.S. ports and encourages domestic producers to send shipments abroad.

The article writes:

“J.A. has been detrimental for the U.S. energy industry because it limits inter-state trade in oil products and LNG with the high costs for US-built vessels forcing producers to turn to less efficient forms of transportation oil products. The average cost of oil transport by huge oil tankers amounts to only US$5 to $8 per cubic meter ($0.02 to $0.03 per U.S. gallon), the second cheapest after pipeline transport. Noncontiguous states and territories, like Puerto Rico, Alaska, or Hawaii, are even more disadvantaged since no pipeline, rail, or truck transport of U.S. energy products can reach them, forcing them to rely on imports.”

Updating the Jones Act could encourage domestic shipments and take away unnecessary costs from disadvantaged East Coast states who often resort to relying on foreign imports. While pipelines are the preferred method of transporting natural gas and oil to consumers across the country, our energy infrastructure network and storage capacity are currently overwhelmed as global demand for crude oil has temporarily decreased during the pandemic.

The article also highlights the legislation is costing Texas plants three times as much to ship oil to east coast refineries compared to Canadian refineries, which should raise some red flags. Repealing J.A. would be a big step in the right direction for U.S. energy success.

Rio Grande Guardian recently published an op-ed by Patrice Douglas, strategic advisor to the GAIN Coalition and former chairman of the Oklahoma Corporation Commission, highlighting the importance of investing in natural gas infrastructure given the fuel’s role in lowering carbon emissions and providing a reliable source of affordable energy for Americans.

With the 2020 election coming approaching, environmental conservation is a top priority for many Americans. Natural gas provides a low emission alternative to coal and is used by millions of Americans in everyday life. However, Douglas writes that regulatory hurdles and challenges to energy infrastructure development can slow progress, limiting American energy capabilities in the process:

“While oil pipelines have slowly caught up with production, natural gas infrastructure is still lagging. As a result, flaring, or the burning off of excess gas, has reached near-record levels of 650 million cubic feet of natural gas per day. Had there been the necessary infrastructure to transport the gas to consumers, that amount would have been enough to supply nearly 4 million homes for a single day. In an effort to alleviate such constraints, a number of companies have committed to building natural gas lines to facilities along the Gulf Coast to get the product to consumer markets in the United States and to allies abroad – but will still take years before coming online.

Furthermore, the need for natural gas infrastructure extends beyond the Permian. For New England residents, flared off natural gas could have gone far in lowering energy prices, or decreasing reliance on imported fuel. In fact, due to infrastructure constraints in the region, Massachusetts has resorted to importing natural gas from Russia each of the past two winters. Even with that additional supply, millions in the region rely on heating oil to heat their homes – a notably less environmentally-friendly alternative to natural gas.”

We should not resort to relying on Russian natural gas considering the U.S. has produced record amounts from areas like the Permian Basin in Texas and the Marcellus in Pennsylvania. We need to be smart thinkers when considering how to meet American energy needs – and that starts with streamlining energy infrastructure development and the regulatory process. We must be considerate of emissions, cost to Americans, and cooperative when making policy choices regarding the future of American energy.  

What would you do with $3 million dollars? The town of Mandan, North Dakota is planning to invest in renovations for local infrastructure projects thanks to a generous $3 million dollar donation from Energy Transfer received this past year. KX Net reported that the town will revamp the Mandan Morton Public Library and Dykshoorn Park.

Speaking on the donation, Executive Vice President and Chief Human Resources Officer of Energy Transfer Chris Curia said:

“This contribution is part of our commitment to be a valued business partner in North Dakota. We are grateful for the support we received from the people of Mandan throughout the construction of the Dakota Access pipeline, and we wanted to find a way to benefit residents of all ages throughout the county.”

It is encouraging to see energy companies like Energy Transfer invest in local communities they conduct business in. Donations such as this one can dramatically improve the daily lives of individuals in small communities such as Mandan.

Jackie Hawes, Mandan Morton Public Library Director, is looking forward to the additions to the library as a result of the donation. Hawes said,

“We currently have a lot of problems here in the existing building or a lot of issues. And so this is pretty much going to address all of those issues that we have. Also, the design is definitely future-focused and so as the community grows, the library may need to go as in the future.”

The donation will create a more inviting workspace for the Mandan Morton Public Library and allow Dykshoorn Park to host more community-bonding activities such as farmers markets, concerts, and additional events. Hopefully more businesses can continue to donate to communities they work in and support local growth and development projects going forward.