Blog

A Look at the Keystone XL Export Argument

2012-02-09T18:49:41+00:00

One of the more ridiculous arguments against the Keystone XL is that the pipeline is really just about exporting crude oil and petroleum products to China. Let’s go to the facts:

Here’s a breakdown of the U.S. crude oil supply in 2011 – using data from the Energy Information Administration (EIA). We see that 99.7 percent of the crude oil produced or imported into the U.S. was processed here. We simply do not export crude oil in any significant way. Nor is that likely to change.

According to the EIA, increased imports of Canadian oil sands crude oil would likely replace declining heavy crude imports from Mexico and Venezuela and Ecuador (the two OPEC members in Latin America). Heavy crude imports from those countries are 900,000 barrels per day lower than their 2005 levels and are projected to decline by an additional 540,000 barrels a day by 2020 and 845,000 barrels a day by 2035. Because of these declines the additional Canadian crude arriving in the U.S. Gulf via the Keystone XL pipeline wouldn’t be likely to create a surplus. In the review of the Keystone XL project the EIA concluded that “Without a surplus of heavy oil in PADD III, there would be no economic incentive to ship Canadian oil sands [crude] to Asia via Port Arthur.”

So like I said in the beginning, the idea that we will be exporting en masse the crude oil transported by the Keystone XL pipeline is a particularly ridiculous bit of politics.

Now on to the petroleum products. What are those, anyway?

Refineries manufacture a variety of products from a barrel of crude oil – gasoline, diesel, heating oil, bunker fuel, etc. and they need markets for every product they produce. We are our own best customer, but the U.S. has a long history of exporting certain petroleum products and importing others to balance refinery outputs and global demand. Most of the products exported are not on-road fuels like gasoline and diesel (ULSD). In fact, exports represent just 8 percent of the motor gasoline and ULSD produced in the U.S.

Any petroleum products exported are still refined in U.S. refineries by U.S. workers, and the U.S. benefits from an improved balance of trade from any and all exports such as grains, steel, machinery and ethanol.

Stopping refiners from exporting products with low U.S. demand will have little positive effect and will threaten their ability to remain competitive globally. U.S. refineries need a global trade in petroleum products to balance supplies and preserve U.S. refining jobs. And having a stable, secure source of crude oil, such as from Canada via the Keystone XL, enhances U.S. energy security regardless of how much may ultimately be exported as product, because those exports can be reduced or eliminated in times of crisis.

Which brings us to President Obama’s recent State of the Union address, in which he touted domestic manufacturing, secure energy and exports as key building blocks for the future. Those are the words. Meanwhile, down the street members of the president’s own party are pushing an effort to curb exports by a domestic manufacturer that would result in less energy security. These are the actions.

This political dance of promising one step forward while taking two steps back has got to stop – we need to be moving forward.

Forestalling a ‘Regulatory Avalanche’

2012-02-09T18:14:46+00:00

John Felmy, API’s chief economist, talked to reporters this week about a looming federal “regulatory avalanche” that could impact the production of oil and natural gas from shale – and reduce the president’s State of the Union call for increased domestic production to hot air:

“On the one hand we have President Obama saying he supports natural gas development. … Within weeks of making this statement, the administration has done just the opposite, announcing several plans to further constrain development, reducing opportunities to produce our domestic supply of oil and natural gas and create and support these American jobs. We have reached a point where our industry’s efforts to produce the natural gas the president says he wants are being overwhelmed by an avalanche of acronyms. EPA, DOE, DOI, USDA, DOD, DOT, SEC, HHS – eight federal agencies in all – are looking at hydraulic fracturing.”

Felmy said the chilling effect on decision-making and investment isn’t dependent on concrete regulatory proposals:

“Some of these investigations or studies have no specific timeline, yet information continues to be shared with the press about how further studies and stricter regulation are being prepared. All this adds to a state of uncertainty and generates fear for which there is no evidence.”

Fear = potential delay, which has a tangible effect on energy development and job creation. Felmy:

“Every day that goes by that we don’t develop this resource is another day that someone doesn’t get a job.”

A couple of other takes on the Felmy briefing:

Oil & Gas Journal:

“This is a prospective regulatory avalanche. Right now, there’s no transparency or indication of prospective outcomes,” Felmy continued. “If they don’t coordinate and aren’t transparent, the results could be negative for American energy.” Felmy said API has no quantitative estimate of possible economic consequences because so many federal departments and agencies have entered the federal oil and gas regulatory picture. “We don’t know the actual inner workings, only that all these agencies are involved,” he said. “Some have had regulatory coverage for a long time. Others haven’t. Are they coordinated? Do they have timelines? That’s our main concern.”

The Oklahoman:

“We are calling on Congress to halt the administration drive toward over-regulation of hydraulic fracturing and commercial oil and natural gas production,” he said. Felmy said the industry is ready to work with the administration to ensure the U.S. becomes more energy self-sufficient as safely as possible."

‘Poisoned’ Politics, the Keystone XL and the National Interest

2012-02-08T17:06:55+00:00

New York Times op-ed columnist Joe Nocera’s piece on the “poisoned” politics of the Keystone XL pipeline decision is a must read. Better get to it right away, before some of the folks posting comments to Nocera’s column descend on the Gray Lady with pitchforks and battle axes, demanding that the article be pulled down. Nocera:

Surely, though, what the Keystone decision really represents is the way our poisoned politics damages the country. Environmental concerns notwithstanding, America will be using oil — and lots of it — for the foreseeable future. It is the fundamental means by which we transport ourselves, whether by air, car or truck.

Nocera’s point about oil (and natural gas) is spot on. According to the Energy Information Administration, oil and gas will supply most of our energy past 2030. More Nocera:

And here is Canada, a staunch American ally that has historically sold us virtually all of its crude exports. Over the past two decades, energy companies have invested tens of billions of dollars in the tar sands, so much so that Canada now ranks No. 3 in estimated oil reserves. Along with the natural gas that can now be extracted thanks to hydraulic fracturing — which, of course, all right-thinking environmentalists also oppose — the oil from the Canadian tar sands ought to be viewed as a great gift that has been handed to North America. These two relatively new sources of fossil fuels offer America its first real chance in decades to become, if not energy self-sufficient, at least energy secure, no longer beholden to OPEC. Yet these gifts have been transformed, like everything else, into political footballs.

Next Nocera focuses on the Keystone XL’s opponents:

As it turns out, the environmental movement doesn’t just want to shut down Keystone. Its real goal, as I discovered when I spoke recently to Michael Brune, the executive director of the Sierra Club, is much bigger. “The effort to stop Keystone is part of a broader effort to stop the expansion of the tar sands,” Brune said. “It is based on choking off the ability to find markets for tar sands oil.” This is a ludicrous goal. If it were to succeed, it would be deeply damaging to the national interest of both Canada and the United States. But it has no chance of succeeding. Energy is the single most important industry in Canada. Three-quarters of the Canadian public agree with the Harper government’s diversification strategy. China’s “thirst” for oil is hardly going to be deterred by the Sierra Club. And the Harper government views the continued development of the tar sands as a national strategic priority.

Back to Nocera’s first point. The politics of obstructing the Keystone XL – as well as the underlying opposition to a stronger energy relationship with Canada that fully utilizes its oil sands – is hurting the United States. The toll is in lost jobs and in an energy future that’s less secure, because the oil will come from less stable parts of the world.

Canada, Nocera’s writes, at least knows where its national interests lie. Unfortunately, under current policy, the United States doesn’t. Here’s former Obama National Security Advisor Gen. James Jones, talking a couple months ago about the Keystone XL impasse:

"If we get to the point where we cannot bring ourselves to do what is in our national interest, then we are clearly in a period of decline, in terms of our global leadership and our ability to compete.”

It’s what worries Joe Nocera. It’s what should worry us all.

Survey Says, Misinformation on Energy, Keystone XL

2012-02-07T22:00:55+00:00

Politico reports (subscription required) this week on a new poll that shows a political edge for the president on energy and jobs – based on a memo from pollster/strategist Geoffrey Garin and Hart Research Associates colleague Allan Rivlin. Key points:

On addressing domestic energy, respondents trust President Obama over congressional Republicans 48 percent to 38 percent
On the Keystone XL pipeline, of respondents who said they hadn’t heard the arguments, 43 percent said the president was wrong to reject the pipeline while 32 percent agreed with him. Among independents, the split was 39 percent disagreeing with the president, 34 percent supporting.
Of respondents who said they had heard both sides of the pipeline argument, the president was supported by 47 percent, opposed by 36 percent.

Most interesting is the opinion shift represented by points two and three above. Politico:

The best way to get voters to back Obama’s decision: “Involve the risk of a toxic oil spill over an aquifer that provides fresh water and water for farming to one-third of the United States — a concern that is compounded by questions about TransCanada’s safety record and the number of spills that have occurred in the first year of the Keystone One pipeline,” according to the memo.

Politico again:

Garin and Rivlin also argue that there is a “sharp decline in the salience of the proponents’ case” for the pipeline regarding how it impacts U.S. energy security “as voters learn the likelihood of the refined oil being shipped off for export.”

And:

The memo also argues there is “significant mistrust of both the oil industry and the Republicans in Congress,” and their arguments for the pipeline are undermined when voters are informed that the claims of jobs tied to the project “are grossly exaggerated.”

This is not to suggest that Garin conducted a push poll, in which respondents were nudged toward a particular outcome with information, but to say that it’s clear how some are trying to frame the debate over energy and the president’s policies with misinformation. So let’s look at the facts:

Spills – The United States has thousands of miles of pipelines delivering crude oil and refined products. The spill rate has fallen nearly 60 percent since 2001 to less than one per 1,000 miles of pipeline. Pipelines already cross the Ogallala aquifer, a point of concern in the Keystone XL debate that Nebraska research hydrogeologist Jim Goeke discusses in detail here.

TransCanada’s safety record – Keystone XL builder TransCanada currently operates the Keystone pipeline that passes through Nebraska (and the Ogallala aquifer). The company says the pipeline itself hasn’t suffered any leaks. A dozen recorded spills have come from pumping stations and 10 of the 12 measured between 5 and 10 gallons, the company says. The Keystone XL would feature state-of-the-art materials and computerized monitoring that would let the company locate and isolate potential problems within minutes.

Exports – We’ve written about this here and here. The exports argument, whether lobbed by a sitting congressman or activists, shows how little some know about U.S. refining, the global market and balance of trade. Basically, more than 90 percent of the on-road transportation fuel refined in the United States is for use in the United States. The remaining less than 10 percent consists primarily of heavier products that aren’t in high demand here. As for markets and trade, the export of refined U.S. petroleum products helps preserve well-paying U.S. refining jobs and improves the country’s trade balance as we buy crude and then sell higher-value refined products.

Jobs – TransCanada details the 20,000 U.S. jobs the Keystone XL would create during its construction phase, here. The Canadian Energy Research Institute says up to 500,000 U.S. jobs could be created by 2035 through full development of Canada’s oil sands, which includes the Keystone XL’s construction. Working Americans know the value of these jobs. Check this video of Laborers’ International Union of North America General President Terry O’Sullivan talking about the job potential of the Keystone XL.

Energy Works in Minnesota

2012-02-06T23:02:10+00:00

For the state of Minnesota, the oil and natural gas industry currently means:

More than 117,000 jobs – with an average salary of more than $67,000 for non-gas station oil and natural gas employees.
$5.8 billion contributed to labor income.
$11.1 billion contributed to the economy.

With sensible energy development and sound tax policies, here’s what the oil and gas industry could mean to Minnesota:

796 additional jobs created by 2015.
1,675 additional jobs created by 2020, supported by oil and gas industry operations in the state.

Energy works in Minnesota, with the men and women of the oil and natural gas industry playing a critical role in that state’s economy. See more, here.

Energy Works in Colorado

2012-02-06T22:58:01+00:00

Here’s what the oil and natural gas industry currently means to the state of Colorado:

$20.5 billion contributed to the economy.
$10.2 billion contributed to labor income.
More than 161,000 jobs provided or supported by the industry – with an average salary for non-gas station oil and natural gas employees of nearly $98,000.

Sound good? This is better – with smart energy development and the right tax policies, the industry could mean this for Colorado:

An additional 61,131 jobs created by 2015 and 88,283 by 2020.
An average of $233 million in new, additional revenue for the state, generated by the industry every year through 2030.

That’s enough to pay for the state’s general fund contribution to the operating budgets of 12 of 22 departments every year – without using additional taxpayer dollars.

Energy works in Colorado, with the men and women of the oil and natural gas industry playing critical roles. See more, here.

Blogger Conference Call – SOTU Follow Up

2012-02-06T18:55:40+00:00

Last week, API hosted a blogger conference call to follow up on President Obama’s State of the Union remarks. API Senior Tax Policy Advisor Brian Johnson and Chief Economist John Felmy laid out steps that can move the country beyond pronouncements to energy policies that will help us meet rising global energy demand. From Felmy’s opening statement:

“I know the conventional wisdom in Washington is that you can’t get anything done in an election year. Yet on some key energy issues, the president actually could get a lot accomplished that would advance his call for more American oil and gas.”

So, what can be done this year? The president could approve the Keystone XL pipeline, take steps to reverse declining oil and natural gas activity on federal lands in the West, add more offshore areas to the federal government’s five-year drilling lease plan, restrain the regulatory hand of government and end the call for increased taxes on oil and natural gas companies. With the right policies and leadership, the oil and natural gas industry could produce more jobs, more energy and more revenues to the government.

Increasing taxes on the industry would have the opposite effect. During the call, Johnson provided some clarity to the president’s rhetoric on “taxpayer subsidies”:

“There is clear difference between a credit, a deduction and mechanisms of cost recovery. A credit we would consider a subsidy. A credit subsidizes activity. It takes money from ‘Taxpayer A’ and gives it to ‘Taxpayer B’ for the purposes of completing a policy objective. Our industry does not currently receive one targeted taxpayer credit in the tax code. … We receive the exact same deductions and cost-recovery mechanisms that any other industry does. Our ability to recover labor costs through (intangible drilling costs deduction), which has been in the code since its inception, is no way a loophole or a special giveaway.”

For more information, take a look at the full transcript below.

Political Theater on Refined Exports

2012-02-03T20:48:36+00:00

One of the flimsier arguments deployed against the Keystone XL pipeline is that the Canadian oil sands crude it would deliver to U.S. refiners would be for export. We addressed that here, and others have chimed in as well. Basically, the United States doesn’t import crude and then turn around and export it. And the fact is the limited amount of finished products that are exported is good for U.S. jobs, good for U.S. trade.

Sound economic reasoning apparently is no barrier to a group of House Democrats who’re offering legislation that would block the export of oil and refined products made from the crude delivered by the Keystone XL (assuming the pipeline is built).

Passing a legislative wand over a bad idea doesn’t improve it. Once again, the facts:

More than 90 percent of on-road transportation fuel refined in the United States is for use in the United States.
The less than 10 percent of on-road motor fuel exported consists primarily of heavier products that aren’t in high demand here, including diesel, residential fuel oil and petroleum coke.

Many of the Gulf Coast refineries not only are among the best in the world at processing heavier crudes like oil sands crude, the crude imports from Canada will likely replace declining heavy crude imports from Venezuela and Mexico, according to the Energy Information Administration. Here’s the Energy Policy Research Foundation’s Lucian Pugliaresi, writing for the Wall Street Journal:

“Canadian crude is perfectly matched to the complex and expensive refinery technology of many Gulf Coast refineries. The production of refined petroleum products is a tough, low-margin business operating in an environment of stiff foreign competition, flat domestic demand, congressional mandates for exotic biofuels, and an avalanche of existing and proposed environmental regulations. U.S. Gulf Coast refiners are now well positioned because they have access to growing markets in Latin America, and have made multibillion dollar investments in advanced processing technology that permits them to run lower-cost crudes, such as blended bitumen from the oil sands in Alberta.”

Each of the markets for the exported products is important to balance supplies and preserve U.S. refining jobs. Energy blogger Robert Rapier sums it up well:

“Consider the situation. Gasoline demand in the U.S. has fallen for several years via a combination of high prices killing off demand and the escalating ethanol mandate. Refiners can respond by shutting down more refineries and laying off workers, or they can seek other markets for their product. … So we are importing oil from Mexico — the source of over 10 percent of our oil imports — and turning around and exporting back to them the higher value finished products. It creates jobs and tax revenue here in the U.S. That sounds like a bad deal for Mexico and a good deal for the U.S. So I don’t understand why people are upset. We could choose to stop selling gasoline to Mexico, in which case we could import less oil from them. But since gasoline is worth more than oil, that doesn’t seem like a very good business proposition.”

It’s not, which is why the no-export legislation being floated by a few Democrats is about political grandstanding, not sound economics – as unwise as ending U.S. exports of wheat or other commodities that are in demand on the global market.

Instead of engaging in political theater, these lawmakers should be listening to the American people, who polling shows overwhelmingly support the Keystone XL pipeline’s construction and the benefits it would bring in jobs and energy.

Earnings Facts, Perspective

2012-02-03T16:07:18+00:00

For a better understanding of oil and natural gas industry earnings, take a look at a pair of blog posts by ExxonMobil’s Ken Cohen (here and here), effectively countering criticisms of the company’s earnings by those who also call for new energy taxes.

Earnings:

2011 global earnings: $41 billion.
2011 global revenues: $486.4 billion – from which costs (about $413.1 billion) and global income taxes (about $31 billion) are subtracted, leaving about $41 billion.

Perspective: Though ExxonMobil’s earnings are large, it earned only about 8.5 cents for every dollar of global revenue, which is less than half the earnings per dollar of sales for companies selling smart phones, computers, beverages and other commodities.

Taxes:

2011 U.S. tax expenses: $12.3 billion

Perspective: Over the past five years, Cohen notes, ExxonMobil’s U.S. tax expense was $57 billion -- $18 billion more than the company earned in the United States over the same period. In 2011, ExxonMobil’s $12.3 billion in tax expenses exceeded its U.S. earnings of $9.6 billion. The chart below shows that averaged over 2005-2009, ExxonMobil’s effective tax rate topped 41 percent, topping a number of other business sectors.

Who benefits?

2011 distributions to shareholders: $29 billion (through dividends and share purchases).

Perspective: As Cohen notes, more than 85 percent of ExxonMobil’s shareholders live in the U.S. Stock ownership includes individuals, retirement and public pension funds. The company’s ownership no doubt mirrors the results of this Sonecon consulting firm study that found nearly 50 percent of all oil and natural gas industry corporate shares are held by public and private pension and retirement funds, including 401(k)s, and IRAs. Individual investors own 20 percent, while financial institutions and asset management companies own 27 percent. That's 97 percent. Less than 3 percent is owned by corporate officers and board members. More on who owns “Big Oil” here.

Bottom line: ExxonMobil works hard for its money, as do other oil and natural gas companies, an industry that supports 9.2 million jobs and pays more than $86 million a day to the U.S. Treasury in taxes, rents and royalties. They’re willing to do more and could, with a set of pro-energy development policies that could create 1 million new jobs by 2018 and $800 billion in additional government revenue by 2030.

Energy Riches: Oil Shale

2012-02-02T16:57:15+00:00

Great post on The Hill’s Congress Blog by API’s Emily Kennedy, bringing attention to another vast U.S. resource: oil shale.

This is oil derived from sedimentary rock that contains a solid material (kerogen) that converts to liquid oil when heated. We’ve got enormous deposits in Colorado, Utah and Wyoming, with estimates that up to 800 billion barrels could be recoverable – almost three times Saudi Arabia’s proven oil reserves. Kennedy:

“The president is right: an all-of-the-above approach is the best path for securing America’s energy future. In oil shale, the United States has another vast energy resource that can’t be dismissed – one that would be best developed by industry and the marketplace, guided by clear policies and a stable regulatory regime.”

Hydraulic Fracturing Workshops Launched

2012-02-01T22:09:51+00:00

This week API is launching a series of hydraulic fracturing workshops in shale energy states to continue the conversation on industry guidelines and standards that will help lead to safe, efficient production of this valuable resource. API President and CEO Jack Gerard:

“These workshops emphasize the importance of our standards and certification programs, demonstrate how states are successfully regulating hydraulic fracturing and examine where we can improve. These are serious issues and the industry is committed to moving forward with responsible development of our nation’s energy from shale.”

API began the dialogue with an inaugural workshop in Pittsburgh attended by nearly 300 energy industry officials from around the country. Panel discussions emphasized the need for excellence in the production of energy from shale, a vast American resource that’s being unlocked by advances in hydraulic fracturing and horizontal drilling technologies. The Energy Information Administration estimates that by 2035, 70 percent of the country’s natural gas will be produced by hydraulic fracturing. The shale industry supports more than 600,000 jobs.

Workshops are planned in Raleigh, N.C.; Annapolis, Md.; Trenton, N.J.; Charleston, W.Va.; Columbus, Ohio; Lansing, Mich.; Albany, N.Y.; Fort Worth, Texas; Oklahoma City; San Antonio; Denver; Bismarck, N.D.; Billings, Mont.; and Cheyenne, Wyo. The workshop series began earlier this week in Little Rock, Ark. Gerard:

“Hydraulic fracturing is critical to our nation’s energy and economic future. The U.S. has the second-largest known reserves of natural gas in the world, and the oil and natural gas industry is leading the way in safely developing these resources in a way that is creating jobs, providing greatly needed government revenues, and increasing our energy security.”

The emphasis on industry guidelines and standards coincides with new National Ground Water Association (NGWA) recommendations that align with industry’s efforts – including chemical disclosure, clear standards on well construction, and best management practices and regulations to protect the environment. NGWA is the world’s largest association of groundwater professionals.

More Evidence of the Keystone XL Consensus

2012-02-01T17:19:36+00:00

New polling on the Keystone XL pipeline shows consensus in America isn’t always elusive. The United Technologies/National Journal Congressional Connection survey shows 64 percent of those polled believe the Keystone XL should be built:

“Even constituencies that are usually more likely to choose protecting the environment over promoting economic growth are, at this point, supportive of the project. A majority of Democrats, 51 percent, said they support building the pipeline, while just one-third opposed it. Sixty percent of those who live in urban areas said they back building the pipeline. Even 60 percent of respondents ages 18 to 29 support it.”

Here’s the National Journal’s chart, showing the different demographic splits:

Those are eye-opening numbers – consistent with a Rasmussen Reports poll earlier this year – that span the breadth of America in terms of age, sex, race, education, party affiliation and income. They’re numbers that should persuade President Obama to reconsider his decision to put off the $7 billion, shovel-ready project until after this fall’s elections. National Journal:

“The overwhelming majority of Americans surveyed—64 percent—agreed that building a pipeline from Canada to the United States would ease America’s dependence on Mideast oil and create jobs, the poll showed. Just 22 percent of respondents agreed with opponents of the controversial pipeline, who fear its environmental impact, and 13 percent were undecided.”

The president’s State of the Union address last week included a call for more domestic oil and natural gas production. The Keystone XL would be an integral part of that, getting American resources – including oil sands crude from Canada and crude from the increasingly productive Bakken region in North Dakota – to U.S. refiners.

Delaying the pipeline delays 20,000 U.S. jobs that would be created during the project’s construction phase. It delays nearly 500,000 U.S. jobs that could be created by 2035 under a strategy that fully utilizes Canada’s oil sands. It delays the more than 800,000 barrels of oil per day that the pipeline could deliver – delaying an energy-security scenario in which 100 percent of our liquid fuel needs could be supplied domestically and from Canada by 2024. Most pointedly, as the Congressional Connection poll shows, delay keeps the White House at odds with most Americans.

Why 75% is an ‘F’

2012-01-31T21:32:37+00:00

“…tonight, I’m directing my administration to open more than 75 percent of our potential offshore oil and gas resources.” - President Obama 2012 State of the Union

So, 75 percent – that must be good, right? Well, not exactly. Let’s take a look at what the Proposed Outer Continental Shelf Oil & Gas Leasing Program 2012-2017 actually provides:

The president wants you to focus on the two numbers on the right, that 77 percent and 78 percent of our potential resources are available. But the more important number is on the left, showing that only 13 percent of our total outer continental shelf (OCS) acreage is even open to development. To understand why we need to understand what those oil and natural gas numbers represent – and what they don’t.

What they represent are the undiscovered, technically recoverable oil and natural gas resources of America’s OCS. Undiscovered means just that: resources that haven’t been found yet but are believed to exist because of past exploration upon which data extrapolations are made. Because these resources haven’t been found, the numbers in the table above are only estimates. But some estimates are better than others. Why? Well, mostly because some estimates have more data behind them. Why? Because, it turns out, the best way of finding resources is by … looking for them. Or as the Minerals Management Service (MMS) put it in 1996: “Actual drilling operations are necessary to confirm the presence of oil or natural gas.”

That’s why the more important number in the above chart is that in the president’s proposed five-year plan only 13 percent of the OCS is open to actual drilling operations.

For example, here is a chart showing government assessments in 1996, 2006, and 2011 of undiscovered technically recoverable oil resources in the OCS.

Alaska? Flat. Atlantic? Flat. Pacific? Flat. Gulf of Mexico? Nice.

Now let’s look at cumulative production of that same period of time:

As you can see there is a strong correlation between being able to produce oil and the potential amount of oil available. Why? Because to produce oil you need to find oil, and to find oil you need to explore, and when you explore you create data and the more data you have the better your estimates of oil yet to be found.

So 75 percent is a nice number for speeches, but a policy of putting 87 percent of the OCS off-limits not only limits our current and future production, it also leaves us guessing as to our potential.

The Myth of Oil & Gas Taxpayer Subsidies

2012-01-30T21:15:06+00:00

In the video below API tax policy advisor Brian Johnson explains why rhetoric about oil and natural gas companies benefiting from taxpayer subsidies is just that, rhetoric.

Creating much of the confusion is the way terms like “subsidies” and “deductions” get used interchangeably. Does the oil and natural gas industry benefit from taxpayer subsidies? “Nothing could be further from the truth,” Johnson says. Take a look:

Energy Works in Florida

2012-01-27T20:18:52+00:00

Here’s what the oil and natural gas industry currently means to the state of Florida:

More than $18 billion contributed to the economy.
More than $10 billion contributed to labor income.
More than 230,000 jobs provided or supported by the industry, with an average salary for non-gas station oil and natural gas employees of $61,388.

Even better – here’s what the oil and natural gas industry could mean to Florida with sensible energy development and sound tax policies:

More than 84,000 additional jobs created by 2015 and more than 131,000 additional jobs created by 2030.
An average of $1.3 billion of new, additional revenue to the state every year through 2030.

Let’s put that second figure in perspective: An additional $1.3 billion each year would be enough to cover three-quarters of Florida’s annual general fund contribution to every state public university – without using additional taxpayer dollars.

Energy works in Florida, with the men and women of the oil and natural gas industry playing a critical role in that state’s economy. See more, here.

Just The Facts: No Targeted Oil & Gas Tax Credits

2012-01-27T20:09:22+00:00

Oil and natural gas opponents think they’ve got some ammunition in a NBC News/Wall Street Journal poll from nearly a year ago showing that 74 percent of Americans support “Eliminating tax credits for the oil and gas industries.”

One problem with the February 2011 poll: There are no targeted tax credits in the Internal Revenue Code currently being used by the oil and natural gas industry.

The inconvenient truth for industry opponents is that contrary to what some politicians and pundits have said oil and natural gas companies currently aren’t receiving any unique tax credits or deductions.

Since its inception, the U.S. tax code has let corporate taxpayers recover costs and be taxed only on net income. These cost-recovery mechanisms shouldn’t be confused with tax credits or “subsidies,” which are direct government spending.

That’s it. Unfortunately, as last year’s NBC/WSJ poll shows, many Americans believe these subsidies exist. It’s testament to a misinformation campaign relentlessly (and disingenuously) waged by those who want to raise energy taxes, claiming oil and natural gas companies need to pay “their fair share.” This despite the fact the industry pays $86 million a day to the U.S. Treasury in rents, royalties and income tax payments, with an effective income tax rate that averaged 41.1 percent in 2010 (compared to 26.5 percent for other S&P Industrial companies).

What Energy Progress Looks Like

2012-01-26T20:03:47+00:00

Interesting piece by the Washington Post’s Robert Samuelson, analyzing America’s energy future in light of new government figures showing increased domestic oil and natural gas production:

“Despite big gains in energy efficiency and increases in ‘renewables’ (wind, solar, biofuels), fossil fuels will remain the mainstay of America’s energy system for years. In 2010, fossil fuel represented 83 percent of U.S. energy consumption, with oil at 37 percent, natural gas at 25 percent and coal at 21 percent. Although total energy use grows only 10 percent between 2010 and 2035, the fossil-fuel share stays high at 77 percent in 2035. Oil is 32 percent, natural gas 25 percent and coal 20 percent.”

Here’s a chart developed from data in the Energy Information Administration’s early release of its 2012 Annual Energy Outlook, in which EIA projects that U.S. liquid fuels supplied by global sources other than Canada (orange) will decrease between now and 2030:

Now, take a look at this chart – specifically, at what happens to imports from sources other than Canada:

They disappear! It’s not magic; it’s not a mistake. By 2024, the United States could see 100 percent of its liquid fuel needs supplied domestically (including biofuels) and from Canada. Here’s the how:

Open access to federal lands and offshore areas that currently are off-limits to oil and natural gas production – reversing current policy that has resulted in a decline in federal acres leased for development and decreased offshore production.
Build the Keystone XL pipeline, linking Canada’s oil sands with U.S. refiners, delivering up to 830,000 barrels of oil per day from a neighbor and ally.
Fully utilize Canada’s vast oil sands resource, with the Keystone XL and other pipelines.

It’s within our reach. All we need are the policies and leadership to make it happen. Samuelson:

“What does the future hold? It may be better than you think. … The energy outlook isn’t half bad. With common sense, it could be even better.”

The Empire State’s Divide

2012-01-26T18:32:29+00:00

The clash between rural New York state mineral rights owners and opponents of natural gas development comes through in a new short film, “The Empire State Divided,” by the Foundation for Land and Liberty. The 22-minute film is divided into three parts. Check out part 1 below and see all three here.

The film was produced by Karen Moreau, the foundation’s former president who earlier this month was named executive director of the New York State Petroleum Council, a division of API. The film depicts economic and political conditions in the state’s southern tier, where struggling farmers and job-starved communities see the potential benefits of natural gas production being kept out of reach by the state’s moratorium on hydraulic fracturing, which is strongly backed by natural gas opponents.

Meanwhile, in neighboring Pennsylvania, natural gas development is creating jobs and fueling local economies as that state’s farmers reinvigorate their operations with lease and royalty payments paid by energy companies.

New York waits, and the film shows the hydraulic fracturing moratorium hurting people who can least afford it. “There are no jobs,” says Mark Galasso, businessman and mayor of Cobleskill, N.Y. “When people leave high school, they leave New York state. There’s no core industry here anymore.”

Unfortunately, as the film notes, what was a discussion of reasonable ways to regulate natural gas production in New York has turned into an effort to ban production altogether – a not-in-my-backyard movement is now a not-in-your-backyard-either movement. Moreau: “There’s something worse than not having money in your pocket. There’s something worse than not having a nice view. And that is having no hope.” Worth a look.

Energy and the State of the Union

2012-01-25T22:05:57+00:00

There were lots of energy mentions in the president’s State of the Union speech, and we appreciate every one of them because they likely will stimulate increased discussion of energy issues in our country. In that way we join the president in trying to make more Americans aware of the country’s stake in energy – in terms of jobs, economic growth and security.

We agree with a number of things the president said. Indeed, the men and women of America’s oil and natural gas companies already have been working in many of the areas mentioned by the president. And they’re willing to do more.

The president said:

“This country needs an all-out, all-of-the-above strategy that develops every available source of American energy …”

Absolutely. The United States will need all available energy sources in the future – oil and natural gas, coal, nuclear, biofuels, renewables and more. We should start by acknowledging that, according to the Energy Information Administration’s most recent analysis, oil and natural gas provide about 62 percent of the energy we use today and will supply about 57 percent of our energy in 2035. No real discussion of America’s energy present and future can diminish or omit the role to be played by oil and natural gas.

The president:

“Over the last three years, we’ve opened millions of new acres for oil and gas exploration, and tonight, I’m directing my administration to open more than 75 percent of our potential offshore oil and gas resources. Right now, American oil production is the highest that it’s been in eight years. That’s right – eight years. Not only that – last year, we relied less on foreign oil than in any of the past sixteen years.”

Increased domestic oil and natural gas production is great news, dropping imports to their lowest level since 1995. Going forward, let’s build on the sound decisions and investments made years ago that resulted in today’s production increases. Start by opening access to areas currently off-limits to development – in Alaska, the outer continental shelf and the West, where leased federal acreage has fallen steadily since 2008. With the right access policies, the oil and natural gas industry could create more jobs, more oil and natural gas and more revenue for government. By 2026, the United States could see 100 percent of its liquid fuel needs supplied domestically and from Canada.

The president:

“We have a supply of natural gas that can last America nearly one hundred years, and my administration will take every possible action to safely develop this energy. Experts believe this will support more than 600,000 jobs by the end of the decade. And I’m requiring all companies that drill for gas on public lands to disclose the chemicals they use. America will develop this resource without putting the health and safety of our citizens at risk.”

Again, the president is on target. Because of a revolution in hydraulic fracturing and horizontal drilling techniques, the U.S. is experiencing a revolution in producing natural gas from shale and other subterranean formations. EIA says shale gas and tight gas, both produced through “fracking,” will account for 70 percent of our natural gas supply by 2035.

Industry already is committed to safety and responsible natural gas development, reflected in field-tested operating standards and cooperation with state and local officials in building effective regulatory regimes. And, companies are on top of the transparency the president called for in hydraulic fracturing operations.

Natural gas and oil developed through fracking is driving economic booms in North Dakota, Pennsylvania, Texas and other states, which the president’s Jobs Council recently noted. There’s a bonus, too. According to a recent study, affordable and reliable supplies of natural gas will help the reinvigoration of U.S. manufacturing the president wants, as companies that use natural gas for energy or as a feed stock sprout and expand.

That’s all great, but we need to keep the ball rolling. Certainly, the president recognizing natural gas’ dynamic potential is important. He can help that potential become reality – with presidential action to curb the chilling effect on investment and development resulting from eight different federal agencies exploring new regulatory layers.

The president:

“Of course, the easiest way to save money is to waste less energy.”

Agreed, which is why industry has made efficiency a core value, pioneering co-generation technology and techniques from oil field to the refinery that allows us to use about half as much energy for every dollar of GDP today than we did in 1980.

The president:

“Building this new energy future should be just one part of a broader agenda to repair America’s infrastructure. So much of America needs to be rebuilt. … There’s never been a better time to build, especially since the construction industry was one of the hardest-hit when the housing bubble burst.”

Infrastructure means direct jobs in construction-related activity, jobs for supporting industries and services and economic growth – which is why the president should change course and approve the Keystone XL pipeline, the largest shovel-ready infrastructure project around. The Keystone XL could create 20,000 U.S. jobs during its construction phase and be an integral part of a strategy to fully utilize Canada’s oil sands, supporting nearly 500,000 new U.S. jobs by 2035.

The president:

“Finally, none of these reforms can happen unless we also lower the temperature in this town. We need to end the notion that the two parties must be locked in a perpetual campaign of mutual destruction; that politics is about clinging to rigid ideologies instead of building consensus around common-sense ideas.”

Amen. Too much of the energy debate has been dominated by the hyper-partisanship the president notes. Let’s have a debate that’s based on fact, not ideological agendas, straw-man arguments and caricature-like depictions. API President and CEO Jack Gerard:

“We need our president, our leaders in Congress and state and local officials to talk about the energy choices we face, the challenges and the opportunities ahead for us, and a vision for our country’s energy future. … An electorate that is educated on energy issues will demand of all candidates, all offices, a commitment to honest, common-sense discussion of how we can achieve energy security.”

As the president said, when Americans apply themselves, America wins. That’s especially true about energy and the policy choices an energy-rich nation can make now and for the future.

Graphically Speaking: Producing Oil Offshore

2012-01-25T16:10:44+00:00

Yesterday, we looked at the time it takes to produce oil on federal lands, now let’s look at offshore. As you can see from the chart below, just like on land, it takes time. In general, from purchase of the lease to first production can take anywhere from 7 to 10 years in areas that have existing infrastructure. In this context, the timeline for OCS exploration and production can include:

Six months to a year for MMS administration and execution of lease sales in unleased areas.
One year for preliminary geological investigation and selection of areas of interest for additional seismic data acquisition.
One year to two years to acquire and to process 3D (and new wide azimuth) seismic data, and to identify drillable prospects from this data.
As much as a year or more to contract and schedule a drilling rig.
Six to 10 months for drilling and completion of an exploratory well.
Six months to a year for follow up evaluation of drilling results, which can include drilling a sidetrack well.
Another two to three years for additional delineation drilling, and formulation of a plan for reservoir development if the exploratory well proves successful. During this time, the company also is working on pre-permit studies, permitting, and design and procurement for production facilities, including surface and subsurface equipment and systems.
One year or more for facilities installation, followed by development drilling, which may take from one to two additional years. During this period, the company is involved in design, permitting, engineering, procurement and installation of a pipeline or offshore mooring system to bring the production to market.

It is also worth noting that a lease is only a rental agreement with no guarantee that the leased area contains any oil or natural gas. In fact, most leased areas do not contain oil and gas in commercial quantities. Capital costs can be considerable for OCS projects, particularly those in deepwater. Marine seismic surveys can cost upwards of $200,000 per day. The cost of offshore exploratory wells can range from $25 million to more than $100 million for some deepwater prospects. It is not unusual for a company to spend more than $100 million on an exploratory well only to come up empty with a “dry hole.” In general, leases not producing by the end of their term are relinquished back to the government, which can then re-lease them. All the capital spent by the company to acquire and keep the lease is lost if the lease is returned to the government.

This is a long expensive process and the decisions, or rather the decisions to delay, made today, have long-term consequences.

Policies For An Energy Future

2012-01-24T20:45:35+00:00

News this week of increased domestic oil and natural gas production is welcome indeed – because increased production means jobs, economic growth and greater energy security for America.

That the president is calling for more American oil and natural gas, while acknowledging that the hard-working men and women of the oil and gas industry are helping lead our economic recovery is great, too. Thanks, Mr. President, for recognizing that this industry can create jobs and produce the energy to fuel our economy, while building a base for manufacturing and other industries.

Now we need policies to take us where we need to go. Increasing access – reversing recent trends on federal lands and offshore – is critical to more economic growth and a more secure energy future. API President and CEO Jack Gerard:

“We welcome this change of course. We know our industry can put Americans to work. We’ve been doing so. We’re part of the solution he’s looking for. We need changes in policy that will open much more of our offshore areas to leasing and permitting, that will speed up leasing and permitting in all federal areas, and that will restrain impractical or duplicative regulations.”

Here’s what we need:

A pro-energy development strategy for the future, following up on past investments that now are yielding the production gains noted in government data, that could create more than 1 million U.S. jobs by 2030.
A change in course in current policies – including those governing onshore and offshore leasing and offshore drilling – that are restraining energy development instead of boosting it.
Real support for the production of natural gas and oil through hydraulic fracturing that already has touched off an energy and economic revolution in North Dakota, Pennsylvania and other states. Specifically: presidential action to end what Gerard called a “chilling effect” on investment and development resulting from eight different federal agencies exploring new regulatory regimes.
A decision not to hamstring an industry that contributed $476 billion to the economy in 2010 with new tax increases – increases that hurt pensioners, individual investors and owners of mutual funds and IRAs, the true owners of America’s oil companies.

Increases in domestic oil and natural gas should be celebrated. The data shows where we are and suggests where we could be with the right policies and leadership. Gerard:

“The administration has an opportunity to turn energy policy in a direction that could provide huge benefits to our economy. And if the president is sincere in this, our industry will work very hard with him to make it happen.”

Graphically Speaking: Producing Oil on Federal Lands

2012-01-24T19:02:41+00:00

One of the most important things to know about producing oil on federal lands is that it takes time. Lots of it. As this chart developed by API illustrates, it’s up to a decade from the time a lease is won at auction to the first actual production of oil. If you include pre-lease sale studies and evaluation, which have to be done before companies bid on federal leases, that’s a couple more years.

The point here is that the production gains the country is seeing now date to a process that started up to a decade or more ago. You don’t just flip a switch and suddenly oil starts flowing.

This timeline also has implications for future production, given current federal data that show leasing acreage on federal lands at its lowest point since 2001 – declining from 47 million acres in 2008 to 38 million acres in 2011 – and that the number of leases in effect also has declined.

The Keystone XL Majority

2012-01-23T22:01:19+00:00

New polling from Rasmussen Reports on the Keystone XL pipeline:

“Most voters still favor building the Keystone XL pipeline from Canada to Texas and think it will be good for the economy despite President Obama’s decision last week to delay the project for environmental reasons. The latest Rasmussen Reports national telephone survey finds that 56% of Likely U.S. Voters at least somewhat favor the pipeline, with 36% who Strongly Favor it. Just 27% are opposed, including 12% who Strongly Oppose the project. Sixteen percent (16%) are undecided.”

Here’s another number from the Rasmussen survey that should get attention at the White House: Among independents the Keystone XL’s favorability is 55 percent, opposition 27 percent. Among independents, 55 percent think the pipeline would be good for the U.S. economy, just 5 percent think it would be bad.

Certainly, the results fit with polling last fall showing broad support among Americans for a strengthened energy partnership with Canada through greater use of that country’s oil sands resources – a resource that’s central to an energy strategy that could see 100 percent of our liquid fuel needs met domestically and from Canada by 2026.

Back to Rasmussen’s numbers -- specifically, the 12 percent that “strongly” opposes the Keystone XL. Who is the 12 percent? The Obama administration is listening to them, not the majority of Americans who favor this project.

They’re the ones blocking more jobs for the United States. They’re the ones blocking the path to greater energy security. Though they claim to be standing up to special interests, they are the special interest – a small minority that lives in a world of energy un-reality and which has captured the administration, foiling the will of a majority of Americans on this shovel-ready, job-creating infrastructure project.

Natural Gas: The 70 Percent

2012-01-23T21:54:12+00:00

The outstanding statistic in the U.S. Energy Information Administration’s preview of its 2012 Annual Energy Outlook is the forecast for natural gas. EIA says that gas from shale and tight gas will account for 70 percent of the United States’ overall natural gas supply in 2035. Here’s their chart:

You can see that there’s been a surge in shale gas production since roughly 2005. That coincides with a surge in new hydraulic fracturing and horizontal drilling techniques, unlocking vast shale gas formations in states including Pennsylvania, North Dakota and Texas. Similar development is dawning in Ohio and other states, bringing energy, jobs and economic boom times. EIA:

Much of the growth in natural gas production is a result of the application of recent technological advances and continued drilling in shale plays with high concentrations of natural gas liquids and crude oil, which have a higher value in energy equivalent terms than dry natural gas. Shale gas production increases from 5.0 trillion cubic feet in 2010 (23 percent of total U.S. dry gas production) to 13.6 trillion cubic feet in 2035 (49 percent of total U.S. dry gas production).

Add in tight gas – natural gas extracted from other kinds of rock via fracking, and you get to 70 percent of the U.S. gas supply. It illustrates the essential link between hydraulic fracturing and the U.S. natural gas revolution – the game-changing development identified by a number of energy experts. Without hydraulic fracturing, there’s no natural gas revolution, no 70 percent in 2035.

Graphically Speaking: Future Global Energy Demand

2012-01-23T15:09:44+00:00

According to the U.S. Energy Information Administration (EIA), the world’s demand for energy is going to increase by nearly 50 percent by 2035. Based on EIA projections, this graphic from API’s 2012 State of American Energy report shows that oil and natural gas is expected to supply 52 percent of that energy, only slightly less than today’s share (55 percent).

This means finding and producing oil and natural gas will remain critical to the global economy in the decades ahead. The International Energy Agency:

“Every advanced economy has required secure access to modern sources of energy to underpin its development and growing prosperity. … In developing countries, access to affordable and reliable energy services is fundamental to reducing poverty and improving health, increasing productivity, enhancing competitiveness and promoting economic growth.”

The Keystone XL, Cynicism and A Public Engaged

2012-01-20T20:22:13+00:00

Hours after President Obama rejected the job-creating, energy-delivering Keystone XL pipeline, “The Fix” blogger Chris Cillizza, a leading member of the Washington Beltway commenting class, weighed the potential political fallout from president’s choice and concluded with a resounding “Meh”:

“Regular people don’t care. … It’s simply not an issue that has broken through with the average person. There is no — we repeat no — credible polling on how many people are even aware of the pipeline (or the debate over it), a fact that suggests that it’s not penetrated anywhere close to broad public awareness … In short: If you care about the issue, you really care. But most people don’t.”

Now, Cillizza writes a well-read blog, but we think he’s mistaken about the Keystone XL’s public visibility. This is evident in a series of public hearings the State Department held last year and strong public support for the project by the governor of every state along the proposed route. As for polling, Rasmussen Reports, a nationally recognized public opinion firm, tested the project’s popularity in November and found 60 percent favor building the pipeline, compared to just 24 percent opposed.

More importantly, Cillizza might be underestimating public reaction to a presidential move that’s arguably one of the more cynical political plays in a good while:

The president says he’s for increased infrastructure – but rejected the biggest shovel-ready project in America, one that would create thousands of U.S. jobs during construction and be a critical part of an energy strategy that could create or support hundreds of thousands of U.S. jobs over the next two decades.

The president says he’s for increased oil and natural gas production – but rejected the actual project to help that happen. The Keystone XL not only would bring oil from neighbor and ally Canada to U.S. refiners, it would be a vital link between those refiners and rapidly growing oil production from the Bakken shale formation in North Dakota.

The president said he had to reject the Keystone XL because there wasn’t enough time to consider the proposal. Lots more on that here, but basically, the federal government has been studying the Keystone XL for more than three years. It has cleared three consecutive environmental reviews. (Concerns about a small portion of the route in Nebraska are being worked out; Nebraska Gov. Don Heineman called the president’s rejection a “big mistake.”)

The president said his rejection of the Keystone XL “is not a judgment on the merits of the pipeline,” yet that’s exactly what he was supposed to decide: Whether the pipeline is in the nation’s interest. Still no call on that from the president, with the project now into its fourth year of consideration.

The president’s decision on the Keystone XL’s merits, the final “national interest” determination, is being deferred until early 2013 – after this fall’s elections.

See, politics is one thing. It’s the cynical, say-one-thing-do-another conduct that riles people up. On the Keystone XL, it’s the abdication of leadership, an unwillingness to identify clear national interest above a political agenda (noted last month by former Obama U.S. national security advisor Gen. Jim Jones), that feeds public frustration.

This is underscored by the range of commentary hitting the president’s call/non-call on the Keystone XL:

Washington Post – “We almost hope this was a political call because, on the substance, there should be no question.

Wall Street Journal – “TransCanada's $7 billion shovel-ready project that would support tens of thousands of jobs if only it could get the requisite U.S. permits. Those jobs, apparently, can wait.”

Chicago Tribune – “Obama made a decision that will cost the U.S. good jobs. He seems to think those jobs will still be there when he gets around to making a decision on the pipeline. But they may well be gone for good.”

Washington Times – “The decision makes no sense. … President Obama continues to demonstrate that he has no idea how real jobs are created or how the economy works.”

American Enterprise Institute energy scholar Kenneth P. Green – “The Obama administration’s decision … is emblematic of the pervasive, systematic hostility the administration has shown to all forms of fossil-fuel production and consumption.”

Syndicated columnist Robert Samuelson – “President Obama’s rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. … The cynicism is breathtaking.”

Yes, it is. Which is why we suspect lots of “regular people” are taking note.

Keystone and Consequences

2012-01-20T16:21:00+00:00

Heather Zichal, Deputy Assistant to the President for Energy and Climate Change, writes:

"But what’s abundantly clear is that there are no silver bullets when it comes to this challenge. And the idea, as some in Washington have tried to suggest, that building a pipeline is the ultimate answer to the question of American energy security and job creation is nothing more than a pipe dream. The truth is that just two of the Administration’s programs – the DOE Loan Guarantee Program and the EPA’s Mercury and Air Toxics Standards – will create more than 10 times the amount of jobs generated by the Keystone XL pipeline, which will only generate a few thousand temporary jobs."

Let’s take them one at a time.

Yes, there are no silver bullets, we need a comprehensive energy policy embracing all of our resources, like perhaps the one proposed by the president’s own Jobs Council:

“Continuing to deliver inexpensive and reliable energy is going to require the United States to optimize all of its natural resources and construct pathways (pipelines, transmission and distribution) to deliver electricity and fuel. The Council recognizes the important safety and environmental concerns surrounding these types of projects, but now more than ever, the jobs and economic and energy security benefits of these energy projects require us to tackle the issues head-on and to expeditiously, though cautiously, move forward on projects that can support hundreds of thousands of jobs.”

No one that we have seen – and we read a lot of this stuff – has said that the Keystone XL pipeline was “the ultimate answer” to the question of energy security and job creation. What has been said, well, let’s let the White House itself explain:

“… the addition of crude oil pipeline capacity between Canada and the United States will advance a number of strategic interests of the United States. These included increasing the diversity of available supplies among the United States’ worldwide crude oil sources in a time of considerable political tension in other major oil producing countries and regions; shortening the transportation pathway for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer.

Canada is a stable and reliable ally and trading partner of the United States, with which we have free trade agreements which augment the security of this energy supply. Approval of the permit sends a positive economic signal, in a difficult economic period, about the future reliability and availability of a portion of United States’ energy imports, and in the immediate term, this shovel-ready project will provide construction jobs for workers in the United States.”

Oops, that was a different pipeline from Canada, one not subject to political threats by the president’s base. In the face of these new threats, security, trade and jobs went out the window.

We will let others handle the Loan Guarantee line – though it is worth point out that the Keystone XL extension was entirely financed by private money – but we have to address the idea that increasing standards are great for job creation because businesses will need to hire people to comply with them. Excellent, so we should have the EPA toss a brick of standards through the windows of every company in America and poof, full employment, right? No actually, that idea was disproved over 160 years ago.

And lastly, regarding job creation, while Zichal may dismiss the job creation potential of the pipeline, the Laborers’ International Union of North America doesn’t:

“The project would create thousands of good jobs at a time when unemployment in the construction industry is 16 percent with 1.3 million men and women jobless.”

And regarding the idea of “temporary jobs,” let’s look at permanent effects, starting with some numbers from the Census Bureau:

What does this show? Well it shows that in 2011 for every $1 of goods we imported from Canada we got back $0.89 from goods they imported from us. It also shows us that in 2011 for every $1 of goods we imported from OPEC countries we got back $0.33.

Now some more numbers. The Keystone XL pipeline would have transported up to 830,000 barrels of oil a day from Canada. At $100 a barrel that equals $83 million a day to Canada. So if pattern holds we would then expect to get almost $74 million a day back from Canada in the goods they buy from us.

Since the Keystone XL pipeline permit has been denied, let’s look at getting that same 830,000 barrels of oil a day from OPEC. We start with that same $83 million a day out, but instead of $74 million we’re only getting about $27 million a day back – a $47 million a day difference.

Which means, drum roll please – the Keystone XL decision is not just killing “temporary jobs,” as Zichal derisively calls them, it is also removing up to $17 billion a year from the U.S. economy. Or to put it another way, using the Administration’s own numbers, it is removing from the U.S. economy about 90,000 jobs, not temporarily, but every year. While these are back of the envelope calculations, they show that short-term political decisions carry with them long-term economic consequences. And not just in the trade of goods.

The Keystone XL pipeline is also a crucial element in expanding America’s role in Canadian oil sands production, which could create over 500,000 American jobs in the next 25 years. These, non-temporary, jobs are now delayed and possibly lost.

And yet with one smart decision, and no federal money, they are jobs that could have been.

Politics, Energy, and the President

2012-01-19T17:16:50+00:00

As befitting a day when, for the president, political interest trumped the national interest, he opened his 2012 campaign advertising with a commercial touting – wait for it – his energy accomplishments. And they say irony is dead. The commercial links to a webpage trumpeting the president “Boosting Domestic Energy Production.”

While it is great that the president recognizes Americans’ overwhelming support for increased domestic oil and natural gas production, any gains made in the past few years have happened not because of the president’s policies, but in spite of them. Consider this: The area of energy production the president has the most control over is drilling on federal lands. In a study we released yesterday, this is what boosting domestic energy production looks like in the Western states:

Leases? Down. Permits? Down. Wells? Down. And not just by a little. Now, I know what you’re thinking: This is because of the struggling economy, right? No.

Permitting on non-federal lands has rebounded. So what does this mean? Well, it means fewer wells in the future.

Fewer jobs:

And less government revenue:

And activity onshore in the West is only part of the story. The president has also put forward a fig-leaf of a 5-year plan (which, for example, puts the waters off Virginia off-limits, even though drilling has bi-partisan support in the state) and has pursued a permitting slowdown in the Gulf that already has led to the departure of 11 rigs and more than $21 billion in capital investments, while costing 90,000 jobs. And then there’s hydraulic fracturing. One more chart, this one from IER on federal production versus production in North Dakota, which is by the way, 96 percent non-federal land.

North Dakota oil production went from 54.3 million barrels in 2008 to 104.8 million barrels in 2010 on non-federal land; on federal land it actually dropped from 8.4 million barrels to 8.2 million barrels.

The tremendous growth in North Dakota has been fueled by the extraction process of hydraulic fracturing, a process on which no less than eight agencies in the president’s administration are tripping over themselves to increase regulation. This, although the process already is well-regulated at the state level – and it’s widely recognized regulation should remain at the state level – and despite the fact that industry has developed operational guidelines and is committed to transparency and working with state officials to develop regulatory regimes that work.

As I said before, America’s energy renaissance is in spite of, not because of the president’s policies. If he really wants to boost domestic production, he should let us do our jobs of safely and responsibly developing our energy resources. And, by the way, doing so will also create jobs. Given his illogical Keystone XL decision yesterday perhaps the president hasn’t noticed, but those are needed too.

An Illogical Decision, Not An Arbitrary Deadline

2012-01-19T14:50:29+00:00

In announcing his rejection of the Keystone XL permit, President Obama said:

"This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people. I'm disappointed that Republicans in Congress forced this decision, but it does not change my Administration’s commitment to American-made energy that creates jobs and reduces our dependence on oil."

Let's leave the politics aside and focus on the facts.

About the "arbitrary nature" of the congressionally imposed deadline – requiring the president to do his job and decide, simply, whether the Keystone XL is in the national interest – the pipeline is in its fourth year of review, well beyond the 18 months to two years the approval process typically takes.

During that time the project has successfully cleared three consecutive environmental reviews conducted by the State Department -- including multiple public hearings, consideration of 14 different routes and 57 special conditions exceeding current federal pipeline regulations that were agreed to by builder TransCanada.

This past summer the White House said that the State Department was committed to reaching a decision "before December 31, 2011." But then in December, the White House arbitrarily put off the decision a year, prompting Congress to pass, and the president to sign, legislation requiring a decision within 60 days. Was that period too short? Sen. Richard Lugar notes:

"In a usual permit review, the State Department will take up to 90 days to formulate their National Interest Determination after a Final Environmental Impact Statement (EIS) is issued. Thereafter, Federal Agencies have an additional 15 days for final comments. The Keystone XL Final EIS was issued on August 26, 2011, so the State Department was already 75 days into its final review when the White House punted a decision until after the 2012 election."

In other words, an additional 60 days was more than enough time to finish the National Interest Determination. The deadline was sound, the benefits are clear – the only thing arbitrary here is the decision to reject jobs, security and energy from a strong ally.

The president's disappointed? Not nearly as disappointed as American workers who were counting on the 20,000 U.S. jobs the Keystone XL would create during its construction phase. Laborers' International Union of North America General President Terry O'Sullivan:

"We are completely and totally disappointed. This is politics at its worst...Blue collar construction workers across the U.S. will not forget this."

Moving on to the last part of the president's statement, what exactly is his Administration's “commitment” to American-made energy?

Is it the permitting slowdown in the Gulf that led to the departure of 11 rigs and more than $21 billion in capital investments?

Is it the permitting, leasing and drilling slowdown on federal lands in western states that has cost us production, jobs and millions in federal and state tax revenues, royalties and lease payments? A slowdown, by the way, not seen on private lands, which means it’s a policy-driven slowdown, not an economic-driven problem.

Is it a a five-year plan that raises royalty rates and places most of our offshore resources off-limits, a step back from the president's previous announcement that we would expand offshore access?

Or is it the eight federal agencies now considering duplicative regulations on hydraulic fracturing, the process upon which rests 69 percent of future natural gas production?

If this is a commitment to American-made energy, then please, do change.

‘Mr. President, What Are You Thinking?’

2012-01-18T21:18:56+00:00

As the above relates to President Obama’s decision to reject the Keystone XL pipeline, the answer is clear: politics.

Even though the only question the president had to answer was whether the 1,700-mile project is in the national interest, he settled on a different calculus – re-election politics.

Jobs and energy security…or politics? He chose politics, while continuing to offer, as he did yesterday, that he’s for “American-made energy that creates jobs."

Yet, in his rejection of the Keystone XL the president is rejecting jobs – 20,000 of them in the pipeline’s construction phase and up to a half-million more over time, as the Keystone XL would play a major part in full utilization of Canada’s oil sands.

The president is rejecting the advice of his own Council on Jobs and Competitiveness just a day earlier, that the U.S. needs an “all-in” energy strategy that pursues more American oil and natural gas, as well as the means to deliver those resources. API President and CEO Jack Gerard:

“What we see and what we hear from this administration are two different things. No place is this more clear than the decision today on the Keystone XL pipeline. President Obama said last year that many of the shovel-ready jobs imagined by his stimulus program were ‘not as shovel-ready as we expected.’ But the Keystone XL pipeline would create 20,000 new U.S. construction-related jobs over the next two years. More importantly, it would help support the creation of half-a-million new jobs by 2035. But today … in a clear abdication of presidential leadership, the president will reject the Keystone XL pipeline. How can you say you are for jobs and reject the largest shovel-ready project in America today? Mr. President, what are you thinking?”

Simple: Politics.

The fact is you can’t be for infrastructure and for jobs – and be against actual projects that create jobs. You can’t be for working men and women and then deny them and thousands of other Americans real jobs with real paychecks. Laborers’ International Union of North America General President Terry O’Sullivan:

“We are completely and totally disappointed. This is politics at its worst. Once again the President has sided with environmentalists instead of blue collar construction workers – even though environmental concerns were more than adequately addressed. Blue collar construction workers across the U.S. will not forget this.”

Neither should other Americans as they judge this administration’s performance on energy and jobs. It has talked a good game but has little to show for it. It has dithered, studying the Keystone XL for more than three years, including two environmental reviews – contradicting the president’s suggestion Wednesday that the project hasn’t had enough review. Gerard:

“The president has had three years to make a fundamental decision: Is this in the national interest?...The president has missed an easy opportunity to do what’s in the best interest of the United States.”

Again, the question: What are you thinking, Mr. President? Politics. When the American people need leadership that results in jobs and a more secure country, politics.

Rejecting the National Interest

2012-01-18T18:27:49+00:00

I just read the best argument for the Keystone XL pipeline this morning:

“… the addition of crude oil pipeline capacity between Canada and the United States will advance a number of strategic interests of the United States. These included increasing the diversity of available supplies among the United States’ worldwide crude oil sources in a time of considerable political tension in other major oil producing countries and regions; shortening the transportation pathway for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer.

Canada is a stable and reliable ally and trading partner of the United States, with which we have free trade agreements which augment the security of this energy supply. Approval of the permit sends a positive economic signal, in a difficult economic period, about the future reliability and availability of a portion of United States’ energy imports, and in the immediate term, this shovel-ready project will provide construction jobs for workers in the United States.”

That is from the State Department approval of the Alberta Clipper Pipeline in 2009, but describes the benefits of the Keystone XL pipeline from Canada to a T: diversifying supplies, shortening transportation paths, increasing supplies from a stable and reliable ally, sending a positive economic signal, and shovel-ready construction jobs.

And yet, as we have just learned, the President has decided not to approve the Keystone XL pipeline, caving to political threats from a small number of misguided activists.

As former Obama U.S. National Security advisor Gen. Jim Jones put it last month:

“If we get to the point where we cannot bring ourselves to do what is in our national interest, then we are clearly in a period of decline, in terms of our global leadership and our ability to compete.”

The President has brought us to that point, the question now is: where do we go from here? Here is Jack Gerard’s vision from the State of American Energy event a few weeks ago:

“We are on the wrong track. Even the status quo will not be enough. So let’s change course. Let’s take advantage of the many opportunities we have to determine our energy future. It’s a future based on increased self-sufficiency and enhanced energy and national security through greater access to domestic resources. We can safely and responsibly produce more of the energy Americans want and need through our own significant supplies of oil and natural gas.

The right track means more domestic energy of all types, including renewable energy, increased efficiency and promoting other environmentally-friendly options, including next generation technologies to reduce our carbon footprint…Over the course of our history, Americans have refused to settle for less. And we don’t have to settle for less now. We have the resources to meet our energy challenges. With the right leadership and vision, we can turn our challenges into opportunities that will make our country stronger.”

It’s time to get back on track.

The Keystone XL’s Real Jobs Numbers

2012-01-17T21:25:59+00:00

In an economy with more than 13 million Americans out of work, every potential new job matters, right? Wrong, according to some Keystone XL pipeline opponents.

Though the Keystone XL is the largest shovel-ready project around, the construction and permanent jobs it would create get little credit from people who oppose the pipeline or the Canadian oil sands crude it would carry – or both. This, from Natural Resources Defense Council President Frances Beinecke, is pretty representative:

“Rather than bringing us energy security, it will transport dirty Canadian oil through America's heartlands – for delivery to China and other countries. Rather than bringing us prosperity, it will leave us with a legacy of poisoned lands and waters. All for, at most, 100 permanent jobs?”

Now, there’s enough misinformation in that paragraph for a week of blog posts, but let’s focus on the jobs.

First, construction jobs. Pipeline builder TransCanada says 20,000 U.S. jobs would be created in the project’s two-year construction phase. Last week the company detailed the 20,000, down to the number of welders and clerks that will be needed:

Construction of the 1,600 mile pipeline is broken down into 17 U.S. pipeline spreads or segments, with 500 workers per spread – that’s 8,500 jobs. Keystone XL also needs 30 pump stations worth tens of millions of dollars. Each station requires 100 workers – that's 3,000 jobs. Add another 600 jobs that would be needed for the six construction camps and tank construction at Cushing, Oklahoma. A project of such magnitude needs construction, management and inspection oversight – that would create 1,000 jobs, bringing the overall Keystone XL total to 13,000 direct, on-site jobs.

Add in an estimated 7,000 jobs in manufacturing the materials that will be used in the project, and you get 20,000. TransCanada President and CEO Russ Girling:

“These are new, real U.S. jobs. Thirteen thousand Americans would be put to work constructing our Keystone XL project. Seven thousand more jobs would be created in the U.S. manufacturing sector, making the materials needed to build Keystone XL.”

And this from TransCanada’s Terry Cunha, responding to critics of the company’s construction-phase job estimates:

“None of them are pipe engineers or experts. We fully understand the jobs that are needed to build a piece of infrastructure of this size. We like to think of ourselves as the experts.”

As for post-construction jobs associated with the pipeline, a study by the Canadian Energy Research Institute estimates nearly 500,000 U.S. jobs by 2035 as a result of oil sands development – of which the Keystone XL would be an integral part. That’s direct, indirect and induced jobs – using the same modeling employed in a number of job studies.

Two points: As suggested above, it’s fairly callous, given the United States’ current economic health, to look askance at any job – especially those that would come from a ready-to-go, privately funded project like the Keystone XL. Building the pipeline would help our economy as do building roads, repairing bridges and any number of other infrastructure construction projects that would be embraced anywhere in America. The pipeline’s long-term job-creating power must be acknowledged as it provides a new link between Canada’s vast oil sands resource (and new, shale-based U.S. oil in the Bakken region) and U.S. refiners, second to none in their ability to process oil sands and other heavy crudes.

The second point is that the pipeline must be seen as part of a comprehensive energy strategy, one that recognizes safe access to supply is critical to America’s future energy security. The Houston Chronicle’s Loren Steffy:

“The purpose for the pipeline, though, isn't to respond to short-term issues of demand. The pipeline is about securing access to long-term supply, not about short-term market reactions. As I've argued for years now, our energy strategy, if we ever decide to adopt one, has to focus on oil supply, not just price. As the available pool of crude in the world market gets divided among more countries with increasing demand, controlling supply is going to be vital for the United States.”

Jobs, both short- and long-term, and energy security argue compellingly for approving the Keystone XL pipeline. To help our economy and make America’s future more secure, let’s green light the Keystone XL now.

Graphically Speaking: Policy and Lost Energy Investments

2012-01-13T22:12:43+00:00

Policies have consequences – in the graphic below from API’s 2012 State of American Energy report, the consequences of the 2010 Gulf deepwater drilling moratorium are manifest: more than $21 billion in investment dollars lost and the departure of drilling equipment to other, more hospitable, venues.

More detail from the report:
• 11 drilling rigs, representing 14 projects had left the Gulf of Mexico since April 2010.
• 91,000 jobs lost as a result of the Gulf moratorium.
• An estimated $18.3 billion of previously planned capital and operating expenditures didn’t occur in 2010 and 2011.
• Gulf oil production is projected by the Energy Information Administration to be down 12 percent in 2012 over 2010.

Those are stark numbers that reflect what happens when policy blocks and/or discourages investments of this scale, which require years of planning and preparation. “Oil is a global commodity,” API President and CEO Jack Gerard said last March. “It will go where it is welcomed and the capital investments and jobs will go with it.”

What Would You Do?

2012-01-13T15:08:25+00:00

Compelling video from the office of U.S. House Speaker John Boehner that cuts to the heart of the case for approving the Keystone XL pipeline project:

What would you do? It’s a great question for all Americans to consider in this election year: Tough economy, federal government awash in red ink and the opportunity to create thousands of jobs in one stroke without spending a dime of taxpayer money.

It’s simple: Leadership + Keystone XL = jobs.

The White House’s Natural Gas/Manufacturing Connection

2012-01-12T21:27:47+00:00

From where we sit, a new White House report that gives substantial credit to natural gas production for recent growth in U.S. manufacturing looks pretty darn good. In this economy, lots of Americans surely would agree.

The report, “Investing in America: Building an Economy That Lasts,” notes the loss of 3 million manufacturing jobs from 2001-2007 – but then the addition of 334,000 of those jobs the past two years. That second number is due in no small part to the production of natural gas from shale through hydraulic fracturing. The White House:

“The discovery of new natural gas reserves, such as the Marcellus Shale, and the development of hydraulic fracturing techniques to extract natural gas from these reserves has led to rapidly growing domestic production and relatively low domestic prices for households and downstream industrial users. Appropriate care must to be taken to ensure that America's natural resources are extracted in a safe and environmentally responsible manner with the safeguards in place to protect public health and safety. Provided these precautions are taken, the potential benefits to the U.S. economy are substantial.”

We agree, and we like their chart showing the surge in natural gas production:

The fact is lots of people have been extolling the vastness of America’s shale natural gas and oil reserves and the economic benefits of tapping into them – already being realized in North Dakota, Pennsylvania and other states.

A recent IHS Global Insight study showed the shale natural gas industry supporting 600,000 jobs, projected to grow to nearly 870,000 in 2015 and more than 1.6 million by 2035. The boost the shale gas revolution is giving to U.S. manufacturing is on the order of 1 million new jobs by 2025 because of affordable energy from shale and demand for products used to develop America’s shale resources. What can we say: It’s good to have the White House onboard:

“By keeping domestic energy costs relatively low, this resource also supports energy intensive manufacturing in the United States. In fact, companies like Dow Chemical and Westlake Chemical have announced intentions to make major investments in new facilities over the next several years. In addition, firms that provide equipment for shale gas production have announced major investments in the U.S., including Vallourec’s $650 million plant for steel pipes in Ohio. An abundant local supply will translate into relatively low costs for the industries that use natural gas as an input. Expansion in these industries, including industrial chemicals and fertilizers, will boost investment and exports in the coming years, generating new jobs.” (Click here for more on the remarkable story of manufacturing/industrial rebirth from Ohio.)

We agree that developing America’s shale resources has to be done safely and in an environmentally responsible way. Industry is on it. It has developed operational guidelines and is committed to transparency and working with state officials to develop regulatory regimes that work.

Now, if folks over at the White House would just see the light on the Keystone XL pipeline…

About Those Net Exports…

2012-01-12T17:22:52+00:00

News that the United States was a net exporter of finished petroleum products last year prompts logical questions – and some wrongheaded commentary – about refining, the proposed Keystone XL pipeline and whether finished products should be leaving the country. Energy blogger Robert Rapier argues net exports are good news for the U.S. economy and quite reasonable in what is, in fact, a global market.

“This news did not sit well with some people, who argued that those exports could have been better used in the U.S. I read numerous comments from people angry that we are exporting fuel. In fact, one of the arguments against the Keystone Pipeline is that the fuel could end up being exported after it is refined. I don’t think the people who are making these arguments have thought this through very well.”

Rapier explains that the refining industry in this country is subject to the demand pressures for gasoline and other products derived from a barrel of oil. Remember, about 83 percent of the oil refined in this country is for use here. The other 17 percent was exported as finished products, most of which aren’t in high demand here. As demand rises and falls for various products, companies adjust by increasing exports. Rapier:

“Consider the situation. Gasoline demand in the U.S. has fallen for several years via a combination of high prices killing off demand and the escalating ethanol mandate. Refiners can respond by shutting down more refineries and laying off workers, or they can seek other markets for their product.”

Rapier notes that most of the gasoline exported (60 percent) has gone to Mexico, from which the United States imports crude oil. The exchange benefits the U.S. Rapier:

“So we are importing oil from Mexico — the source of over 10% of our oil imports — and turning around and exporting back to them the higher value finished products. It creates jobs and tax revenue here in the U.S. That sounds like a bad deal for Mexico and a good deal for the U.S. So I don’t understand why people are upset. We could choose to stop selling gasoline to Mexico, in which case we could import less oil from them. But since gasoline is worth more than oil, that doesn’t seem like a very good business proposition.”

Here’s the takeaway: Oil is a global commodity, and so are finished products. The Keystone XL pipeline would be a component in a process that responds to market demands – which also is true about U.S. refiners and the products they turn out. Keeping our refineries fully supplied is one important part of the equation. So is the ability to export – to help protect U.S. refining jobs from demand fluctuations while also helping our trade balance.

Study: Effects of Gulf Drilling Policies Detailed

2012-01-11T16:20:25+00:00

Policies have consequences. Certainly, we’ve seen economic impact in the 2010 decision to halt deepwater drilling in the Gulf of Mexico and the subsequent slow pace of oil and natural gas permitting. A new study released by API underscores this:

The effects of the deepwater drilling moratorium and subsequent permit slowdown have already reduced total capital and operating expenditures in the Gulf of Mexico by a combined $18.3 billion for 2010 and 2011 relative to pre‐moratorium plans. Since April 2010, eleven deepwater drilling rigs have left the Gulf of Mexico. These rigs have gone to countries such as Brazil, Egypt and Angola. Through 2015, the investment in other regions instead of the U.S. associated with these rigs is estimated to be over $21.4 billion including drilling spending and associated project equipment orders, even accounting for the portion of equipment that will likely be manufactured in the United States. As a result of decreases in investment due to the moratorium, total U.S. employment is estimated to have been reduced by 72,000 jobs in 2010 and approximately 90,000 jobs in 2011.

Let those numbers sink in. More than $18 billion in capital and operating expenditures means lost investment, lost economic stimulus from an industry that’s a proven supplier of stimulus. Deepwater drilling rigs departing for places where they can be put to work means more lost investment. The job losses are remarkable, more than 160,000 over nearly two years. API President and CEO Jack Gerard:

“The economic impacts of the moratorium are still being felt. We’re not doing what we should be doing to help meet our nation’s energy needs, deliver revenue to our government, and create jobs. This is not just hurting people in the Gulf, it’s hurting people across the country.”

Key findings in the study prepared by Quest Offshore Resources:

Gulf deepwater permits currently are being issued at less than half the rate compared with pre‐moratorium levels.
Shallow water permits are being issued at rates 40 percent lower.
By issuing future drilling permits at pre-moratorium rates, the number of shallow water projects delayed could be significantly reduced from 85 (under the current path) to 37 from 2012-2015, and from 48 to 9 for the deepwater (see chart below). The increased number of projects would boost investment by more than $15 million from 2012-2015, raising average annual U.S. employment between 17,000 and 49,000 jobs per year over the same time period.

Certainly, the administration talks about more domestic oil and natural gas production. What’s needed is less talk and more action. Gerard:

“Energy policy needs a course correction. Our industry has a vision of an energy future that will support and create millions of jobs and strengthen our energy security. It is based on smart, realistic deployment of all of America’s energy assets, including our ample supplies of oil and natural gas.”

Taking Action and Engaging the Industry on Keystone XL

2012-01-10T17:49:45+00:00

Editor’s note: Guest post from the good folks at Energy Nation.

With less than 30 days until President Obama must decide whether or not to approve the Keystone XL pipeline, the debate over this critical project continues to heat up in Washington. Once approved, the project will create 20,000 jobs, and bring secure supplies of oil from Canada and the U.S. upper Plains states to refineries on the Gulf coast. In order to win approval, API is working with our industry advocacy program, Energy Nation, to educate the industry community about the importance of this project.

Energy Nation is a service of API that provides opportunities for the people of America's oil and natural gas industry to learn about—and take action on—critical issues facing our industry. The Keystone XL project is one such issue where we have been communicating with our advocates, asking them to send letters to the President and calling on him to approve the pipeline. And now we must do more.

The President has until February 21, 2012, to determine whether the project is in the national interest and move forward with construction. Fortunately for him, the national interest is clear: jobs, economic growth and energy security.

The numbers are truly impressive and once approved, Keystone XL will lead to:

Jobs: 20,000 jobs will be created and in total, the project will generate half a billion dollars in salaries.
Economic growth: $6.5 billion worth of materials, services and local economic activity spanning the country and business sectors.
Energy Security: 830,000 barrels of oil per day from Canada, as well as oil from the upper plains states in the U.S., to U.S. refineries on the Gulf Coast will add certainty to future supplies.

Approving Keystone XL is an opportunity to create 20,000 much-needed jobs and strengthen our country’s energy security—and we must ensure the president knows this.

As members of the oil and natural gas industry, we must make a true effort so the president knows where we stand. Energy Nation is doing just that. If you or a family member currently work in the industry, are vendors or suppliers to the industry, or a retiree of the industry, please take a moment to sign up and let the president know that he should approve Keystone XL.

Vote 4 Energy’s Metro Profile

2012-01-09T20:00:09+00:00

Check out the slideshow below for a visual on the new “Vote 4 Energy” campaign – as currently seen in the Capitol South Metro station.

The goal is to raise voter awareness of energy issues in this election year. The hope is more Americans will see their vote this year as key to a pro-energy development approach that could create jobs, generate tax revenues for our government and help make America more secure.

Graphically Speaking: Bakken Oil & Natural Gas Production

2012-01-06T16:06:11+00:00

Pretty neat animation by the Energy Information Administration, showing the growth of oil and natural gas production in the Bakken shale play between 1985 and 2010. You can see the locations and the yields of different wells within the Bakken in time-lapse fashion. EIA:

“Oil production growth in the Bakken shale play mirrors somewhat the growth in natural gas production in the Barnett play (Texas). Like the Barnett, the Bakken drilling and production animation … shows that drilling activity built up gradually and eventually led to rapid growth, particularly from 2006 to 2010. Production grew because of increased use of horizontal drilling and the addition of hydraulic fracturing, coupled with elevated prices for crude oil and other natural gas liquids.”

That last sentence is very important. Check the bar graph in the lower left-hand corner of EIA’s animation, which plots the blast off in Bakken oil production since 2006 – paralleling breakthroughs in hydraulic fracturing and horizontal drilling. The Wall Street Journal:

“The Bakken wasn't discovered so much as unlocked. The energy industry figured out that a combination of technologies—hydraulic fracturing and vertical wells that turn underground to run horizontally through oil-rich rock—could free petroleum and natural gas trapped in dense rock formations.”

As a result, North Dakota now is the country’s fourth-largest oil producer behind Texas, Alaska and California – and might not remain fourth for long. At the current production pace – averaging 445,000 barrels per day in August (up from 344,000 bpd at the end of 2010) – North Dakota probably will pass Alaska and California this year.

Increased domestic production is the reason oil imports as a share of U.S. consumption fell to their lowest point in 16 years last year – a level that could drop more with increased access to domestic resources and continued development of America’s shale storehouse.

There’s no energy-from-shale revolution in the U.S. without a revolution in hydraulic fracturing and horizontal drilling techniques. Indeed, it’s impossible to be in favor of the energy benefits from American shale and opposed to fracking. Safely and responsibly done, hydraulic fracturing is redefining the extent of our oil and natural gas wealth. Just ask North Dakota.

Starting the Energy Debate

2012-01-05T22:30:45+00:00

Will Americans vote energy in 2012? We think they should, and API President and CEO Jack Gerard made a compelling argument for it yesterday at the second State of American Energy event in Washington, D.C.

Gerard’s speech was both an appeal and a signal. The appeal: America’s oil and natural gas industry believes there’s never been a better time for a fact-based debate on energy that focuses on ways to help make this country more energy self-reliant and more secure. The signal: API’s new Vote 4 Energy campaign is under way, designed to persuade American voters to be energy-issue voters in this election year.

If you missed it you can see Gerard’s speech and subsequent Q&A here. Key takeaway points:

The United States has vast energy resources, onshore and offshore, that are among the largest in the world.
With the right policies in place, we could see 100 percent of our liquid fuel needs supplied domestically and from Canada by 2026.
A pro-energy development approach could produce 1 million new U.S. jobs by 2018 and billions of dollars in additional revenue to government.
Vote 4 Energy is an informational/engagement campaign to help Americans see what’s at stake and why energy should figure prominently in their voting decisions. Gerard:

“It’s not about candidates, it’s not about political parties, it’s not even about political philosophy. Energy should not be a partisan issue. It’s an American issue. … We believe a vote for energy will elevate the energy conversation.”

Certainly, there are hurdles to clear. Opposition to this vision is primarily political. Yet, the energy debate this country needs should be based on fact – not ideology, distortions or caricatures. Some key areas to watch:

Earnings – America’s oil and natural gas industry is strong and economically dynamic, contributing $476 billion to the U.S. economy in 2010. Industry earnings, averaging about 7 cents for every dollar of sales over the past five years, are well in line with the U.S. manufacturing sector. Most accrue to regular Americans – individual investors and the beneficiaries of public and private pension and retirement funds.

Taxes – The industry uses tax deductions available to virtually all U.S. businesses. As for taxes paid, oil and natural gas companies pay their fair share, more than the average manufacturing company, with income tax expenses (as a share of net income before income taxes) averaging 41.1 percent in 2010, compared to 26.5 percent for other S&P Industrial companies.

Jobs – The industry supports 9.2 million jobs, a lot of them well-paying jobs. Its job-creating ability already is being demonstrated in areas where energy development is taking place – North Dakota, Pennsylvania, Texas and other states. Growth is especially robust where natural gas and oil are being produced from shale on a revolutionary scale through hydraulic fracturing and horizontal drilling.

Access – The industry’s message, one of those to be borne in the Vote 4 Energy campaign, is that it’s ready to do more. Construction of the Keystone XL pipeline would create 20,000 new U.S. jobs right away, and the pipeline would be a critical piece in an approach to Canada’s oil sands that could create 500,000 new U.S. jobs by 2035. Real jobs, real paychecks.

As Gerard said, the pipeline awaits a decision that the project is in the U.S. national interest. Gen. James Jones, the president’s former national security adviser, strongly believes it is. So do Steve Rattner, the administration’s former “car czar” and others. Canadian Prime Minister Stephen Harper calls the Keystone XL decision a “no-brainer.”

We could go on – and will. The debate’s just getting started.

Vote 4 Energy: The Launch

2012-01-04T22:05:18+00:00

Challenge: Getting more Americans to see themselves as energy-issue voters in 2012.

Solution: API’s Vote 4 Energy campaign, launched today at the second State of American Energy event at Washington, D.C.’s Newseum.

In a keynote speech President and CEO Jack Gerard framed the energy-related issues upon which API hopes to engage Americans with the new informational campaign:

America as an energy-rich nation.
America’s oil and natural gas industry as a tremendous catalyst for job creation, economic growth and energy production.
Energy as key to America’s future security.

Americans will base their votes this year on a number of things, but none is more important than the energy that runs our economy and sustains our way of life. Gerard:

“The Energy Information Administration predicts the world will need 45 percent more energy in 2035 – and the U.S. will need 16 percent more. To get there, we’ll need a lot more renewable energy, but also more fossil fuels. And despite rapidly expanding renewable energy sources like solar and wind power, we’ll still need oil and natural gas to supply more than half our energy.”

The industry already is proving its ability to create jobs and stimulate the larger economy. Gerard:

“One in seven of today’s recent college graduates live at home today because they can’t find good jobs. In North Dakota, young people working in oil and gas hold jobs that pay more than their parents earn. The average oil and gas salary in North Dakota is more than $90,000 a year – more than double the state average. In Pennsylvania, Governor Corbett’s staff told me that shale gas development generated more than 90,000 jobs between 2009 and 2011. That development has also generated many millions of dollars of revenue to the state treasury.”

One vision for America’s energy future is of opportunity and growth. The other is of shrinking options and limited vision. That’s the vision behind delaying the Keystone XL pipeline, limiting access to offshore and onshore domestic resources and an incoherent approach to the country’s vast natural gas reserves. Gerard:

“Frankly, this vision and its policies are disconnected from current economic and energy reality, which is a landscape of global economic struggles and geopolitical challenges. This vision ignores the jobs and the energy that could be produced here in the U.S. Instead, it’s on a course for less energy, not more. These policies are failing us.”

Enter Vote 4 Energy, designed to be decidedly non-partisan, non-ideological. Gerard:

“Vote 4 Energy will help Americans understand what’s at stake and why energy issues should figure prominently in their voting decisions. Vote 4 Energy is not about a political party—it’s not even about candidates. We are going to encourage voters, all voters, to make energy a voting issue. … We’ll hold up our end: through information distributed through our state networks, through grass roots outreach to millions of voters, and through conversations like the one we’re having here today.”

For complete State of American Energy coverage, click here. See the event video here.

Photos and Context on Oil Sands

2012-01-03T19:35:52+00:00

From a post on the Climate Progress website (cross-posted on Grist), on the environmental effects of Canadian oil sands production:

“Extraction of Alberta's energy-intensive tar sands has expanded steadily in recent years, with about 232 square miles now exposed by mining operations. Tar-sands production is expected to double over the next decade, which could mean the destruction of 740,000 acres of boreal forest …”

The post includes photo comparisons – purportedly depicting the before and after of oil sands development. It looks/sounds dreadful. One commenter to the site writes, “What a beautiful country it was …”

Actually, Canada still is a very beautiful country, including Alberta’s oil sands region. Lacking in the Climate Progress post is valuable context. There’s this from Yale University’s School of Forestry and Environmental Studies:

“Canada’s boreal forest stretches from British Columbia to Newfoundland, covering 2.2 million square miles, an area nearly 60 percent the size of the United States, including Alaska. Much of Canada’s boreal is intact, making it — along with the Russian taiga and the remaining, undisturbed portions of the Amazon — one of three great tracts of forest on the globe.”

OK, let’s do the math. Multiply 2.2 million square miles by 640 (the number of acres in a square mile). That comes to 1,408,000,000 acres of boreal forest in Canada. Now, divide 1.4 billion by 740,000 and you get 0.05 percent – as in five-hundredths of a percent of Canada’s boreal forest could be affected if the country’s oil sands resources are fully developed.

A couple of other things the Climate Progress post leaves out. First, Canadians are very protective of their environment, and by law oil sands development areas have to be restored to their natural state by companies operating there. Suncor, for example, has developed a way to reclaim its tailings ponds, as well as a process that will eliminate the need for tailings ponds altogether. Here’s a photo of a former tailings pond – transformed into a lush meadow with hundreds of thousands of tree seedlings planted.

Bottom line: For a small, temporary footprint in Canada’s vast boreal forest, we get stable energy from a friend and ally and job creation, right here in the United States.

Informing the Keystone XL Decision

2011-12-29T19:16:29+00:00

With the Keystone XL pipeline back on President Obama’s to-do list, let’s hope he does the right thing and approves this shovel-ready project – to create thousands of jobs and help make America more energy secure, which most Americans support.

Recent legislation extending the payroll tax cut, which the president signed, also requires him to decide on the Keystone XL within 60 days. He should say yes. Previous objections to the pipeline’s path through Nebraska are being worked out, and Nebraska Gov. Dave Heineman is onboard. All that’s needed is a green light from the White House to bring good-paying jobs to Americans.

Amazingly, not everyone supports the creation of more U.S. jobs and greater energy security from the Canadian oil sands crude that would come to the U.S. through the Keystone XL. Opponents are recycling some of the same misinformation they used last summer, trying to turn what should be a no-brainer into brain freeze.

Among many things opponents say Canadian oil sands oil is “dirty” and that it’s more corrosive than other crude oil. They say the oil would be exported – while dismissing the notion that Canada could turn to other markets if the Keystone XL is rejected. They claim the new 60-day decision deadline amounts to “rushing” things when in fact officials already had been evaluating whether this project is in our nation’s interest for 75 days. Since it looks like the media truth squads and fact checkers are on holiday, let’s take a look at some of these.

Claim: Oil sands oil is “dirty” oil and uniquely corrosive – The fact is about 70 to 80 percent of the greenhouse-gas emissions from oil, no matter where it comes from, occur when fuel is burned. GHGs from Canadian oil sands are comparable with those from other crudes refined in the U.S. (See below, Page 30 of an information-rich oil sands guide by the Canadian Association of Petroleum Producers.) As for corrosion, oil sands crude has been transported in existing pipelines for decades. Experts say it’s characteristically similar to other crudes.

Claim: Canadian oil sands crude is mostly for export – U.S. refineries are better equipped than others to process heavy crude oils, like those from Canada, Mexico and Venezuela, to produce the fuels we need as well as supply products demanded on the global market. The vast majority (83 percent) of crude refined in the U.S. is for use here. But refineries produce lots of products from a barrel of oil – gasoline, diesel, heating oil, bunker fuel and more – and they need markets for each. In 2010 only 17 percent of U.S. refinery production was exported, mostly products that aren’t in demand here. Meanwhile, the Energy Information Agency says increased imports of Canadian oil sands crude likely would replace declining heavy crude imports from Venezuela and Mexico. Two other points: Any exported products still would be refined in U.S. refineries by U.S. workers, and petroleum exports help the United States’ balance of trade just like exports of steel, ethanol, grains and machinery.

Claim: U.S. or bust – Some argue there’s no urgency to a decision on the Keystone XL because Canada doesn’t have alternative buyers for its oil sands crude. That’s not the impression you get listening to Canadian officials (here’s Canadian Prime Minister Stephen Harper talking about his country’s oil sands options) or by noting China’s increasing oil sands investment. We import more oil from Canada than another other country. Strengthening our energy partnership with Canada makes us more energy secure, and it’s good for our economy. For every dollar we spend on Canadian goods, Canada returns 90 cents to the US economy.

Claim: Rush to a decision – The Keystone XL is in its fourth year of review. During that time the project has successfully cleared three consecutive environmental reviews conducted by the State Department and has been the focus of numerous public hearings across the country. As Gen. James Jones, the president’s former national security advisor, said recently, the Keystone XL is in the nation’s interest, and it’s time for an affirmative decision on that basis. “The President needs to make a decision on the Keystone XL permit,” Sen. Richard Lugar said last week. “Enough is enough. How long does it take to put America’s workers first?”

Great question.

More Energy Charts …

2011-12-29T18:28:00+00:00

Hope we didn’t sound irked last week because The Atlantic’s best charts of the year didn’t include any of ours or, for that matter, any showing America’s energy abundance. In fact, Carpe Diem’s Mark J. Perry points out that America’s energy richness was missed by a lot of year-end chart lists.

No problem. Here are a couple more of our favorites from 2011, starting with one of Perry’s. It plots the amazing growth in North Dakota oil production, primarily due to development of the state’s Bakken shale play through hydraulic fracturing and horizontal drilling techniques.

Here’s another – from the Wood Mackenzie consulting firm’s study of how pro-development energy policies could create new jobs in this country. The job-growth curve here is nothing short of fantastic – nearly 600,000 new jobs by 2014, 1 million by 2018 and 1.4 million by 2030.

Energy by the Numbers: Taxes

2011-12-22T18:15:20+00:00

The Atlantic ran a series of end of year charts yesterday and for some reason we weren’t invited. We won’t take it personally, and hey, via the magic of the Internet we can publish our own list of charts we love. First up, a look at “Big Oil” and taxes, it actually completes a chart The Atlantic ran here. What we see is that though some folks throw out profit numbers as an excuse to raise energy taxes, they often overlook the income taxes the industry already pays.

And while we are here. Let’s throw in another chart, on the choice between pro-development policies and higher energy taxes as regards jobs, government revenue, and energy security.

Check the Fact Checker

2011-12-19T21:42:05+00:00

Compare two passages from the Washington Post’s fact checker, Glenn Kessler.

Here’s A:

“… the biggest stretch in all of these figures is the biggest number: the 118,000 ‘spin-off’ jobs that supposedly would be created from building the pipeline.”

Here’s B:

“Some readers might wonder how helping the unemployed manages to create any new jobs. That’s because the unemployed must still pay rent, buy food and so forth. The money they receive from the government thus helps keep other Americans in their jobs.”

OK, so in “A” Kessler sounds dubious, skeptical and dismissive of jobs that could stem from construction of the Keystone XL pipeline. When you say something is a “stretch,” you’re saying it’s distorted, either intentionally or accidentally. You can virtually see Kessler’s eyes rolling when he writes that these Keystone XL jobs “supposedly” would be created.

In “B” the fact checker is instructing, educating, patient. To Kessler, unemployment disbursements have positive effect as people use the money to meet various obligations while putting food on their tables. Dare we say, an “induced” effect?

It seems that when induced jobs are used to justify government spending, the Washington Post steps up to educate readers. But when talking about induced jobs from private infrastructure investment – in this case the shovel-ready Keystone XL pipeline – the jobs figure is called a “stretch” and those jobs’ larger economic benefit is dismissed. Here’s the point: Even a dogged fact checker has his or her filters.

Growth vs. Decline on Keystone XL

2011-12-16T22:13:39+00:00

"If we get to the point where we cannot bring ourselves to do what is in our national interest, then we are clearly in a period of decline, in terms of our global leadership and our ability to compete.”

That’s Gen. Jim Jones, former U.S. National Security advisor in the Obama administration, warning Washington policymakers of the harm in continued delay on the Keystone XL pipeline – delay caused by his former boss’ decision to shelve the project’s permit application until early 2013, after the 2012 elections.

In a conference call with reporters, Jones emphasized “national interest” in his support for the Keystone XL – which was supposed to be the basis for the administration’s decision on the project’s fate. The analysis isn’t difficult. We know the questions:

• Is building a 1,700-mile, privately financed pipeline, connecting Canada’s oil sands region with U.S. refiners in a safe and environmentally sensitive manner, in the national interest?
• Is an ultra-modern conduit for upwards of 830,000 barrels of oil per day from ally and neighbor Canada – vs. oil from less stable sources – in the national interest?
• Is creating 20,000 new U.S. jobs during the pipeline’s construction phase in the national interest?
• Is a project that would be key to broader development of Canadian oil sands, which could result in more than 500,000 new U.S. jobs by 2035, in the national interest?

Yes, yes, yes and yes. Given the fact the Keystone XL has been under review for more than three years and has cleared three consecutive environmental studies, this decision really was and is, as Canadian Prime Minister Stephen Harper said, a no-brainer. Except that politics intervened. API President and CEO Jack Gerard:

“The administration delayed a decision to go forward with the Keystone XL project until after the election. … Based on the facts it is hard not to conclude the president’s decision was driven by politics. He relented to the demands of those who essentially oppose all development and consumption of oil and natural gas. … The president’s apparent deference to political expediency means he has also put on hold thousands of near-term, shovel-ready construction and manufacturing jobs at a time when millions of America’s workers are desperately seeking them. These are jobs that could put food on the table and help pay the rent of many Americans, now without the ability to do either.”

For Jones, the Keystone XL non-decision decision has strategic risks:

“A nation that fails to secure the energy its citizens and its economic engine need to keep functioning leaves itself vulnerable to external contingencies in a dangerous and uncertain world and to the whims of foreign leaders and other actors who may not always have its interests at heart.”

Look again at what Gen. Jones said at the top:

“If we get to the point where we cannot bring ourselves to do what is in our national interest, then we are clearly in a period of decline …”

Does the Keystone XL delay indicate such a slide? Clearly, politics is trumping the national interest. With an overwhelming case for the Keystone XL in front of it, the administration has a clear choice: investment, infrastructure, jobs and security – or paralysis, delay and stagnation. One represents growth, the other decline. This shouldn’t be a question.

Survey Says: Shale Gas is an 80/20 Issue

2011-12-15T22:01:13+00:00

Note to Washington policymakers: Americans get the natural gas revolution. Big time. Data points from a new poll by the Deloitte Center for Energy solutions:

• 83 percent of those surveyed favorably connect natural gas development with U.S. job growth.

• 79 percent favorably connect natural gas with reviving the economies of states and communities where gas is being produced from shale.

• 62 percent of people in areas where shale gas development is established, like Texas, associate well-paying jobs with the natural gas industry.

Those are slam-dunk numbers, and Deloitte’s Peter Robertson says they’ll only grow as shale gas production increases:

“Shale gas made up a small share of domestic natural gas production in 2005, but has surged since then – and in 2010 made up 20 percent of what is produced domestically. By 2030, the portion could be close to 50 percent.”

The Deloitte results also support using hydraulic fracturing and horizontal drilling techniques to free natural gas from shale formations that typically are several thousand feet below the surface. Nearly 60 percent believe the benefits of shale gas – jobs, economic growth, clean-burning energy – outweigh production concerns. More than 70 percent of people living in established shale areas say they would recommend that family members and friends lease their land for production. Robertson:

"There's so much shale activity in so many parts of the country that it's important to communicate and operate effectively. Everything shale gas producers do gets enormously magnified. That's why they have to get it right every time, on every well drilled. Consistently operating with excellence and communicating effectively with all impacted stakeholders are critical attributes."

Agreed. Which is why industry is committed to continued development of standards and operational guidelines for shale gas production, transparency, close cooperation with state and local regulators and improved relationships with communities and individual landowners .

Study: Shale Gas Will Boost U.S. Manufacturing

2011-12-14T22:16:27+00:00

More good news from shale: A new study projects 1 million new jobs in the U.S. manufacturing sector by 2025 because of affordable energy from shale and the demand for products used to develop America’s vast shale resources. “Shale gas has the potential to spark a U.S. manufacturing renaissance over the next few years, boosting revenue and driving job creation,” the PricewaterhouseCoopers (PwC) study says.

In addition to jobs, the analysis supported by the National Association of Manufacturers finds other benefits from clean-burning natural gas from shale:

Lower feedstock and energy costs could save U.S. manufacturers as much as $11.6 billion annually through 2025.
Demand growth – This year, 17 chemical, metal and industrial manufacturers noted in filings with the Securities Exchange Commission that shale gas developments drove demand for their products – compared to none in 2008.

PwC:

“An underappreciated part of the shale gas story is the substantial cost benefit to manufacturers, based on estimates of future natural gas prices as more shale gas is recovered. Historically, there has been an indirect relationship between the level of energy prices, such as those for natural gas, and the level of domestic manufacturing employment, as manufacturers consume approximately one-third of all the energy produced in the United States. Consequently, this relatively abundant domestic energy source has the potential to drive an uptick in US manufacturing over the long term and create new jobs in the sector.”

Examples of investment decisions stemming from shale natural gas, according to PwC:

Dow Chemical plans to build new ethylene unit on the Gulf Coast by 2017, restart a dormant ethylene unit in Louisiana by next year and construct new propylene unit in Texas by 2015 – all of which would capitalize shale gas as a feedstock.
Formosa Plastics plans to spend $1.5 billion on an ethylene plant and downstream assets in Texas by 2015, partly due to the availability of shale gas feedstock.
Chevron Phillips Chemical announced a feasibility study for an ethane cracker and ethylene derivatives facilities on the Gulf Coast.
Bayer Corporation is talking about building an ethane cracker in the Marcellus shale region.
U.S. Steel invested $95 million in an Ohio plant to help meet demand from shale gas extraction activities.
Vallourec is spending $650 million on a new plant in Ohio to supply steel pipe for companies extracting shale gas.

The study’s release coincides with the American Chemical Council’s year-end and outlook assessment, which cites the role of shale natural gas in helping to expand chemical sector opportunities. ACC President and CEO Cal Dooley:

“The shale gas production boom is moderating natural gas prices and creating more stable supplies, which has allowed U.S. chemical manufacturers to become more competitive with producers abroad.”

Good news for shale, great news for American workers and the economy.