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Over the last several months, the United States energy industry celebrated a hugely significant milestone: a return status as one of the world’s net energy exporter. New discoveries in sites like the Permian Basin have revealed the United States is sitting on a massive reserve of oil and gas, and entrepreneurs throughout the nation are ready to charge into this brave, new world.
Don’t confuse “net energy exporter” with “energy independent,” however. There’s still a long way to go before the United States can rely solely on itself to meet the country’s growing energy needs. In the meantime, diplomacy is the best response.
The 50-Year Record
Even if you’re not intimately tied into the United States oil and gas industry, you’ve likely heard someone proudly exclaim that the United States is set to become a net exporter of energy by 2020, a feat the nation hasn’t accomplished since 1953. Make no mistake, that’s a big deal.
No, really, “It’s a big deal,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “We’re not as reliant on foreign oil as we were.”
‘Not as Reliant’ Doesn’t Mean Independent
There’s no stopping the US oil and gas boom. Some estimates put the United States as surpassing Russia and Saudi Arabia combined as soon as 2025. Should that estimate hold true, the United States could control more than 50 percent of the world’s liquids market. It’s an exciting possibility that could have incredible implications for the US economy.
That said, without work on the US refinery system, the title “energy exporter” won’t help the United States get any closer to energy independence.
Building the Right Vessel
The southern coast of the United States is dotted with several critically-important refineries designed to transform “heavy” grades of crude oil into usable energy. The only problem with that is that heavy oil isn’t produced in the United States. It comes from Venezuela, Canada, Mexico, and other foreign nations.
The United States, on the other hand, produces what’s known as “sweet” crude. US refineries are capable of handling some sweet crude, but not enough. As a result, the surplus oil extracted in the United States needs to be exported to foreign countries with the ability to refine it.
A Bridge to International Cooperation
The US oil boom is a fantastic development in no uncertain terms. It can help improve the struggling US economy and establish the country once more as a power in the world’s energy sector. However, the US oil boom’s capacity for building relationships hasn’t been largely explored.
Almost by accident, the United States finds itself sitting on a goldmine of oil that it can’t (yet) refine. Several other nations find themselves in the same situation, only with different grades of crude underneath their territory. Meanwhile, the global demand for oil is increasing at an exponential rate. The only possible response — at least until enough US refineries are built to accommodate the Permian’s supply — is to reach out and work alongside the rest of the world.
The Trump administration is showing blatant favoritism to the energy industry.
That’s the complaint coming from several critics of the current administration who feel that state and federal outlets of the Department of the Interior should cease any and all oil and gas-related business while the government is shut down. It’s certainly tempting to believe that the president is twisting the government to his own capitalism-loving ends, but there’s nothing wrong (ethically or legally) with the Interior Department’s handling of the government shutdown.
‘Utterly Immoral’ Behavior from the White House
In the words of California Democrat Alan Lowenthal, “At a time when the shutdown is imposing pain on Americans across all walks of life, it is utterly immoral that the Trump administration treats one group of friendly businesses — the fossil fuel industry — as more valuable and deserving than all others.”
Arizona Rep. Raúl Grijalva jumped on the anti-energy bandwagon, as well, writing an open letter to David Bernhardt, the acting director of the Interior Department, chastising Bernhardt for, “making sure it’s business as usual for oil and gas industry.”
Those volleys make for intriguing headlines, but they couldn’t be farther from the truth.
A Slimmed-Down BLM
The Department of the Interior — and the oil and gas industry, by extension — has felt the pinch of the longest government shutdown in US history. Throughout the nation, individual offices of the Bureau of Land Management are operating on a skeleton crew. Projects approved before the shutdown and projects that were all but complete before the shutdown are the sole focus of the remaining employees at the BLM.
New projects, by comparison, have been stopped in their tracks. Though some of the Interior Department offices remain open for business, to say that the government agency remains untouched by the government shutdown is ludicrous.
You Don’t Want the Government to Halt Oil and Gas Projects
In response to the assault on oil and gas, Western Energy Alliance president Kathleen Sgamma countered, “Just because the government is shut down doesn’t mean private-sector economic activity grinds to a halt.”
Sgamma argues that partisan arguments impacting the government should not derail a thriving economic sector on which millions of Americans rely. There’s also the billions in tax benefits the oil and gas industry delivers every year. That’s to say nothing of the growing number of nations that rely on United States energy development to keep the lights on.
In other words, to lock the door of the Interior Department would be to jeopardize not only the United States economy, but an energy revolution that’s changing the way the world works.
That’s not favoritism. It’s a safety net.
Just like to tragic historical happening for which it was named, the modern day “Children’s Crusade,” as it was dubbed, has concluded in defeat. Frankly, it’s about time.
Martinez v. COGCC
For those unacquainted with the long-running battle, the COGCC has been under attack since 2013, when Xiuhtezcatl Martinez filed a petition with the Colorado Oil and Gas Conservation Commission (or COGCC) that demanded the regulatory agency suspend all new projects until they could prove conclusively that oil and gas development was not harmful to the environment. For nearly six years, the national oil and gas industry has been threatened by anti-fracking activists whose primary selling point is that they’re too young to go into a bar.
Sure, on the surface, that sounds like a noble quest. The fact that Martinez was a kid also made for stylish headlines, as well. Regardless of the long-running debate surrounding it, Martinez’s petition never amounted to more than a poorly-executed ploy designed to shame one of the hardest working regulatory bodies in the country.
Building an Industry While Handcuffed
In the ruling, Justice Richard L. Gabriel pointed out that the primary role of the COGCC is to “foster the development” of Colorado oil and gas. Ceding economic growth to niche environmental concerns comes a clearly defined second. Even then, the COGCC mandate states that addressing environmental concerns should come, “only after taking into consideration cost-effectiveness and technical feasibility.”
Meanwhile, the COGCC finds themselves operating under regulations that are both wildly restrictive and self-imposed.
In a statement from President & CEO of the Colorado Oil & Gas Association Dan Haley, the exec wrote, “The plaintiffs in the Martinez v. COGCC case ignored, and attempted to disrupt, decades of regulatory precedent and legal oversight. The Colorado Oil and Gas Conservation Act (Act) directs the COGCC to consider multiple factors in making its decisions, including environmental priorities. Following the Act, which is existing Colorado law, the COGCC has enacted the most extensive and stringent regulations for the oil and natural gas industry in the country.”
Still, however, Colorado oil and gas finds a way to thrive.
The Battle the Continues
The Supreme Court ruling handed down early this week is an undeniable victory for the state’s energy companies. That said, there’s little time for Colorado oil and gas to revel. Opponents of hydraulic fracturing, including the newly elected governor of Colorado, have voiced their disapproval at the decision. In short, it’s only a matter of time before the state’s, and the nation’s energy interests are threatened once more.