It’s a new era for American energy production. At 9 million barrels per day, production levels are the highest we’ve seen since the 1980s. Net petroleum imports are at their lowest levels in decades. And, of course, gas prices are at four-year lows. The 60-cent drop in the price of a gallon of gas by the end of 2014 had the equivalent impact on the U.S. economy of a one-time tax cut of between $100 billion and $125 billion, according to Goldman Sachs economic analysis.
Few could have predicted the dramatic turnaround in our energy outlook, but the causes are simple enough to identify in hindsight. A recent memo from US Trust’s chief market strategist Joseph Quinlan lists “pro-market policies at the state and local levels,” “revolutionary technologies like horizontal drilling and hydraulic fracturing” and “good old American entrepreneurship and risk taking” as the three “ingredients of the U.S. energy revolution.”
{mosads}Notice anything missing? “Pro-growth federal policy” is conspicuously absent. With the Keystone XL pipeline in its sixth year of limbo, 87 percent of federal offshore acreage closed to development, and crude oil exports still subject to a ‘70s-era ban, federal policy is all too often an obstacle to energy progress.
To transform federal policy from barrier to contributor to America’s emergence as an energy superpower, Democrats and Republicans should spend some time at their congressional retreats this week adding these long overdue items to their agendas:
Keystone XL: With last week’s decision by the Nebraska Supreme Court to uphold the state’s approval of the current pipeline route, President Obama has no more excuses left to veto the bipartisan Keystone XL legislation headed to his desk. The president has called the state of American infrastructure “embarrassing” and compared the U.S. system unfavorably to the “rapidity” with which China builds major infrastructure. Meanwhile, we could have built the Keystone XL pipeline three times over during the six years the project has been under review by the president’s administration. The merits of the project are as strong as ever. Five positive environmental assessments in six years have cleared the pipeline, and the State Department has concluded Keystone XL will generate “no substantive change in global GHG emissions.” The administration may try to downplay Keystone XL’s jobs potential, but the State Department numbers speak for themselves: 42,000 jobs putting $2 billion in workers’ pockets during the two-year construction phase. Keystone XL will provide a crucial and lasting boost to our energy security, transporting 830,000 barrels per day in stable oil supply from Canada, North Dakota and Montana. It’s time for President Obama to stand with the American people and join the House and Senate in approving this vital, shovel-ready infrastructure project.
Exports: Our restrictive approach to exports of crude oil and liquefied natural gas (LNG) may be a gift to our global competitors, but it’s doing our own economy no favors. The 70s-era crude oil ban is obviously obsolete, and lifting it could add as many as 300,000 jobs to our economy by 2020 and cut our annual trade deficit by up to $22 billion. Multiple studies show opening access to global markets should stimulate even more domestic production and put downward pressure on U.S. gas prices. It’s the same story with LNG exports, which could contribute up to 452,000 jobs nationwide between 2016 and 2035 and add up to $73.6 billion annually to the GDP. Our Eastern European allies – some of whom are dependent on Russia for 100 percent of their natural gas supplies – are urgently entreating the United States to make more of our abundant supply available. We’re the world leader in natural gas production, but failure to capitalize on that advantage risks squandering significant economic growth and geopolitical influence. It’s essential we streamline the LNG export approval process.
Access: Since 2009, oil production is up 61 percent and natural gas production is up 33 percent on private and state lands. By contrast, production is down on federally controlled acreage — 6 percent for crude oil and 28 percent for natural gas – and off limits entirely in 87 percent of federal waters. New studies show opening the Atlantic, Pacific and eastern Gulf of Mexico to development could create nearly 840,000 new American jobs, grow our economy by up to $70.2 billion per year and generate over $200 billion in cumulative revenue for the government. With an election night poll showing 83 percent of midterm voters support increased production of U.S. oil and natural gas resources, policies to increase access are fertile ground for bipartisan action.
America’s energy outlook has been transformed from 20th century scarcity to 21st century abundance. Congress and President Obama have a unique opportunity to ensure that future generations only know their nation as a global energy leader. That goal should guide energy policy in the coming year.
Gerard is president and CEO of the American Petroleum Institute, the national trade association that represents all aspects of America’s oil and natural gas industry.