petroleum

Open federal land to energy exploration and development to boost economy

The United States has recently experienced a boom in oil and gas production, but that has occurred almost exclusively on private and state lands. Federal land has been largely closed due to the policies of several administrations.

The American Energy Alliance has a new report “Beyond the Congressional Budget Office” which shows the potential of a more enlightened federal policy in energy development. Here is the executive summary:

While headlines have reported a boom in US oil and gas production, that boom has been related almost exclusively to exploration and development on private and state lands and waters. Even that limited expansion has had profound effects. Opening up Federal resources — in addition to private and state resources — to exploration and development can accelerate all of those trends. But recent administrations have yet to follow through on promises to allow access to Federal resources, instead proposing to levy increased taxes on oil and gas production.

The Congressional Budget Office (CBO), at the request of the House Budget Committee, recentlyreleased an analysis of lease revenues that could be expected to arise from a proposal to open Federal lands and waters to oil and gas leasing (the “CBO Assessment”). Specifically, the proposal aims to open areas that are statutorily or as a matter of administration policy prohibited from leasing. The issue has repeatedly been a hot-button political and economic issue in the last several years, most recently at the beginning of the Obama administration and then again as Republican challengers in the 2012 election placed opening the lands and waters at the center of their energy policy.

But while the Administration cannot shy away from exploring the fiscal benefits of opening Federal lands, the CBO study was restricted to analyzing just one component of those benefits: lease revenues. This paper highlights the larger economic effects, including economic growth, wages, jobs, and both federal and state and local tax revenues, of opening Federal lands and waters to oil and gas leasing, relying solely upon the CBO natural resource and oil and gas price

estimates to show these broader economic effects in order to maintain direct comparability with their analysis. This paper also seeks to “complete” the CBO Assessment by taking measurements of output, jobs, wages and tax revenues into consideration.

The findings of this paper demonstrate that opening federal land that is currently closed-off because of statutory or administrative action would lead to broad-based economic stimulus, including increasing GDP, employment, and wages. Specifically:

GDP increase:

• $127 billion annually for the next seven years.

• $450 billion annually in the next thirty years.

• $14.4 trillion cumulative increase in economic activity over the next thirty-seven years.

These estimates include “spill-over” effects, or gains that extend from one location to another location. For example, increased oil production in the Gulf of Mexico might lead to more automobile purchases that would increase economic activity in Michigan. Spillover effects would add an estimated $69 billion annually in the next seven years and $250 billion over thirty years.

Jobs increase:

• 552,000 jobs annually over the next seven years.

• Almost 2 million jobs annually over the next thirty years.

Jobs gains would be felt in high-wage, high-skill employment like health care, education, professional fields, and the arts.

Wage increase:

• $32 billion increase in annual wages over the next seven years.

• $115 billion annually between seven and thirty years.

• $3.7 trillion cumulative increase over thirty-seven years.

Increase in tax revenue:

• $2.7 trillion increase in federal tax revenues over thirty-seven years.

• $1.1 trillion in state and local tax revenues over thirty-seven years.

• $24 billion annual federal tax revenue over the next seven years, $86 billion annually thereafter.

• $10.3 billion annual state and local tax revenue over the next seven years, $35.5 billion annually thereafter.

Read the full report here.

MasterResource also has a three-part series on this subject:

Part I: Expanding “Depletable” Resources

Part II: Coal Issues

Part III: Federal Land Potential

BLM Wild Lands Designation Attempts To Bypass Congress

At a time when America is seeking to reduce its dependence on foreign sources of petroleum and minerals, the Obama administration is throwing up impediments to developing domestic resources. In late December, Secretary of the Interior Ken Salazar issued “Secretarial Order 3310” which establishes the new designation of “Wild Lands” separate from Wilderness Areas (which must be designated by Congress) and Wilderness Study Areas, a precursor to Wilderness designation.

The Order will require local Bureau of Land Management field offices to inventory all land under their jurisdiction for “wilderness characteristics.” “Field Offices will determine when it is appropriate to conduct a wilderness inventory… BLM must conduct an inventory before authorizing a proposed project that may impair those apparent wilderness characteristics.”

This means that there will be bureaucratic delays when projects such as mineral or petroleum exploration, grazing, or logging are proposed on BLM land. There appears to be no time limit imposed on the field offices to conduct the inventories. The designation will also affect rights-of-way across BLM land.

The definition of “wilderness characteristics” is rather fuzzy.

First, the area must contain at least 5,000 acres of contiguous roadless BLM land, except that it may be smaller if it is adjacent to other federal lands “which have been formally determined to have wilderness or potential wilderness values or … such lands include designated Wilderness, BLM Wilderness Study Areas, U.S. Fish & Wildlife Service areas Proposed for Wilderness Designation, U.S. Forest Service Wilderness Study Areas or areas of Recommended Wilderness, and National Park Service areas Recommended or Proposed for Designation.”

Secondly, the land must contain “naturalness,” meaning “It must appear to have been affected primarily by the forces of nature, and any work of human beings must be substantially unnoticeable.” That is except for a whole bunch of exceptions.

Significant “human impacts” can occur just outside the area to be designated.

“Wild lands” must contain either “opportunities for solitude…” which seems inconsistent with the sentence above, or “a primitive and unconfined type of recreation.” The field offices are instructed: “Do not disqualify an area based on a finding that outstanding opportunities exist in only a portion of the area.”

(For more detail, see BLM Inventory instructions to filed offices).

From a related BLM document we have these additional instructions:

“Wild Lands must contain management actions to achieve protection and could consider land use plan decisions including, but not limited to, those that:

1. Recommend withdrawal from mineral entry.

2. Close to leasing or allow leasing only with No Surface Occupancy/No Exceptions.

3. Designate rights-of-way exclusion areas.

4. Close to construction of new temporary or permanent roads.

5. Close OHV (off highway vehicle) use or limit OHV use to designated routes.

6. Close to mineral material sales.

7. Exclude certain commercial permits (e.g., commercial or personal-use wood-cutting permits).

8. Designate as Visual Resource Management Class I or II.

9. Close to new structures unrelated to preserving the wilderness characteristics.

10. Retain public lands in Federal ownership.”

This new “Wild Lands” designation will inhibit our ability to explore for and produce vital natural resources at a time when we are becoming more dependent of foreign sources. One of the first targets is the National Petroleum Reserve in Alaska (NPR-A) which is near the Arctic National Wildlife Reserve. NPR-A was established in 1923 and administered by the Defense Department until 1976 when it was transferred to Interior. NPR-A was estimated to contain 900 million barrels of crude oil and 53 trillion cubic feet of natural gas by the U.S. Geological Survey in 2010.

These regulations are very similar to the process for designating Wilderness Areas. But Wilderness Area designation requires an act of Congress. It seems that “Wild Lands” are nothing less than the administration’s attempt to bypass Congress and rule by executive decree, the same policy the administration is following by allowing the EPA to regulate greenhouse gases. Wyoming Governor Matthew Mead, in a letter to Interior Secretary Ken Salazar said, “A Wild Lands designation will further drag out (if not permanently halt) the permitting process while local economies suffer. The BLM currently does not have the appropriate resources or track record for approval of plans and projects; and this will only make the problem greater and delays longer.”

Putting more land off limits locks up our domestic energy and mineral supplies, kills jobs, and eliminates potential government royalties and taxes that could help decrease the deficit.

P.S. I took the photo in Southern Arizona.  Does anybody recognize where it is?

EPA fuel standards costly and ineffective

The Environmental Protection Agency has proposed increasing fuel mileage standards for motor vehicles from the current 30.2 mpg for passenger car fleets to 35.5 mpg by 2016. Their rationale for this increase (so they say) is twofold: reduce carbon dioxide emissions and thus forestall temperature rise; and reduce our total consumption of petroleum products. The fuel standards will fail on both counts.

The proposed fuel mileage standard will have no measurable effect on temperature according to Dr. John Christy, Distinguished Professor of Atmospheric Science at the University of Alabama in Huntsville and Alabama’s State Climatologist. Christy testified before Congress last year on California’s proposed vehicle emission reduction of 26% (equivalent to a 43 m.p.g. standard). Christy’s research found that such a reduction in carbon dioxide emissions would have a theoretical temperature impact of “no more than 0.01 °C by 2100.” “…if the entire world adopted and adhered to this legislation, the net effect would be less than 0.04°C by 2100. As an atmospheric scientist who regularly publishes temperature records for specific regions as well as the globe, I can assure you this level of impact is too small to be detected. Global temperatures change by more than this from day to day.”

Added to that, there is evidence that better fuel mileage will not result in lower total fuel consumption. Department of Transportation data show that as automobiles become more fuel efficient, each car is driven more miles, so that there is actually no reduction in total fuel use.

Various estimates claim the more efficient vehicles will cost consumers about $1,000 to $1,500 more per vehicle and cost the auto companies $52 billion to comply. For 100,000 miles of driving, the new standards would save 495 gallons of fuel per vehicle. Depending on gasoline price, the owner may or may not recover the additional purchase price cost.

There is another consideration. The first vehicle fuel standards were imposed by the 1975 Energy Policy and Conservation Act as the Corporate Average Fuel Economy program, better known as CAFE. We have seen since that time that the more fuel efficient vehicles tend to be smaller, and smaller vehicles tend to be more dangerous in crashes with larger vehicles. A 2002 National Academy of Sciences study concluded that increases in CAFE contributed to between 1,300 and 2,600 more deaths in a single representative year, and to 10 times that many serious injuries. A 1989 Brookings-Harvard study estimated that CAFE caused a 14 to 27 percent increase in occupant fatalities-an annual toll of 2,200 to 3,900 deaths. A 1999 USA Today analysis concluded that, over its lifetime, more restrictive fuel standards had resulted in 46,000 additional fatalities. The National Highway Traffic Safety Administration estimates that every 100-pound reduction in the weight of small cars increases annual traffic fatalities by as much as 715.

The EPA seems to ignore science and history. Is it blinded by a political agenda?

The cost of increased fuel economy standards is high in both money and lives, but it may give false comfort to those afflicted with “green guilt.”