Hydraulic Fracturing is Saving You at the Pump

A recent study conducted by the American Petroleum Institute (API) showed Americans are saving nearly a dollar per gallon when they fill up for gas because of the innovative horizontal drilling and hydraulic fracturing techniques that gave us access to significantly more domestic oil and natural gas reserves.

This development has gas prices as low at $2.29 per gallon in some communities and AAA reported nationwide gasoline prices are set to drop below $3.00 per gallon on November 1st. Prices this low would have been unimaginable just a few years before the boom in American energy production.

API Vice President Kyle Isakower explained what policymakers should learn from this boom in a statement, “It’s important for policymakers to recognize that the U.S. energy revolution was not a lucky accident, but the result of decades of American innovation aimed at unlocking our resources here at home.”

In other words, the dramatic changes natural gas and oil have undergone is the ultimate example of free-market—not government mandated—innovation, and the results speak for themselves. For example, the study found that U.S. oil production that utilizes horizontal drilling and hydraulic fracturing jumped from 11 percent of U.S. production in 2008 to 48 percent of U.S. production in 2013. According to the Energy Information Administration this dramatically increased overall U.S. oil production too from around 158 thousand barrels a month in 2008 to over 268 barrels this August, which has helped to lower prices.

Most importantly this makes a huge difference for middle class and lower class Americans who have been struggling to make ends meat in a stagnant economy. For instance, the Consumer Expenditure Survey shows that the lowest quintile of income earners spends twice as much as the highest quintile of income earners on gas as a portion of their income. Having access to affordable transportation not only gives Americans freedom to go where they choose, but also dramatically expands job and housing opportunities too.

In addition to direct benefits to consumers, more oil production in the United States makes us more secure and less dependent on unstable regions for oil imports. The best way to continue to increase energy security is to responsibly unleash the power of markets in order to incentivize further innovation and productive use of our national natural resources.

API’s Isakower explained that government policies threaten continued prosperity and safety, “To build that momentum and strengthen our position as an energy superpower, it’s critical that policymakers turn aside duplicative regulations on hydraulic fracturing and ensure that U.S. consumers can benefit from energy production on federal lands that remain off-limits.” Lets make sure that we continue to benefit from innovative technologies like horizontal drilling and hydraulic fracturing and support free-market energy policy.

Federalism at Work: States Lead on Hydraulic Fracturing Regulation

It is not by the consolidation, or concentration of powers, but by their distribution, that good government is effected. Were not this great country already divided into states, that division must be made, that each might do for itself what concerns itself directly, and what it can do so much better than a distant authority.

-Thomas Jefferson

The Ground Water Protection Council (GWPC), a national association of state agencies, recently released a new study that examined what states are doing to effectively regulate hydraulic fracturing in light of its rapid increase in use.  The study found “…state oil and natural gas regulatory agencies have been diligent in addressing the technological, legal and practical changes that have occurred in oil and gas E&P [exploration and production] over the past four years.” Effective state regulation of hydraulic fracturing is a modern example of our great federalist system at work.

Scope and Background

The GWPC study was a collaborative effort between the various stakeholders in government, environmental protection groups, and affected industry groups.

This version of the study is an update on a similar 2009 study. The purpose of the update was to identify if state regulations have kept pace with the rapid increase in the use of hydraulic fracturing due to technological increases in horizontal drilling. By and large the authors of the study were confident that new regulations have been effective in mitigating risk.

Specifically, it identified the different approaches that 27states are taking throughout the hydraulic fracturing process to ensure safety, emerging issues, regulatory coordination, and data management. In addition to this analysis, the study made recommendations about emerging issues that states should pay attention to regarding hydraulic fracturing.

States Effective because of Federalist Principles

According to the report states are better able to regulate hydraulic fracturing because state agencies have the most applicable knowledge. The authors of the study concluded, “…on most issues the greatest experience, knowledge, and information necessary effectively rests with state regulatory agencies.” This is because governments must be aware of the various local geological features that surround sites to know how to best guard against potential environmental harm caused by hydraulic fracturing. GWPC stresses, “…the variability between state programs is a natural outgrowth of the unique characteristics of each state. There is no ‘national’ geology, geography, topography, or hydrology. State programs protect water resources best because they address the unique conditions that exist locally.”

The report goes further and says not only would national requirements be less effective, they could also be disastrous in certain situations where a beneficial requirement in one case could lead to environmental destruction in another. For example, the authors wrote, “…it might seem like a good idea to require that surface casing be set a minimum distance below the deepest underground source of drinking water. While that might work in most cases, in some places over-pressured and contaminated zones are located below, but in close proximity to, the deepest underground source of drinking water. In such a case, the mere drilling of the hole into a deeper zone could result in the contamination, rather than the protection of underground sources of drinking water.” Many of the regulations surrounding hydraulic fracturing require local specificity that a federal one-size-fits-all approach cannot provide.

In addition to the benefits of local knowledge there is also increased accountability when regulators are closer or part of the group of people they are seeking to protect. This is because they are the same people who ultimately have to live with the consequences contaminated water- and therefore have greater incentive to get the regulation right.

Finally, competition among states to drive economic growth in a safe environment makes it less likely that states will place overly onerous regulations on industry. When multiple states are finding out what works, what doesn’t work, and how they can improve their processes from other states’ experiences as well as their own, overall effectiveness of regulation increases rapidly. This is very different that when a federal agency proposes a rule because there is limited flexibility to change the rule once promulgated without going through a long and expensive process.

Regulatory Trends

States have been updating and increasing the regulations they impose on the oil and gas industry throughout the entire process of hydraulic fracturing due to the rapid increase in its use since 2010. The regulatory process has been updated from increasing permit requirements before hydraulic fracturing activity even occurs, to ensuring proper treatment and handling of waste and closing of wells once finished.

Regulation of Hydraulic Fracturing Should be left to States

Finally, given their examination of regulations, the authors of the report concluded, “…there is no reason to believe that overlaying additional federal controls on the regulatory process would lead to better, safer, or more environmentally protective development of oil and gas.”

Continuing the successful state regulation of hydraulic fracturing is a great example of our federal system at work. By using local knowledge and involving those most interested in outcomes to perform the regulation, we are keeping groundwater clean while reaping the immense benefits from the hydraulic fracturing revolution. It is up to the U.S.  to ensure that it continues to work  successfully by keeping hydraulic fracturing regulations in the hands of the states.

It’s not what it looks like

energy 2014 AEA 600

The Divestment Movement is Morally Bankrupt

This week’s National Journal Energy Insider’s question is “What’s the Value of Divestment?” AEA President Thomas Pyle’s response is below:

In response to the recent climate change rally in New York, the satirical newspaper the Onion quipped, “7.1 Billion Demonstrate In Favor of Global Warming.” Their point? Nearly everyone benefits from the use of natural gas, petroleum, and coal because they provide the reliable and affordable energy that makes modern life possible.

FossilFree, a pro-divestment group, refers to the “singularly destructive influence” of natural gas, petroleum, and coal. They suggest that divesting from those energy sources is a moral imperative, but they have it backwards. Closing the door on reliable, affordable energy from natural gas, petroleum, and coal would have disastrous consequences, such as reversing the decades-long trend of improving the human condition.

In India, for example, electricity generation—largely from coal and petroleum—has increased by 270 percent between 1990 and 2012. During that same time period, GDP per capita has risen by 300 percent, life expectancy has risen by 13 percent, access to improved sanitation facilities has gone up by 103 percent, child mortality has fallen by 55 percent, and PM10 air pollution has dropped by 18 percent (World Bank statistics). It is a morally bankrupt position to want to reverse these trends and condemn people in the developing world to abject energy poverty.

The positive trends mentioned above actually point to something deeper. Making energy more affordable and reliable is the moral choice because energy radically amplifies our ability to live productive, healthy, and long lives. It lightens our load and improves our living conditions in meaningful and tangible ways. With more energy, we can make more water drinkable, build more hospitals, and grow more crops. Even if the worst predictions about the impacts of increased carbon dioxide in the atmosphere turn out to be true, practical solutions point towards using more energy, not less.

But is the divestment movement truly “anti-energy”? Let’s look at the statistics. Last year, natural gas, petroleum, and coal provided 82 percent of our total energy needs in the United States (and a similar share abroad). Divestment advocates are silent on the question of what source of energy can take their place, and that is because nearly all other sources remain impractical. Industrial wind and solar power are unreliable. Hydroelectric power is limited in scale. New cost-effective nuclear power remains elusive. These sources cannot replace the energy we currently get from natural gas, petroleum, and coal, and they certainly can’t provide a rapidly expanding source of affordable, reliable energy for the more than one billion people who have little to no access to modern energy.

Those in favor of divestment preach about the moral imperative to rid themselves of investments in natural gas, petroleum, and coal and yet billions of people around the world are improving their lives right now by using these very fuels. Driving the kids to school, heating and cooling our homes and businesses, and lighting the night – all without breaking the bank. That’s the worldwide pro-energy rally taking place each and every day that divestment activists are trying to drown out.

Climate Change Not a Top Priority for Americans

Yesterday, Washington Post’s Plum Line blog wrote that climate change is the one “bright spot” for Democrats in the upcoming midterm election. Despite the very real prospect of losing the Senate, the blog asserts, “Liberals may have made a bit of headway in forcing climate change on to the national agenda.”

For support, the article cites a Pew poll finding that large swaths of the population overwhelmingly believe in climate change (such as 18-29 year olds, nonwhites, and college educated whites). It then points to another article that mentions certain segments of the population are increasingly naming climate change as an important issue, such as minorities, the millennial generation, and socially liberal upscale whites.

However, believing in climate change is not the same as prioritizing it as an important issue, and is a far cry from advocating legislative or regulatory action.

Reality check: a Pew article from last month titled “Polls show most Americans believe in climate change, but give it low priority” explains why climate change is not a winning issue. As the article explains, climate change “ranked near the bottom of Americans’ 2014 priorities for President Obama and Congress.” Most people are not focused on climate change. Instead, Pew found that Americans are most concerned with issues such as the economy, jobs, education, and balancing the budget.

Top Policy Priorities: Economy, Jobs, Terrorism

Our own polling shows similar results. In fact, as many as four out of five of those polled said that Congress and the President should make jobs and the economy one of their top priorities for 2014. Other top priorities included health care (60 percent) and federal spending (59 percent).

In addition to viewing climate change as a low priority, most American voters have serious reservations about the federal government’s involvement in their energy choices (which is exactly what environmentalists advocate for to address climate change). When asked about specific federal programs that implement the agenda of national environmentalist groups, voters reject them.

This is especially true when polled on the wind Production Tax Credit (PTC), where only 18 percent of those polled said that federal tax credits where the best way to develop and improve alternative sources of energy. The same goes for EPA’s proposed power plant rule, where 60 percent of respondents disagreed with the rule’s implicit mandate on citizens to buy certain amounts of renewable energy (also known as building block number three).

This is not new information for politicians. In 2009, Democrats had an opportunity to pass cap-and-trade legislation when they controlled both chambers of Congress. Like the name implies, cap-and-trade would have capped total emissions of carbon dioxide, hamstringing the economy. This legislation failed on a bipartisan basis because of voter pushback.

Put simply, the vast majority of voters do not see climate change as an important issue, and many rank it near the bottom of their priorities. Bloggers who claim victory for the left on the issue of climate change aren’t taking an objective look at the facts. They can hope that these facts will change, but wishful thinking rarely makes for good policy.

Outrage Over EPA Rules Continues

Since EPA proposed the new carbon dioxide emissions rules for existing power plants on June 2nd, twelve states have filed suit, arguing the new regulations are illegal under the Clean Air Act. The governors of Texas and West Virginia have demonstratively spoken out against the rules, citing their need for coal-fired power plants to provide their citizens with affordable, reliable power. And now, Virginia’s State Corporation Commission has released their own criticism.

“As currently drafted, the carbon emission rates that EPA proposes for Virginia are arbitrary, capricious, and unlawful.”

“Virginia’s compliance with the Proposed Regulation, as currently drafted, will be expensive and will be paid for by Virginia residents and businesses. Contrary to the claim that ‘rates will go up, but bills will go down’, experience and costs in Virginia make it extremely unlikely that either electric rates or bills in Virginia will go down as a result of the Proposed Regulation.”

“Additional near-term generator retirements caused by the Proposed Regulation will compound existing, unresolved reliability concerns in the Commonwealth.”

The Commission is absolutely right, on all counts. EPA’s proposed rules for existing power plants will disproportionately hurt the low-income families that need reliable, affordable energy the most, and the proposed regulations are being promoted by a misleading PR campaign designed to hide their questionable legality.Electric power lines

Power plants with enough generating capacity to reliably power 44.7 million homes–plants that have provided states like Virginia with affordable, reliable power for decades–have already or will soon be shut down as a result of the EPA’s regulations. Five of these coal-fired plants will be unnecessarily shut down in the Old Dominion by 2016, while the state is forced to reduce their carbon dioxide emissions by 38% by 2030. Every citizen should be outraged by EPA’s “arbitrary, capricious, and unlawful” rules, and we are glad to see the Virginia State Corporation Commission leading the way.

 

Is EPA Shutting Down Your Power Plant?

A recent report from the Institute for Energy Research revealed that 72.7 gigawatts (GW) of power have closed or are scheduled to close because of EPA’s Mercury and Air Toxics Rule (colloquially called MATS or Utility MACT), the proposed Cross State Air Pollution Rule (CSAPR), and the recently proposed restrictions on carbon dioxide emissions from existing power plants. This is enough electricity to reliably power 44.7 million homes, or every home in every state west of the Mississippi River, excluding Texas.

There are 37 states with projected power plant closures. View the interactive map below to see how your state is being affected by EPA regulations:

Public Enemy #1

Public Enemy AEA 600

Secretary of State John Kerry needs to get his priorities straight. Recently he was quoted saying “threats posed by climate change should be addressed with as much ‘immediacy’ as confronting the Islamic State in Iraq and Syria (ISIS), and the Ebola outbreak.” Iraq is in shambles, the battle for Kobani rages on in Syria, and as Vox reports the Ebola epidemic could be even worse than we thought:

The World Health Organization projects that 20,000 people will be infected in November. HeathMap, put the number at about 14,000 if there’s no improvement in the situation.

But in worst-case scenario, the Centers for Disease Control and Prevention project that up to 1.4 million people could be infected by January.

Putting climate change in the same breath as nations ridden with civil wars and crippling diseases shows just how disconnected from reality Mr. Kerry is.

Using More Energy Helps the Planet

National Journal recently published an article with the somewhat exaggerated headline, “Why Natural Gas Won’t Help Save the Planet.”

The story cites a study in Nature which equates “saving the planet” to “slashing global greenhouse-gas emissions.” But what do they say about the role energy plays in improving the planet? The report goes on to state, “Lower natural gas prices accelerate economic activity, reduce the incentive to invest in energy-saving technologies, and lead to an aggregate expansion of the total energy system: a scale effect.”

National Journal’s headline implies that “accelerated economic activity” and “expansion of the total energy system” are threats to the planet. What those abstract terms really represent is the ability for human beings to live longer, healthier, more productive lives.

For example, using World Bank data, the Institute for Energy Research analyzed the role that higher energy consumption and electricity generation played in human development in China and India. The following charts indicate that as energy use and electricity generation have risen, so have economic growth, access to improved sanitation facilities, and life expectancy at birth, while child mortality has dropped:

China Energy Use

India Energy Use

We should focus more on improving the planet for humans than on making sure humans alter the planet as little as possible. The reality is that using more energy to pump water, provide light, and refrigerate food and medicine makes social and economic development possible. “Saving the planet” should mean improving the lives of people on the planet.

 

No More Carbon Taxes in the Land Down Under

Australia’s carbon tax was so disastrous that some of its biggest supporters are hastily distancing themselves from it — and lawmakers in the U.S. should take note.

The Sydney Morning Herald reported this week that the democratic socialist Labor Party is officially bailing on support for a carbon tax. Party leader Bill Shorten announced:

“We will not have a carbon tax, the Australian people have spoken and Labor is not going to go back to that.” [Emphasis added]

The carbon tax was such a disaster that much of the 2013 Prime Minister election was centered around the tax. Then-candidate for Prime Minister Tony Abbott said, “More than anything, this election is a referendum on the carbon tax.”

Abbott went on to win the election in part by pointing out the damages caused by the carbon tax–including higher electricity prices and greater unemployment. A peer-reviewed study from 2013 by Dr. Alex Robson of Griffith University in Brisbane laid out the economic pains the carbon tax caused Australian families:

  • In the year after Australia’s carbon tax was introduced, household electricity prices rose 15%, including the biggest quarterly increase on record.
  • The job market had previously been stable, but after Australia’s carbon tax, the number of unemployed workers has risen by more than 10%.
  • Carbon dioxide emissions have actually increased, and will not fall below current levels until 2043, according to the Australian government.

The following chart from Dr. Robson’s study also maps the ways in which a carbon tax and similar “green” schemes have forced households in Queensland (QLD) and New South Wales (NSW), Australia to pay higher electricity bills:

Screen Shot 2014-10-14 at 12.17.40 PM

As a result of these negative impacts, Australians spoke loud and clear on election day when they voted in Tony Abbott as Prime Minister. And even the Labor Party, once a staunch supporter of the carbon tax, is distancing itself from the carbon tax.

Although Australians recognized that the carbon tax was destroying their economy, many U.S. policymakers and pundits continue to support implementing a similar system in the U.S. Just recently, Senator Mark Udall from Colorado touted his support for a price on carbon dioxide emissions:

Australia’s carbon tax brought higher energy costs and unemployment to its citizens. To prevent these same outcomes in America, our policymakers should heed the warning signs in Australia and drop their support for a carbon tax, or risk paying the political price of ignoring the priorities of the American people.