Category: Natural Resources

Available and Off-Limits Offshore U.S. Oil and Natural Gas Resources

Despite the fact that the federal government has made it clear that all oil and natural gas drilling along the Atlantic coast is off limits, oil and natural gas companies are still going ahead with seismic surveys to see just how much oil is resting off of our eastern coast.

Close to 87 percent of all federally controlled offshore acreage are off-limits to offshore oil and natural gas development. If included in the federal government’s next five-year leasing program and lease sales beginning in 2018, exploratory drilling could start the following year with commercial production expected as early as 2023.

Opening the Atlantic Outer Continental Shelf, the Pacific Outer Continental Shelf and the Eastern Gulf of Mexico to offshore oil and natural gas development could have remarkable benefits. By 2035, this opportunity could:

  • Create nearly 840,000 new jobs along coasts and across the country.
  • Add about 3.5 million barrels of oil equivalent per day to domestic energy production.
  • Generate more than $200 billion in cumulative revenue for the government.
  • Lead to nearly $450 billion in new private sector spending.
  • Contribute more than $70 billion per year to the U.S. economy.

Specifically, increasing access to offshore oil and natural gas resources in the Atlantic with an investment of an estimated $195 billion cumulative between 2017 and 2035, could by 2035:

  • Produce an incremental 1.3 million barrels of oil equivalent per day (MMboe/d).
  • Add nearly 280,000 jobs.
  • Contribute up to $23.5 billion per year to the U.S. economy.
  • Generate $51 billion in cumulative government revenue.

If seismic activity were to begin in 2017 and lease sales in 2018, first production could be expected as early as 2026.

Mar 30, 2016 | Leave a Comment | by

Let Wind and Solar Energy Subsides Expire

Wind energy is doing very well…even though renewable sources of energy are still just a fraction of energy output in the United States with significant federal and state subsides. The success that some states have had with wind energy production is encouraging other states to expand their wind energy production offshore. However, offshore wind facilities will be very expensive to build and maintain.

According to the Energy Information Administration (EIA):

  • Offshore wind is 2.6 times more expensive as onshore wind power and is 3.4 times more expensive than power produced by a natural gas combined cycle plant.
  • On a kilowatt hour basis, offshore wind power is estimated to cost 22.15 cents per kilowatt hour, while onshore wind is estimated to cost 8.66 cents per kilowatt hour and natural gas combined cycle is estimated to cost 6.56 per kilowatt hour.
  • Overnight capital costs (excludes financing charges) are 2.8 times higher for offshore wind than onshore wind power.
  • An offshore wind farm is estimated to cost $6,230 per kilowatt, while those costs for an onshore wind farm are estimated to be $2,213 per kilowatt.

Apparently, solar energy is now more affordable. If solar energy is now affordable, then the federal subsidies are no longer needed. These federal subsidies have provided wind and solar developers with as much as $24 billion from 2008 to 2014.

The biggest wind and solar tax credits have expired or will expire by 2016. Let the renewable energy sources compete in the market by letting their subsidies expire.

Nov 11, 2015 | 3 comments | by

Real Water Markets: Another Leadership Imperative

Political and economic freedom plus the rule of law and free enterprise yields the prosperity that we enjoy, and its absence explains why most of the world lags so far behind us. Its absence also explains why some sectors of our economy lag so far behind the rest. We use our resources more wisely than most of the rest of the world because market-determined prices guide most of our resource use decisions.

Changing market prices are a powerful information and incentive system. That system has an impressive track record because every price is the result of a serious, continuous, money-where-your-mouth-is indirect conversation about priorities and costs. It involves the entire population, so it harnesses much more information than the central planning alternative, which is just guesswork by a handful of over-extended public officials spending someone else’s money. Central planning has an awful track record, not just for economic inefficiency and poverty, but for creeping tyranny.

Market-determined prices will address Texas’ water management challenges more effectively than our current system of limited markets and central planning. Willing buyer — willing seller exchange of privately-owned water rights will tell us what each basin’s lowest value water uses are worth. Until we know what price existing users would sell water for, we cannot tell which potential water projects are wise investments. Price differences between water basins tell us if inter-basin transfers make economic sense, and tell us what restrictions on inter-basin transfers cost. The same price information is an essential element of water conservation planning.

Texas surface water law allows water rights’ exchanges, but transfers are over- regulated. For example, water rights holders cannot change water uses without state permission. Water rights are just revocable permission to use state water; a factor that undermines exchange, investment in water-related infrastructure, and promotes wasteful use-it-or-lose-it usage. Let’s hope for the wisdom and leadership to fix that before our drought and recent referendum push us to waste billions of dollars and the environmental disaster of unnecessarily flooding thousands of acres under new reservoirs.

Texas groundwater law has not even come that far. Many groundwater basins have long since reached the point where recharge can no longer keep up with unlimited pumping, which means that efficient use requires quantified pumping rights and a price system. Only the Edwards Aquifer area of South Central Texas has quantified pumping rights, but even there, water users cannot trade directly. Much of the Edwards Aquifer permitted pumping is locked into historic and mostly low water uses. Those are very expensive restrictions. How expensive? Only a system of market-determined prices can reveal the true amount.

The legal infrastructure needed to foster market-determined surface- and ground- water prices will have to incorporate numerous geologic, hydrologic, and historic use details that are beyond the scope of this commentary. But nothing about issues like third-party claims, drought management, and environmental values preclude the government from severely curtailing its costly micro-management of water use. Getting there is just a matter of leadership; selling the correct, limited government policies to a general public interested in freedom-based new ideas.

Mar 24, 2014 | Leave a Comment | by