Tag: "natural resources"

U.S. House Energy Bill Debate Today

The House of Representatives starts the debate today on 38 amendments out of an original 103 submitted for H.R. 8 —North American Energy Security and Infrastructure Act of 2015 — and concludes discussion tomorrow. The 2015 energy bill would modernize energy infrastructure, build a 21st century energy and manufacturing workforce, bolster America’s energy security and diplomacy, and promote energy efficiency and government accountability.

Despite the President’s threat to veto the House bill, lawmakers from both parties have over one hundred amendments to the Energy and Commerce Committee’s broad energy bill to discuss in this week’s floor debate.

The amendments included many policy recommendations relating to energy, natural resources, infrastructure and grid security. Below are a few of the 38 amendments to be debated:

  • Rep. Joe Barton (R-Tex.) has filed an amendment to repeal the crude oil exports ban.
  • Sean Duffy (R-Wis.) is proposing to require the Secretary of Energy to collaborate with the Secretariat of Energy in Mexico and the Ministry of Natural Resources in Canada when developing guidelines to develop skills for an energy and manufacturing industry workforce.
  • Rep. Gene Green (D-Tex.) has offered an amendment that would establish a permitting process within DOE, the Federal Energy Regulatory Commission and the State Department for cross-border infrastructure projects.
  • Rep. Scott Peters (D-Calif.) has an amendment that includes energy storage as a form of energy that DOE should consider to enhance emergency preparedness for energy supply disruptions during natural disasters.
  • Rep. Trent Franks (R-Ariz.) has an amendment that secures the most critical components of America’s electrical infrastructure against the threat posed by a potentially catastrophic electromagnetic pulse.

The Arctic — Our Last Energy Frontier

As the Arctic Ocean ice thaws, countries prepare to tap into the vast energy resources currently trapped beneath the Arctic Ocean. The U.S. Geological Survey (USGS) estimates that the Arctic could hold as much as 12 percent of the world’s undiscovered oil and 30 percent of its undiscovered gas, not including unconventional oil and gas deposits. Of that, the portion of the Arctic belonging to the United States could hold 33 percent of total oil and 18 percent of total natural gas in the Arctic.

The United States, though, is limited in its reach into the Arctic since it has not signed onto the United Nations Convention on the Law of the Seas (UNCLOS) treaty. Without that ratification, the United States, unlike the other four Arctic nations of Russia, Canada, Norway and Denmark, is constrained to an Exclusive Economic Zone (EEZ) of 200 nautical miles off their coasts. The other four Arctic nations, however, have asked to secure international legal titles to sites up to 350 miles off their coasts. Russia and Canada have even submitted claims that reach the North Pole.

Drilling in the Arctic could also be further complicated by harsh storms, drifting sea ice, poor infrastructure and a lack of available crisis response centers. On the other hand, Arctic drilling would take place at shallower depths than drilling in the Gulf of Mexico. In a positive push for Arctic drilling, President Obama signed Executive Order 13580 in 2011 to establish a coordinate efforts among federal agencies to develop energy in the Arctic. The order was intended to expedite future permit issuance and improve information sharing.

Shell Gulf of Mexico has made moves to be at the forefront of oil exploration in the U.S. Arctic region, specifically in the Chukchi Sea and the Beaufort Sea. The company also produced an extensive Oil Spill Response Plan to assure the government of their preparedness in case of an oil spill in the region. Fears regarding oil spill response in the Arctic continue as the Coast Guard admits to having no offshore response capability in Northern and Western Alaska. Due to harsh regional realities, Shell has currently only been granted legal permission for drilling between July and October.

While Arctic drilling may still seem like a dangerous opportunity, future technological innovations and improved Arctic preparedness and infrastructure will make such drilling a reality in the near future. The massive quantities of energy stored in the U.S. Arctic will stay there until we decide to take advantage of this opportunity.

Mexico Opens to Big Energy

For the past 55 years, Mexico has prohibited private companies from owning any of its oil and natural gas production. The national oil and gas company PEMEX, once a major international energy player, has been reduced to an irrelevant player due to the government’s ever increasing and frequent siphoning of funds from PEMEX. The demise of PEMEX and the rise of the reform minded President Enrique Pena Nieto opens the door to changes to the Mexican constitution now allowing big energy companies to purchase oil and natural gas land.

Mexico’s break-even costs are low:

  • Deep water production is $50/bbl or lower.
  • Energy output from Mexico’s deep water could be transported to the U.S. by existing infrastructure.
  • Mexico is far more stable than the Middle East.

Mexico is currently 10th in oil production and opening the country up to big energy will greatly benefit Mexico and the world energy market.

Upheaval — Natural Gas Growth Could Redefine Decades

Over the past few years, natural gas growth has been an energy investor’s fallback strategy. With a historically positive growth in almost every company’s stock and unperturbed fundamentals — promoted by technological advances — it is highly unlikely that such an industry trend is cyclical.

Some of gas’ most representative stocks (as deemed by the New York Stock Exchange) for companies such as Sempra Energy, Intergys Energy Group Inc. and AGL Resources Inc. were reformatted and indexed by the NCPA:

Gas Index

An unusually warm winter reduced energy demand and put a damper of gas prices, which suppressed growth towards the end of the graph in 2014. However, projections made by the Energy Information Administration (EIA) show that the sector will continue to expand at a stable rate throughout 2015 — supporting the theory that the market growth is due to a structural change.

In the case of the United States, this may be our golden age of natural gas. The U.S. is ready to be a net gas exporter by the end of this year, Market Realist proclaims “Some of the higher production in the Eagle Ford Shale in South Texas will be set to export to meet the growing demand from Mexico’s electric power sector.” On the other side of the Pacific, the same kinds of environmental laws that brought American coal to heel, such as the Clean Air Act (CAA), have come into effect as of January in China. The most prominent of which are the Chinese Air Pollution Prevention and Control Law’s amendments, which were made in response to deteriorating atmospheric quality over the country and the recent environmental initiatives taken between the United States and China. Thus, coal’s rising costs have instigated a shift in demand, one that will start favoring gas — this is a trend that could soon be seen globally.

But where do we stand as gas producers, and why does that matter?

world gas production

wold gas reserves

The United States is by no means the owner of the world’s largest natural gas reserves, however from the EIA’s datasets, one can intuitively see that for its reserves, the U.S. has an overwhelmingly dominant production capacity — meaning we have the most resources to extract and process gas. Should private and public players move to ease trade barriers between the countries, this is an advantage that the U.S. is unlikely to lose for years given China and other BRIC countries’ surging energy demands. Specifically, China’s policy changes have provided a niche for emerging American liquefied natural gas (LNG) vendors to seek partnership. We will not have a production advantage over other countries forever, and as the chart Known Natural Gas Reserves Across the World shows, a failure to capitalize on this opportunity would be a serious blow to American leadership and competitiveness on environmental, energy security and economic fronts.


Alaskan Oil Put on Ice With New Proposal

Last week, the Interior Department’s Bureau of Ocean Energy Management issued a five-year strategy that would open offshore drilling from Virginia to Georgia, but put previously deferred areas off the Alaskan coast off-limits, reports Politico.

While possibly good news for the Atlantic coast ― as well as the oil and gas industry ― the Alaskan delegation is far from pleased. Just last week, the Obama administration announced its intention to close of 12.28 million acres of Alaskan land from oil and gas exploration in the name of wildlife preservation.

“This administration is determined to shut down oil and gas production in Alaska’s federal areas ― and this offshore plan is yet another example of their short-sighted thinking,” said Senator Lisa Murkowski, the chairman of the Senate Energy and Natural Resources Committee in a statement. “The president’s indefinite withdrawal of broad areas of the Beaufort and Chukchi seas is the same unilateral approach this administration is taking in placing restrictions on the vast energy resources in ANWR and the NPR-A.”

While the Interior’s proposed plan does included three proposed lease sales in Alaska’s federal waters, Murkowski says it’s not enough. “The proposed lease sales we’re talking about right now aren’t scheduled until after President Obama is out of office,” Murkowski said. “Forgive me for remaining skeptical about this administration’s commitment to our energy security.”

Obama’s recent give-and-take oil and gas policy is particularly confusing in the wake of his State of the Union address, where he lauded the U.S.’s growth in production and drop in oil prices over the past year.

2014 Election and the Future of Energy Legislation

Election Day is officially behind us. The votes are in, the campaign ads are over, and the traffic in front of the grocery store, local high schools and other polling places should go back to normal. The Republicans kept the House and took the Senate. Now the big question is: what does it all mean?

The Republicans taking the Senate could signal big changes in U.S. energy policy. This past session, Republicans and Democrats battled over the expansion of domestic energy production, GMOs and EPA regulations.

With majorities in both the House and the Senate, Republicans now have an opportunity to make some big changes in the environment and energy conversations. Yet as pointed out over at the NCPA Health Blog, running straight for the controversial topics will only lead to partisan bickering, not effective change. Rather than targeting the extreme topics, Republicans would do well to target their legislation at topics with broad, bipartisan support.

Over the course of the 113th Congress, 76 bills made it past the House, but have yet to make it past the Senate. For those that don’t make it through this session, the topics that already a) have enough clout to make it through the House and b) have enough bipartisan support to get through both houses without a huge expenditure of political capital.

Energy Bills Passed by the House

Looking back at these bills, there are a few topics that stand out in both of these terms. Among them are:

Cutting Burdensome Regulations. Two bills, H.R. 2279, or the “Reducing Excessive Deadline Obligations Act of 2013” and H.R. 935, the “Reducing Regulatory Burdens Act of 2014,” both focused on cutting unnecessary regulations instituted under the banner of environmental protection. Curbing the growth of government regulations is rarely a bad idea, especially if you can do it in a bipartisan way. H.R. 935 passed with 62 percent of the vote, 8.6 percent of which came from the Democrats. While not a wide margin, it’s definitely a topic to consider as Republicans move forward into the next session.

Promoting Efficiency. No one likes inefficiency — not even Congress. H.R. 2126, the “Energy Efficiency Improvement Act of 2014,” passed the House with a whopping 87 percent of the vote. Energy efficiency, as well as procedural efficiency, could be a good focus for energy enthusiasts as we head into next session.

Increasing Domestic Energy Production. Increasing domestic energy production has the power to create jobs, boost the economy and protect national security. While definitely a more polarizing topic — the average number of Democratic supporters ranges from 7-20 for many of the bills that made it through the House, it could be a good strategy for a nation looking for an answer to Putin’s misbehavior. H.R. 6, the “Domestic Prosperity and Global Freedom Act,” actually passed with 62 percent of the vote. Exporting our natural gas reserves could be a huge help to the parts of Europe dependent on Russia, and the jobs and money it would bring in here at home aren’t a bad tradeoff.

As this next session gets under way, Republicans should keep in mind the lessons learned from Obamacare: Focusing all of your political capital on a partisan agenda right at the beginning can be disastrous. Focusing on smaller, bipartisan measures can have just as big an impact and hopefully with less of a mess.

Reducing Europe’s Dependence on Russia, Benefits United States

As tensions over the situation in the Ukraine heightened over the last few months, sanctions were thrown left and right between Russia, the United States and the European Union. The sanctions targeted the Russian banking and energy sectors, putting pressure on Russian President Putin’s inner circle.

Since the sanctions, Russia has lost $75 billion in capital worth, faces weaker direct investment and is teetering on the brink of recession, according to the BBC.

Unfortunately, Russia wasn’t the only one impacted by the sanctions. As one of the biggest energy suppliers in the world, Russia ranks in the top five producers of both petroleum and natural gas and is a huge energy supplier to the E.U. Sanctioning Russia could very well backfire on many E.U. nations.

So the question remains: how can the global community, and in particular the U.S., take action against Russia without risking E.U. economies?

According to Stephen Cheney’s Wall Street Journal op-ed, the answer is simple: expediting the export of liquefied natural gas (LNG) from the U.S. to the E.U. and its neighbors.

Oil and natural gas sales accounted for 68 percent of Russia’s total export revenues in 2013, according to the U.S. Energy Information Administration (EIA). From natural gas alone, Russia took in $73 billion last year.

The U.S. has seen booming growth in the natural gas industry over the past few years, and that growth is only expected to continue. According to Cheney, a recent Citigroup study predicted that the U.S. energy industry would add 665,000 new jobs and be a net exporter of energy by the end of the decade, and that by 2035 $115 billion would be added to the U.S. gross domestic product.

Creating U.S. LNG exports would transfer $4 billion in wealth from Russian consumers to European consumers, according to a 2013 Deloitte study. Additionally, says Cheney, reducing Europe’s dependence on Russia would increase the national security of both the U.S. and its allies. Yet the U.S.’s restrictive export laws only allow exports to be sent to nations with which the U.S. has a free-trade agreement, or after a lengthy permit process to ensure the export is within “the public interest.”

If opening up U.S. exporting restrictions to allow U.S. companies to export liquid natural gas could increase natural security, add jobs, and increase the security of our allies, shouldn’t that fall within “the public interest?”

Megan Simons is a research associate at the National Center for Policy Analysis.

Lower Energy Prices Help Many Americans Stay Warm

Many Americans struggle during the winter with expensive and excessive consumption of energy resources to keep warm. Inflated energy prices really puts a strain on many families and their budgets. However, this upcoming winter will be a bit easier to get through, thanks to the fracking boom.

  • Propane prices are 24 percent and consumption is 13 percent lower.
  • Oil price reduction allows a 15 percent reduction in heating oil energy spending.
  • Homes will use 10 percent less gas and 5 percent gas bill reduction.

The recent fracking boom has not only lowered energy prices for consumers, but also benefited the United States economy. Fracking’s benefits are very important to American consumers. This benefit will increase as fracking technology advances and the option to export our natural resources becomes more of a reality.

Critical Minerals: Rare Earths and the U.S. Economy

Rare earths are 17 elements in the Earth’s crust used in a variety of applications, from hybrid cars and x-ray units to cell phones and wind turbines. Unfortunately, the United States is largely dependent on China for these critical minerals,posing a serious threat to the American economy.

Despite their name, rare earths (REs) are relatively abundant.  However, they are generally not concentrated together, making extraction expensive and often uneconomical.  While the United States has 13 percent of the world’s rare earth reserves, China dominates the industry with an estimated 50 percent of global RE reserves and 95 percent of all RE production. Currently, the United States has only one fully operating mine — the Mountain Pass mine in California — but it largely lacks the capacity to process the raw materials into finished components.

Not only are REs widely used, they have few substitutes:

  • Europium is used as a red phosphor in color cathode ray tubes and liquid crystal displays. It costs $2,000 per kilogram and there is no substitute.
  • Erbium is used in fiber-optic telecommunication cables as laser amplifiers. It costs an average of $1,000 per kilogram and there is no substitute.

Supply cuts could be devastating to certain sectors, especially the defense industry:

  • Advanced jet aircraft engines depend upon yttrium thermal coatings to shield metal components from extreme heat.
  • Rare earth permanent magnets that utilize neodymium move the fins of precision-guided munitions.
  • Military radar and detection systems us neodymium, yttrium, lanthanum, lutetium and europium to amplify sounds and improve signal resolution.

Lawmakers have drafted legislation to improve the regulatory process relating to mining in order to jumpstart investment and encourage the development of an American rare earths supply chain.

Water Policing vs. Water Pricing in California

California is in significant drought, with a water crisis that has caused acres of crops to die or go unplanted, as water reservoirs continue to be depleted. According to one NASA water scientist, “If this drought continues, we’re going to be in a terrible situation within the next 12-24 months.”

The water crisis has caused municipalities to take action, sending “water police” out to monitor water usage and charging violators for excessive watering and other violations. Neighbors have begun to report one another to city authorities for using their sprinklers too often.

Water usage in California is suffering from the “tragedy of the commons.” In fact, water use in the state has increased by 1 percent this year, despite the worsening drought.

Why are Californians unwilling to curb their water use?

  • The authors explain that the state has incredibly low water prices: it costs less than 0.7 cents per gallon in San Diego and Los Angeles.
  • McKenzie himself writes that he pays just 0.2 cents per gallon for water in Irvine, California, meaning that he can purchase over 2,000 gallons of water for the same price as a single gallon of gas.

McKenzie and Shelton write that because water is so cheap, few Californians see it as a precious resource. They encourage raising the price of water in the state:

  • According to economists, raising the price of water by 10 percent will lead to a drop in consumption of 2 percent to 4 percent.
  • In order to reduce consumption in California by 20 percent, rates will have to rise by 50 percent.
  • By raising the price, consumers will give greater thought to their water usage and find ways to be more efficient.

To prevent the price hike from hurting the poor, a progressive pricing structure (in which the price of water rises as use increases) should kick in after a consumer has reached a minimal level of water usage.

NCPA Senior Fellow Richard McKenzie and Kathryn Shelton of the America’s Future Foundation