Skip to comments.Oil Is Where the Growth Is, So Let's Drill
Posted on 02/19/2014 5:54:17 AM PST by thackney
The economy is stumbling along at 2 percent annual GDP growth and employment growth continues to disappoint. One bright spot is energy, which is booming despite government obstacles. With more efficient regulation America could increase energy production, and next week Senator Ted Cruz (R-TX) will release a bill to do just that.
A soon-to-be-released report by my Manhattan Institute colleague Mark Mills shows that even though U.S. employment is still below prerecession levels, jobs in oil and gas industries have grown by 40 percent since 2007, the start of the recession. With oil and gas adding $300 billion to $400 billion every year to the economy, Mills suggests that the United States might still be in a recession if not for oil and gas.
About 1 million Americans work directly in oil and gas, and another 10 million work in jobs linked to the industry, producing steel for pipelines, supertankers, and railcars. This job creation is not the result of "Big Oil," the five largest oil and gas companies, but from 20,000 small and midsize companies. Each employs fewer than 15 people, on average.
In addition, foreign companies are expanding, or relocating to the United States, due to inexpensive energy. An Egyptian firm is investing in a billion-dollar fertilizer plant in Iowa, and a South Korean tire company wants to build an $800 million factory in Tennessee.
Oil production has risen by 60 percent since the end of the recession in 2009. This growth has been in spite of federal government help, rather than because if it. Imagine how much more growth could have occurred if applications for permits for oil and gas exploration, as well as refinery construction, were approved in a more speedy manner.
"With so many Americans still unemployed or underemployed in the wake of the Great Recession, it is unconscionable that our government is not doing everything it can to get out of the way of any part of the economy where there is growth," Mills told me.
He continued, "In the last few years, the oil and gas sector, dominated by small and mid-sized companies, tens of thousands of them, has achieved astounding and broad-based job creation, more than in any other single segment of the economy."
Senator Cruz is listening. He wants to remove some of these regulatory obstacles to oil and gas development. One major disadvantage for any kind of business development is a lengthy, cumbersome, and unpredictable approval process. This deters new entrants, such as the very people who are creating jobs in oil and gas.
Cruz's bill would streamline the approval process for a number of projects.
This has been accomplished in Canada. Canada's Responsible Resource Development Act, passed in 2012, places timelines on regulatory approvals, normally two years from filing of completed application with the regulator.
Enbridge's Northern Gateway, a dual pipeline from Alberta to a marine terminal in British Columbia, was one of the first such projects approved under the new law. Canadian federal regulators had until end of 2013 to decide on whether to allow the pipeline to proceed. The government gave the project a positive recommendation in December.
In order to be competitive, as well as to increase economic growth, the United States should pass similar legislation. Cruz's bill would require approval in four months for transnational oil and gas pipelines and electrical transmission lines. In contrast, the approval process for Keystone XL has taken nine years, and still counting. Surely the United States should be able to give a definitive yes or no within a shorter period.
If Cruz's proposed bill were to become law, the Federal government would have to speed up its approval process. Companies would get a decision, up or down, fast. Here are some timelines in the bill:
* Drilling permits: 20 days after an application.
* Shale drilling applications: 30 days (with a possible extension of another 30 days).
* Offers of open areas for oil and gas leasing: 18 months after designation.
* Issuance of leases for exploration or production: 60 days after payment by the company.
* New refineries: one year.
* Expansion of existing refineries: four months.
One potential bureaucratic response to such fixed timelines would be to disapprove all applications, unless applicants "volunteer" to request an extension. Sadly, that behavior already permeates some government agencies.
Senator Cruz's bill could be improved by making the application as deemed granted unless disapproved, and with extensions available only through an adversarial hearing before a federal court, perhaps the D.C. Circuit court.
The government agency would have the burden of demonstrating the need for the extension. The Court would grant the extension in only the rarest of circumstances. Such a procedure would get the federal agencies out of the habit of asking individuals to "volunteer" for an extension.
The Cruz bill would allow exports of oil, gas, and coal, except to countries that are subject to sanctions or trade restrictions. It would repeal current presidential authority to limit oil exports, as well as other laws that prevent oil exports from the Outer Continental Shelf or in pipelines over federal rights of way.
Senator Cruz told me in an email, "In a Providential blessing, we are witnessing the beginnings of an American energy renaissance, driven by the private sector. The Obama Administration's opposition to energy-- to coal, to new refineries, to the Keystone Pipeline--is political, not driven by science. Today, we are facing the lowest labor force participation since 1978--now is the time to reduce the barriers to new production and to open up federal lands, so we can allow millions of high-paying jobs to be created across America."
If Congress and the President are serious about getting America back to work, they should take a careful look at Senator Cruz's bill.
S! was correct.
Hey—I say if you haven’t got an oil well, get one!
Sounds like a plan to me—LOL!
This is the easiest way to get our economy back on track.
Then we should remove all gun regulations, pass a “Constitutional Carry Act” and watch the economy grow.
Think of the demand for machine guns, fueled by the endless stream of Black on White beatings/killings.
Then, machine guns burn LOTS of ammo, and the ammo industry contributes to the economy.
Just think of the number and size of ranges for all the new machine gun owners - more growth!
So much for the cheap seats. People would also like armored vehicles so they would not need to fear being dragged from their vehicle by “exuberant youths wilding” - and nothing stops exuberant Urban Ferals like armor and light machine guns.
Think of the jobs building such vehicles. Now add in the boost to the economy from the training grounds and practiced fees. Tanks and ammo and fuel ain't cheap, folks.
Pilots could buy whatever planes they wanted, and the yacht crowd could install close in defense weapons, just the thing when arrogant Messicans swarm your marine trying to confiscate your yacht over an obscure $50 tag, tax, whatever. Sustained auto-cannon fire IS capable of reminding the most officious bureaucrat of the manners his Mother tried so hard to teach him, but failed.
Arms - the world's best etiquette instructor!
Drill baby drill!
Actually, it probably wouldn't have made much difference. As I understand it, essentially all available equipment and experienced personnel are working overtime.
The feds could have made additional land available for drilling, but that wouldn't have magically produced more rigs or people.
Additional federal encouragement would have been significantly effective only if rigs would otherwise have been standing idle. Let's not ourselves fall into the trap of believing that federal policies magically produce jobs.
Should have noted that there is a good point about refinery and pipeline expansion.
“Actually, it probably wouldn’t have made much difference. As I understand it, essentially all available equipment and experienced personnel are working overtime.”
Would not the industry respond by new rigs, etc. if there were a more favorable Federal attitude?
If experienced personnel spent less time involved in needless regulation and overpermitting requirements, it would help.
Given the amounts of money being made, I suspect the companies involved are expanding capacity as fast as they can.
But this isn’t my field, so I could certainly be wrong.
Again, not my field.
But I strongly suspect the drilling companies have personnel that specialize in dealing with regulations and permits, and that the people actually doing the drilling don’t spend a lot of their time on it.
That is certainly how doctors deal with insurance companies and Medicare/Medicaid, and I would assume drilling companies do the same.
But it does take time and money. It effects the capital allocation for new projects. Just as a rise in the cost of steel effects the marginal projects. It effects money available for training new personnel. It effects money available for upgraded equipment.
In the coal business the regs have made it almost impossible to expand or get new mining permits. This has resulted in layoffs and cutbacks of those people who do this type work not to mention the miners themselves. The Feds are winning the war on coal. Watch your electric bill, it will double in the near future and those who say switch to nat gas do not know basic math. It is several times more expensive to use nat gas and with a switch to it the price of nat gas will go up even further. The Feds are winning the war on the middle class also. Aside from that you cannot just throw a switch and instantly start using nat gas.
Coal fired electric plants are being shut down because of the expense of installing green tech solutions to cut in half the output of soot. Soot. Not something that causes sickness but something that if you are close to a power plant may make your car look dirty. Think brown outs and black outs can’t happen in this country? Think again.
Not defending the regs being imposed on power plants.
Just pointing out that I suspect fracking is going full tilt, at or near capacity. It’s not being inhibited much, if any, by restrictions on drilling on federal land.
If anything, the regs being imposed on coal are creating artificial demand for nat gas, and thus keeping the price, and incentive to continue drilling for it, high.
That means a lot more business for the $31 billion fracturing industry, which shoots pressurized payloads of water, sand and chemicals deep into the earth to break open dense shale rock. Horizontal operations access more of a reservoir and require more pressure pumping.
But thats small relief two years after a surge of oil field services startups left the U.S. market with far too much fracturing equipment and sent prices for fracturing jobs plummeting.
Im not going to kid you and say its not a challenge to survive, said Greg Lanham, chief executive of FTS International, the fourth-largest U.S. hydraulic fracturing company by horsepower, a measure often used for fracturing companies capacity. But weve been able to adapt quickly enough, and weve been able to maintain our market share.
Pumps move to the Permian under market pressure
January 26, 2014
Thanks for the info.
I just haven’t seen any evidence that the limiting factor in utilization of rigs is land on which to drill.
Which would seem to be the primary way federal restrictions would impact drilling.
Just looking at the map of shale gas plays, a relatively small percentage of the total is in areas where most of the land is in federal hands. Most is east of the Rockies, where the land is private. Possibly this is because nobody wants to try to deal with the feds and so aren’t drilling there.
I have also never quite understood those who object strongly to regulations prohibiting drilling or mining. It’s not like those resources go away. They’re still there available for future access, if needed. Think of them as an untapped bank account.
I’d be glad if the government would get out of the way on these issues, but I don’t think government policies are at present greatly inhibiting gas/oil production in USA.
Acquiring debt while paying money to your enemiesand while keeping your own accounts inaccessible is rarely a way to better your future.
The number of drilling rigs in operation in the US has fallen about 10% over the last two years.