It appears there’s a new leader in global oil reserves. And it’s us. According to a report from the Financial Times, the United States now leads the world in recoverable oil reserves. A recent estimate form Rystad Energy estimates recoverable oil in the U.S. to be 264 billion barrels, compared to Russia’s 256 billion barrels and Saudi Arabia’s 212 billion barrels.
That is, of course, good news for American consumers. It is also welcome news for the geopolitical scene, which has been influenced to a great degree by middle eastern nations that wield global power through their vast oil holdings. Perhaps even better news is that, given recent discoveries in the Permian Basin in Texas and New Mexico, America’s oil glut is likely to increase even more.
“There is little potential for future surprised in many other countries, but in the US there is,” said Per Magnus Nysveen, analyst at Rystad Energy. “Three years ago the US was behind Russia, Canada, and Saudi Arabia.”
Not all experts agree, though, on either the amount of recoverable oil in the U.S. or about what expanded reserves in the U.S. would mean globally. Other notable estimates still place the U.S. behind other nations in oil reserves. Some experts also believe that U.S. reserves are not likely to disrupt the oil market completely, mostly because of the relatively high expense of producing American oil. Richard Mallinson, of Energy Aspects in London, for example, explains that the cost of production is a huge factor in determining the significance of oil holdings.
“Reserve numbers matter but lots of other factors also determine short and long term returns from what the oil companies and nations hold,” Mallinson told Financial Times. “The rise in prominence of the US doesn’t diminish the role of Saudi Arabia or Russia, which have some of the cheapest to produce oil in the world.”
While opinions vary about how America’s oil reserves will eventually affect the global marketplace, one piece of news that is not disputed is that gas prices in the U.S. have benefitted from a drop in oil prices. In fact, the Energy Information Administration (EIA) recently reported that the retail price of regular season will average $2.04 per gallon during the summer of 2016. That is down from $2.63 per gallon last summer and also represents the lowest summer average since 2004. That means more disposable income in the hands of American consumers and lower overhead costs for many businesses.
See EIA’s Fuel Outlook Here
“Access to more domestic oil is good for America’s national security and ultimately good for consumers here at home,” says PACE Executive Director Lance Brown. “However, we have to remain committed to keeping production costs for American oil competitive. The U.S. can use its oil supplies to make our nation stronger and more independent, but that won’t be possible if we choose a path of excessive regulation and higher costs of production.”
Despite being the subject of a stay from a federal court, the EPA’s carbon mandate, known as the Clean Power Plan, remains a topic of debate among state and federal policy makers. Some believe, for example, that EPA’s efforts to regulate carbon dioxide goes too far toward controlling the sources of power available to utilities. One of those concerned voices is Travis Kavulla, President of the National Association of Regulatory Utility Commissioners (NARUC).
NARUC President Travis Kavulla
According to a recent report from Rod Walton of Electric Light & Power, Kavulla testified in a hearing called by House Republicans on what he deems to be EPA picking the winners and losers of energy industry. According to Kavulla, EPA’s Clean Power Plan will disrupt the traditional economics of the electricity market, for example, by favoring renewables over nuclear power. In his opinion, the rule is a top-down approach that overlooks state preferences and market realities.
“The implementation of the Clean Power Plan probably will have the semblance of a political compromise that involves creating a carbon resource plan where politically favored power plants are brought online either through a direct mandate of a state plan, or in exchange for emissions reduction credits or similar instruments created by regulatory fiat and which other generators are required to obtain,” Kavulla said, according to a transcript of his testimony.
“The production of those new power plants then will increase supply in the competitive markets, suppressing the market clearing prices that all resources rely upon for their continuing operations, including other clean energy resources that were previously constructed but which do not obtain credit from the EPA for Clean Power Plan compliance,” he adds. “If this sounds complicated, let me assure the subcommittee: It is.”
Kavulla, who hails from Montana, foresees a major shift in the power supply market if EPA is allowed by the courts to continue its effort to regulate carbon emissions. Montana is one of twenty-four states claiming that EPA is overreaching its authority. In fact, Montana is expected under the EPA’s current proposed rule to cut carbon emissions by 47 percent, one of the highest reductions in the nation. Kavulla, like many other regulators, believes that the states, not federal bureaucrats, should be the ones driving energy decisions that affect utility customers.
“The importance of this state planning expertise is not merely an opinion; it is the foundation of the long-standing legal framework of our country’s electric power sector, which establishes a bright line between the federal and state jurisdiction over generation of electrical energy,” Kavulla’s testimony reads. “While my association has periodically disagreed with the Federal Energy Regulatory Commission—our counterpart on oversight of the power sector—that agency’s actions have usually been undertaken in a spirit of cooperative federalism.
In addition to concerning policy makers on a state level, the Clean Power Plan has also drawn the ire of some in Congress. A week ago, the EPA’s air chief, Janet McCabe, whose office is responsible for implementing EPA’s new carbon mandate, sparred with Rep. Ed Whitfield of Kentucky over the agency’s decision to continue working on the plan despite a stay from the federal court. Whitfield serves as Chairman of the Energy and Commerce Committee’s energy and power panel.
Whitfield expressed concern that EPA shows no sign of slowing down its effort to regulate carbon dioxide from the power sector, despite the stay. For example, although the overall carbon mandate is under a stay from the federal court, the EPA has nonetheless completed a “44-page proposed rule for a voluntary clean energy incentive program that goes with the halted plan.”
“Taking this action is not inconsistent with the stay,” McCabe explained to Whitfield. “The stay precludes EPA from implementing the Clean Power Plan. EPA is doing nothing to implement the Clean Power Plan.”
Rep. Whitfield seems to disagree, and so do many others. As the courts continue to deliberate on the future of carbon regulation, EPA’s actions will be something to watch closely.
It hasn’t been a good month or so for those who want to stop the practice of fracking. That’s because two significant cases have dispelled misinformation about fracking and dealt a blow to federal attempts to regulate it.
First, the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) concluded a major study that looked at fracking practices off the coast of California, finding no significant environmental impacts. As reported in The Hill and elsewhere, the two federal agencies reviewed data from twenty-three drilling platforms off the coast of California for a period dating from 1982 through 2014. The results were not what anti-fracking forces were expecting.
See the Official Finding Here
“The comprehensive analysis shows that these practices, conducted according to permit requirements, have minimal impact,” BOEM Director Abigail Ross Hopper said in a statement.
“Overall, most resources will not be impacted or impacts will be negligible,” the report goes on to state. “In some cases where impacts are somewhat more pronounced, such as with discharge of produced water, the impacts are minor, short-term and localized.”
Offshore fracking permits had been suspended in the state until further study could be completed. These new findings open the door for further energy development off of California’s coast.
Second, a federal judge in Wyoming ruled last month that federal regulators lack the authority to set rules for fracking, dealing a blow to those who want to curtail the extraction of fossil fuels. According to a report from the Associated Press, “U.S. District Judge Scott Skavdahl said the Bureau of Land Management can’t set the rules because Congress has not authorized it to do so. The judge, who was nominated by Obama in 2011, wrote that the court’s role is not to decide whether hydraulic fracturing is good or bad for the environment, but to interpret whether Congress has given the Department of Interior legal authority to regulate the practice.”
Officials in Colorado, North Dakota, Utah, and Wyoming have opposed the Bureau of Land Management’s attempt to regulate fracking, a significant source of both energy and jobs in those states. The ruling in U.S. District Court means that federal authorities will have a tougher time standing in the way of fracking’s future. It also means a setback to the administration’s environmental and energy agenda, which many have argued is built on overreaching federal authority and circumventing Congress. It could also be a setback for anyone wanting to extend President Obama’s environmental agenda in a future presidency.
In an article published in the Wall Street Journal, Amy Harder explains, “That bodes trouble for the Democratic Party’s presumptive presidential nominee, Hillary Clinton, who has vowed to continue and double down on Mr. Obama’s environmental agenda irrespective of Congress’ interest in working with her if she wins the election in November.”
For their part, the American people are largely committed to the use of American fossil fuels to grow the economy and build energy independence. In fact, a recent poll commissioned by the American Petroleum Institute (API) finds that a majority of Americans support the expanded production of U.S. oil and gas. According to API CEO Jack Gerard, the survey “makes clear that when it comes to energy, what matters to most Americans is that they want and expect reliable and affordable energy.”
Fracking is, of course, just part of the nation’s energy puzzle. But it is an important part, one that policy makers would do well to protect. These recent developments are a step in the right direction.