Federal Mandates Threaten America’s Energy Growth

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Jeff Eshelman / Julia Bell
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For Immediate Release
May, 4 2012

WASHINGTON – From offshore moratoria in the Gulf of Mexico to arbitrary restrictions for onshore development, the impact of redundant federal regulations on our nation’s ability to produce oil and natural gas — energy we all rely upon each day — should not be underestimated.

Today’s Decision. Today, the Obama administration released proposed regulations regarding well construction and hydraulic fracturing on federal and tribal lands.  The proposal — which will add thousands of dollars to the cost of each well, threatening development and related job growth — is one of many federal mandates imposed on the oil and natural gas industry over the past year.  As featured in Bloomberg, the Independent Petroleum Association of America’s (IPAA) Barry Russell noted that the rule is “an unnecessary layer of rigidity.”  More from the IPAA in the Grand Junction Sentinel:

“America’s independent oil and natural gas producers are already having a tough time obtaining permits to develop federal lands,” said IPAA’s Barry Russell in a prepared statement.

“BLM’s proposed regulations, which would mandate one-size-fits-all regulations on well construction and hydraulic fracturing operations on these lands, are redundant. They will undoubtedly insert an unnecessary layer of rigidity into the permitting and development process.”

Nothing new. Today’s news comes as little surprise based on the current administration’s policies towards oil and natural gas development.  This year alone, we have seen multiple new federal regulations for practices already effectively regulated by the states. In 2011, nine separate federal agencies looked to implement new regulations and procedures to delay, if not altogether halt, U.S. oil and natural gas production. As Barry Russell wrote in the Houston Chronicle this winter,

“America has been safely developing its natural gas resources for a century through sound state and federal regulatory programs…Federalizing oil and natural gas regulation will not result in tangible safe development benefits. But, needless to say, such misguided actions could paralyze production across the country.”

Offshore mandates. In 2010, Virginia was ready to take its place as the first state ever permitted on the East Coast to produce oil and natural gas offshore. Yet in November of 2011, the current administration dropped Virginia from the government’s leasing plan, sacrificing jobs and development for the state with little explanation. This week, Governor McDonnell wrote in the Wall Street Journal about the negative impact this arbitrary decision has had on his state and the practice of offshore oil and natural gas drilling in general:

“In the Gulf, delays in permitting have resulted in dramatically reduced investments. The Energy Information Administration projects that Gulf production will decrease by over 200,000 barrels per day in 2012 compared with levels before the president assumed office. Some studies, including one published last year by the energy research firm IHS CERA, have indicated that closing this gap could provide between 110,000 to 230,000 jobs across a multitude of sectors.”

Of course, the damage done to the Gulf’s economy from the drilling moratorium in 2010 was enormous, according to a recent piece by Investor’s Business Daily:

“The decision arguably hurt the region worse than the spill itself, says Joe Mason, a senior fellow at the Wharton School. ‘Job losses were not too bad until the moratorium,’ he told IBD.

“Interior’s estimate was that well closures temporarily cost 8,000-12,000 jobs and $1.2 billion in economic activity. Mason put job losses at 13,000-19,000, lost wages at $800 million and lost tax revenue at $200 million.”

And it’s not as if industry has been standing still on safety; far from it. Oil and natural gas companies have been and continue to be committed to increasing safety in offshore development. At the recent Offshore Technology Conference in Houston, nearly 80,000 professionals spent four days listening and learning from producers and service companies featuring developments in offshore safety and technology.  But despite these advances, new regulations have slowed permitting, and caused confusion amongst producers and regulators alike. IPAA Vice President Dan Naatz spoke at the conference about making sure lawmakers and the general public know the impacts of onerous regulations on our nation’s independent producers. “There is an amount of education that has to happen,” Naatz said.  

As Gov. McDonnell properly observed in the Wall Street Journal,  “Energy is the lifeblood of our nation’s economic growth. More energy means more jobs and we need to use all of our domestic energy resources.” Independent producers are dedicated to safe and responsible development under fair, state-enforced regulations. But with every top-down federal regulation and mandate imposed, the ability to deliver affordable energy to the American people is put even more at risk.