Federal government continues to limit energy production in Texas

This commentary originally appeared in the Midland Reporter-Telegram on April 14, 2015. 

The Obama Administration rolled out the latest threat to the U.S. energy boom in the form of a methane emissions reduction plan. Veiled as a way to reduce what the Administration deems as “dangerous” greenhouse gases, this plan is simply an assertion of federal control over upstream oil and gas to stymie production.

Because most hydraulic fracturing operations happen on private and state lands, long regulated by state and local officials, the upstream energy sector has largely operated without burdensome federal interference. Until now.

The administration seeks to curtail energy production by requiring new and modified wells to reduce their methane emissions by 40 percent to 45 percent (based on 2012 levels) by 2025. This target ignores the last two decades of industry success in reducing methane emissions.

From 1990-2014 emissions dropped by 17 percent, while gas production increased by 37 percent. Even more staggering, natural gas operations that employed hydraulic fracturing reduced methane emissions by 73 percent from 2011-2013 — at a time when the U.S. became the leading natural gas producer.

The reason for the substantial methane emissions drop is simple: methane is the main component of natural gas. Any loss in methane is a direct loss in product, and thus potential profit for producers.

Industry groups predict the administration’s methane emissions reduction plan will increase production costs, slow energy production rates and new drilling operations, and will delay genuinely effective methane emission reductions.

The plan proposed by the administration and EPA would regulate methane as a greenhouse gas, denying basic science about methane operation in the atmosphere. The EPA vastly overstates the potential “warming” impact of methane as a greenhouse gas.

The EPA alleges that methane has a warming effect 50 times greater than that of carbon dioxide. However, scientists estimate that figure to be inflated by a factor of as much as 100, due to the fact that atmospheric water vapor already absorbs most of the infrared radiation (heat) that methane could theoretically trap. The same radiation cannot be absorbed twice. Amusingly, the EPA concludes the next leading source of methane emission is livestock.

Obama’s methane reduction plan is not the only harmful federal regulation strangling U.S. energy production.

For almost four decades the ban on crude oil exports has put American crude oil producers at the mercy of domestic refiners by limiting the market to which they can sell. As shale oil production has swelled, U.S. refineries have been able to reduce the price at which they can purchase domestic shale oil. For example, the average West Texas Intermediate oil price in March was $48 per barrel, while the Brent (world) price was $56 per barrel.

The U.S. is already a net exporter of refined oil and opening up the ability to export crude oil could provide a much more dynamic oil market. Simply, companies only drill if they can sell oil at a profit.

Studies show that allowing crude oil exports would not only benefit U.S. consumers but could increase U.S. oil production by as much as 500,000 barrels per day by 2020. This increase may create as many as 300,000 jobs, add as much as $38 billion to economic output and give the U.S. a strategic benefit in dealing with oil cartels, such as OPEC.

Despite these gains, many in Congress continue to oppose lifting the export ban, which belies their real motivation for its support — climate change politics.

The shale revolution has severely weakened the appeal of renewable fuels by providing cheap oil and natural gas. Repealing the export ban will further undermine renewables by incentivizing domestic expansion of oil and gas production, further decreasing prices. This becomes a near insurmountable setback to those championing the end of the fossil fuel era.

Whether under the guise of a climate change plan or export ban, one thing is clear: continued federal intrusions on the free market threaten the continued success of energy production in Texas and across the country.   

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Leigh Thompson is a policy analyst with the Armstrong Center for Energy and the Environment at the Texas Public Policy Foundation.  She may be reached at [email protected].