The Wall Street Journal issued a blistering rebuttal today — in an editorial titled “Energy in the Executive” — to Barack Obama’s energy policy comments made during the debate this past Tuesday night. Contrary to the implications of an “all of the above” sound bite that the administration wants us to believe defines its energy policy, the true policy is something more like “all of the above except anything having to do with hydrocarbon-based fuels.”
As the editorial rightly points out, the coal industry has been specifically targeted. Given the passage of a number of draconian EPA regulations requiring prohibitive expenditures on retrofits of coal-fired plants, the coal industry is slated to see a number closures that will necessarily reduce U.S. energy production. Rolling blackouts resulting from the expected closures along with the toll in job losses, however, are somehow often ignored whenever the administration needs to publicly discuss the issue.
Moving along the hydrocarbon chain, the revolution in unconventional oil and gas drilling has represented a massive uplift to many of our country’s regional economies. States such as North Dakota (Bakken Shale), Texas (Eagle Ford Shale) and Pennsylvania (Marcellus Shale) now represent some of the strongest states in the country in terms of economic growth and improved employment trends.
Now for the administration, the resulting growth in jobs and oil and gas production has put them in a bit of a quandary. How can they stay on good terms with the activist environmental lobby and still promote their “all of the above” energy policy? The answer is that they will try to burn the candle at both ends, taking credit for job growth and oil and gas production resurgence while limiting energy industry growth by minimizing permit issuance for drilling on federal lands and deferring decisions on major projects such as the Keystone XL pipeline.
Looking to the future, much will depend on the outcome of the election. Should Obama prevail, rumors of a sharp increase in regulations on fracking by the EPA could well become reality. Such actions by the EPA would generate higher costs for producers and thus raise energy prices. Reducing the gap in price between alternative energy sources and hydrocarbon sources is one goal that the administration seeks to accomplish here.
Of more significance, an increase in burdensome regulation of unconventional drilling efforts will likely diminish many of the benefits the country is now seeing from the energy revolution. In addition to job growth from the build-out of energy infrastructure, tremendous benefits are also accruing to a number of our domestic industries that use natural gas in their processes. The petrochemical complex is a huge beneficiary of lower feed-stock costs in the form of ethane, a natural gas derivative. Our country’s energy security is an obvious benefit as we become less dependent on foreign imports of oil. Finally, the advances made in oil service technology have been nothing short of spectacular.
These innovations will contribute not only to improved economics in unconventional oil and gas drilling, but also will result in greater assurance that related environmental issues are given the deserved attention. The oil service technology that continues to see advances is also being taken to overseas shale basins with positive implications for areas such as continental Europe. In this region where the Russian Federation accounts for 34 percent of natural gas imports, the implications for the balance of power are far reaching.
The United States is a position to embrace a revolution in energy that has dramatic economic and geopolitical implications. Should the Obama administration continue to meddle with imposing crushing regulations on our energy industry, however, many of these benefits could be tragically lost.