Six energy policy changes to watch for in a Republican-controlled Congress

This is a long one from Marita, but it needs to be.  Read all of it … it is worth the few minutes you’ll spend compared to the enjoyment and satisfaction you’ll receive.

Commentary by Marita Noon

Executive Director, Energy Makes America Great Inc.

Contact: 505.239.8998, marita@responsiblenergy.org

Words: 2463

Six energy policy changes to watch for in a Republican-controlled Congress

Now that the dust has settled on the 2014 midterms, we can get a sense of how things will change in Washington under a Republican controlled Senate—and energy will be front and center.

Republicans and Democrats have very different views on energy development and policy. The past six years have seen taxpayer dollars poured into green-energy projects that have embarrassed the administration and promoted teppan-style renewables that chop-up and fry unsuspecting birds midflight and increase costs for consumers and business. Meanwhile, Republicans have touted the job creation and economic impact available through America’s abundant fossil-fuel resources.

Voters made their preference clear: Republicans won more seats, and with bigger majorities, than anyone predicted.

The day after the election, the Friends of the Earth, wasting no time, sent out a dramatic fundraising pitch, opening with: “The election’s over—the planet lost.” (You may not have even known that the planet was on your local ballot, but apparently it was.)

The email’s proclamation, once again, exposes the environmentalists’ agenda: “President Obama hasn’t always done the right thing for the environment. He should have denied the Keystone Pipeline years ago, he should be rolling back unchecked fracking, and he should have taken stronger action on climate both at home and in international negotiations.”

Gratefully, though ideologically aligned with them, he attempted to appease and didn’t take the extreme level of action Friends of the Earth would have liked.

The Keystone pipeline remains a strong possibility, though the Canadians have nearly given up on us. Fracking is regulated at the state level, which, mostly, allows it to continue to increase America’s energy freedom—resulting in lower prices at the pump. Because more than 96 percent of the wells drilled in America today use the decades-old, but new-and-improved, technology of hydraulic fracturing, a federal fracking ban, like environmental groups have been trying to pass through city and county initiatives, would virtually shut down our booming energy economy. President Obama tried, but couldn’t pass a cap-and-trade bill—even when his party controlled both houses. Nor could he get a new Kyoto-like international treaty ratified. Most of the western world is now retreating on the climate pledges made in a different political era.

Friends of the Earth is correct, though. The email states: “Now, with both the Republican Senate and the House salivating and ready to sink their teeth into our most basic environmental laws, the President’s environmental legacy is truly at stake.” The Republicans are likely “salivating”—though not specifically about “basic environmental laws.”

Big changes in energy policy are in the works. Not just because Republicans want to destroy the president’s “legacy,” but because a wealthy country is better able to do things right. A growing economy needs energy that is efficient, effective and economical—which is why countries like China and India will not limit energy availability and why Republicans want to expand access in the U.S.

What energy policies might the Republicans want to “sink their teeth into”?

Keystone pipeline
At a November 13 breakfast presentation on “the unconventional oil and gas revolution,” Senior Director, Energy Insight IHS, Chris Hansen said: “I expect to see action on the Keystone pipeline within the next few months.” While it is widely believed that Keystone would be an easy win in the Republican-controlled congress, the November 4 results are already making a difference.

Post-election, the Keystone pipeline—which the State Department has projected would create more than 40,000 jobs—has suddenly leapt to the front of the lame-duck-legislation line. Months ago, Senators Mary Landrieu (D-LA) and John Hoeven (R-ND), along with 54 others (including 11 Democrats), reintroduced legislation to authorize building the Keystone pipeline—but Senate Majority Leader Harry Reid (D-NV) has blocked the popular bill by repeatedly denying requests to take up the legislation. The House has already approved eight previous Keystone bills and quickly passed an identical bill sponsored by Landrieu’s election opponent Rep. Bill Cassidy (R-LA).

The question remains is whether or not the White House will approve the bill, though spokesman Josh Earnest hinted at an Obama veto—which would further anger his union supporters that have pushed for its passage for the past six years. If the president vetoes what many are calling the Save Mary Landrieu Act, all is not lost for the Keystone pipeline.

With many Democrats already on board with Keystone and a push for more support from union leadership, the new Congress may be able to pass it again—this time with a veto-proof majority.

Federal lands
President Obama likes to brag about the increased U.S. production of oil and gas. In his post-election press conference he stated: “Our dependence on foreign oil is down.” While the statement is true, it falsely implies that he had something to do with that fact.

Reality is, as a Congressional Research Service report makes clear, while oil production has increased 61 percent on state and private lands, it has decreased 6 percent on federal land where the administration has authority. Additionally, the report points out, applications to drill on federal lands take nearly twice as long to process under the Obama administration than they did previously.

Not only has the White House discouraged drilling on federal lands, President Obama has used his pen to lock up federal lands with potential development, such as the newly designated Organ Mountain Desert Peaks National Monument—which blocks production without analyzing the economic impact. “Every time they lock up federal lands, whether through national monuments, conservation areas, or wilderness areas,” Steven Henke, President of New Mexico Oil and Gas Association, told me, “they eliminate the potential for royalties from the federal estate. Those funds benefit both the state and federal government and reduce the burden to the taxpayers.”

For example, one prediction has drilling in the Arctic National Wildlife Refuge (ANWR) becoming a part of the Republican Party’s vision of energy independence: Alaska’s senior Senator “Lisa Murkowski has long argued that drilling in ANWR would help reduce the national deficit.”

Not all federal lands have oil-and-gas, or other mineral-extraction, potential, so a reversal of policy may not increase production by the 61 percent seen on state and private lands—but it could mean the U.S. not only passes Saudi Arabia in oil production, it leaves it in a dust storm.

Oil and natural gas exports
Before the new Congress is sworn in, we already hear a lot of talk about lifting the ban on oil exports that was put into place in response to the 1970s Arab oil embargo. Reuters reports: Senator Murkowski “has fought to relax the ban all year by issuing a series of papers detailing how such exports have been allowed in the past, holding a private meeting on the subject with Commerce Secretary Penny Pritzker, and hinting that 2015 could be the time to introduce ban-ending legislation.”

With the Republicans now in charge come January, Murkowski will become the Chairman of the Energy and Natural Resources Committee. She is expected to start by “holding hearings, pressuring Obama administration officials, and testing the level of support from party leadership.”

Oil producers continue to lobby for the lifting of the ban, as the light crude now being produced in the U.S. is difficult for domestic refiners to process with current equipment. If Congress can increase drilling access to federal lands, even more crude will flood into refineries with limited capacity. Reports indicate exports will have little impact on pricing within the U.S.

“Policy makers need to catch up with the industry,” Harold York, an analyst of the refining sector at Woods Mackenzie said. He projects that easing the crude oil restrictions “would lead to $70 billion in investment spending in the U.S. oil sector and further economic stimulus.”

Different from crude oil, the law currently allows liquefied natural gas (LNG) exports, but the Energy Department has dozens of applications for LNG export terminals languishing on some bureaucrat’s desk. Just six applications have been approved in the past year. Bipartisan support exists for expediting the permitting process—especially in light of Russia’s stranglehold on natural gas supplies to many of our European allies. Legislation must be drafted and passed to allow exports to non-European free-trade countries.

Environmental Protection Agency (EPA)
President Obama’s Clean Power Plan (CPP) has widespread opposition within the Republican Party—including state governors who struggle to interpret the regulations but who are asking the right questions regarding the impact on their individual states. Even coal-state Democrats, such as Senator Joe Manchin (D-WV), have concerns with the CPP.

The CPP has the potential to prematurely shutter hundreds of coal-fueled power plants when viable option exists for the plants’ replacement. This winter, Massachusetts is experiencing a 37 percent increase in electricity rates over last year because plants closed without sufficient infrastructure for their replacement.

The CPP, plus the many other regulations—such as those coming on ozone and methane—have many lawmakers concerned about the EPA’s impact on grid reliability and the economy. President Obama is not likely to sign any legislation designed to rein in his personal priorities, but Republicans can make changes in EPA appropriations.

In a post-election analysis webinar, Scott Segal, founding partner of the Washington, DC-based Policy Resolution Group, declared Obama’s approach to greenhouse gas emissions—specifically the CPP which projections show may cost $42 billion—as the number one priority of the Energy and Natural Resources and Environment and Public Works Committees. He believes the committees’ oversight will look at reliability, cost, and, benefits. Segal said: “I think you can expect tailored legislation to focus on these topics. You can expect use of the Congressional Review Act for resolutions of disapproval when these regulations become final. You can also look to the appropriations process. …that might mean an Interior and Environment appropriations bill might have a rider, not that sets aside the CPP entirely, but that makes narrowly targeted changes to that plan. Then the president would be confronted with a choice: ‘do I essentially shut down the EPA or do I work with Republicans in the House and Senate to reform my proposal?’”

The Endangered Species Act (ESA)
The ESA direly needs revision, updating or outright repeal as, though well-intended in the beginning, it has more recently been used as a funding tool for environmental groups and a way for them to block economic activity, such as oil-and-gas extraction, and ranching, farming, and mining.

Earlier this year, a group of 13 GOP lawmakers released a report, which called for an ESA overhaul, though CBS News called the changes “unlikely given the pervasive partisan divide in Washington, DC.” CBS continues: “The political hurdles to overhaul are considerable. The ESA enjoys fervent support among many environmentalists, whose allies on Capitol Hill have thwarted past proposals for change.”

While repeal is unlikely, this may be the time to introduce legislation that would reform the ESA to curtail litigation from wildlife advocates and give states more authority—two ideas that were brought forth in the report.

Kent Holsinger, a Colorado-based attorney specializing in ESA issues, told me: “As radical groups continue to push their agendas, other parts of the country are now beginning to feel the threat that westerners have long suffered. The House moved significant, but targeted, legislative measures just recently. Perhaps the Senate might follow suit?” Maybe we can encourage them.

Climate Change
The biggest change will come on the climate change agenda. While Obama will not back down, committees have significant influence, as previously mentioned, through the appropriation process. Also, expect oversight on Obama administration policies.

The Environment and Public Works Committee (EPW) Chairmanship will change from one of the biggest supporters of Obama’s climate change agenda (Senator Barbara Boxer [D-CA]) to the biggest opponent of his policies (Senator Jim Inhofe [R-OK]). On election night, Inhofe stated: “I am looking forward to taking back the environment committee”—a role that, according to Environment & Energy Publishing (E&E): “Already has greens cringing.”

“A leadership transition would mark a seismic shift in the tone of the EPA Committee,” states the E&E report. The switch will mean, according to Frank O’Connell, president of the environmental group Clean Air Watch, that instead of serving as a “shield for the executive branch” the committee could turn into “a battering ram against the executive branch.”

This reversal of attitude in climate change policies is already evident in the response to the president’s newly announced pact with China to reduce carbon dioxide emissions and his promised $3 billion contribution to a U.N. climate fund designed to help poor counties deal with potential impacts of climate change.

About the deal with China, Inhofe said: “This deal is a non-binding charade. The American people spoke against the president’s climate policies in this last election. They want affordable energy and more economic opportunity, both which are being diminished by overbearing EPA mandates. As we enter a new Congress, I will do everything in my power to rein in and shed light on the EPA’s unchecked regulations.”

Reports now declare: “Climate change compromises may be easier with China than Congress.”

What does Inhofe have in his power? Andrew Wheeler, EPW staff director when Inhofe was chairman previously, says: “I know he won’t hesitate to conduct oversight of the Democratic Obama Administration.”

The E&E report projects: “Among the topics Inhofe would likely zero in on: EPA’s rules to clamp down on greenhouse gas emissions from power plants, a controversial EPA proposal to clarify the scope of the Clean Water Act and the science underpinning federal environmental rules. EPA management could also be the topic of some oversight hearings.” Wheeler added: “I think his climate work will probably be focused more on the EPA regulation.”

The $3 billion pledge to developing countries is subject to Congressional appropriations. In a statement from Inhofe’s office, he vows to work with his colleagues “to reset the misguided priorities of Washington in the past six years.” He says: “The President’s climate change agenda has only siphoned precious taxpayer dollars away from the real problems facing the American people.”

The National Journal states: Republicans “want nothing less than to send money to poor countries to fight climate change.”

As a part of this shift, watch for environmental activists to be more aggressive on the state level—pushing for increased mandates for renewables and more regulation and/or bans on hydraulic fracturing.

***

For those of us who watch the politics of energy policy, it is going to be an interesting two years. If the Republican policies turn the economy around as predicted—offering a sharp contrast to the stagnation of the past six years, they will pave the way for victory in 2016. Call your Senators and Congressman and ask him or her to support these six energy policy changes that will give America energy security and economic strength.

(A version of this content was originally published at Breitbart.com)

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column.

Marita Noon: About elections and petro prices

Marita Noon

Commentary by Marita Noon

Executive Director, Energy Makes America Great Inc.

 

The oil price election connection

After years of rising gasoline prices, people are puzzled by the recent drop that has a gallon of gas at levels not seen in nearly four years. Typically in times of Middle East unrest, prices at the pump spike, yet, despite the violence in Iraq and Syria, gallon of gas is now at a national average of $3.

The public hopes it will last. The oil industry can’t afford continued price suppression.

I believe the price will tick up in the days ahead (post-election)—which will make it economic for producers to continue to develop—but the increases will not be so dramatic as to take away the economic stimulus the low prices provide.

Experts call the low cost the “equivalent to a tax cut averaging almost $600 for every household in the U.S.” while it boosts our gross domestic product by 0.4 percent. Consumers surely welcome the reprieve. But why now and why won’t it last?

As gasoline prices have made headlines, several narratives are repeated. Generally the explanations revolve around two basic truths—but, as we’ll explore, there is more.

The reasons offered for the drop in prices at the pump (which reflects the price of a barrel of oil) are 1) increased North American oil production and, 2) sluggish economic growth in Europe and Asia—which together result in a surplus, or a global glut, of oil.

American Abundance

Following a multi-decade decline, U.S. oil output now stands at a 28-year high—up 80 percent since 2008. Thanks to the combined technologies of hydraulic fracturing and horizontal drilling, the U.S. equaled Saudi Arabia’s production over the summer and experts predict the U.S. to become the world’s top producer by 2015. CNN Money reports: “The U.S. isn’t addicted to foreign oil anymore. The shale gas boom in the U.S. is a game changer for oil prices.” Our country’s oil imports have fallen from 60 percent of consumption to less than 30 percent. The data proves out what any beginning economics student knows: more supply + less demand = lower prices.

ISIS Influence

The U.S. has changed global oil markets, but so has ISIS. Several months ago, when ISIS first emerged as a threat to Iraq’s oil production, oil prices experienced the usual uptick. However, when the Iraqis and Kurds thwarted its southern movement and it did not take over Basra’s oil fields, prices eased.

In this new war, different from the days of Al-Qaeda, rather than blowing up oil fields to hurt Western economies, ISIS captures oil-producing regions in Syria and Iraq and uses the bounty for its own benefit.

ISIS has become a real player in the global oil markets. The territory controlled by ISIS has a pre-war capacity of 350,000 barrels per day (bpd). Estimates vary, but it is widely believed that ISIS produces 50-80,000 bpd—most of which the terror group on the black market at prices assumed to be $25-60 per barrel. ISIS reportedly funds its activities with oil revenues as low as $1 million a month to as high as $3 million a day—with $2 million a day being the most frequently cited (likely paid in cash or bartered goods). Production and revenues could easily increase if it were not for the militant’s limited technical prowess in working in the oil fields. To overcome the lack, ISIS is advertising for experienced engineers to run its oil operations (apparently the we’ll-kill-your-family-if-don’t-work approach hasn’t been successful).

ISIS doesn’t abide by any international agreements or price regulations. This is a “black market.” There are no tangible income or production numbers. We don’t definitively know all of ISIS’ customers.

The region’s long-established smuggling routes make it easy for the oil to be trafficked out of the territory. Once in the hands of middlemen, “no big traders, no serious companies are going to fool around with that oil,” says Matthew M. Reed, vice-president of Foreign Reports, a Washington-based consulting firm that analyzes oil and politics in the Middle East. He continues: “That oil is essentially radioactive at this point. No one wants to touch it.”

But, someone buys it—to the tune of millions of dollars a day. Who would buy the “radioactive” oil?

Some of ISIS’ heavily discounted oil reportedly ends up in Pakistan. A CNN article titled: “How Iraq’s black market in oil funds ISIS” states: “ISIS controls smuggling routes and the crude is transported by tankers to Jordan via Anbar province, to Iran via Kurdistan, to Turkey via Mosul, to Syria’s local market and to the Kurdistan region of Iraq, where most of it gets refined locally.” As Reed pointed out, legitimate traders won’t deal in it, so it likely goes to nations that care little about the rule of law—perhaps, North Korea and China. The outlets that are soaking up the discounted oil, are not buying the full-price oil, which leaves millions of dollars, 50-80,000 barrels, a day of full-price oil, on the table, looking for a buyer.

So, U.S. oil and ISIS oil continue to put a lot of supply into the market, keeping the price low. Unless coalition forces successfully bomb the oil fields in ISIS control, the black market oil supply will grow. If Republicans, who support developing our resources, take control of the U.S. Senate, our production could well increase. Both will help keep supply high, and prices low.

Saudi Strategy

The last piece in the low-priced oil puzzle is Saudi Arabia. BusinessWeek states: “With the U.S. on track to become the world’s largest oil producer by next year, it’s become popular in Washington and on Wall Street to call America the new Saudi Arabia. Yet the real Saudi Arabia hasn’t relinquished its role as the producer with the most influence over oil prices.”

The Saudi kingdom reportedly needs oil at $83.60 a barrel to balance its national budget. Yet, in September, with prices already down, due to a global oil glut, the Saudis boosted production. Then, in October, it lowered prices by increasing the discount offered to its Asian customers. Oil prices have reached the lowest level in nearly four years. Despite calls for price hikes from other OPEC nations, primarily Venezuela (which recently announced food rationing), the Saudi policy will not likely change before the November 27 OPEC meeting.

Saudi Arabia’s price war has surprised the markets and made watchers wonder what they are up to. With its government 85 percent dependent on its oil revenues, the Saudis need to protect their turf as the dominant force in oil.

Some say the move “is the result of a deliberate strategy by the Gulf nation to test the mettle of rival producers from Russia, to fellow OPEC member Iran and US shale producers.” Most experts agree that keeping prices low hurts higher-cost production such as that from U.S. shale oil and Canadian tar sands. Higher prices encourage more discovery and development. A report from Aljazeerah claims: “OPEC leader Saudi Arabia hopes to claw share from U.S. producers.”

The Financial Times reports: “The lower prices also appear to be designed to put a brake on the shale oil boom, which has been the most significant upheaval in global energy for a decade.”

Two years ago, Saudi Arabia did much the same thing—increasing production and dropping oil/gasoline prices. At that time, the U.S. faced an important presidential election where one candidate loudly supported America’s new energy abundance and the other’s energy agenda was all about “green.” Had gasoline still cost in the range of $4.00 on November 6, 2012, the party in power would have suffered; the public would have been screaming: “Drill, baby, drill.” The Saudis came in and with their unique ability to throttle production up or down, took some heat off of the Obama Administration.

Now, in the midst of another election cycle—one that is very important to the future of oil production in America, the Saudis, once again, appear to be orchestrating geopolitical outcomes. OPEC’s oil output is close to a two-year high—despite production drops in Angola and Nigeria. Saudi Arabia has made up the difference.

Some observers say the Saudis’ increased production in a time of global over-supply “is not about a political attack on the U.S.” Others see it, as “more nuanced.” Yet, last week a Saudi industry official, discussing the production/export data leaks acknowledged: “Sorry, it is politics.”

It seems clear that OPEC does not want U.S. production to increase, and Saudi Arabia is in a position to try influence American politics. Lower prices favor the party in power. A shift in control of the Senate would mean a change in America’s energy policy—one that favors our homegrown energy resources; one that Saudi Arabia doesn’t want.

However, it appears, regardless of possible Saudi meddling, the Senate leadership will shift. Once American voters make that decision on November 4, the OPEC leader will no longer have the incentive to inflict short-term pain on its own economic climate for long-term gain. Saudi Arabia will likely dial back production and the intentionally low price will stabilize—but not so much that it hurts the benefit to the American economy that abundant energy provides.

The American consumers win; American energy producers win. America wins.

(A version of this content was originally published on Breitbart.com)

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column.