Policy Feature Issue: Energy Policy under President Obama – More of the Same

In his State of the Union address, President Obama is expected to announce more of the same when it comes to U.S. energy policy.  But what does this mean?  More permitting delays?  More regulation?  More lawsuits?  America deserves a true “all-of-the-above” energy policy that removes barriers to affordable, reliable domestic energy sources.

The nation is in the midst of an energy revolution, largely because of technological innovations that have allowed us to tap vast domestic oil and gas reserves.  These previously inaccessible resources have been a game-changer, posturing America to lead the world in energy production by 2015.  In a time of economic uncertainty, the energy sector has been a bright spot, creating jobs, increasing household incomes, and reducing energy bills and the cost of goods and services.  Yet the President wants to limit this progress.

In his State of the Union address last year, the President announced a series of unilateral actions he would take to restrict greenhouse gas emissions and further eliminate energy sources relied upon by Americans.  At the time, these policies were predicted to increase energy costs and put many people out of work.  As they have been implemented, they are doing just that.

President Obama’s Policies:

  • The Obama Administration proposed new regulations for hydraulic fracturing (HF) on public lands,[1] which threaten to significantly drive up costs.  The Administration estimates the regulations will cost only $11,000 per well and have little impact on economic development; but a recent analysis estimates the regulations would cost $345 million annually—or $96,913 per well.[2]
  • Burdensome regulations and permitting processes led natural gas production on federal lands to fall by 23% since FY 2007.[3]  A 2012 report showed fossil fuel production on federal land at a ten-year low.[4]
  • Offshore production, which represents a large portion of crude oil production on federal lands, “fell by 23 percent in fiscal year 2012,” and “The vast majority of areas of in the offshore United States remain off limits to leasing during the next 5 years . . . .”[5]
  • Costly EPA regulations have already contributed to the closure of over 300 individual coal-fired electric generating units across 33 states.[6]
  • Regulations proposed by the Administration would restrict emissions from new coal-fired power plants to a standard that no coal-fired power plant in the world currently can meet.
  • The proposed regulations would require new coal-fired power plants to install “carbon capture and storage” (CCS) technologies, even though there are no full-scale commercial power plants in the world with the CCS technologies needed to meet the proposed standard.[7]
  • Based on one estimate, adding CCS technologies for a new coal-fired power plant could increase capital costs by up to 60%.[8]
  • Despite the enormous compliance cost, EPA’s own analysis “projects that [the proposed standard] will result in negligible CO2 emission changes . . . .”[9]
  • If coal power were phased out over a twenty-year period, electricity prices could rise by 20% in the first sixteen years.[10]

America’s Energy Potential:

  • Innovations in horizontal drilling and HF have unlocked vast domestic oil and gas reserves, putting the U.S. on a path to lead the world in energy production by 2015.[11]
  • In 2000, shale gas provided 1% of our nation’s gas supplies; today it is 25%.  Half of the natural gas consumed today is produce[d] from wells drilled within the last 3.5 years.”[12]
  • “[S]hale oil and natural gas activity contributed over 1.7 million jobs in 2012 and will increase by over 45% to almost 2.5 million jobs in 2015.”[13]
  • The amount the U.S. spends on energy imports has fallen by 40% since 2008.[14]
  • “Unconventional oil and gas activity increased disposable income by an average of $1,200 per US household in 2012 in the form of lower energy bills as well as lower costs for all other goods and services. That figure is expected to grow to just over $2,000 in 2015 and reach more than $3,500 in 2025.”[15]
  • According to a recent study, increasing offshore oil and natural gas production in the Atlantic alone would create 280,000 jobs by 2035; contribute up to $23.5 billion annually to the U.S. economy; and generate $51 billion in federal and state revenues.[16]
  • Coal was the largest source of electricity generated in the U.S. in 2012, producing 37.4% of all electricity nationwide.[17]
  • Coal is used to generate electricity in 48 states” and it supplies “at least one quarter of the electricity in 29 states.”[18]
  • Coal’s role in generating U.S. electricity is expected to increase to 40.5% of the nation’s electricity in 2014.  This projection does not take into account new regulations that could hurt coal energy production.[19]

[2] Business Impact of Revised Completion Regulations, John Dunham & Associates (July 22, 2013).  This assumes a best case scenario in which BLM approves 100% of all applications.

[3] Marc Humphries, U.S. Crude Oil and Natural Gas Production in Federal and Non-Federal Areas, Congressional Research Service (Mar. 7, 2013)at Table 2.

[4] Fossil Fuel Production on Federal Lands at a Ten Year Low, Institute for Energy Research (June 10, 2013).

[5] Id.

[6] American Coalition for Clean Coal Electricity: Coal Unit Shutdowns  (Oct. 15, 2013).

[7] In its Sep. 2013 Proposed Rule, EPA does not identify any currently operating commercial scale power plants that are equipped with the CCS technologies that would meet the requirements of the proposed rule.  

[8] See EIA Report: Capital Cost for Electricity Plants at Table 1 (Apr.12, 2013).  Additionally, the Department of Energy’s National Energy Technology Laboratory has estimated that using today’s commercially available technologies could add 35-80 % to the cost of generating electricity from coal plants. See 77 Fed. Reg. 22392 (Apr. 13, 2012) at 22415-22416.

[10] David W. Kreutzer, Nicolas D. Loris, and Kevin D. Dayaratna, Cost of a Climate Policy: The Economic Impact of Obama’s Climate Action Plan, Heritage Foundation (June 27, 2013).

[14] World Energy Outlook 2013 Factsheet, International Energy Agency at 2.

[17] American Coalition for Clean Coal Electricity: Coal Facts (Oct. 17, 2013).

[18] Id.

[19] Id.