OpEd Contributor
Obama plan could cut half of domestic off-shore oil, gas production
By: Barry Russell, OpEd Contributor
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May 13, 2009
There’s an old saying among America's smaller, independent natural gas and oil producers -- sometimes called "wildcatters" -- that the best way to end up with a million dollars is to start off with a billion.
But while booms and busts, dry holes and even drier ones have always been a part of life for independent producers, state treasuries and everyday American taxpayers may soon find it applies to them as well.
Thanks to an effort gaining traction in the corridors of power in Washington, an old slate of federal laws and regulations may soon be tweaked and twisted in ways that extend their authority over state and local oil and gas operations across the country.
The upshot? New regulations that could result in millions of lost jobs, hundreds of millions in lost royalties and state tax revenue, and a major step back on our road to energy independence.
Such are the findings of a new analysis released this week, written by leading experts in the field and commissioned by America’s oil and gas producers. According to the report – just one in a series of studies known collectively as Project BRIEF (Bringing Real Information on Energy Forward) – DC’s attempt to transfer regulatory authority from the states to EPA could result in lost U.S. oil production of 183,000 barrels a day.
That’s in the first year alone. The impact would be no less severe for natural gas – stranding 245 billion cubic feet a year that would’ve otherwise been found, produced and delivered to the American people.
All told, a staggering 57 percent of producing onshore oil wells in the U.S. could be shut in if some interest groups and lawmakers in Washington have their way, along with 35 percent of producing onshore natural gas wells.
Local landowners who share a cut in the take when producers find energy on their property – and, in some cases, even if they don’t – would lose an estimated $600 million a year.
As you’d expect, you simply can’t lose that much revenue and that much energy without having a serious impact on state, local and even the federal government. Under the scenario laid out above, state governments would have to make do without $785 million in lost energy taxes. And the feds would have to find a way to fill a $4 billion hole in lost income tax receipts. Somebody better hide the printing presses!
Even for those with no direct connection to the energy industry, the effect of shutting in an estimated 204,000 oil wells and 150,000 natural gas operations will mean a lot fewer direct jobs, thousands of fewer spin-off jobs, and thus -- a lot less economic activity. When that day comes, it doesn’t matter whether you’re working at the wellhead or the water park. You’ll both be standing in the same line at the end of the day.
With an economy in peril and millions of Americans out of work, there’s never been a more important time to put our nation’s massive energy resources to good use. And thanks to recent advances in new technology – such as horizontal drilling and a deep energy recovery technique known as hydraulic fracturing – there’s also never been a time when acquiring those resources was as safe and efficient as it is today.
Smart regulation and proper oversight play an important role in making sure those advances continue, creating thousands of good-paying jobs along the way. Bad regulation – shoehorned in, stretched beyond its limits, complicated for complication’s sake – does not.
Thankfully, state and local regulators are well equipped to manage the oversight and enforcement process on the ground, and at the wellsite, just as they have for generations. EPA is not. Thanks to Project BRIEF, now we know just how bad it could get if it tries.
Barry Russell is president and CEO of the Independent Petroleum Association of America, representing America's 5,000 independent natural gas and oil producers. For more information on Project BRIEF, visit www.energyindepth.org
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