Regulations deemed threat to U.S. energy production

Christopher Guith
Christopher Guith

Kelly Sloan, The Business Times

Dramatic increases in energy production have resulted in more jobs and government revenues while lowering prices.

But even with vast reserves of oil, natural gas and coal in the United States, government regulations at all levels could threaten that production.

“There is a good chance we could still screw this up,” said Christopher Guith, vice president of policy for the U.S. Chamber of Commerce Institute for 21st Century Energy.

Guith covered energy production and reserves as well as regulations during a briefing hosted by the Grand Junction Area Chamber of Commerce.

In addition to promoting what it bills as “common sense” energy strategies, the institute tracks U.S. energy security risk.

Guith said hydraulic fracturing and horizontal drilling in shale formations have resulted in unprecedented increases in oil and natural gas production.

That boom in turn has had equally dramatic economic effects nationwide and in Colorado, he said.

In Colorado, shale oil production supported 78,000 jobs, generated $1.4 billion in new government revenues and contributed $11.6 billion in economic growth in 2012, he said. Those numbers are expected to grow by 2020 to 121,000 jobs, $2.4 billion in government revenue and $17.6 billion in economic growth.

Guith said the U.S. Bureau of Labor Statistics reported that oil and natural gas jobs in the U.S. have increased 38 percent since 2007 even as all other nonfarm employment dropped 2.6 percent over the same period.

Increased energy production also has helped to lower prices, Guith said. The average American family saved about $1,200 in energy costs last year thanks to domestic natural gas production.

Low natural gas prices also have spurred an increase in private investments in the petro-chemical industry — to the tune of $120 billion to $130 billion, he said.

Even as domestic energy production has increased, oil imports from overseas have decreased dramatically since 2010, Guith added.

Increases in domestic energy production in the U.S. have occurred almost exclusively on state and private lands, Guith said. While U.S. oil production has grown since 2010, production has remained flat on federally owned land onshore and decreased on federally owned areas offshore, he said.

“This energy revolution is happening in spite of federal policies,” Guith said, adding that energy policies still are based on assumptions made 40 years ago the U.S. doesn’t have enough energy and uses too much. “That’s just not true anymore,” he added.

In fact, the outlook for continued increases in energy production remain bright given the vast energy resources in the U.S., Guith said.

According to an Institute for Energy Resources analysis of government data, technically recoverable resources — those that can be produced with existing technology — include a 120-year supply of natural gas, a 206-year supply of oil and a 464-year supply of coal.

Counting resources that are in place, but too difficult or uneconomical to recover with existing technology, there’s a 536-year supply of oil, a 586-year supply of natural gas and a nearly 10,000-year supply of coal, Guith said.

Obstacles remain, however, among them government energy policies and regulations, he said.

A spate of bans on hydraulic fracturing imposed around the country, including bans along the Front Range in Colorado, could result in decreases in production, Guith said. The result could be 1.5 million lost jobs by 2015.

Obstacles to liquefied natural gas exports have hurt the energy industry in its efforts to take advantage of what are comparatively lower prices, he said.

The average price of natural gas in the United States hovers at around $3 per million British Thermal Units (BTUs). In contrast, the cost tops $10 per million BTUs in Europe and $15 per million BTUs in Japan.

While current policies allow gas producers to export to countries with which the U.S. has free trade agreements, most of those countries don’t need natural gas, Guith said.

Other regulations, including higher renewable energy standards, will curb the use of coal and possibly even natural gas while increasing energy costs, he said.

Federal Clean Air Act standards are increasingly rigid and could preclude a natural-gas fired power plant from meeting  increased standards within five years, he added.

Government regulations at all levels of affect energy production, Guith said. “We can screw this up at the federal, state and local level.”