Ending the War on American Energy
The Trump administration just proposed the largest oil and gas lease sale in U.S. history.
For decades, many American leaders have talked about energy independence. The Trump administration actually takes this commitment seriously. Last week, Secretary of the Interior Ryan Zinke announced his department’s proposal for the largest oil and gas lease sale in U.S. history. Known as the Proposed Lease Sale 250, the Department of the Interior will be offering leases totaling 76.9 million acres. The lease locations span the federal waters of the Gulf of Mexico, the unleased areas of the Gulf of Mexico’s Outer Continental Shelf (OCS), as well as offshore locations in Texas, Louisiana, Mississippi, Alabama and Florida. The sale will be held and livestreamed from New Orleans in March of 2018.
Proposed Lease Sale 250 will not only create jobs for Gulf Coast states, but it also enhances our national security position. According to the U.S. Energy Information Administration, in 2016, the U.S. net imports on petroleum accounted for about 25% of all petroleum consumption (about 10.1 million barrels per day (MMb/d)). Roughly 70 countries supply our imports, with Canada, Saudi Arabia, Venezuela, Mexico and Colombia being the top five.
Petroleum and petroleum products include crude oil, gasoline, diesel fuel, jet fuel, asphalt, biofuels (ethanol and biodiesel) and others. Our importing not only means that the U.S. economy supports off-shore jobs rather than American jobs, but it presents a significant strategic hurdle in our foreign policy. The U.S. dependence on foreign oil places us in a strategically vulnerable position where we must rely on another country (often those who do not share our interests) to fuel our cars, boats, planes and military equipment. Energy independence means that we gain self-sufficiency, and do not have to play political games with oil-supplying countries who use their energy supply as a way to manipulate our geopolitical position and our loyalties.
The Bureau of Ocean Energy Management estimates that the development of the lease sites could be between .21 and 1.12 billion barrels of oil and breaks through barriers that have prevented job growth and expansion in the energy industry. A recent report by the Department of the Interior outlines the many burdens and barriers to energy growth in the U.S. including slow permitting processes and redundant regulations. Vincent De Vito, counselor to the secretary for energy policy, stated, “The federal government can and must be a better business partner. … The recent actions outlined in this energy report show how interior is rolling back some of these burdensome regulations that add little or no value, while promoting responsible energy development.”
The sale excludes whole and partial blocks of the Flower Garden Banks National Marine Sanctuary, and other blocks due to congressional moratoriums and other statutes. According to the statement from the Department of the Interior, “In addition to the high bids and rental payments, the Department will receive royalty payments on any future production from these leases. Outer Continental Shelf (OCS) lease revenues are directed to the U.S. Treasury, Gulf Coast states, the Land and Water Conservation Fund and Historic Preservation Fund.” This means a great increase in funding for the federal government, Gulf Coast state governments and funds committed to preservation and conservation.
Proposed Lease Sale 250 also creates a stability and certainty regarding the future of the energy sector. Congressman Rob Bishop, chairman of the House Committee on Natural Resources, observes, “If we are serious about energy dominance and long-term energy affordability, we must create certainty about future access in the Outer Continental Shelf.”
Under Barack Obama, 94% of the Outer Continental Shelf (OCS) was prohibited from leasing. In May, Secretary Zinke issued Secretarial Order 3350, which began a five-year program to help develop the OCS. Uncertainty regarding lease availability, permitting and regulations has adversely affected the American energy industry. Companies don’t want to risk their business if the government decides to fine them for “new rules” or close their drilling area. With an administration that has their back, American energy producers can face the future with certainty and optimism.
Optimism, in fact, has been a huge factor in the revitalization of the economy since Trump’s inauguration, and, according to Investor’s Business Daily, stronger optimism and factory output has greatly increased.
Business is based on the principle of optimistic risk in which business owners risk their money and resources hoping for a reward. Take, for example, the lemonade stand. You invest money to buy the lemons and sugar. You invest money in marketing (signs made from posters and markers). You invest time to sit outside and advertise your product, hoping that the combination of a good location (corner lot), supply (you were the first one out there) and the hot weather (demand) will mean that you will have customers. You price each cup so that you can make a profit. In total, you risk the investment in the lemonade stand for the reward of people purchasing your lemonade. This is basic business.
Now imagine that you invested all this money into your lemonade stand with the projected profit of a certain amount. Then the government comes in unannounced and says, “You need a permit. That will cost $50. You can only sell lemonade on this block, in the middle and not the corner lot. You can only sell three cups per hour. You can’t use real sugar, you need to use alternative sugar (that has a bad aftertaste).” Then they create additional rules without warning and fine you for non-compliance. Now that the government has reshuffled your deck, you must deal with multiple variables and things just became uncertain. This is called business uncertainty.
Under the previous administration, energy and other industries endured multiple aspects of uncertainty including unpredictable rules and regulations, which stifled productivity, optimism and business confidence. Now, with Proposed Lease Sale 250, and an administration committed to removing burdens and regulations, the business landscape for American energy has begun to change.
As Senator Bill Cassidy notes, “President Trump and his administration are following through on their promise to end the war on American energy,” which ultimately means a big win for American industry, the American worker and the American geopolitical position.