The Brookings Institution: President Obama, This is Your Energy Moment
February 12, 2014
Charles K. Ebinger, The Brookings Institution
Dear President Obama,
The United States is in the midst of an energy transformation in which our vast abundance of cheap natural gas and rising production of crude oil pose the opportunity for a manufacturing renaissance and a revitalization of the North American industrial base. Utilizing these resources can make us – as well as Canada, our largest trading partner and steadfast ally – among the lowest-cost producers of almost any industrial product. This turnabout in our energy fortune has occurred as the result of historic advances in oil and gas exploration and extraction technologies, initially supported by federal research and development tax dollars, and decades of American innovation.
Our energy abundance has also been spurred by the presence of competitive markets, the willingness of our entrepreneurs to take on risk, the availability of capital for those with pioneering technology and a vision of a future that challenges conventional wisdom of where oil and gas can be found. These developments have brought a historic opportunity to expand our economy, produce thousands of high paying jobs, reduce our balance of payments and add tax revenue to the federal treasury. With the surplus of natural gas and crude oil beyond our domestic needs, we also have the opportunity to help alleviate the dependency of our major trading partners in Europe and Asia on more politically insecure regions of the world.
Yet groups such as America’s Energy Advantage continue with the chimera that exports of liquefied natural gas (LNG) are injurious to our manufacturing resurgence and that the gas resource base is inadequate to both foster industrial expansion and export. This argument is misleading as well as out of date. In the last four years, the U.S. Department of Energy (DOE) has raised its estimate of recoverable gas reserves by 34 percent as well as its forecast for 2035 production by more than 20 percent from the forecast it made just two years ago. Upon examining the evidence, you have acknowledged that we may have 100 years of reserves at current production levels and that gas offers the opportunity to serve as a “bridge” to a cleaner energy future based on renewables. While I welcome your prescience, I would argue that rather than being a bridge, gas is the future. Given the quantity of gas that is being discovered around the world, it will be the future in many nations once shale gas development takes off in China, Algeria, Russia, Argentina, South Africa and elsewhere.
Mr. President, you have stated that your energy policy is “an all of the above” strategy, suggesting that all energy options are needed to insure the nation’s future wellbeing. Yet you have failed to show such balance. We can reduce national CO2 emissions by backing out coal in the power sector – as you have rightly promoted – and replacing diesel in the transportation sector (18-wheeler trucks, marine transportation and locomotives). However, you have allowed your environmental constituency to guide your inaction on the issues of: expedited licensing of LNG projects; streamlining the permitting of oil and gas infrastructure needed to bring these new unconventional resources to market; making a decision on the Keystone XL pipeline despite five favorable environmental reviews; or using executive authority to lift the ban on U.S. crude oil exports.
Despite its promise, the development of natural gas infrastructure to get it to market both domestically and internationally remains mired in a cumbersome regulatory process. There are currently 25 applications awaiting an export permit from the DOE .Yet export permits issued by the Department are only provisional until projects complete the broader review demanded by FERC involving 20 state and federal agencies. While this review process stumbles along, LNG and intercontinental pipeline projects in other nations, as well as world class coal projects under development, will pose strong competitive threats after 2020 to any U.S. or Canadian LNG projects not already in the marketplace. By 2025 new shale gas projects will also emerge as competitors to those at the back end of the current U.S. queue.
While LNG exports represent the greatest opportunity, the current ban (with a few exceptions) on crude oil exports also needs to be reexamined, as current market conditions and policies based on assumptions about oil scarcity no longer reflect market realities. Here too, however, protectionist forces are already sharpening their knives to block exports under the mantra of “energy security.”
Mr. President, I am a lifelong democrat who voted for you twice, but I join a growing group of those who are tired of protectionist policies that keep this nation from moving our energy strategy forward. The opportunities afforded by the full development of our natural gas and crude oil resources need to be seized now, providing you a legacy for years to come. Mr. President, this is your energy moment!
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