Another Perspective

By Courtney Loper, Energy In Depth

Earlier this week, a gaggle of activists published a report under their umbrella group – the Western Organization of Resource Councils (WORC). The report, titled “Gone for Good,” strikes an expectedly dramatic tone about the water usage of oil and gas operations in the West.

But, before we start debunking the claims in the report, let’s take a quick look at the authors.

The Western Organization of Resource Councils is made up of smaller, state-focused anti-oil and gas activist groups – Dakota Resource Council, Dakota Rural Action, Northern Plains Resource Council, Oregon Rural Action, Powder River Basin Resource Council, and Western Colorado Congress.

Lest you think we are unfairly labeling them as activists, note that these groups have called hydraulic fracturing and the oil and gas industry “dangerous,” “uncontrollable,” “hazardous,” “a major threat,” “exempted from regulation,” and accused the industry of “fouling the air, drying up home wells, polluting groundwater, and poisoning livestock.” Heck, the Western Colorado Congress even proudly touted their association with the Bucket Brigade and Gasland’s Josh Fox.

Doesn’t sound like a group of unbiased researchers, does it?

Because no one should be forced to read though yet another repackaging of talking points and debunked claims, Energy in Depth took one for the team and read the report. Here are a few of the worst claims:

Claim: “[I]t seems clear that water use for fracking is reaching a crisis point in the region. There is mounting evidence that the current level of water use for oil and gas production simply cannot be sustained…”

Fact: The press release accompanying the WORC report claims the total annual water use for hydraulic fracturing across Colorado, Wyoming, Montana, and North Dakota is “at least seven billion gallons.”

Now, let’s assume that estimate is accurate (given the associations mentioned above, we know “facts” are not something these folks typically worry about, but just for argument’s sake, let’s pretend otherwise). According to the US Geological Survey, those four states use roughly 33,250,000 acre-feet of water in a year. That’s approximately 10.8 trillion gallons.

So, 7 billion gallons represents roughly 0.06% of the combined water use of those four states. That’s even lower than the 0.08% finding in a report last year by three Colorado state agencies who specifically estimated hydraulic fracturing water use, and much lower than the Department of Energy (DOE) and Ground Water Protection Council’s (GWPC) estimated range of “less than 0.1% to 0.8% of total water use,” depending on the basin. Of course, there’s nothing scary about those percentages, so the WORC report simply throws around the term “billions of gallons” again and again without any context to frighten as many people as possible.

It turns out that DOE and GWPC officials anticipated this kind of alarmism, and included the following passage in the water use section of their report on hydraulic fracturing:

“While these volumes may seem very large, they are small by comparison to some other uses of water, such as agriculture, electric power generation, and municipalities, and generally represent a small percentage of the total water resource use in each shale gas area.”

In Colorado, for instance, while hydraulic fracturing accounts for about one-tenth of 1% of water use, the recreation industry uses almost 6%, municipal and industrial users account for more than 7%, and the agriculture sector consumes more than 85%.

Claim: “With few exceptions, the rest of the water used for fracking is gone for good from the hydrological cycle.”

Fact: Here’s another major flaw – the report completely ignores the water that’s added to the hydrological cycle as a result of oil and gas development.

For example, Gov. John Hickenlooper recently pointed out that when natural gas is burned, it produces “far more than the water used in fracking,” because “when you burn natural gas, it gives off CO2 and H2O that goes into the air and into the hydrologic cycle.”

Based on estimates from DOE and the Colorado Oil & Gas Association, every billion cubic feet of natural gas burned produces more than 11 million gallons of water:

US Department of Energy, January 2012 - “All hydrocarbon fu¬els release significant quantities of water vapor as a combustion byproduct. … When one molecule of methane is burned, it produces two molecules of water vapor. When moles are converted to pound/mole, we find that every pound of methane fuel combusted produces 2.25 lb. of water vapor, which is about 12% of the total exhaust by weight.”

Colorado Oil & Gas Association, June 2012 - “Since a volume measurement of H2O is easier to interpret than pounds of water, we want to convert our 2.25 lb yield of H2O into gallons. … Our calculations show the combustion of 1 pound of methane results in the production 3.71 gallons of water and that 1 BCF of methane produces over 11 million gallons of water.”

Claim: “Congress exempted fracking, other than fracking with diesel, from the Safe Drinking Water Act
in 2004. Federal agencies have
not yet identified a means of
regulatory leverage adequate to
address looming conflicts over
water quantity.”

Fact: First of all, you simply cannot get oil or natural gas out of shale rock without complying with overlapping state and federal environmental laws, and the many regulations that are issued under those state and federal laws. As the U.S. Government Accountability Office reported last year:

“As with conventional oil and gas development, requirements from eight federal environmental and public health laws apply to unconventional oil and gas development.”

The DOE and GWPC leave no uncertainty about this, saying, “The development and production of oil and gas in the U.S., including shale gas, are regulated under a complex set of federal, state, and local laws that address every aspect of exploration and operation.”

As for SDWA specifically, in 2005 (not 2004) Congress passed the Energy Policy Act, which did not “exempt” hydraulic fracturing from any law, period. It simply affirmed the regulatory system already in place: states regulate hydraulic fracturing. This has been the established structure since the first hydraulic fracturing job was completed in southwest Kansas in 1947. SDWA, meanwhile, became law in 1974, and it has never covered hydraulic fracturing, because it was never designed to cover hydraulic fracturing. How can you be “exempt” from something that never applied to you in the first place?

Activists, it’s time to put this talking point to rest.

Same recycled activist groups, same recycled talking points. The only “crisis” here is a crisis of credibility for environmental activists, who will do or say anything to manipulate the fear of drought in the West into fear of the oil and gas industry. This so-called report is just another chapter in that irresponsible fear campaign, masquerading as “science” and research.

Loper is field director for the mountain states for Energy In Depth.

By Bill Shireman, Future 500

Environmentalists hope President Obama will kill the Keystone XL pipeline. But, privately, many expect to lose this battle. They worry: what’s next for the movement?

Win or lose, the next step needs to include a bold left-to-right alliance that unites the two halves of the sustainability movement: economic and social/environmental sustainability.

Conservatives are right: as a nation, we are out of money and deep in debt. Progressives are also right: we cannot pay off our debt by extracting it from the poor, the middle class, or the environment. But, because the political process leaves them no other choice, the solution each offers makes the problems worse.

The right’s solution is to drill baby, drill – and liquidate our ecological capital. The left’s solution is to spend baby, spend – and liquidate our financial capital. The solution of vested interests – corporations, unions, professionals, governments – is to do both. They like both the right and left agendas – more drilling, and more spending.

The combination of drill-and-spend just reinforces yesterday. It locks in status quo interests. That’s because the past has powerful lobbyists, but the future has almost none. In Washington DC, right now, there are probably 10,000 meetings happening, in which advocates are figuring out how to play the left and right against each other, to get one little policy advanced.

They play the left and right against each other all the time – it’s second nature. Here’s how they do it:
To hook the right, they play the conservative narrative: government power is running amuck. We need free enterprise to save us. Here’s how you can support free enterprise: oppose these mandates, and support these giveaways. To hook the left, they play the progressive narrative: corporate power is running amuck. We need democratic government to save us. Here’s how you can support democratic government: support these handouts and these mandates.

But there is a big difference between private enterprise and entrenched corporate power, and there is a big difference between democracy and entrenched government power. The left thinks this is all done by Charles Koch and a small powerful group of corporate conspirators. The right thinks it’s all a plot by George Soros and big government socialist conspirators.

But it’s not. It’s done by us – not as a whole, but in all our parts. Parts of us are represented really well in DC. The companies, unions, professional and governmental groups that we work for or depend on – these parts of us are all well-represented. The gun lobby is the most visible to play the game right now. To hook the extreme right, they play the “government is taking over” narrative – and attach that fear to even the most sensible ideas, like background checks. To hook the left, they give them an alternative corporate demon: Video game manufacturers.

But the same game is played by “good guys” and “bad guys” in every field – associations of teachers, doctors, nurses, hospitals, energy, finance, insurance, homebuilders, veterans, lawyers, consumers – hundreds of groups, all representing us – pieces of us – legitimate interests. The base on the left and right don’t intend for this. But because they are fighting each other, this is what they get.

Now, we’re not saying we shouldn’t ever drill, and we shouldn’t ever spend. If we’re smart in how we do it, we’ll be drilling and spending for hundreds of years. But what we need to do even more is to innovate – to actually create value. Drilling and spending are both ways to liquidate value, and spend our wealth. They are OK, only if we are also restoring that wealth and well-being, banking it. That takes not just conservation, but also innovation.

Future 500 is engaging business, social and environmental stakeholders, to craft a very simple agenda for doing that. We call it The Innovation Agenda. Seven policies that, according to McKinsey Global Institute and others, would pay off both our ecological and economic debts, and restore genuine, economically and environmentally sustainable growth.

The policies are not yet politically realistic. But they, or something like them, will be, because over time, the necessary always becomes possible. Barriers to change ultimately fall, sometimes in time, sometimes too late.

The question is: when will we be ready? We believe we’re ready right now. Our polls show there is a plurality on the left and the right – and even within the corporate, labor, professional, and government sectors – who support these changes, but the institutions that represent these parts of us are often slow moving.

These interests need to be able to come together across institutional and ideological borders, to work together. That is why Future 500 is helping to bring them together, behind a seven-point Innovation Agenda:

• First: Set a National Innovation Goal. Increase to increase the productivity of energy, materials, and carbon by four percent, every year;
• Second: Stop Taxing Jobs and Prosperity. Cut payroll and income taxes on both individuals and corporations;
• Third: Wind Down Resource Subsidies. Shift to real prices for energy, water, and food. This won’t increase real prices – it will reduce them;
• Fourth: Drive Radical Efficiency. Especially through information, telecommunications, and smart materials – which can deliver ten-fold gains;
• Fifth: Tax Pollution, Not Prosperity. Put a price on fossil fuel pollution, set at the rate that will drive the four percent annual resource productivity gain. Make the net cost zero by cutting taxes on prosperity in various forms: payroll, income, and profits; and
• Sixth: Use Border Adjustments to Cut Taxes More. Apply the same price on pollution to imported goods – including oil imports – so the price on domestic pollution does not inadvertently subsidize China, Venezuela, or Iran. Use 100% of the proceeds to cut other taxes.

An agenda like this could drive a resource revolution in the US, based on the McKinsey data. As other nations follow our lead, it could help the world meet 30% of its total resource needs in 2030, and cut projected oil demand by up to 27 MMb/d, reducing global climate risk.

The bad news is that to achieve these gains, we need a massive increase in one extremely scarce resource: political courage and collaboration. Government and its industrial-era partners on the right and left must unwind more than US $1 trillion in global subsidies that supersize energy, agriculture, water, and other resource consumption beyond sustainable levels.

That investment will pay off nicely. McKinsey projects a $3.7 trillion annual gain in global prosperity, through a combination of a $30 per ton carbon price and removing key subsidies. From 70% to 90% of the productivity investments have an internal rate of return of over 10%.

But it won’t happen now. In the marketplace, low prices on quality products generate the fastest sales. In politics, the opposite is true. The best policies – the ones that cost little and accomplish much – don’t sell as quickly as the expensive ones, those that pass money around to a long list of dependents. The political process deadlocks. In deadlock, the status quo has the advantage in power.

But there is a way out.

That brings us to Innovation Agenda #7: Business and NGO’s need to lobby for the future. Specifically, corporate leaders need to break open their government affairs silos. Right now, the purpose of government affairs is to insulate operations from potential effects of legislation or regulation. This is the biggest driver of anti-corporate activism on the planet. It ties the company so fundamentally to the past that, over time, it sets it up for collapse.

Activists need to change their practices too. They have been too shy about pressing companies to collaborate to change public policy. Activists have the capacity to motivate companies to advocate policy that is good for the public. Companies don’t fear the capacity of activists to pass federal legislation. They do fear their capacity to spoil consumer acceptance of their brands. Activists should use this power, with integrity.

Inside corporate America, there is wide understanding that the political system is broken, and that corporate government affairs practices are part of the reason. But internal politics make it difficult to change. More than one executive has asked me to help activists encourage companies to make their political and operational commitments consistent – to use their political power to create a level playing field in which social responsibility is consistent with profitability.

It is time for corporate and NGO leaders to engage on a higher plane. As former global Shell chairman Mark Moody Stuart has said, CEOs and environmentalists need to walk into Congressional offices together, and place their joint proposals on the desks. If politicians won’t lead, we need to.

The past and present are well-represented in Washington D.C. and all state capitals. But the future is not. It needs a good lobbyist, and a powerful coalition that crosses all the borders, and represents us whole: business, labor, professionals, government – not as we are, but as we can be, together.

Bill Shireman is president and CEO of Future 500.

By Michael Binnion, Questerre Energy Corp.

The independent Canadian Energy Research Institute (CERI) recently released an economic impact study of the Utica natural gas discovery in Quebec.

In my last blog “Quebec Development penalized,” I suggested that Quebec should, temporarily at least, be allowed to keep more of the benefits of resource development. I suggested a reform of equalization along the lines of the deal that worked so well for the Newfoundland economy.

Stereotypes about Albertans are so strong that Le Devoir and many others assumed incorrectly that I was repeating an old refrain about cutting equalization. Actually I was saying the opposite which is that we need a positive and incentive based approach. It turns out this idea might mean even more than I thought for Quebec’s tax revenues.

According to the study by CERI, the Utica natural gas discovery has bigger potential impacts on the economy and taxes than previously reported.

They considered two, 25-year development scenarios. One is developing to a production level of 500 MMcf of natural gas per day. This is about equal to the current average daily demand in Quebec. The other is for 1.5 Bcf per day, which would likely involve Quebec exporting natural gas.

The report also estimates break even prices under three different productivity scenarios. Under the better scenario, break even prices are only $4.14 per mcf, which is lower than the current price of natural gas in Quebec. If confirmed, this case would mean the Utica discovery is economic today.

Under the 1.5 Bcf/day scenario GDP impacts nationally are $112 billion, with over 44,000 peak jobs and $31 billion in new tax revenue. The vast majority of that impact would be felt in Quebec.

Even under the lower scenario impacts are very significant: $37 billion in GDP, 14,000 peak jobs, and over $10 billion in new tax revenue.

The miracle is that local development of Utica natural gas is cleaner for our shared environment than the sources Quebec currently uses.

Can you imagine – a cleaner environment, bigger economy, more jobs, and greater government revenues? Under a Newfoundland style equalization deal, Quebec would keep even more of the revenue to develop its economy. It’s more than I thought.

Michael Binnion is the president and founding shareholder of Questerre Energy Corp.

By Bill Cooper, The Center for Liquefied Natural Gas

As the debate in the US over whether or not to expand exports of LNG unfolds, it is worth underlining the significant benefits abundant US resources will bring to the global energy market. According to the International Energy Agency (IEA), natural gas will be a key component of the global energy portfolio for decades to come. Indeed, just this month the American Gas Association, alongside the Potential Gas Committee estimated that the US has reserves of 2,384 Tcf of available natural gas.

From an environmental standpoint, natural gas is the cleanest burning fossil fuel. Natural gas has roughly half the carbon emissions of coal when used to generate electricity. IEA data shows that increased natural gas use could reduce CO2 emissions by 740 million metric tons by 2035 – more than is currently emitted each year by France, Brazil, the UK, or Canada.

The benefits of natural gas do not simply end with the environment. Study after study has concluded that natural gas exports represent a major opportunity for international trade. Numerous countries, including some of America’s closest allies, are in need of reliable energy supplies. Increased natural gas trade via LNG shipments and pipelines will provide a clean-burning fuel source for consumers while making energy supplies more affordable for importing nations.

Allowing natural gas exports to reach the shores of US trade partners would create a more competitive LNG marketplace, and erode some of the power of those who use energy resources as a geopolitical weapon. Moreover, the US International Trade Administration (ITA) found that each US $1 billion of exports could result in more than 5,000 new jobs, many of which would be permanent manufacturing jobs.

In order to further participate in the global LNG market, regulatory hurdles must be met. Importing or exporting natural gas requires authorization from the US Department of Energy (DOE), which makes its determination based upon the public interest. Selling natural gas to countries with which the United States has a free trade agreement (FTA) is automatically deemed to be in the public interest, assuming all applicable environmental standards are met. However, selling to countries outside of existing FTAs must undergo further regulatory review.

Independent experts, Congress, DOE, and the general public have engaged in a thorough, public dialogue about the benefits of selling some of our abundant natural gas supply to our trading partners and there is a growing momentum of support across the country to export LNG. The bottom line remains: increased US LNG exports will benefit the environment, countries in need of energy resources, and the US economy. Now is the time for the US government to approve all pending LNG export applications so that the US and global economies can reap the benefits.

Bill Cooper is president of the Center for Liquefied Natural Gas.

By Steve Everley, Energy In Depth

A recent University of Texas poll asked respondents what they thought about a variety of energy issues, not the least of which was hydraulic fracturing. Interestingly, the poll actually shows how anti-energy activists are losing in their misinformation campaign against responsible shale development.

Regarding the issue of hydraulic fracturing in general, the UT poll (full cross-tabs here) found that a plurality supports its use — 45% support to 41% oppose. Since September 2012, support has actually increased by four points, while opposition has remained unchanged. In three separate polls over the past year conducted by UT, opposition has never exceeded support. Averaged out among the three polls, support exceeds opposition by six points, 45% to 39%.

In the current poll, those who said they wanted to promote hydraulic fracturing specifically on public lands also outnumbered those who want to ban it, 41% to 36%.

Sheril Kirshenbaum, director of the UT energy poll, observed that the polling shows “steady support for the expansion of domestic natural gas development.” Indeed, an amazing 62% of respondents support more natural gas production in the United States. That matches the findings of a recent Gallup poll, which showed that 65% of Americans want more emphasis placed on domestic natural gas development – including clear majorities among Republicans, Independents, and Democrats.

The UT poll also made it clear that anti-energy groups’ attempts to demonize natural gas as some sort of dirty fuel that’s not worth being produced are backfiring – big time. When asked if the benefits of domestic natural gas development outweigh the costs, 41% said “Yes” and only 18% said “No,” an amazing 23-point spread. Asked about specific benefits of natural gas, the results were even more stunning:

§ 75% believe job creation is a benefit of natural gas (only 4% disagree);

§ 70% believe natural gas production provides energy security (only 5% disagree);

§ 69% say natural gas boots US manufacturing (only 5% disagree); and

§ By a margin of 53 to 11, Americans say natural gas development is lowering carbon emissions.

The upshot is that Americans overwhelmingly view natural gas development as both an economic and environmental boon to the United States.

Regulation?

Naturally, media reports have either ignored or buried the good news listed above, focusing instead on the poll’s finding that more than 60% of respondents support more regulation for hydraulic fracturing or stronger enforcement of existing laws (the university’s news headline emphasized a “divide on fracing”). The implication is that not enough is being done to protect the public, and that the industry is avoiding proper oversight. The reality, however, is much different – even if it’s not convenient for the media to discuss it.

The industry worked with environmental groups in Colorado and Texas to establish disclosure regulations that have been touted as the gold standard. In California, the industry is supportive of similar disclosure regulations, and it’s actually certain environmental groups – some of whom supported those provisions in Colorado – who are now strangely opposing their implementation.

In Illinois, the industry teamed with labor, business groups, farm organizations, and environmentalists on legislation that would add new regulations for shale development. In Pennsylvania, the industry supported Act 13, which created a new fee that is generating hundreds of millions of dollars in new public revenues.

Notice the trend here? Despite what opponents have claimed for years, and to which too many in the media have provided a forum, the oil and gas industry does not oppose regulation. On the contrary, the industry has actively supported new regulatory measures in the states as a way to provide public assurances that responsible shale development will continue to be protective of the environment.

It is worth noting, however, that many of the same problems we identified with a Bloomberg poll last year (which found a similar percentage of respondents supportive of “more regulation”) also appear in similar form in the UT poll.

For instance, the Bloomberg poll included a question about global warming immediately before the question about “more regulation or less regulation” of hydraulic fracturing. The UT pollsters, however, asked several questions that could have “primed” the respondents to make what they perceived to be the more environmentally conscious option (i.e. more regulation or stricter enforcement). Prior to the questions on hydraulic fracturing, the UT poll asked, among other things:

§ A question about “the impact that US energy production and consumption has on the environment;”

§ A question regarding how public policy “will affect your clean energy choices;”

§ A question on whether climate change is occurring. If respondents answered in the affirmative, they were read a list of possible contributing factors, including specifically oil and natural gas; and

§ A question on how they could best be incentivized to reduce water consumption.

To be clear, there is nothing inherently wrong in asking these questions. That’s what pollsters do, after all. But preceding a question about regulation of an activity used in oil and gas development with statements that frame the debate in terms of impacts from that development is, at the very least, a caveat worth highlighting as we interpret the meaning of the results.

Of course, that “priming” also raises another important point. Even with respondents geared toward what was clearly an environmental bent, a plurality still said it supports hydraulic fracturing. In that sense, it would be difficult to find a better example of how anti-fracing activists are losing the debate: even their “base” is abandoning them.

By Mark Green, Energy Tomorrow

Before digging into some new misinformation about the job and economic impacts of the Keystone XL pipeline, let’s underscore a figure: 58%. That’s the share of likely US voters who favor building the full Keystone XL, according to a Rasmussen Reports poll.

In public opinion terms, 58% is a slam dunk, a grand slam. Rasmussen says those who strongly favor the Keystone XL outnumber the strongly opposed by nearly three to one. Rasmussen’s finding is consistent with other Keystone XL surveys (Harris Interactive, Fox News, and Pew Research). Americans want the full project built.

And they want it built despite more than four years of delay, despite often hysterical opposition from the 10% to 15% who’re adamantly against this project – and other pipelines, Canadian oil sands crude, refineries, and most likely, any fuel source or infrastructure that could provide Americans with reliable, affordable energy. They want it built for simple but important reasons: jobs, economic stimulus, and energy security.

Some keep trying to dismiss the jobs and economic lift construction of the full Keystone XL could provide. The folks at Think Progress have a post decrying misinformation in the Keystone XL debate but then dispense a good deal of their own rhetorical chaff. Starting with jobs:

“The most recent State Department assessment, written by contractors hired by the pipeline developer, found that constructing the pipeline would create 3,900 temporary jobs, but just 35 permanent jobs.”

Here’s what the US State Department said in its latest Keystone XL review:

“Including direct, indirect, and induced effects, the proposed Project would potentially support approximately 42,100 average annual jobs across the United States over a 1-to 2-year construction period …”

State goes on to describe economic benefits that construction of the full pipeline could generate:

“This employment would potentially translate to approximately $2.05 billion in earnings. Direct expenditures such as construction and materials costs (including construction camps) would total approximately $3.3 billion. Short-term revenues from sources such as sales and use taxes would total approximately $65 million in states that levy such a tax.”

And there’s more:

“Yields from fuel and other taxes could not be calculated, but would provide some additional economic benefit to host counties and states. The proposed project area does not have sufficient temporary housing for the anticipated construction workforce. Keystone proposes to meet the housing need through a combination of local housing and eight construction camps. Property taxes on these camps would potentially generate the equivalent of one full year of property tax revenue for seven host counties, totaling approximately $2 million.”

These are the benefits that accrue when a construction project of this magnitude gets off the drawing board. This would be real-world growth, for which real-world people – including the skilled men and women of the US construction trades, suffering 16% unemployment – have been waiting for more than four years. Sean McGarvey, president of the AFL-CIO’s Building and Construction Trade Department, from earlier this year:

“For the skilled craft professionals that I am privileged to represent, the past four years have not been a recession, they have been a depression. … This has been the most scrutinized infrastructure project, perhaps, in our nation’s history. And at every juncture, concerns about safety and the environment have been met and satisfied. It is now time to build the Keystone XL pipeline and put thousands of Americans back to work.”

As for jobs involved in the operation of the pipeline, let’s not miss the point that a project of this size can stimulate the economy beyond itself. According to the Canadian Energy Research Institute, 117,000 new US jobs linked to oil sands development because of the Keystone XL would be created by 2035.

There are other economic benefits, such as trade. The fully completed Keystone XL would change the way Gulf Coast refiners get their oil, and the change is big.

Last year the US imported 331,697,000 bbl of oil worth more than $33 billion from Venezuela. The State Department says oil delivered by the Keystone XL – and remember, 25% of the pipeline’s pickup would be US oil from the Bakken region in North Dakota – would likely displace Venezuelan oil. The Keystone XL has contracts in place to ship 555,000 b/d from Canada, or more than 202 MMbbl a year.

Here’s why it matters whether we get that oil from Canada instead of Venezuela. According to the Census Bureau, in 2012 for every $1 in goods we bought from Venezuela, Venezuela purchased 46 cents worth of goods from us. Yet, in trade with Canada, for every $1 in goods we bought from our northern neighbor, they bought 90 cents worth of goods from us – a 44-cent difference. Figure it out: The potential trade differential from buying slightly more than 202 MMbbl of oil from Canada instead of Venezuela is about $9 billion a year in potential US exports. The Commerce Department translates those exports into an additional 48,297 US jobs per year – from buying that amount of crude oil from Canada instead of Venezuela.

Think Progress also takes another shot at the Keystone XL’s economic benefits, saying there’s no guarantee oil delivered by the pipeline will stay in the US after it’s refined into gasoline, diesel and other products. The State Department says that’s unlikely. Even if the state is mistaken, the export of finished, more valuable products is a win for the United States. More on that another day.

As for energy security and the Keystone XL, a new Chicago Tribune editorial says it pretty well:

“The US has made great strides toward energy independence, thanks to conservation efforts and an incredible boom in exploration for domestic oil and natural gas. A recent report from Citigroup projected the US could become North American energy independent by 2020. That is, this nation could get all of its energy from the US and Canada. … But those projections depend on the US making the right decisions about supply and consumption. One of those decisions is approval of the Keystone pipeline.”

The benefits of the Keystone XL are clear. They were clear in 2011, they were clear in 2010. They have been clear for more than four years. The facts have been discussed, parsed, researched, studied, reviewed, appraised, examined, reexamined, reviewed, and scrutinized. It’s time to approve the full Keystone XL pipeline.

By Jon Goldstein, Environmental Defense Fund

Wyoming is already one of the country’s top natural gas producers. And large new developments under review by the US Bureau of Land Management totaling more than 25,000 new wells in the coming years could further solidify Wyoming’s status as a national energy leader.

But what will this leadership look like? Will this series of development projects lead to worsening air quality or set an example for safe, responsible development? US Bureau of Land Management totaling more than 25,000 new wells in the coming years could further solidify Wyoming’s status as a national energy leader.

The first of these, the Continental Divide – Creston Project, is alone one of the largest onshore natural gas developments ever proposed on federal lands in the United States. This enormous development slated for the Wamsutter area of south-central Wyoming, includes drilling nearly 9,000 new natural gas wells across 1,672 sq miles (or 1.1 million acres) of public and private lands – an area a bit larger than the state of Rhode Island. The well-known Jonah field in western Wyoming, by comparison, covers about 21,000 acres and includes about 3,500 wells.

The scale, concentration and vicinity of new wells proposed by the CD-C project are fueling concern for regional air quality issues. If managed improperly, this project could lead to more unhealthy air for local residents and workers.

Unhealthy air, as a result of oil and gas development, has been a particular issue in Pinedale, a community just northwest of the CD-C proposal in Wyoming’s Upper Green River basin. The past few winters have earned the area unwanted national attention for its US Environmental Protection Agency nonattainment designation for ground-level ozone pollution – one of the first non-urban areas to report such high levels of smog.

Leaks from equipment and other sources of emissions in the nearby oil and gas fields have created California-style smog in rural Wyoming. In recent years, ozone levels in Pinedale (population: around 1,400) have at times been higher than the smoggiest days in Los Angeles or Houston.

This is one reason why groups like EDF and the Wyoming Outdoor Council are working with state and federal regulators on commonsense measures to improve regional air quality.

EDF and other groups have submitted comments for the draft environmental impact statement to ensure that BLM fully understands the air quality implications of the CD-C project and that the final proposal contains some of the strongest air emission controls anywhere. Meanwhile in Pinedale, EDF, and WOC are advocating for the state to act swiftly on a series of strong actions agreed to by local citizens, industry and environmental groups alike and that are designed to improve the unhealthy air already plaguing the area.

It’s a two-way street. The CD-C project’s proximity to the nonattainment area underlines the need for strong emission controls on any new wells. At the same time, the plans for so many new emissions sources right next door to the Upper Green River basin make fast action there imperative.

Wyoming has historically been a leader on air quality issues and a national model for holding the oil and gas industry to a high standard. That reputation – and even more importantly, the health of local citizens – is what’s at stake here as these new large-scale developments come to Wyoming.

Jon Goldstein is the senior energy policy manager for the US Climate and Energy Program.

By Don Briggs, Louisiana Oil and Gas Association

President Barack Obama’s second term is now in full swing. New terms equal new department heads and new nominations. The president recently nominated Gina McCarthy to become the Environmental Protection Agency chief administrator and Ernest Moniz to become the secretary for the US Department of Energy. Due to the United States experiencing an historic shale revolution, each nominee, pending US Senate confirmation, has a large task ahead.

While McCarthy has a lengthy resume with the EPA, if she is senate-confirmed as the chief of the department, she will have the opportunity to work with the oil and gas industry, unlike her predecessor. Over the past few years, former EPA head Lisa Jackson has been less than effective at forming a productive relationship with the oil and gas industry.

Within the EPA’s control, fall the regulations for hydraulic fracturing. This technical process, often referred to as fracing, is truly the game-changing technology that has enabled the oil and gas industry to experience the tremendous amount of activity the country is privileged to have today. A senior Obama official recently praised the hydraulic fracturing process. William Press, a member of the president’s council of advisers on science and technology, said America will only achieve the ambitious climate change goals outlined by President Obama by encouraging wide-scale hydraulic fracturing for natural gas over the next few years.

As for Moniz, he will hold the reigns to fulfill some of the promises that Obama made in his most recent State of the Union speech. The president spoke of minimizing red tape surrounding oil and gas permitting process. Moniz will be charged as the secretary to facilitate and execute this lengthy process that is currently required to receive a permit for new exploration. Also, within Moniz control, will be the option of opening new US coastal waters for exploration. Energy independence and or energy security cannot and will not be achieved if more coastal waters are not opened.

Portions of the Gulf of Mexico, the east and west coast and regions surrounding Alaska all need to be opened for additional acreage of exploration. While shale plays, like the Bakken and the Eagle Ford, are adding to the US supply of crude oil, opening additional coastal waters must be part of the energy equation. This past month, two refineries have come back online, producing hundreds of thousands of gallons of gasoline a day. Analysts are predicting this will provide some relief at the pump for residents in the south. Again, this will not solve the US’s greater energy needs.

The EPA and DOE will each have to contribute to the greater goal that the president allegedly desires: less dependence on foreign resources and a greater utilization of our domestic natural resources. While less red tape, a faster permit process, opening additional coastal waters for exploration and cheaper prices at the pump can each drive this nation to true energy security, no one component can be successful without the other. Achieving energy security for the US will be a collaborative effort.

Don Briggs is president of the Louisiana Oil and Gas Association.

By Kathleen Sgamma, Western Energy Alliance

The story of the US’ revolution in oil and natural gas over the last several years is well known to readers of E&P magazine, but the rest of the US also is waking up to the huge success story.

Policymakers are struggling to come to grips with the paradigm shift from energy scarcity to the very real potential of North American energy independence.

The abundance of natural gas has created the opportunity to export LNG in potentially significant quantities. The US Department of Energy (DOE) recently made clear the benefits of exports for the American people in a study by NERA Economic Consultants, which found that in every export scenario examined, gross domestic product grows. The more we export, the more America benefits. While economists have been documenting the benefits of free trade for centuries now, the study very clearly restated that conclusion, which is good since policymakers seem to need to relearn that lesson every generation.

Many politicians rightly see it as an opportunity to create jobs and economic prosperity right here at home, while achieving greater energy and national security. Others who mistrust free markets and prefer a government approach to energy policy, are reverting to type. They would rather have an energy policy dictated by Washington and controlled by taxpayer handouts to politically favored companies like Solyndra.

The natural gas boom is indeed a threat to today’s renewables, as they cannot compete on the basis of price and reliability, even with direct production subsidies, tax incentives, and feed-in tariffs. The government should continue to invest in developing alternative energy technologies of the future by supporting basic research, rather than funneling taxpayer money to companies for technologies that otherwise can’t compete. The abysmal record of the government trying to play venture capitalist over the last few years is yet another example of misguided Washington policies attempting to circumvent the free market.

One legitimate concern about exports is their effect on prices. Low natural gas prices have enabled American consumers to save about US $65 billion annually, according to the Manhattan Institute. Low prices and increased NGL supplies are enabling the chemical industry and other industries to bring manufacturing jobs back to the US. The American Chemistry Council estimates there will be potentially 17,000 jobs in the chemical industry and another 395,000 related jobs. Meanwhile, German industry is roiling from high energy prices after years of misguided green policies, losing manufacturing competitiveness to the US.

The good news is that the DOE’s LNG export study found only modest price increases, from 22 cents/Mcf to $1.11/Mcf after five years. Increases in that range would still maintain prices well below those in Germany, Japan, and other potential importing countries, which are currently three to four times higher. Given the large disparity between US and world natural gas prices, American manufacturing would still retain its competitive advantage.

However, even those modest price increases are probably too high, as the analysis failed to take into account the capacity of the oil and natural gas industry to increase production in response to the greater demand generated from exports. Because of the oversupply of natural gas, spare capacity is available in the Green River, Piceance, Powder River, San Juan, and Uinta basins, for example. Greater amounts of associated gas from oil wells in the Bakken and Permian basins are being captured. Producers would quickly ramp up production in response to increased demand, further moderating prices.

In addition, LNG transport costs are considerably more than standard pipeline costs at $10.51/Mcf vs. $4.35. That cost is another market signal, coupled with the demand signal to producers, that will favor domestic consumers.

The danger is that politicians who don’t trust the market will look to introduce policies that attempt to interfere with exports by pressuring the DOE not to approve LNG terminal licenses or to drag its feet with more study until America’s market advantage evaporates. Paralysis by analysis is a favorite tactic of the environmental lobby – the Keystone XL pipeline being a recent example. Groups such as the Sierra Club and National Resources Defense Council are publicly opposing exports, which fits in with their agenda of shutting down fossil fuels. They would like nothing better than to increase prices so much that today’s wind and solar become competitive with natural gas.

As with any technology, the US cannot expect to maintain its first-mover advantage forever. Other nations are starting to invest in American-developed horizontal drilling and hydraulic fracturing technology to develop their own reserves. If we wait too long, others will step in to fill the world demand for LNG, and that job and economic growth will be lost. The DOE has made the case for exporting LNG; it’s now time to take the next step and approve export terminal licenses.

Kathleen Sgamma is vice president of government and public affairs for Western Energy Alliance.

By Sarah O. Ladislaw and Frank A. Verrastro, Center for Strategic & International Studies

The winds of change are once again blowing in Venezuela. The recent announcement of Hugo Chavez’s passing has opened up a host of questions about the future leadership of Venezuela and the potential impact this leadership transition could have on Venezuelan oil production and global oil markets.

Venezuela is one of the largest oil and natural gas resource holders in the world. It is among the world’s largest oil producers (13th) and exporters (10th) and has historically been one of the United States’ largest sources of oil imports (fourth behind Canada, Saudi Arabia, and Mexico). Ever since the failed coup and the subsequent strike that brought about a short collapse in oil production in 2002, followed by nationalization of the oil sector, onlookers have been waiting for indications that the regime’s approach to energy production would either fail once and for all or that some political change would bring about reform and rejuvenation of the energy sector. A political transition in Venezuela is now upon us but how it evolves could mean a lot for the energy sector and global energy markets.

Despite its enormous oil resources, Venezuela’s oil production (regardless of whose figures you use) has long been in steady decline. In 2011, liquids production was 2.47 MMb/d , down a million barrels per day since 1999. Some of this is reflects the changing cost and economics of Venezuelan oil production, but field decline is significant and expertise and reinvestment are questionable and looking harder to come by. The internal technical and managerial capabilities of state run oil and gas company PDVSA have deteriorated since the 2002 strike and aftermath. Increasingly, PDVSA relies on contractors, as well as other private company partners, to keep the fields in production, but reports state that contractors have not been paid in months and that the political uncertainty in the country has even driven routine decision making to a halt.

The sustained political uncertainty has also slowed investment; Russian and Indian companies were planning to invest in Venezuela’s oil fields but so far have withheld incremental new money. China has not announced a new line of credit or extensions on its development-linked financing since last April.

At the same time that production is dropping, highly subsidized domestic consumption of oil is increasing while revenue from exports is also declining. The United States remains the largest recipient of Venezuelan oil exports at 950,000 b/d in 2011, roughly 40%, plus another 185,000 b/d from the Caribbean that was Venezuelan sourced but those volumes area down as US demand has declined and other crudes have become available.

Venezuela’s next largest export destinations are the Caribbean (31%) and then China (around 10%). Venezuela sells to many of its Caribbean neighbors at below market rates due to extremely preferential financing relationships, including additional heavy subsidies for Cuban exports. All of this culminates in an outlook for continued decline in oil production and a worsening economic outlook for Venezuela during a politically difficult time.

However, conventional wisdom argues that maintaining oil production is in the interest of any regime. Revenue from oil production is such a large part of Venezuela’s government balance sheet that no leadership could survive for long without a sustained cash flow that oil exports bring. The converse of this argument is that revenues generated by the energy sector are such an important source of power and influence in Venezuela that there is potential for infighting over control of the sector. Moreover, the potential for strikes or instability among groups involved in the sector (some of whom have not been paid) could have additional negative impacts on production.

While oil markets have so far taken the news of Chavez’s demise in stride (many claim because the news was largely expected, others because the political outcome is still so uncertain) an actual disruption in Venezuelan production could add pressure to an already difficult market outlook. The last year has produced a number of supply disruptions around the world from OPEC, the Middle East North Africa region, as well as non-OPEC sources. If the economic outlook continues to improve and yield an increase global energy demand, if Iran sanctions remain in place, and if Venezuelan production be compromised, then oil prices would experience much more significant upside pressure from any new disruptions.

Even under the best of circumstances, reform in the energy sector will take a long time to emerge. The damage that has been done to not only PDVSA but to the institutions of the state and civil society could take years to rehabilitate. A few key reasons for this include:

1) Revenue from the oil and gas sector that is diverted for political purposes and not reinvested in a way that will drive new production will be hard to direct back to useful investment in the sector;

2) Much of the private sector has been driven away from investment in Venezuela and may be reluctant to return, or for the companies in country to re-invest in the short-term given their experience in the 2000s;

3) Oil field mismanagement and damage may have likely occurred over the last decade, and it will take time and investment to revitalize;

4) Many of Venezuela’s core assets are in technologically complex and capital-intensive heavy oil projects that take time and resources to develop and must now be viewed in light of the global array of upstream options that are now on the table for international oil investors as compared to a decade ago;

5) Some of Venezuela’s current commercial relationships on the upstream or export side may have to be revisited in light of a more commercially-based hydrocarbon policy;

6) Venezuela’s energy sector is dominated by the state’s decisions and management, and it will take time to replace the managerial competency that once existed; and

7) Highly subsidized oil is a key feature of Venezuelan society and the political will to reform the entire energy sector into one that is more market-based and open to private investment will necessarily have to feed into the domestic demand-side of that equation.

What about Venezuela’s relationship with the United States? Over the last 10 years the sustained trading relationship between the United States and Venezuela has been one of the stabilizing forces in an otherwise contentious and sometimes volatile relationship. US refineries in the Gulf Coast are specifically designed to process Venezuela’s sour and medium to heavy crude and serves as its natural market.

Despite oil production being down, the United States still imports just under a million barrels of crude per day from Venezuela (down from a peak of 1.4 MMb/d in 1997) and, as stated earlier, the government of Venezuela is highly dependent on those revenues for their ongoing stability, especially as revenue from other exports and domestic consumption decline. As we look ahead to another period of transition in Venezuela, it is important to be mindful of the potential for disruption and to look for ways to mitigate the impacts of such disruption, but it is equally important to remember the trade ties that bind the two countries for the time being and to find opportunities to drive change in a positive direction.

Time may be limited in this regard because the US domestic production outlook is changing thanks to tight oil development in the United States and the influx of Canadian oil sands, both of which are giving US refiners more options in terms of the crudes they use and more decisions to make about how they want to configure their refineries going forward. A future in which Venezuela is no longer as competitive in its natural market in the United States would change the outlook for Venezuelan crude marketing decisions.

The long-term outlook for Venezuela’s continued oil market production is changing both in commercial and political terms. The situation has looked unsustainable for a long period of time but has managed to persist longer than most people though it would. Only time will tell if the upcoming leadership changes will bring a new chapter for Venezuela.

Sarah O. Ladislaw is co-director and senior fellow with the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Frank Verrastro is senior vice president and James R. Schlesinger chair for energy and geopolitics at CSIS.