north america's new energy future

CEA’s North America’s New Energy Future Report - 1 CEA’s North America’s New Energy Future Report - 1

North America’s New Energy Future:A Roadmap for energy self-sufficiency. If we choose it.


Table of Contents From Peak Oil to Abundant Resources .......................................................................6

Onshore Resources .................................................................................................7

Potential Energy ...................................................................................................9

Canada and Mexico .................................................................................................9

Public, Private and Beyond .....................................................................................11

Offshore Resources .................................................................................................11

Renewables .............................................................................................................12

Wind .....................................................................................................................13

Solar .....................................................................................................................13

Transmission ........................................................................................................13

What Does it All Mean? ...............................................................................................14

A Non-OPEC World .................................................................................................14

Benefits of Increased Domestic Production to the U.S. Economy ..........................15

Creating Jobs, Rebuilding Communities .............................................................16

Increasing Revenues ............................................................................................17

Benefits of the New Energy Future for Consumers .................................................18

Energy Security ........................................................................................................19

Threats to the Domestic Energy Revolution ................................................................20

Regulatory and Non-Technical Challenges .............................................................20

Developing a Sensible Domestic Energy Policy ..........................................................22

The New Energy Future - Setting the Stage ............................................................22

Predictability and Success ......................................................................................22

Achieving Balance ...................................................................................................23

Provide Regulatory Certainty ...................................................................................23

Support Infrastructure Improvements .....................................................................24

Promote Conservation and Efficiency .....................................................................24

Next Steps ...................................................................................................................25

Appendix A ..................................................................................................................28

Appendix B ..................................................................................................................29

Appendix C ..................................................................................................................30


Over the past two decades, a revolution has been growing in the world of energy. It is a revolution born of technology; not necessarily new technologies, but the perfection and application of existing technologies in a way that is unleashing vast new supplies of an old energy source: oil and natural gas. In a sense, the technology revolution which began in Silicon Valley has made its way into natural resource development and created The New Energy Future.

This revolution began slowly and on several fronts: in the Barnett Shale of Texas, where George Mitchell, founder of Mitchell Energy, encouraged his team to find a way to apply hydraulic fracturing and horizontal drilling to release hydrocarbons from shale; in the deepwater Gulf of Mexico, where energy companies have perfected ways to drill and develop scores of wells in formations over 8,000 feet below the ocean surface from floating structures in 8,000 feet of water; in the Arctic Ocean, where oil companies are beginning to explore for and produce huge accumulations of hydrocarbons in remote regions in harsh conditions; and in the oil sands of Canada, where a massive resource larger than the reserves of Saudi Arabia is being accessed cleanly and efficiently through the application of technology and know-how.

The American public is becoming increasingly aware of the abundant natural gas resources that have been discovered in the Barnett, Marcellus, Haynesville and other gas plays across the United States. As a result of these prolific resource basins, the United States now has more than a 100-year supply of domestic natural gas. Just six years ago the conventional wisdom was that America would need to import billions of cubic feet per day of liquefied natural

gas in order to meet U.S. demand. Now the United States has passed Russia to become the world’s largest producer of natural gas. And the current price is so low it is not affordable for some companies to continue drilling.

Similarly, substantial increases in crude oil production from the Bakken, Eagle Ford and Niobrara shale areas and improved technology allowing for deeper and more diverse exploration in the deepwater Gulf of Mexico and the Arctic have significantly expanded U.S. potential energy reserves.

Companies are applying these innovations across North America, which is cumulatively contributing to a phenomenon that was not believed possible two or three years ago: The United States is now becoming less dependent on imports from overseas.

In the coming decade, North America can become significantly more energy self-sufficient. In fact, the United States now imports less than 50 percent of the crude oil we consume, a substantial change in direction after years of increasing reliance on imports.1 Of these U.S. imports, an increasing portion comes from our northern neighbor, Canada. In 2011, Canadian crude accounted for approximately 23% of U.S. oil imports, up from 17% just five years ago.2

According to Goldman Sachs, the United States is on track to become the world’s largest oil producer by 2018.3 North Dakota is already producing more oil than Ecuador, an Organization of the Petroleum Exporting Countries (OPEC) member nation, even though a few years ago the state barely produced any oil.

North American Energy Production: The New Energy Future

1 U.S. Energy Information Administration, “Petroleum and Other Liquids.” 2 Ibid.3 Fox Business News, “Goldman Sees U.S. As Top Oil Producer in 2017,” September 11, 2011 –

http://www.foxbusiness.com/industries/2011/09/11/goldman-sees-us-as-top-oil-producer-in-2017-report/#ixzz1Y7zvPLve.


In the coming decade, North America can become significantly more energy self-sufficient. In fact, the United States now imports less than 50 percent of the crude oil we consume.

Innovation is also taking place in the form of hydrocarbon processing and utilization. New markets and uses for natural gas – as a generation fuel, as a chemical feedstock and as a source of transportation fuel – will also affect imports, manufacturing and global trade. With so much natural gas available enormous potential exists for change through technological innovation.

Renewable sources of energy are increasingly important to the New Energy Future. Wind, solar, biomass and hydropower all play a key role in diversifying sources for electricity generation and growing the nation’s generating capacity. In 2011, wind power accounted for 35% of all new generating capacity in the United States. This expanding energy source, when coupled with broader adoption of alternative fuel, electric vehicles and fuel-efficient vehicles will contribute to the reduction of demand in the coming years.

It is for these reasons, Consumer Energy Alliance believes North America can become energy “self-sufficient” by 2020. Energy self-sufficiency will see North America reduce the gap between our energy demand and energy production to within 10 to 20 percent. North American energy self-sufficiency will enable us to reduce our dependence on OPEC member states, help insulate our consumers from price shocks and supply disruptions, and grow our economy. And it will reduce our trade deficit and allow the United States to remain competitive in the global energy marketplace.


Indeed, years of conventional wisdom that assumed the United States would become more dependent on imports, and that there was no way to drill ourselves out of dependence, can now be called into question. Technology and ingenuity are moving North American energy supplies in a positive direction – a path forward in which we can harness these resources in a manner that furthers economic and environmental sustainability. This is the New Energy Future.

From Peak Oil to Abundant ResourcesIn 2010, the International Energy Agency (IEA) announced that, as of 2006, the world had reached peak oil at global production of 70 million barrels per day.4 The IEA believed that the world’s capacity to produce oil had stagnated or “plateaued” and production would only decrease from that point forward. Peak oil would undeniably present a number of problems for the world, and for the United States in particular.

This is the New Energy Future.


First, the price of oil would only increase going forward; limited supply and a growing demand for oil would pressure the commodity price higher and higher. To put it bluntly, “The age of cheap oil is over,” said Fatih Birol, IEA chief economist.5

But by 2012 it appeared that the game had changed. According to a recent report from Citi Investments, “The growing continental surplus of hydrocarbons points to North America effectively becoming the new Middle East by the next decade.” Citi went on to say that “The main obstacles to developing a North American oil surplus are political rather than geological or technological.”6 How does this statement fit with the statements that the United States only contains two percent of global oil reserves?7

The answer is two-fold. First, “proven reserves” refers to a very strict definition of oil that has been discovered and is 90% likely to be economically viable. By definition, ten years ago the Bakken reserves would not have been counted as a proven resource. While proven reserves serve a function, this classification certainly does not tell the entire story. Resource assessments determine potentially recoverable quantities of petroleum from either known or unknown sources, and these assessments can be a much more effective way to determine a nation’s potential for oil production. Assessments of proven and unproven resources cumulatively indicate that the United States has an enormous oil resource base.

Second, consider not only the oil contained in the United States, but also in our North American neighbors. Canada contains immense oil resources in the oil sands; is proximate to the United States; and is a trusted ally and trading partner of the United States. Mexico also has enormous oil and gas resources that have yet to be tapped. As the Citi report concludes, the combined North American oil and gas resource base is the world’s largest.

In looking to advance the objective of reducing imports from outside North America, consider this: The top 10 oil exporters to the United States – Canada, Mexico, Saudi Arabia, Venezuela, Nigeria, Russia, Iraq, Colombia, Algeria and Angola – account for just fewer than 80% of all oil imported. And the top two importers - Canada and Mexico - account for over one-third of the oil imported into the United States.

Onshore ResourcesIn order to significantly and effectively lower U.S. imports of overseas crude, the United States must focus on both decreasing the demand for transportation fuels and increasing North American supply of fuel.

A decrease in demand seems probable – if not imminent – considering advances in a variety of areas, including biofuels, automotive technology and fuel economy standards. The U.S. Energy Information Administration (EIA) estimates that an increase in the use of biofuels (most of which are domestically

4 International Energy Agency, “World Energy Outlook: 2010: Executive Summary,” http://www.worldenergyoutlook.org/media/weowebsite/2010/WEO2010_es_english.pdf.

5 National Geographic, “Has the World Already Passed “Peak Oil?” November 9, 2010.6 Citi CPS: Global Perspectives & Solutions, “Energy 2020: North America, the New Middle East?” March 20, 2012.7 New York Daily News, “Obama compares GOPers to ‘Flat Earth Society’,” March 15, 2012 –

http://articles.nydailynews.com/2012-03-15/news/31198623_1_president-obama-high-gas-prices-cheap-gas.

Canada27%

Mexico12%

SaudiArabia

12%Venezuela

9%

Nigeria8%

Russia 6%

Iraq 5%

Colombia4%

Algeria 3%All Others

14%

% of 2011 Oil Imports to U.S. by Country


produced) equivalent to 1.2 million barrels per day of crude oil by 2035 combined with light-duty vehicle (LDV) corporate average fuel economy (CAFE) standards could further reduce demand for petroleum and other liquids.8 Due, in part, to these advances, the EIA projects that the net import share of domestic consumption, which reached 60% in 2005, will be significantly reduced to 36% by 2035.9

While developing technologies can reduce the demand for energy resources, they have also had a recent and meaningful impact on supply. Thanks in part to these new technologies, producers can now develop resources that were once thought inaccessible or uneconomical. The recent upsurge in shale extraction, for example – with millions of barrels coming from domestic plays like Eagle Ford and Bakken – reflects the kind of sudden exponential growth that is possible when new technologies emerge. Between 2010 and 2035 shale gas development will grow from 23% of domestically produced natural gas to 49%, more than doubling its share of the market.10

This growth is changing America’s story of energy self-sufficiency. Fortunately, the story is changing not just for the United States but for North America in general. Canada and Mexico share in America’s geological good fortune and consequently are able to develop their own shale production. In June 2012, the largest shale gas field in North America was discovered in British Columbia.12 This production,with its strong geographical and economic ties between the North American countries, also improves America’s sense of energy security. Energy resources in the hands of stable and sympathetic governments, particularly with respect to Canada, are a boon to domestic needs.

8 U.S. Energy Information Administration, “EIA Annual Energy Outlook 2012,” June 2012 -- http://www.eia.gov/forecasts/aeo/pdf/0383%282012%29.pdf.9 Ibid.10 U.S. Energy Information Administration, via Essential Public Radio, “Chart Illustrates Shale Gas’ Key Role In Domestic Production,” January 2012 --

http://stateimpact.npr.org/pennsylvania/2012/01/27/chart-illustrates-shale-gas-key-role-in-domestic-production/.11 U.S. Energy Information Administration, “AEO2012 Early Release Overview,” January 2012 -

http://205.254.135.7/forecasts/aeo/er/pdf/0383er%282012%29.pdf.12 Wealth Daily, “Ex-Saudi Aramco Exec: U.S. becoming Energy Independent,” June 19, 2012, -

http://www.wealthdaily.com/articles/us-is-energy-independent/3538.13 Congressional Research Service, “U.S. Fossil Fuels Resources: Terminology, Reporting and Summary,” March 25, 2011.14 U.S. Energy Information Administration, “World Regions Overview,” -- http://www.eia.gov/countries/index.cfm?topL=con.15 Natural gas ice crystals that exist on the ocean floor and in the frozen tundra.16 Rand Corporation, “Oil Shale Development in the United States: Prospects and Policy Issues,” prepared for the U.S. Department of Energy, 2005.17 Institute for Energy Research, “North American Energy Inventory,” December 2011.18 Independent Petroleum Association of America, “The Federal Oil Plays: Gulf of Mexico and Alaska,” June 2012 –

http://oilindependents.org/the-federal-oil-plays-gulf-of-mexico-and-alaska-2/.

U.S. natural gas production, 1990-2035 (trillion cubic feet)11

1990

1995

2000

2005

2010

2020

2025

2030

2035

2015

Shale Gas

Tight Gas

Non-Associated Offshore

Alaska

Coalbed Methane

Associated with oil

Non-Associated Onshore

23%

26%

9%2%9%10%

21%

History Projections

49%

21%

7%1%7%7%

9%


Potential EnergyThe exact amount of our resource base cannot be known until further exploration occurs, but potential and unaccounted for sources of energy may be found in undiscovered, technically recoverable oil resources (UTRR). Experts estimate the amount of UTRR believed to exist by evaluating geologic characteristics in areas where exploration has not occurred. While the production of these resources is technically feasible, economic conditions and other factors may limit how quickly these resources come online.

A 2011 Congressional Research Service report conservatively estimates that U.S. proven resources are at 22.3 billion barrels of oil and 283.9 trillion cubic feet of natural gas. The report notes UTRR estimates are around 134.5 billion barrels of oil and 1,176.2 trillion cubic feet of natural gas.13 Since the United States consumes 18.8 million barrels of oil per day (as of 2011), America’s current combined oil resources could last until 2035 – if the United States only used U.S. oil.14

Notably, resource estimates have repeatedly increased over the last few decades and these estimates are likely to continue as technology enables the exploration, production and utilization of new unconventional fossil fuels such as methane hydrates and oil shale.15 According to a study by the Rand Corporation prepared for the U.S. Department of Energy, approximately 800 billion barrels of recoverable resources could come from the 1.5 to 1.8 trillion barrels of oil shale in the Green River Formation deposit oil in the Western United States.16 Since that 2005 study, the U.S. Geological Survey has increased its estimate of recoverable oil shale reserves to 982 billion barrels of recoverable oil resources.17

Canada and MexicoCanada is arguably one of America’s closest allies, culturally, militarily and economically. According to the U.S. State Department, the “relationship between the United States and Canada is among the closest and most extensive in the world. It is reflected in the staggering volume of bilateral trade -- the equivalent of $1.4 billion a day in goods -- as well as in people-to-people contact.” About 400,000 people cross the border every day by all modes of transport. And, for every dollar of the $277.6 billion the United States spends on Canadian goods and services in 2011, 90 cents came back to the United States.

Mexico has also been a strong trade partner and oil exporter with the United States for decades. Yet, experts state that the state-owned oil company, Petroleos Mexicanos, or Pemex, has failed to make the proper investments in upstream technologies to

0

10

20

30

40

50

60

OffshorePacific,AtlanticCoasts

Gulfof

MexicoAlaska

OffshoreLower 48

Proven

UndiscoveredTechnically Recoverable

Bill

ion

Bar

rels

Crude Oil Reserves18

“The relationship between the United States and Canada is among the closest and most extensive in the world”


If Mexico fails to make technology investments, experts project that Mexico could become a net importer within a decade.


counter the declining outputs from traditional fields. This lack in investment is partially contributable to constitutional restrictions that limit private, competitive investment in Mexico’s oil business. Compounding the problem, Mexican demand for crude oil from the country’s upgraded refineries has kept much of the crude oil at home. If Mexico fails to make these technology investments, experts project that Mexico could become a net importer within a decade.19 Pemex has made some recent announcements suggesting it is planning to increase its investment and production in the coming decade, including a $200 million investment in Mexican shale plays.20

Public, Private and BeyondThe geologic landscape of America has worked in combination with a variety of factors – legal, financial, and technological – to create a near ideal environment for continued development of shale plays on private land. On private land, landowners often own the associated mineral rights which in turn may be sold to exploration and production companies. These companies, often small companies interested in taking on high-risk, high-reward targets, have taken full advantage of the freedoms that private land exploration affords. As a recent study by the Belfer Center noted, “With the exception of Canada, these key features are foreign to other parts of the world, and they make the U.S. and Canada a sort of unique arena of experimentation and innovation.”21 This experimentation and innovation has been essential to the shale boom.

However, over 70% of U.S. shale resources exist beneath federally owned land.22 In fact, the largest deposits of oil shale in the world

are located in the Green River Formation in Colorado, Utah and Wyoming, and more than 70% of that formation is federally owned and managed.23 But under a current proposal, the acreage of federal lands available for oil shale development would be reduced by over 75% (from over 2 million acres to 461,964 acres),24 significantly curbing access to these resources. This limitation is just one factor that makes private development more appealing to oil and natural gas companies.

Additionally, states regulate shale development on non-federal lands, and these state regulations can vary from state to state to account for regional differences and concerns.25 Regulations that are more responsive to the geologic and environmental challenges particular to each play have put development of state and private lands significantly ahead of federal development.

Offshore ResourcesWhile America’s current shale production is prodigious, it is also of recent vintage. Some

Shale Wells on Private, State and Federal Lands26

19 Baker Institute Policy Report, “The Future of Oil in Mexico,” June 2011.20 Rigzone News, “Pemex to Spend $200 Million Looking for Shale Gas”, Sept, 12, 2012 – http://www.rigzone.com/news/article.asp?a_id=12063421 Belfer Center, Harvard Kennedy School, “Oil: The Next Revolutions – The Unprecedented Upsurge of Oil Production Capacity and What It Means for

the World,” June 2012 -- http://belfercenter.ksg.harvard.edu/files/Oil-%20The%20Next%20Revolution.pdf.22 2012 Oil Shale & Tar Sands Programmatic EIS, Oil Shale/Tar Sands Guide -- http://ostseis.anl.gov/guide/oilshale/23 Ibid.24 U.S. News, “Closing Off Shale Oil Sources Hurts U.S. Energy Security,“ -- http://www.usnews.com/opinion/blogs/on-energy/2012/02/09/closing-off-shale-oil-

sources-hurts-us-energy-security; citing 2012 Oil Shale & Tar Sands Programmatic EIS, http://ostseis.anl.gov./documents/peis2012/index.cfm.25 International Energy Agency, “Golden Rules for a Golden Age of Gas,” 2012 -- www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_

GoldenRulesReport.pdf.26 Institute for Energy Research, “Private and State Lands Producing 5.5 Times More Oil Per Acre,” May 17, 2012 -- http://www.instituteforenergyresearch.

org/2012/05/17/private-and-state-lands-producing-5-5-more-oil-per-acre/; citing PFC Energy North America Onshore Service.


critics warn that the domestic shale boom is not a long-term solution to America’s energy needs. Though the extent of shale’s potential remains to be seen, America’s extensive offshore and Arctic resources are both proven and potential domestic sources of energy. Per a 2011 Bureau of Ocean Energy Management (BOEM) assessment of the U.S. offshore UTRR, an estimated 88.59 billion barrels of oil exist between Alaska, the Atlantic, the Gulf of Mexico and the Pacific.27 (See appendix A)

However, the nature of these resources – due to environmental, regulatory and technical demands – is such that the offshore production timeline can easily take up to ten years between preplanning and seismic work to first production. A recent report on drilling in the Gulf of Mexico noted that regulatory changes since the 2010 Deepwater Horizon spill have increased the average time to receive approval on a drilling plan several times over.28 Notably, production in the Gulf of Mexico in 2012 was 30% lower than EIA projections in 2010.29 Therefore, while the post-Macondo moratorium on drilling has been technically lifted, a “permitorium” remains, removing operator certainty about the future of drilling projects and driving offshore investment dollars to foreign countries. (See appendix B)

Despite the need for long-term planning in order to bring domestic resources online, the

recent Department of the Interior Proposed Final 2012-2017 Outer Continental Shelf Oil and Natural Gas Leasing Program does not open up any new areas for leasing, including the Mid- and South-Atlantic.30 With exploration delayed, and the approval time for deepwater plans averaging 157 days in 2012 (the historical average is 61 days), American waters have become less economically reliable than many foreign offshore opportunities.31

RenewablesAlternatives and renewable energy sources are already contributing to North America’s path toward energy self-sufficiency and will play an increasingly important role in decades to come. Use of renewable and alternative energy sources are increasing as sources of generation and transportation fuel. In 2010, EIA reported that there were about 9 million alternative fuel vehicles on the road in the United States. While that number is less than 1 percent of the total U.S. fleet, it also predicts that alternative fuel vehicles will represent 5 percent of the fleet in 2025 and 12 percent in 2035. Those numbers don’t assume any major technological break-throughs that might occur in the coming years.

Biofuels, such as ethanol and biodiesel, are also making an increasingly significant impact on fuel supplies. In 2010, ethanol blended into motor fuels displaced the need for 364 million

27 U.S. Bureau of Ocean Energy Management, “Assessment of Undiscovered Technically Recoverable Oil and Gas Resources of the Nation’s Outer Continental Shelf,” 2011 -- http://www.boem.gov/uploadedFiles/BOEM/Oil_and_Gas_Energy_Program/Resource_Evaluation/Resource_Assessment/OCSMAP-2011-UTRR-BOEM-FINAL-11-9-2011.pdf.

27 U.S. Bureau of Ocean Energy Management, “Assessment of Undiscovered Technically Recoverable Oil and Gas Resources of the Nation’s Outer Continental Shelf,” 2011 -- http://www.boem.gov/uploadedFiles/BOEM/Oil_and_Gas_Energy_Program/Resource_Evaluation/Resource_Assessment/OCSMAP-2011-UTRR-BOEM-FINAL-11-9-2011.pdf.

28 Maguire Energy Institute, “The Outlook for Energy Production in the U.S. Gulf of Mexico: How the Regulatory Risk Premium is Restraining Production,” May 2012 -- http://www.cox.smu.edu/c/document_library/get_file?p_l_id=68463&folderId=229433&name=DLFE-6063.pdf.

29 Gulf Economic Survival Team, “Getting Back to Work in the Gulf of Mexico,” May 24, 2012 -- http://www.gulfeconomicsurvival.org/facts-and-figures, citing EIA.

30 Bureau of Ocean Energy Management, “Five Year OCS Oil and Gas Leasing Program,” June 2012. http://www.boem.gov/5-year/2012-2017/31 Gulf Economic Survival Team, “Facts & Figures: Getting Back to Work in the Gulf of Mexico,” Updated May 24, 2012.

Alternatives and renewable energy sources are already contributing to North America’s path toward energy self-sufficiency and will play an increasingly important role in decades to come.


barrels of oil and reduced our dependence on oil exporting nations.32 Breakthroughs in the production and use of biomass-based fuels could add significantly to the overall North American fuel mix.

WindIn terms of generation capacity, alternative sources such as wind, solar, geothermal and biomass are already making significant contributions to North America’s energy supply. U.S. wind energy is a success story. The U.S. industry had installed 49,802 megawatts (MW) of cumulative wind capacity through the end of the first half of 2012. Currently there are over 10,300 MW under construction in 30 U.S. states and Puerto Rico. In the past five years, the U.S. wind industry has added over 35% of all new generating capacity. Today, U.S. wind power capacity represents more than 20% of the world’s installed wind power. To date, most wind energy projects have been located in western states. A challenge has been how to get power generated from wind to consumers in the central and eastern part of the United States. Several offshore and onshore wind energy projects are being pursued in Eastern United States.33

SolarThe United States currently has about 1,650 MW of installed solar capacity, according to U.S. EIA. The industry installed 506 megawatts (MW) of solar voltaic capacity in the first quarter 2012, which amounted to an 85 percent

increase in deployment from year to year. The industry is reporting a substantial increase in demand from year to year across the residential, commercial and utility-scale markets.34

TransmissionOne of the biggest impediments to renewable energy production in the United States is adequate transmission infrastructure. With so much of renewable generation capacity located in more remote areas in western states, adequate transmission capacity is needed to bring supplies to more populous areas on the east and west coasts. Transmission projects are capital intensive and it is difficult to achieve financing. Projects also face siting and rights-of-way issues that are similar to those faced by pipelines and other energy infrastructure projects. Local opposition and litigation by national NGOs is hampering the ability to initiative and complete transmission projects.

While significant impediments exist, many renewable energy companies are analyzing the feasibility of a “distributed model” of solar generation and transmission. The model focuses on increasing rooftop solar and wind installations, thereby reducing the need for extensive transmission construction and challenges with facility siting. Some studies show that 10-25% of our electricity generation could be supplied by rooftop solar alone.35

Other issues facing the renewables industry include energy storage, project finance and low natural gas prices.

32 Growth Energy, “Ethanol Policy Brief,” November, 2010 http://www.growthenergy.org/images/reports/brief_ethanolpolicy_20101116.pdf33 http://www.awea.org/learnabout/industry_stats/index.cfm34 http://www.statisticbrain.com/solar-energy-statistics/35 National Renewable Energy Laboratory, “Supply Curves for Rooftop Solar PV-Generated Electricity for the United States.”

http://www.nrel.gov/docs/fy09osti/44073.pdf

Alternatives and renewable energy sources are already contributing to North America’s path toward energy self-sufficiency and will play an increasingly important role in decades to come.


What Does it All Mean?A Non-OPEC WorldNorth America’s energy revolution is also creating a new reality for the world energy market. George Friedman, CEO of Stratfor Global Intelligence, has said that North America’s ability to export fuel is one of the biggest game changers for American foreign policy. This could express itself by the ability of North America to become capable of insulating itself from the Organization of the Petroleum Exporting Countries (OPEC) and its manipulation of production and oil prices. The ability of the United States and North America to achieve

this insulation rests on the production of our shale resources. While some measure of shale-related geopolitical shift seems inevitable, some members of OPEC have been criticized for being short-sighted with respect to shale by downplaying or rejecting its impact on OPEC’s future stake in the global energy market.36

Current projections for non-OPEC production suggest a complicated narrative. A recent study out of Harvard’s Kennedy School, which conducted field-by-field analyses of all energy investments underway globally, determined that the shale and tight oil boom in the United States “is not a temporary bubble but the most important revolution in the oil sector in decades” likely to “trigger worldwide emulation over the next decades.”37 Similarly, in its recent short-term energy outlook, the EIA

36 Reuters, “Head in the sand, OPEC sees no shale oil threat,” June 2012 -- http://www.reuters.com/article/2012/06/14/shale-opec-idUSL5E8HDG6K20120614.


reported projections that non-OPEC crude oil and liquid fuels production would rise by 0.8 million barrels per day in 2012 and by a further 1.2 million barrels per day in 2013, with the largest area of non-OPEC growth in North America, “where production increases by 890 thousand bbl/d and 470 thousand bbl/d in 2012 and 2013, respectively, resulting from continued production growth from U.S. onshore shale and other tight oil formations and Canadian oil sands.”38 Of this non-OPEC growth, the United States and Canada are projected to take a strong lead.

Other non-OPEC countries, such as Argentina, Brazil, Kazakhstan, China, Russia and Colombia, are also expected to increase oil production in 2012 and 2013. Meanwhile, the EIA projected a decrease in OPEC crude oil production in 2013, “as non-OPEC supply growth increases and stocks remain flat.”

While OPEC’s oil resources remain strong, the development of a “gas OPEC,” which would further compromise the United States in the broader geopolitical scheme, seems less and less likely. A 2011 Rice University study estimates that domestic shale gas production is expected to more than quadruple by 2040, “reaching over 50 percent of total U.S. natural

gas production by the 2030s” and thwarting a potential monopoly by a gas cartel.39

Notably, U.S. and Canadian projected production increases will set in motion anticipated further declines in U.S. overseas imports through the year 2035.40 (See appendix C)

Benefits of Increased Domestic Production to the U.S. EconomyExpanded North American energy production not only equals better energy security, but better economic security as well. As more and more projects come online, the oil and gas industry will help create hundreds of thousands of jobs and billions in tax revenue. These economic opportunities don’t end at the well-pad either. Sectors including manufacturing, pipefitting, trucking, catering, lodging and other oilfield service providers will see a boom in demand from the oil and gas industry, helping to spur additional job creation and investment in local economies. Finally, the availability of greater quantities of oil and natural gas will support expansion in some energy-intensive industries like petrochemical manufacturing and steel production.

3 37 Belfer Center, Harvard Kennedy School, “Oil: The Next Revolutions – The Unprecedented Upsurge of Oil Production Capacity and What It Means for the World,” June 2012 -- http://belfercenter.ksg.harvard.edu/files/Oil-%20The%20Next%20Revolution.pdf.

8 U.S. Energy Information Administration, “Global Crude Oil and Liquid Fuels,” June 2012 -- http://www.eia.gov/forecasts/steo/report/global_oil.cfm.39 James A. Baker III Institute for Public Policy, Rice University, “Shale Gas and U.S. National Security,” July 2011 --

http://bakerinstitute.org/publications/EF-pub-DOEShaleGas-07192011.pdf.40 U.S. Energy Information Administration, “Annual Energy Outlook 2012 with Projections to 2035,” June 2012 --

http://www.eia.gov/forecasts/aeo/pdf/0383%282012%29.pdf.

The path that policymakers and the general public choose will determine whether North America will truly benefit from The New Energy Future.


Creating Jobs, Rebuilding CommunitiesCumulatively, our oil and natural gas resources support over 9 million American jobs.41 If the federal government adopted certain pro-energy policies that allowed for greater access to our resources, the United States could see the addition of 1.4 million jobs by 2030 thanks to expanded North American oil and natural gas production.42

These jobs would span from Alaska to Florida and nearly every state in between – even those that do not host much traditional energy development. For instance, financial services, computer software and consulting firms in Massachusetts have recently seen an increase in demand from shale gas producers throughout the country seeking a variety of services.43 Similarly, the offshore industry has tremendous potential to create jobs outside of the coastal areas. According to a 2011 IHS Global Insight report, increased drilling activity in the Gulf of Mexico and the adoption of a “pro-active regulatory pace” could generate 230,000 American jobs, one-third of which would be generated outside the Gulf region in places like Georgia and Illinois.44

According to a report by PriceWaterhouseCoopers, lower feedstock and energy costs from the shale gas revolution, should reduce natural gas expenses for U.S. manufacturers by as much as $11.6 billion annually through 2025.45 This could result in the manufacturing sector employing up to one million more workers by 2025. Natural gas supply increases could result in 17,000 high-paying jobs in the U.S. chemical industry alone, plus 395,000 additional jobs outside the industry, according to a report by the American Chemistry Council.46

Moreover, oil and gas related jobs provide significantly better compensation packages compared to other industries. In 2011, the average salary in the oil and gas industry was $98,000.47 This is more than double the national average salary for U.S. workers. Industry jobs also enjoy relatively low disparity of wages based on level of education. Indeed, the largest year-over-year wage increase as reported by Rigzone.com was amongst workers whose highest level of education was high school graduation. Demonstrating the demand for highly skilled workers, high school graduates with vocational and on-site training also enjoyed higher average compensation (>$5000/yr.) than those with four year degrees.

41 PriceWaterhouseCoopers, “The Economic Impacts of the Oil and Natural Gas Industry on the U.S. Economy: Employment, Labor Income and Value Added,” September 2009.

42 Wood Mackenzie, “U.S. Supply Forecast and Potential Jobs and Economic Impacts (2012-2030),” September 2011.43 The Boston Globe, “Mass. Gets boost from shale boom,” May 23, 2012.

http://articles.boston.com/2012-05-23/business/31814214_1_shale-formations-natural-gas-pipelines. 44 IHS Global Insight and IHS CERA, “Restarting the Engine – Securing American Jobs, Investment and Energy Security,” July 2011.45 Price Waterhouse Coopers, “Shale Gas: A renaissance in U.S. Manufacturing?” December 2011.

http://www.pwc.com/en_US/us/industrial-products/assets/pwc-shale-gas-us-manufacturing-renaissance.pdf46 American Chemistry Council, “Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs, and US Manufacturing,”

March 2011. http://www.americanchemistry.com/ACC-Shale-Report47 Rigzone.com, “2010-2011 Compensation Survey,” March 23, 2012

Natural gas supply increases could result in 17,000 high-paying jobs in the U.S. chemical industry alone, plus 395,000 additional jobs outside the industry


Increasing RevenuesThe U.S. oil and natural gas industry is one of the principle revenue-producing sectors for the U.S. Treasury and is the greatest non-tax source of revenue for the federal government. In fiscal year 2011, the Office of Natural Resources Revenue (ONRR) in the U.S. Department of the Interior disbursed more than $11.16 billion in revenues to various federal, state and local agencies, including over $6 billion to the U.S. Treasury.48 In years with significant lease sales – either in the federal Outer Continental Shelf or on public lands – revenues can be much, much higher. In 2008 when the government issued leases in the Chukchi Sea off Alaska, total royalty revenues including bonus bids exceeded $24 billion.49

One must note, however, that these revenues constitute only royalties, bonus bids and rents for oil and gas development on federal lands. Personal income taxes paid by employees, state taxes and corporate taxes all contribute to greater revenues for the government.

Allowing companies to access oil and natural gas resources currently off-limits could generate

an additional $1.7 trillion in government revenue.50 In the Gulf of Mexico returning to historical, pre-Macondo permitting levels could boost federal revenues by $17.9 billion within two years due to increased royalty revenues, corporate taxes, and personal income taxes created from additional jobs.51 Off Alaska, development of oil and gas resources in the Beaufort and Chukchi Seas could generate over $230 billion if oil averages $100 per barrel. Onshore, expanded production could lead to an additional $12 billion in government revenue by 2030.52

All of these government revenues help fund critical infrastructure, social services and healthcare needs at both the federal and state level. In addition, some of the federal and state royalties go to the federal Land & Water Conservation Fund and the Historic Preservation Fund, helping to ensure energy production proceeds sustainability. Expanding our government revenue base will be critical to easing our national debt and ensuring American citizens have access to the basic needs government provides.

48 Office of Natural Resources Revenue, “Who We Are,” http://www.onrr.gov/About/default.htm. 49 Office of Natural Resources Revenue,

http://www.onrr.gov/ONRRWebStats/Disbursements_Royalties.aspx?report=AllReportedRoyaltyRevenues&yeartype=FY&year=2008&datetype=AY. 50 American Petroleum Institute, http://www.api.org/Newsroom/upload/SOAE_Exec_Summary.pdf. 51 IHS CERA and IHS Global Insight, “Restarting ‘the Engine:’ Securing American Jobs, Investment, and Energy Security,” July 2011.52 Wood Mackenzie, “U.S. Supply Forecast and Potential Jobs and Economic Impacts (2012-2030),” September 2011.


• Lower natural gas prices. The price of natural gas has plummeted since 2008, from around $14 per thousand cubic feet (tcf) to around $3 per tcf in the summer of 2012 as a result of new supplies and technologies. The falling cost of natural gas alone will save U.S. households $926 a year between now and 2015, according to consulting firm IHS Global Insight.54

• Increased domestic refining capacity. The 15% gain in U.S. crude-oil production since 2008 is by far the biggest globally, with new fields now in the early stages of development. Expanded capacity and greater efficiencies at existing U.S. refineries has enabled the United States to export surplus product, mostly diesel. The United States has overtaken Russia as the world’s largest refined-petroleum exporter, according to Citigroup’s Edward Morse.55 This will help reduce future price shocks from market externalities such as weather events and moderate commensurate supply fluctuations. For consumers, this means cheaper, more secure supplies of domestic gasoline, diesel and other refined products.

• Lower electricity prices. The lower natural gas prices achieved with shale gas production will result in an aver-age reduction of 10% in electricity costs nationwide between 2010 and 2035.56 Georgia Power announced a reduction in fuel charges – the amount it pays for natural gas, coal, nuclear and renewable fuels to make electricity—on customer bills by $567 million a year over the next two years. This reduction should result in a 6% drop in a typical monthly bill of 1,000 kilowatt hours.57 This decrease is based largely a move towards more affordable natural gas.

• Potential for lower gasoline prices. According to IHS Global Insight, a $10 decrease in the price of crude oil lowers U.S. gasoline prices by 24 cents a gallon. According to many sources, there is potential to drop the price of crude to $70 per barrel from oil produced from shale. Assuming this price drop occurs, the resulting price of gasoline would be around $3 per gallon.58

• Reinvigorated manufacturing base. A 25% increase in ethane supply – which is derived from natural gas – would generate 17,000 new jobs in the U.S. chemical industry alone.59

• Jobs. IHS Global Insight says the natural-gas boom alone supported more than 600,000 jobs in 2010 and will rise to 1.6 million by 2025.60 And more energy independence could mean 3.6 million new jobs, enough to cut unemployment by two percentage points, according to Citigroup.61 Industry employment studies show the average salary for energy related jobs was over $98,000 in 2011,62 more than double that of the national average wage.

• The multiplier effect. The money saved on energy will pay dividends throughout the economy. The United States sends $400 billion abroad annually for oil, and a reduction in this amount would function like a huge tax cut, says Chris Lafakis, energy economist at Moody’s Analytics. Lafakis estimates a one-third to 40% reduction of imports by the next decade. “At 40%, that’s $160 billion a year, and that’s massive. It’s like the temporary payroll tax cut we have now, plus a third, and it lasts forever.”63

53 USA Today, “U.S. energy independence is no longer just a pipe dream,” May 15, 2012 – http://www.usatoday.com/money/industries/energy/story/2012-05-15/1A-COV-ENERGY-INDEPENDENCE/54977254/1.

54 IHS Global Insight, “The Economic and Employment Contribution of Shale Gas in the United States,” December 2011: http://www.ihs.com/images/Shale-Gas-Economic-Impact-Dec-2011.pdf.

55 Oil and Gas Investor, “ECC 2012: Citi’s Morse Highlights U.S. Production Growth, Export Opportunities,” June 12, 2012. http://www.oilandgasinvestor.com/Finance-Industry-News/ECC-2012-Citis-Morse-Highlights-US-Production-Growth-Export-Opportunities_101770.

56 IHS Global Insight , “The Economic and Employment Contributions of Shale Gas in the United States,” December 2011.57 The Atlanta Journal Constitution, “Utility regulator wants Georgia Power to lower bills by June,” April 26, 2012 –

http://www.ajc.com/business/utility-regulator-wants-georgia-1426651.html. 58 IHS, “Oil Prices and the U.S. Economy: Some Rules of Thumb,” February 24, 2012: http://www.ihs.com/products/global-insight/industry-economic-report.

aspx?id=1065929077.

Benefits of the New Energy Future for ConsumersEnergy security and economic health profoundly affect everyone in North American. Boom areas like Williston, North Dakota, Carroll County, Ohio and Williamsport, Pennsylvania tell the story of prosperity taking the leading role. Williamsport, until recently was known almost exclusively as the home of the Little League World Series, is now often associated with the nearby Marcellus Shale formation. Since the discovery of natural gas there, six hotels are being built, 100 businesses have moved in, and residents with a high school education are earning six figures annually.53 In the words of Pennsylvania Governor Tom Corbett, the shale play “put people to work who hadn’t worked in a long time. It was a natural-gas rush that put demand on housing, on stores, on restaurants.”

In addition to putting people to work, the New Energy Future can also be expected to benefit consumers across the board:


Energy SecurityEnergy security can be defined as the relationship between a country’s ability to meet their energy needs and a country’s access to affordable supplies of energy. Access to equitable supplies depends on the availability of supply on the global market, the ability to transport energy safely to its import destination, and the ability of the importer to receive and distribute the energy to consumers safely and efficiently. Depending on a variety of factors, such as geopolitical relationships, internal politics and technological factors, the landscape of energy security is constantly in flux.

Many of America’s energy security concerns stem from geopolitical relationships. For example, the long history of enmity between Iran and Iraq, internal instability in many of the Persian Gulf and West African states, and hostilities arising from the Israel-Palestine conflict can all affect the global supply of oil. Should instability disrupt supply, huge spikes in the price of oil would result, compromising America’s energy security and threatening the health of the economy.

Recognizing the seriousness of energy security and the effect of supply and demand on America’s energy and economic security, the U.S. Congress commissioned a study by the Department of Commerce in 1999 called, “The Effect on the National Security of Imports of Crude Oil and Refined Petroleum Products.” The Department found that reliance on petroleum imports is a threat to national security, and recommended a plan to reduce U.S. dependence on foreign oil. This plan urged improving the efficiency of America’s national energy system, and further recommended preventing disruptions of global

energy supplies (per the study’s observation that energy security depends on free access to oil at “reasonable and predictable prices”).64 Together, the Department believed these efforts would help better protect the U.S. economy by bolstering U.S. energy security in the short and long term.

While some of the dynamics of global energy have changed since the 1999 study, the fundamental issue – the scarcity of a resource that is central to the U.S. economy – remains the same. Much of the oil that the United States traditionally imports from overseas originates in geopolitically unstable regions: Colombia has been ranked in the top ten countries for political and social unrest, largely due to high rates of income inequality and violence65; Nigeria, due to varied ethnic, cultural and religious clashes, often experiences civil strife; Venezuela’s president, a former coup leader, is openly critical of the United States; and Libya recently experienced a political revolution in which the second largest state-owned oil company in the country announced its support of the rebelling faction.

Dependence on these unstable nations leaves the United States vulnerable to supply disruptions. The difference now, in the new reality of America’s energy revolution, is that the United States appears to have the wherewithal to substantially lessen its dependence on these unstable sources of oil. As the State Department’s Carlos Pascual observed, “Whereas at one point there were real and serious concerns about the ability to maintain sustainable access of supplies to the United States if there were disruptions in the Middle East, that has changed.”66

59 American Chemistry Council, “Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs and US Manufacturing,” March 2011: http://www.americanchemistry.com/ACC-Shale-Report.

60 IHS Global Insight , “The Economic and Employment Contributions of Shale Gas in the United States,” December 2011.61 USA Today, “U.S. energy independence is no longer just a pipe dream,” May 15, 2012:

http://www.usatoday.com/money/industries/energy/story/2012-05-15/1A-COV-ENERGY-INDEPENDENCE/54977254/1.62 Rigzone.com, “2010-2011 Compensation Survey,” March 23, 201263 Ibid.64 U.S. Department of Commerce, “The Effect on the National Security of Imports of Crude Oil and Refined Petroleum Products,”

http://beta-www.bis.doc.gov/index.php/licensing/forms-documents/doc_view/78-crude-oil-and-petroleum-products-1989. 65 The Royal Bank of Canada, “The political and social unrest index – who’s next?” – http://www.rbc.com/newsroom/index.html. 66 The New York Post, “US weaning itself off Mideast oil,” June 27, 2012.

http://www.nypost.com/p/news/international/us_weaning_itself_off_mideast_oil_RS7zGoiHVCvFr1pZ4zOEcL.


Threats to the Domestic Energy RevolutionRegulatory and Non- Technical ChallengesNorth America continues to face increasing challenges in the form of non-technical risk. In the United States these risks come in a number of forms that can be summarized as:

• Access to acreage/resources• Increasing challenges to permits, approvals and

environmental reviews• Increasingly stringent standards for air, water and

other environmental requirements• Permitting delays• Lack of agency resources• Increased misinformation over hydraulic fracturing• Lack of clarity within federal agencies over

approvals and other processes• Citing of rights of way for critical infrastructure• Changes or threat of changes to fiscal terms• Legal challenges• Endangered Species Act listings • Noise and view shed issues

Opponents of oil and gas activities have increasingly challenged new projects. Furthermore, government agencies, both federal and state, are increasingly less motivated to make timely decisions due to the proliferation of legal challenges against agency decisions. All of these factors have an impact on the ability of U.S. oil and gas operators to explore and produce energy.

It is especially impactful to producers on federal lands. Delays and uncertainty around leasing and permitting on federal lands have reduced the attractiveness of exploration on U.S. Bureau of Land Management and U.S. Forest Service lands, primarily in the Western States. Many of these lands are also natural gas heavy and recent low natural gas prices have made development less economically viable.

Meanwhile, many of the major shale plays exist on private and state lands in other parts of the United States. The promise of the shale boom coupled with the burdens of exploring on federal lands has driven investment away from the Western States and into state and private lands.

Historically, state legislatures and regulatory authorities have created more reasonable and competitive environments for oil and gas development. However, state and private lands activities are not without their own non-technical risks and difficulties. Increasingly, state regulatory agencies are making it more difficult to operate on state and private lands. New regulations will impose greater restrictions and regulatory authority over these activities. Many of these regulations are needed and will actually help create long-term and sustainable regulatory environments. However, opponents of oil and gas development are often successful in imposing restrictive laws, regulations and even prohibitions on activities that are threatening development in many areas.

A case in point has been the opposition to development of the Marcellus Shale in New York and Pennsylvania. Lawsuits are taking their toll in these areas. A legal challenge to Pennsylvania’s oil and gas law is already affecting development in the Pennsylvania Marcellus, and numerous other legal actions over drilling, permitting and hydraulic fracturing are underway. Furthermore, the U.S. EPA has been seeking to expand its regulatory authority in the states. The EPA is conducting a study on hydraulic fracturing, which is largely viewed as a way to circumvent the statutory prohibition of any EPA regulation of hydraulic fracturing.

Finally, the combination of state and federal laws, regulations and regulatory authorities in areas where activities take place on federal and state lands can make the process exceedingly difficult and complex. Better coordination amongst federal agencies and between state and federal authorities can reduce uncertainties, conflicts and delays.


Increasingly, state regulatory agencies are making it more difficult to operate on state and private lands.


Legal challenges spawning from expanded citizen suit provisions have also created new uncertainties for energy producers.

Developing a Sensible Domestic Energy PolicyThe New Energy Future - Setting the StageIn order to maximize its stake in this New Energy Future, America’s energy policy must be responsive to the new realities of its energy resources and the world’s energy needs. And unlike various geopolitical factors – political instability, OPEC production, U.S. energy policy can be determined and controlled within our borders. The reality is that that the United States and Canada are home to tremendous energy resources, with the new technology to dramatically increase access to these resources. Our energy policy must build

on its strengths, and strengthen its weaknesses if we are to continue to develop and realize the New Energy Future.

Predictability and SuccessUntil recently, U.S. policy encouraged maximum production. In general, North America has a track record of optimizing production due to an environment that encourages energy production, particularly in the Gulf of Mexico. Competition has led to innovation; The United States was the first to drill for oil, the first to drill in deepwater, and the pioneer of hydraulic fracturing.

Predictable property rights, a stable government and a stable regulatory regime have played an important role in the development of oil and gas resources. The legal and social environments that help foster development do not happen by chance. Nor did it happen overnight.


Thoughtful, balanced government policies that protect the environment without handicapping industry are major elements of what has made North America so successful. On the precipice of enormous energy opportunities, the U.S. government also has an opportunity to enable and encourage innovation and energy production that has historically been typical in the United States.

For any business, predictable rules and transparent regulatory processes play a pivotal role in making investment decisions. Simply put, if the process is not dependable – with respect to the timing and likelihood of approved permits to drill – a company is less likely to “pull the trigger” on investments and projects.

Legal challenges spawning from expanded citizen suit provisions have also created new uncertainties for energy producers. Additionally, environmental NGO’s have made a business out of filing friendly lawsuits with EPA and other agencies such as the BLM to seek favorable settlement provisions at odds with energy production. Without significant tort reform at both the regulatory and legislative level, producers and federal agencies will face an increasing onslaught of legal challenges that will bog down the process.

Achieving BalanceAccording to the U.S. Energy Information Administration global energy demand will increase by more than 43% between now and 2035.67 In order to meet that demand growth and ensure stable, affordable supplies, a reasonable and more robust approach is needed to strike a proper balance between the use of traditional sources of energy and the long-term development of alternatives, as well as improved energy efficiency and conservation and increased energy research and education.

Expansion of domestic oil and gas production will reduce our dependence on imports and significantly reduce the billions of dollars we send abroad. Although oil prices are determined by a global market, domestic oil production can help insulate American

consumers during a supply disruption and mitigate the influence that foreign produc-ers have on global markets. Investing in domestic resource production, as part of a balanced energy policy, will also generate new economic activity and add new jobs.

The United States must also continue to encourage the development of alternative and renewable energy sources. While investments in renewable sources have become a recent political flashpoint, policymakers can provide modest reforms that will insure fiscal responsibility, while still maintaining adequate incentives for growth in the sector.

Provide Regulatory CertaintyIn general, U.S. energy policy should embody a “we need it all” philosophy to pursue energy security through reduction of overseas imports, balanced with environmental and cultural concerns. Specifically, Congress and the Administration should enforce only those laws and regulations that would clearly establish exploration and production requirements and clarify regulatory authority with respect to permits for exploration, production and infrastructure development (e.g. transnational pipelines). An overhaul of the regulatory regime is not necessary; under current regulations, industry has sustained a laudable safety and environmental record. However, on the margins there are areas where Congress and the Administration can improve the process.

Clarify and streamline competing regulatory interests. BOEM, BSEE, EPA, NEPA, BLM, NOAA. This string is but a small taste of the alphabet soup of regulatory agencies that regulate and impact energy projects, usually before production can even begin. The government must find a way to simplify, clarify and coordinate the roles its regulatory agencies play so that companies can achieve some level of predictability in exploration and production. For example, granting oversight, timeline and ultimate decision-making authority to a single

67 24/7 Wall St., “ Global Energy Demand Will Grow by 53% by 2035,” September 19, 2011 – http://247wallst.com/2011/09/19/global-energy-demand-will-grow-by-53-by-2035/.


The United States was the first to drill for oil, the first to drill in deepwater, and the pioneer of hydraulic fracturing.


agency or to a coordinated, single-agency led interagency task force would enable producers to better ascertain how much time and money would be necessary to start a project. There are cases like Shell Alaska, where billions of dollars have been spent and years have gone by due to unforeseen regulatory hurdles. Such unpredictability, however unintentional it may be, is simply bad for business and bad for consumers.

Similar to offshore regulation, onshore producers have to wade through an often confusing sea of regulators and regulations. The main difference is that onshore production has historically been the realm of state governments. Recently, however, federal regulators have inserted themselves into the regulatory fray, muddying the waters for companies who would like to invest in onshore development. The EPA’s current study on hydraulic fracturing, which is behind schedule and which has prematurely released disputed findings, may become problematic to natural gas production.

Regulations targeting onshore production on state and private lands should continue to be promulgated at the state level. Neighboring states or those with similar resource profiles should consider and/or bolster their shared regulatory framework to reduce confusion and increase efficiency and uniformity. EPA and similar agencies should serve only in a supervisory role as new rules are proposed and promulgated. Additionally a portion of state and federal revenues derived from the production of energy should be diverted directly to the agencies tasked with regulatory oversight of the industry. This will help insure that agencies responsible for creating and enforcing the rules are properly staffed and able to perform their function.

Support Infrastructure ImprovementsFor the New Energy Future to be realized, and North America to become a leading producer of energy, significant improvements in energy infrastructure must be made in the coming

years. U.S. energy policy should put a renewed focus on improving existing energy transportation and transmission infrastructure and look for ways to facilitate the construction of new projects. These line companies should be provided with the same regulatory certainty given to extraction-based entities.

Rules and regulations regarding the construction and siting of lines should be uniform across the various agencies responsible for oversight, and states should again remain the primary jurisdiction for regulatory authority. As with extraction activities, states should consider a common regulatory framework and work together to reduce the complexity and inefficiency associated with intrastate pipeline and transmission projects.

Promote Conservation and EfficiencyIn addition to increased energy production, reducing aggregate demand should also play a role in U.S. energy policy. An increase in energy efficiency and overall sustainability will help us lower our dependence on foreign sources of energy as well as increase the profitability of American businesses and value of American products. Policies to promote improved energy efficiency standards, with requisite tax incentives, should be strengthened in future legislation. Public-private partnerships should be expanded and created to help facilitate access to energy-efficient building and house-hold improvements. The United States should also work to continue its energy-efficiency standards for consumer products, vehicles, and appliances.

Education on responsible energy production and use should also be addressed. Opportunities for consumer education on resource extraction as well as energy efficiency and sustainability should be promoted at both the state and federal level.


Next StepsConsumer Energy Alliance offers the following steps that, if taken, would put the United States in a position to take advantage of the New Energy Future for energy. These steps would create jobs, decrease confusion for investors, decrease our reliance on overseas sources of energy and increase government revenues.

Policies that Can Lead to Energy Self-Sufficiency1. Create and enact a coherent National Energy Policy that facilitates North American energy production, eliminates

unnecessary regulatory and legal impediments, recognizes the strong regulatory framework already in place, and advances North American Energy Self-Sufficiency by 2020;

2. Promote energy efficiency and sustainable practices, and increase public education and awareness of the role that energy plays in our economy, our security and our daily lives.

3. Continue development of a diverse energy portfolio, including expanded development and use of alternative and renewable energy sources and transmission infrastructure;

4. Ensure regulations are equitable, consistent, scientifically based, non-duplicative with existing federal or state statutes, and properly reflective of the concerns of Congress and the public for all energy sources, including nuclear and other unconventional sources;

5. Provide adequate funding for federal agencies that lease, permit and regulate energy exploration, and provide direct funding from oil and gas revenues back to federal land management agencies;

6. Review the existing regulatory processes for issuing permits, leases, exploration plans and environmental reviews for energy production on the Outer Continental Shelf as part of an overall program to reduce uncertainty and redundancy;

7. Maintain reasonable state and federal fees for energy production and a consistent tax structure;

8. Promote the development of energy infrastructure such as pipelines, to ensure the efficient movement of energy supplies across North America;

9. Recognize the importance of Canadian energy production to North American energy self-sufficiency and prevent the enactment of federal, regional, or state regulations that discriminate against it;

10. Recognize the importance of the Trans-Alaska Pipeline System and the role Alaskan energy resources will play to its viability, and to meeting future U.S. energy demand.

The policies and recommendations listed above are to be considered a starting point for a broader conversation about what federal and state governments can to do encourage and keep from discouraging energy production. The list is by no means exhaustive but contains specific areas where public policy can be improved in order to more fully and quickly realize the New Energy Future.

North America has vast reserves of oil and gas, and the capacity to produce large amounts of renewable energy. Our ability to tap these resources has dramatic implications for the economic future of the Unites States and our allies. It also presents a unique opportunity to reshape our foreign policy and strengthen our national security.

Energy consumers stand to benefit the most from the New Energy Future. Jobs and economic activity resulting from energy development will help propel our economy for the next several decades. Expanding tax bases will help provide revenue to the government and ensure investments are directed to where they are needed the most. New industries will be created and long-dead industries will be raised from the ashes of a time when North America was deemed energy dependent.

And these benefits can be realized in the not so distant future. With the right policies and enough desire to reap the benefits, we can immediately ramp up production and become energy self-sufficient. In a few short years we can grasp the ...New Energy Future. If we choose to.


8. Promote energy efficiency and sustainable practices, and increase public education and awareness of the role that energy plays in our economy, our security and our daily lives.


Appendix AAssessment of Undiscovered Technically Recoverable Oil and Gas

Resources of the Nation’s Outer Continental Shelf, 2011

Washington/Oregon

NorthernCalifornia

CentralCalifornia

SouthernCalifornia

NorthAtlantic

Mid-Atlantic

SouthAtlantic

Straitsof Florida

Eastern Gulfof Mexico

Central Gulfof Mexico

Western Gulfof Mexico

7.76 Tcf5.32 Bbo

2.28 Tcf0.40 Bbo

3.58 Tcf2.08 Bbo

2.04 Tcf0.53 Bbo

69.45 Tcf12.38 Bbo 16.08 Tcf

5.07 Bbo133.90 Tcf 30.93 Bbo

2.49 Tcf2.40 Bbo

9.87 Tcf 1.35 Bbo

0.02 Tcf0.02 Bbo

19.36 Tcf 1.42 Bbo

Assessment of Undiscovered Technically Recoverable Oil and Gas Resources of the Nation’s Outer Continental Shelf, 2011

BowersBasin*

AleutianBasin*

NavarinBasin

Chukchi Sea

Aleutian Arc*

St. GeorgeBasin

ShumaginNorthAleutianBasin

Kodiak

Gulf of Alaska

Cook Inlet

Beaufort Sea

ALASKA

Hope Basin

NortonBasin

St. Matthew-Hall

3.77 Tcf0.15 Bbo

76.77 Tcf15.38 Bbo

27.64 Tcf8.22 Bbo

3.06 Tcf0.06 Bbo

1.22 Tcf0.13 Bbo

2.80 Tcf0.21 Bbo

1.20 Tcf1.01 Bbo

4.04 Tcf0.63 Bbo

1.84 Tcf0.05 Bbo

0.49 Tcf0.01 Bbo

8.62 Tcf0.75 Bbo

*

* Not evaluated in this study - petroleum potential is negligible.

Natural Gas in Trillions of Cubic Feet (Tcf)Oil in Billions of Barrels (Bbo)

Undiscovered Technically Recoverable Oil and Gas Resources (UTRR)

Mean* Estimates for Planning Areas

* Arithmetic average or expected value

Regional Totals: Alaska OCS 26.61 Bbo 131.45 Tcf Atlantic OCS 3.30 Bbo 31.28 Tcf Gulf of Mexico OCS 48.40 Bbo 219.46 Tcf Pacific OCS 10.20 Bbo 16.10 TcfTotal U.S. OCS 88.59 Bbo 398.37 Tcf

1 - 10

10 - 20

20 - 30

30 - 40

40 - 50

50 - 60

Barrels of Oil Equivalentin Billion barrels (Bboe)

< 1


Appendix BWhile the United States struggles to grow its offshore development, global offshore production is flourishing.

• Middle East offshore production has more than doubled since 2000, with oil production increasing by 16% and gas production increasing by 290%.68

This production is attributable, in part, to a period of heavy investment in both onshore and offshore production, as well as ongoing exploration in the Persian Gulf, which has augmented Middle East gas reserves.69 A total of 1,910 exploratory and development offshore wells are expected in the Middle East in the next five years.70

• In recent years, the oil and gas regulatory body of Canada, the National Energy Board (NEB), has worked with public and private groups to develop better technology for offshore Arctic operations in the Beaufort Sea, where exploration companies have purchased exploration rights.71

• Exploratory drilling “has already commenced near Denmark’s offshore areas – a fact that could boost Canadian as well as Russian interests in the offshore Arctic region.”72

• Norway has sustained annual increases in total natural gas production through the development of new offshore fields. In 2010 Norway drilled 45 exploration wells, made 16 discoveries, and had four new fields come online.73

• Between 2005 and 2010, Australia granted 119 new exploration titles in Australian waters, creating a proposed $6 billion of investment in exploration activity.74

• Ghana, China, Russia, Mexico, Trinidad and Tobago, Mozambique, Cameroon, Libya, and Cuba all recently began deepwater drilling activities.75

• In July 2012, Sierra Leone awarded several offshore exploratory blocks to various exploration companies.

• More than 50 countries had new offshore field discoveries in 2009 for both oil and gas.76

68 Offshore, “Middle East to be World’s Largest Offshore Producer,” Offshore -- http://www.offshore-mag.com/articles/print/volume-68/issue-10/middle-east/middle-east-to-be-worldrsquos-largest-offshore-producer.html, citing Douglas-Westwood & Energyfiles, “The World Offshore Oil & Gas Forecast 2008-2012.”

69 Offshore, “Middle East to be World’s Largest Offshore Producer,” Offshore -- http://www.offshore-mag.com/articles/print/volume-68/issue-10/middle-east/middle-east-to-be-worldrsquos-largest-offshore-producer.html.

70 Ibid.71 ASD Reports, “The growth of the offshore drilling market is being driven by high demand and rising prices of crude,” March 2012. 72 Ibid.73 U.S. Energy Information Administration, “Norway Analysis Brief,” August 2011 -- http://205.254.135.7/countries/cab.cfm?fips=NO&trk=p2.74 Australian Department of Resources, Energy and Tourism, “Australia’s Offshore Petroleum Industry,” --

http://www.ret.gov.au/Department/Documents/MIR/FS_1_AUSTRALIA%27S-OFFSHORE-PETROLEUM-INDUSTRY.pdf.75 IHS, “Global overview of offshore oil & gas operations for 2005-2009,”

http://www.offshore-mag.com/articles/print/volume-70/issue-50/international-e_p/global-overview-of.html.76 Ibid.


Appendix C

Conventional Oil

Unconventional Oil*

Alaska**

Natural Gas Liquids

Canadian Oil Sands

Offshore/Deepwater

25

20

15

10

5

02011 2015 2020 2035

Mill

on

bar

rels

per

day

45.5%28.6%

4.02%5.9%

Canadian & U.S ConsumptionDifference Between Canadian & U.S. Supply and Demand

* Does not include Canadian Oil Sands** Does not include projected 700,000 barrels per day of new production from Chukchi & Beaufort Seas

Sources for Oil Consumption:National Energy Board – Canada, “Canada’s Energy Future: Energy Supply and Demand Projections to 2035.” November 2011.U.S. Energy Information Administration, “Annual Energy Outlook 2012.” June 2012.

Sources for Oil Production:Citi GPS: Global Perspectives and Solutions, “Energy 2020: North America, the New Middle East?” March 2012.National Petroleum Council, “Prudent Development: Realizing the Potential of North America’s Abundant Natural Gas and Oil Resources.” September 2011.

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