President Obama campaigned on his ‘All-of-the-Above’ energy policy in 2012. Prior to and since his re-election he has claimed full credit for increasing U.S. crude oil production and reduced imports. Total U.S. oil and gas production has definitely increased since 2008. But, how much of this new production can be reasonably credited to the Obama Administration’s energy policy and regulatory actions?
Oil & Gas Development and Production Processes – the overall process to develop new oil & gas production is fairly complex. The process involves evaluating the most economically promising and available on- and off-shore reserves, obtaining required leases through open bidding processes, obtaining the numerous required environmental and construction permits, drilling exploratory wells, constructing production wells & required infrastructures, bringing the new production up to full capacity, and performing the required maintenance & well reconditioning to maximize production and minimize depletion rates. On average this overall conception-to-full production process typically takes 3-5 years.
The development of innovative technologies in recent years have significantly improved the efficiency and performance of new oil & gas development-production, and reduced the physical footprint and environmental impacts of new production well-head sites. Rather than having to drill numerous single wells from many different sites, new and innovative ‘branching’ and ‘horizontal’ drilling technologies have allowed tapping large regions of oil & gas reserves from a single production site. While numerous advancements have been made in secondary and tertiary oil recover techniques (heating, well conditioning, physically displacing oil deposits with water/steam/CO2, etc.), the new hydraulic fracturing (what some call ‘fracking’) technologies have initiated the new ability to tap previously unrecoverable shale (natural) gas and shale (tight) oil. All of these technologies and developments have greatly contributed to the recent increases in on- and off-shore oil & gas production.
Historic Oil & Gas Production Trends – the production of U.S. domestic oil & gas has been in decline since the recent historic peaks in1985 and 2001 respectively. The decline in oil & gas production bottomed out in 2008 and 2005 respectively, and has since increased quite significantly. During 2008-2012 domestic oil production increased 29% and 2005-2012 natural gas production increased 27%. A broad number of factors have affected these peaks and valleys in oil & gas production volumes. Besides earlier generation production technology inefficiencies and performance limitations, closed off access to known Federal on- and off-shore oil and gas reserves was a major factor to depletion of total production rates historically. Closed off access to the vast majority of coastal regions has forced Oil Companies to develop the limited available reserves found increasingly in deeper waters, and to focus primarily on developing non-Federal land reserves.
Recent Oil & Gas Production Trends – the Congressional Research Service (CRS) recently completed an analysis of U.S. Crude oil and Natural Gas Production in Federal and Non-Federal areas. This CRS study covered the production on Federal on- and off-shore areas, and the production on non-Federal Private and State lands. Refer to the following crude oil graph:
Source: Federal data from ONRR Statistics
Crude oil from Federal on- and off-shore leases peaked in 2010 and has decreased by 18% over the past 2 years. In contrast, crude oil from non-Federal Private and State lands began increasing fairly rapidly and has increased by 33% since 2010. The net impact on total U.S. crude oil production has been an increase of 14% 2010-2012. As noted previously, due to the normal project schedules required to fully develop new oil production, these recent increases come from leases primarily issued 2007-09 or early (i.e. largely prior to the current Administration’s influence).
U.S. natural gas production has also increased significantly in recent years. Refer to the following graph:
Source: Federal data from ONRR Statistics
Natural gas from Federal on- and off-shore leases peaked in 2008 and has decreased by 33% over the past 4 years. Natural gas from non-Federal Private and State lands has increased by 31% since 2008. The net impact on total U.S. natural production has been an increase of 14% 2008-2012. Similar to crude, the majority of these recent increases are due to leases issued 2007-09 or earlier (i.e. prior to the current Administration).
How Much of Recent Crude Oil Production Increases are due to the Obama Administration’s Actions? – Crude oil production on Federal on-/off-shore was clearly increasing prior to the 2010 BP Deepwater Horizon disaster. As a result the Obama Administration was forced to take action to ensure a repeat of this incident would not happen again. This necessary action unfortunately contributed to the recent reduction in Federal off-shore crude oil production, which declined by 23% since the Deepwater incident. Federal on-shore crude oil production actually increased about 36,000 barrels per day (BPD) 2010-12. Much of this increase appears to be due to utilization of improve production technology upgrades.
The largest increase of U.S. crude oil production is clearly due to new well developments on non-Federal Private and State lands. During 2010-2012 total Private + State land crude oil production increased by 1,127,000 BPD. This increase off-set all the 2010-12 reduction in Federal off-shore (397,000 BPD decline) and resulted in increasing total U.S. crude oil production by almost 700,000 BPD. Individual States’ are responsible for Administering the leasing, permitting and production of crude oil on all Private and State lands within their state. The Federal Government oversight and support for crude oil production on Private and State land is relatively insignificant.
The recent decline in Federal off-shore oil production was primarily due to the BP Deepwater Horizon incident. The current Administration was, however, partially responsible for the relatively slow recovery in off-shore production. A significant factor is the Federal drilling permit process that has increased by 2-3 months over the past several years and now requires an average of 10 months per permit.
Overall the Obama Administration can reasonably claim ownership or credit for helping develop some part of the total 77,000 BPD increase in to U.S. crude oil production that occurred on Federal on- and off-shore leases 2008-12. This increase only represents a maximum of 6% of the increase in total U.S. crude oil production during this same period.
Can the Obama Administration be Reasonably Credited for Increased Natural Gas Production? – While the President implies that natural gas is part of his ‘All-of-the-Above’ energy policy, his Administration does not appear to be significantly supportive of natural gas. Coincidentally, the EPA’s regulatory strategy of blocking new coal power plants and eventually retiring many existing coal plants will lead to substantial increases in fuel switching from coal to natural gas. This developing EPA coal reduction program, however, was not originally intended to support any other fossil fuels. To the contrary, the EPA has very actively been trying to regulate the hydraulic fracturing technologies used for producing the recent large increases in shale (natural) gas. Many of the EPA’s actions to supersede the current environment authorities of responsible State Agencies have been strongly contested by the individual States and the Natural Gas Industry.
Overall, the Obama Administration appears to lack any definite policies or supportive actions that can reasonably be attributed to the recent successes and growth in shale gas production.
How Could the Obama Administration Justify Claims for Future Increases in U.S. Oil & Gas Production? – The President and his Administration could reasonably claim ownership for future increases in oil & gas production by taking actions that actually support these critical domestic energy supplies, and do so in an environmentally responsible manner. This could be accomplished by possibly expanding and making the current Federal on- and off-shore leasing and permitting processes more efficient (without compromising the environment or safety), and improving the working relationships between responsible regulatory Agencies and the affected Industries. By increasing domestic oil & gas production the U.S. can substantially reduce imports (increase energy security), increase jobs and improve the economy, and better position the U.S. to make the transition from high carbon intensity coal to lower carbon alternatives including natural gas. Making sure that the most cost effective, lower carbon and secure fossil fuels are available in the near future, will help better position the U.S. economy to successfully and sustainably make the needed transition to lower carbon and renewable energy sources.