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Is America’s energy independence at risk?

Aug 07, 2023


The Biden administration is in the process of implementing regulations designed to increase the costs for energy companies involved in drilling on public lands. Environmental groups have praised this move as a step towards addressing climate change. However, the oil industry has expressed concerns that these rule changes may discourage domestic oil and gas production in the United States, potentially impacting the country’s energy independence.

Straight Arrow News contributor Peter Zeihan isn’t concerned. He’s confident that the rule modification will have minimal implications for America’s oil independence.

Excerpted from Peter’s Aug. 4 “Zeihan on Geopolitics” newsletter:

Our next video in the ‘Ask Peter’ series comes to you from just above Loveland Pass at about 13,000 ft. As the Biden administration piles on more drilling restrictions on public land, will America’s energy independence be jeopardized?

Quick backstory on America’s energy journey. The U.S. was a net energy exporter until 1973. Once we used up all the “easy-access” oil, we became the world’s largest oil importer, peaking in the mid-2000s. Then the Shale Revolution changed everything.

Fracking gave the U.S. access to a boatload of new oil (this technology has been around for a while but wasn’t popularized until the early 2000s). Fast forward to today, and the U.S. is once again energy independent (minus a little COVID hiccup).

So will the Biden administration’s new restrictions on public land drilling set us back again? Oil from public lands accounts for such a marginal amount of the total U.S. output that any of these regulations aren’t going to move the needle much. As long as there’s an incentive for these private landowners to be successful, this shouldn’t be a problem…

Offshore drilling is a little different. The quick and dirty is that short-term market moves aren’t the primary motivator in this space, so longer approval periods and stricter regulations aren’t of too much concern.

Hey everybody, Peter Zion here coming to you from just below stick Tao peak at about 13,000 feet above. Just have Loveland Pass in Colorado. Today is the most recent in our ask Peter series, specifically, the question is, with the Biden administration, more difficult to drill for oil and natural gas on public lands, is that going to hurt America’s energy position, especially its independence. First, a little bit backstory, how the United States was a net energy exporter to about 1973. And that’s the year but a number of factors kind of came together to kind of crush that process. But mostly it was technical, rather than legal. We were running out of conventional reservoirs that were easy to tap. American economic growth at that point had been going for 150 years very strongly. And we simply gobbled up everything we had available. And we went on to become the world’s largest oil importer. And that process peaked in around 2004 to 2010, which probably the actual ceiling 2007 2008, when we were importing roughly three quarters of the oil that we used, what came starting in the early 2000s is the rise of the shale revolution, which is a different process. Normally, when you drill for crude, you’re you’re looking for a formation that is porous, and the oil percolates through the formation over the eons until it reaches a cap rock that it can’t flow through. And then it builds pressure in kind of a pool, and you punch through the cap rock, the pressure is released, the oil comes to the surface and eventually maybe you pump in air or water in order to encourage it to come out fast or or get velocity. What the shale revolution does is something completely different. There are a lot more strata of rock where oil was trapped, where it’s not porous. So it’s just trapped in tiny little droplets, almost at the moment that it was formed geologically. And what you then drill laterally through those formations and pumping water to crack the rock open. Once you crack the rock, you’ve released all these tiny trillions of little packets of pressure in oil and natural gas, and they force the water up and out through the bore and then follow it out. And you get a positive true wealth. That technology has always existed. A lot of these things have always been part of the oil sector going back 100 years or so. But it was really in the early 2000s, when a lot of these independent different technologies kind of came together suite of tech savvy to recognize a shield. So anyone who says that Shell Technology is toxic, or overly polluting compared to conventional oil is an idiot and doesn’t know their history, because we’ve been using all of these techniques, since at least the 1880s. Okay, anyway, what does this mean? It means that starting in 2004, we started getting natural gas. And starting in 2008, we started getting oil. And by the time we got to about 2015, where we were nearly that oil independent. We kind of fell off of that during the COVID. epidemic. And we’re back again. Now that that’s the overall technical issue. I let’s talk about what’s going on with public lands. Public Lands, as you might guess, are regulated primarily by the US Federal Government. And so regulations at the federal level determine what can be done and what the permitting process is, what the regulatory structure is, what the pollution quotients can be, what water usage can be all that good stuff. And so based on who is Iranian, the administration, the EPA and the Energy Department, work for the White House, and they can determine exactly what can flow and how this changes administration to administration. But something to keep in mind is whenever the federal government is involved, there are layers of involvement. And because the federal government owns the subsurface as well, the only reason that the federal government will encourage energy production on federal lands is if we’re in a situation where energy is scarce. And that is not the situation the United States. So the last time we had an administration had to deal with energy scarcity. That was the W. Bush administration. They did loosen up regulations on federal lands, especially when it came to natural gas production. And that did allow more energy to flow. But we’re talking here like two 3% of total American output on shore American federal lands, that shrank under Obama, not because Obama would tighten up the regulations, although he did, but because it was just so much easier to do it on private lands. When you’re sorry, there’s just no air of here. When you’re on private lands of the landowner has a vested interest in the success of the project, and that encourages more production. In addition, it is regulated by the states and states have very different approaches to handling energy production. So for example, in the case of Texas, which is in general considered to be the most pro energy production state, which it’s probably accurate, it takes about 48 hours to get a permit from the state government in order to drill on federal lands under the Trump administration, which was when we had the shortest period for permitting, it took about 200 days. You can see the problem here, because if the market moves, you know, the shale guys are going to do things differently. And it takes a conventional system five to 10 years to bring online, it only takes a shale Well, a few weeks. So in the time that it takes to get a federal permit, the market conditions will have changed and it probably obviates any desire on the part of the drillers to operate in the first place. Whereas in Texas with 48 hours concluding Christmas and Thanksgiving and New Year’s, you’re talking about how time to target that is very, very, very quick and they can react to market movements. So you know, 1%, less than 1% of American shale output comes from onshore federal lands. And so if the bight administration increases the current time to I don’t know, 1000 days for permitting, it’s really not going to move the needle very much. It’s a little bit different in the offshore. But with the offshore, you’re talking about those longer time horizons of five to 10 years, and market moves aren’t the primary at least short term market moves are the primary reason why companies operate there. Okay, so not too worried about that one. You guys take care

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