Oil Industry to Feds: Enough Already With the Regulations

These should be happy days for the U.S. oil and gas industry. The United States leads the world in oil and gas production, providing a level of global energy stability unthinkable just a few years ago. Even as Saudi Arabia’s execution of a dissident cleric sent tensions soaring in the Middle East, the impact on the global energy market was a big yawn: The price of crude oil continued to drop.

As the Wall Street Journal reported, “Monday’s decline illustrates how political unrest in the Persian Gulf, the world’s largest oil-producing region, is no longer a sure-fire source of price gains at a time when there is close to a record amount of crude available in storage and continued robust production in the U.S.”

Increased U.S. production has reduced the market’s historic instability, said Jack Gerard, president of the American Petroleum Industry. “It’s very significant, what’s happening,” he said. 

But despite record production levels by API member companies, industry officials are increasingly frustrated by the growing roster of federal regulations that govern their operations. Gerard detailed API's complaints at a Washington event Tuesday to release the group’s annual report. 

Not surprisingly, the frustration is felt most acutely in the Western states, where the federal government owns much of the land.

The API report compares oil and gas development in energy-rich Utah, where 67 percent of the land is under federal control, with that of Pennsylvania, which has a similar political climate and history of energy production, but where only 2 percent of the land is under federal control:

In 2008, the start of the shale energy revolution, Utah’s total dry natural gas production was roughly 430.3 million cubic feet; Pennsylvania’s 197.3 million cubic feet. Based on [Energy Information Administration] data from 2014, the states’ roles have reversed: Utah’s production increased to only 434.6 million cubic feet, barely 1 percent, while Pennsylvania’s production increased more than twenty-fold to 4,174.4 million cubic feet. The stark difference between the trajectory of energy production in Utah and Pennsylvania is not a result of geologic science but of federal energy policy. 

The federal government’s permitting process is much more cumbersome than that of the states. For example, API notes that the state of Colorado on average takes fewer than four weeks to issue a drilling permit, whereas “it took an average of 236 days just to submit all the required paperwork required by [the Bureau of Land Management’s] permit application, and an additional 11 weeks to issue a decision on the permit.” 

The red tape deters companies from maximizing the energy potential of federal land and limits the economic benefits for Western communities, Gerard said. “This is driven by ideology, not geology.”