Despite the United States being mired in a national recession, the state of North Dakota enjoyed the nation’s lowest unemployment rate and a billion-dollar budget surplus in 2012. North Dakota’s prosperity was achieved because the state was allowed to utilize new energy extraction technology to recover readily available deposits of oil and natural gas. In 2018, America may be on the cusp of the next energy boom, and this one has the potential to benefit business owners and individuals nationwide. On January 4th, the Trump administration announced a draft proposal to offer large swaths of offshore terrain comprising nearly 90% of the United States’ outer continental shelf to commercial oil and gas drillers. The move will be a reversal of President Obama’s 2016 decision to indefinitely block oil and natural gas exploration from the unleased offshore locations surrounding the continental United States and Alaska. In what will potentially be the largest lease sale ever, Interior Secretary Ryan Zinke said the draft proposal would offer leases to nearly 1 billion acres to drilling companies between 2019 and 2024. Currently, the Bureau of Offshore Energy Management (BOEM) permits offshore drilling in federal waters off the coasts of Alabama, Mississippi, Louisiana, Texas and parts of Alaska and California. BOEM currently manages about 2,900 active OCS leases, covering almost 15.3 million acres – the vast majority in the Gulf of Mexico. Fully implemented, Trump’s offshore exploration proposal would give energy companies access to leases to more than a billion offshore acres.
While offshore drilling projects would generate billions of dollars in revenue for state and local governments, the economic benefits extend to far beyond enriching the federal government and drilling companies. Offshore exploration saves money for taxpayers, supports hundreds of thousands of jobs, reinforces our national security, and reduces the cost of energy for both individuals and businesses nationwide. Each year, small businesses collectively spend more than $60 billion on energy. Ten percent of small-business owners claim that energy is their single greatest cost – greater than wages, salaries, materials, and supplies. According to NFIB’s Energy Consumption poll, energy costs are one of the top three expenses for 35% of small businesses. Increased access to offshore leases will undoubtedly reduce energy costs by increasing supplies, driving down energy costs for America’s job creators. However, the economic benefits of offshore energy exploration extend beyond cost savings. According to the American Petroleum Institute, opening our coasts to offshore drilling would lead to over 450 billion in new private sector spending, creating over 840,000 new jobs across the country.
Offshore exploration is also good for the government, with projections generating more than $200 billion in cumulative revenue. It is projected that opening unleased waters to offshore drilling will contribute more than $70 billion per year to the U.S. economy. North Dakota’s fracking boom, offers a pertinent illustration of what happens to communities when energy companies can invest. Invariably, private investment flows into communities, and local economies begin to thrive. Skeptics need look no farther than the massive economic boom that came with Bakken energy exploration, which plummeted North Dakota to 2.4% unemployment. The state now ranks sixth in best states for infrastructure. Fracking investment has helped North Dakota’s small businesses by creating opportunities across the state. Furthermore, fracking has made energy bills in North Dakota some of the lowest in the nation. Gas bills plummeted $13 billion per year from 2007 to 2013 because of increased fracking, which adds up to $200 per year for gas-consuming households. Moreover, all types of energy consumers, including commercial, industrial, and electric power consumers, saw economic gains totaling $74 billion per year from increased fracking.
Similarly, expanding drilling to America’s costs will bolster our economic and national security and provide states vital revenue and jobs that are needed to meet the increasing costs of state budgets. Many states, particularly those on the Atlantic Coast, lack dedicated infrastructure to support drilling operations, which provides an opportunity for businesses across the country to deliver the human and material substructure needed to support exploration efforts. FBAE believes that energy production is not only critical to our economic and national security but also keeps the lights on and energy costs low for main street job creators. It’s time for a pragmatic approach to our energy policy, and opening America’s offshore regions to energy exploration would be a bold step towards lasting economic prosperity for states governments, businesses, and consumers.
Last month, the International Trade Commission ruled in a 4-0 decision that imported solar panels threatened the future of domestic manufacturing of solar components. The decision came after two solar manufacturers, Suniva and SolarWorld Americas petitioned the commission for tariffs. Suniva, which is 63-percent owned by a Chinese company, and SolarWorld Americas, whose parent company is a German firm, specifically requested a “40-cent-per-watt duty on imported cells and a 78-cent-per-watt floor price for imported modules. In lieu of the petition, the ITC has issued tariff recommendations that now await President Trump’s decision to implement within 60 days.
The commissioners offered three different recommendations, but it will be up to President Trump to decide on which recommendation to follow or to make completely new recommendations of his own.
- On the high end of the recommendations made by the ITC, the commission’s chairperson recommended a 35-percent tariff on all imported solar modules, as well as a four-year tariff of 30 percent on solar cell imports exceeding 0.5 gigawatts and a 10-percent tariff on cell imports under that limit. The tariffs would decline gradually.
- The intermediate recommendation suggested a 30-percent tariff on modules and a 30 percent tariff on imported solar cells more than 1GW. This tariff would also gradually decline.
- The third and most relaxed recommendation came from one commissioner who recommended a four-year import quota system that allowed 8.9GW of solar modules and cells to be imported in the first year.
Earlier this year, the solar advocacy group SEIA, which represents 1,000 solar industry companies worldwide, stated that Suniva’s requested tariffs could cause the industry to lose 88,000 jobs next year alone, more than one-third of the industry’s entire workforce. Many US-based solar companies would be negatively impacted by a tariff, specifically those that conduct R&D domestically, but manufacture abroad. A coalition of pro-free trade conservative groups joined SEIA in opposition to solar tariffs. Additionally, in April, a bipartisan group of 69 members of Congress Friday sent the ITC a letter urging the commission to reject the request from Suniva and SolarWorld.
While FBAE has stood as a staunch opponent of taxpayer giveaways to the solar industry, we also believe that the import cost of solar panels should be governed by the free market, not the ITC. This means allowing the market and the consumer to determine the success or failure of enterprise instead of using the government levy favorable tariffs at the behest of specific companies. Tariffs and import restrictions reduce employment and drive up prices for consumers. Furthermore, pro-tariff policies have a negative impact on blue-collar American workers in rural communities and increase the cost of electricity on businesses and families who utilize solar. For solar power to become a truly self-sufficient and economically viable energy source, the government should avoid picking winners and losers – penalizing some companies over others.
Last April, Energy Secretary Rick Perry request a study of America’s electric grid to examine potential problems and solutions to maintain reliability. The study is of particular importance to family businesses who rely on affordable and reliable sources of electricity to run their businesses. Secretary Perry called for the study to not only examine the effects of renewable energy on the grid, but also develop policy prescriptions to help govern future energy production. Specifically, Secretary Perry sought to understand whether further increases in intermittent renewable energy sources would affect the reliability of the electrical grid and endanger base load power sources. Fears surrounding the study’s findings surfaced on both sides. Utility companies levied reasonable apprehensions about potential federal preemption of state energy policies on national security grounds. Exelon CEO Chris Crane made the case for a diverse energy portfolio and emphasized that nuclear energy’s contribution to baseload power generation was being “squeezed” and that the elasticity of nuclear energy made it an integral part of the power grid. Crane’s concerns are well founded. States like California have already begun to phase out nuclear energy production in the state.
Expectedly, in an attempt to head-off any criticisms of the reliability of renewable energy national green energy business associations like the Advanced Energy Economy, American Council on Renewable Energy, American Wind Energy Association, and Solar Energy Industries Association flooded the DOE with research arguing that the inclusion of more renewables in the power mix would have a measurable effect on system reliability. When the 154-page report was finally released late August, some environmentalist activists predictably belittled the study as a full-blown war on renewables and claimed that the study’s findings were a direct contradiction of what “other energy experts were saying” while others praised it as a fairly well-evidenced overview of the energy markets as they currently stand. Tom Kuhn, the President of Edison Electric Institute, which represents all U.S. investor-owned electric companies stated, “While we are still thoroughly reviewing the study, EEI has long advocated that our customers are best served by public policies that promote a balanced and diverse energy mix, which includes both traditional and renewable energy sources, and that also recognize the vital role 24/7 energy sources play in sustaining a secure, reliable, and resilient energy grid.” Kuhn went on to affirm the importance of energy production as an integral component of a robust infrastructure network that deserved investment, specifically pointing out the importance of defending energy infrastructure in the face of both man-made and natural disasters.
Ultimately the study details a few key findings. First, that market forces are driving baseload retirements, specifically the low price of natural gas as the largest contributor to maintaining older base load power plants. Nevertheless, the study indicated that coal, oil, and nuclear power generation still faces threats under the current market conditions, specifically with the difficulty in covering fixed costs in a market environment with cheap natural gas, subsidies for renewable energy sources, and government-mandated renewable energy goals. The report also pointed out the resiliency of coal-fired power plants and the stability associated with coal prices in comparison to the volatility of natural gas, as a positive for the continued use of coal power plants as part of base load production.
Our future energy grid must rely on sources capable of providing continuous output for base load power partnered with economically stable sources of electricity during peak load hours. States should examine their current goals, mandates, and subsidies for renewable energy production to ensure reliability and fair economic competition with base load production. We look forward to working with states to ensure family businesses are provided with affordable and reliable energy sources.
Activist investors have been on the rise in recent years, but their latest target on behalf of left wing environmentalists puts every day New Yorkers’ pensions in trouble.
New York state lawmakers are currently considering a proposal offered by state Sen. Liz Krueger that would mandate the state comptroller to begin divesting all state pension funds from energy companies producing coal, oil and natural gas by 2022. With New Yorkers already facing the highest state-imposed tax burden in the nation, and their state pension system confronting $250 billion in unfunded liabilities, it’s shocking that Albany would consider a measure as onerous to taxpayers as the New York State Fossil Fuel Divestment Act.
The state’s retirement fund is currently 92 percent funded, a shortfall of approximately $5,000 per private sector worker. If the divestment movement is successful, the loss from expected growth could reach the trillions in coming decades. New York Comptroller Thomas DiNapoli has come out against the bill. A Democrat and self-avowed environmentalist, DiNapoli is tasked with being the chief financial officer for the state, and now must weigh special interest activism against the creditworthiness of pensions for New York’s police, first responders, and other public employees.
If Krueger’s measure were to become law, the very people that the pension fund is designed to support would be most negatively affected. An arbitrary decision to divest from traditional energy companies will only increase unfunded liability gap, putting stress on the state’s ability to deliver on its promises to public employees.
A recent study conducted by University of Chicago Professor Daniel Fischel found that pension holders would see New York City’s funds shrink by over $100 million annually, and that divestment would have “minimal or no environmental impact.” New York City Employee Retirement System (NYCERS) alone would lose between $41 and $60 million annually; this adds up to nearly $700 billion over the next 50 years. Decreased returns on investment coupled with the ensuing wave of tax increases intended to offset the shortfall would undoubtedly land on the laps of many of the state’s workers. By rejecting this misguided legislation, New York lawmakers will be protecting public employees and workers statewide.
A burgeoning divestment movement is cropping up across the country, and New York is the latest example. Legislators across the country should follow the lead of Comptroller DiNapoli and keep political activism out of the pension system, focusing instead on driving returns that will ensure promises made to state retirees are promises kept.
Read at: http://www.stargazette.com/story/opinion/2017/08/20/yo-political-activism-ny-pensions/104723192/
Last month, the Pennsylvania state Senate voted in favor of a massive tax increase as part of a plan to close the state’s $2 billion budget gap. The 26-24 vote will result in a tax hike of 571.5 million across the state, affecting over half of households in the form of increased heating bills. While the tax hike will be a great revenue raiser for the government, small businesses will face an uphill battle in the form of fewer jobs, and the suppression of the state’s newest and most vibrant revenue stream. The vast majority of the tax hike is targeted at the state’s booming natural gas industry. The nation’s largest natural gas field, the Marcellus Shale, is located in Pennsylvania. The new severance tax will raise an estimated $100 million each year with an effective tax rate for 2017-18 of 2 cents per thousand cubic feet of natural gas. The state’s natural gas industry has been a target of Pennsylvania Governor Tom Wolf throughout his tenure as Governor. In February, he proposed a 6.5 percent tax on the value of the production. In 2015, he had proposed a 5 percent production tax, plus 4.7 cents per thousand cubic feet. Despite the fact that Governor Wolf has been forced to settle for roughly half of his desired tax rate, there are still significant problems with targeting the natural gas industry. The severance tax is far from the steady revenue source needed to reduce the deficit. The natural gas industry is cyclical with periods of robust growth and decline. No one knows how long the state can depend on revenue from the Marcellus Shale developers. Supporters of the tax have pointed to the fact that Texas also levies a similar tariff on their natural gas. However, as Elizabeth Stelle from the Commonwealth Foundation points out,
“If Texas is really the model to follow, then any severance tax proposal should also include eliminating the corporate income tax, eliminating the personal income tax and streamlining Pennsylvania’s regulatory regime. Sadly, that’s not the type of severance tax the governor and lawmakers want. Their idea is to raise the special tax charged to drillers—now called an “impact fee”—when the industry is already struggling with year-long permit delays for permits that do not even exist across the border in Ohio, ongoing litigation to build critical infrastructure, and the highest effective corporate tax rate in America.”
With Pennsylvanians already paying increased taxes and regulatory costs, it’s unfair to levy an additional burden on energy producers. Onerous government-imposed tariffs exist outside the free market, and not only distort the cost of labor, but tangible goods as well. Instead of clobbering hard-working Pennsylvanians with yet another tax increase, we encourage Governor Wolf to leverage the Marcellus Shale for greater investment that will create jobs.
Recent news has highlighted the United States pulling out of the Paris Climate Agreement, however few articles have mentioned the US’s already impressive record of reducing carbon emissions without a government mandate. According to a new study by Morgan Stanley, the United States may meet the outlined minimums of the Paris Climate Agreement despite no longer being a party to the accord. In their recent analysis, the brokerage firm found that technology is steadily driving down the price of these energy sources to the point that market functions will eventually make renewable energy an equitable possibility for large-scale power.
“We project that by 2020, renewables will be the cheapest form of new-power generation across the globe,” Morgan Stanley analysts said in a report published last Thursday. According to the report, the US is to exceed the Paris commitment of a 26-28 percent reduction in its 2005-level carbon emissions in the next three years. The report points out that better understanding of wind conditions and redesigned wind-turbine blades have made wind power an increasingly viable power option.
Many in the environmentalist community will point to the cost reduction as an argument in favor of maintaining the United States position in the Paris Climate Agreement, and for continued subsidization of green projects. However, we believe that if true, these statistics render the continued government subsidization of green projects completely superfluous. The goal of green energy projects should be to achieve competitiveness based on the merits of the technology, not financial support as an “approved power source” from the government.
The United States’ exit from the climate treaty has been treated as an environmental calamity by supporters of renewable energy, pointing to German Chancellor Angela Merkel’s steadfast support for the treaty as a roadmap for the US to follow. Interestingly, the math doesn’t favor that argument. The U.S. actually reduced its overall greenhouse emissions at a faster rate than Germany over the last decade. American emissions fell by 9.9 percent between 2005 and 2015, as compared with Germany’s 8.8 percent, even though the U.S. was not a signatory to any carbon emissions treaty during that period.
FBAE believes that it is critical for the United States to be judicious in the extent to which it tethers itself to the climate goals of other nations. Climate treaties place an undue burden on the American economy, and in the case of reducing carbon emission is proving to be unnecessary.
President Trump has designated the last week of June as “Energy Week”. Policy weeks have become a trademark of the Trump presidency, and for family businesses, the consequences of this Energy Week could be welcomed by many who are plagued with volatile energy costs. The common thread of Energy Week will be a renewed reliance on traditional energy sources, and dominance of U.S.-based fuels in the export market. The reversal of Obama-era energy policy was a key tenant of the President’s campaign, and based on his Energy Week schedule, Trump aims to make good on that promise. Now, Trump is looking forward, forging actionable plans to shape America’s energy future. In his first 150 days, the president has used his executive power to lift regulatory barriers to domestic energy production and has empowered the Interior Department to begin revisions of Obama-era fracking regulations.
The President has been outspoken on reducing regulations, providing greater access for energy extraction purposes, and encouraging energy production to help lower the cost of our energy production needs. While specifics on the President’s Energy Week plans are scarce, it is known that he will discuss oil and natural gas exports with Indian Prime Minister Narendra Modi when he hosts here today at the White House. On Tuesday, EPA Administrator Scott Pruitt will appear before a Senate Appropriations subcommittee where he will deliberate on the President’s spending blueprint. Energy Secretary Rick Perry will likely offer a preview of some of the President’s priorities when he speaks Tuesday with analysts and executives at the U.S. Energy Information Administration conference in Washington – agenda here. On Wednesday, President Trump will meet with Governors and Native American tribal leaders along with Energy Secretary Rick Perry. This meeting will precede a Thursday panel in the House Natural Resources Committee that will explore energy industry access to federal lands – link here. Finally, the President Trump will host and event at the Energy Department on Thursday where he will focus on how the sale of U.S. natural gas, oil, and coal helps strengthen America’s influence globally.
While President Trump is expected to place his policy focus on traditional energy sources, he is expected to describe openings for other energy exports, including U.S. technology that harnesses power from the wind and sun, and a new generation of advanced and modular nuclear reactors. Many in the industry have argued that the licensing rules for new reactors are cumbersome and convoluted, discouraging investment in an inexpensive and environmentally friendly energy source. There are hopes that President Trump will eliminate these hurdles.
In addition to making it easier to produce traditional forms of energy, the Bureau of Land Management is currently finalizing environmental reviews to allow leasing of federal land for the purpose of installing solar energy collectors in Nevada. The Dry Lake region on Nevada could be the first federal land installation of solar power generation in the country.
Streamlining the energy permitting process and reducing regulations will drive down costs, which is welcomed news for many family-owned and operated businesses with tight margins. FBAE is hopeful that the changes highlighted during Energy Week will lift the burden that stifles job creation and holds back our economic recovery.
While large-scale energy projects seem inconsequential to local family businesses, the unpredictability of a volatile energy market can financially squeeze these vital contributors to our economy. Yesterday, President Trump spoke to a crowd at the Rivertown Marina in Cincinnati, Ohio about his long-awaited infrastructure plan, providing a broad outline of his priorities. In addition to reducing permitting time for projects from 10 years to 2 years and “slashing regulations to speed up the decision-making process,” Trump has made overtures to enhance infrastructure in the energy sector. While specifics have remained scarce, the president has made clear his commitment to eliminating burdensome rules hindering oil and gas exploration.
The Rivertown comments come after Trump’s nominations of Robert Powelson, and Neil Chatterjee to FERC in May. Progress on several natural gas pipeline projects was stalled by the lack of a quorum, causing a number of energy groups to prod the President to fill the positions at FERC. Now, the commission has $50 billion in energy projects to address and is working through proposals to reform wholesale power market structures. Another large component of President Trump’s $1 Trillion plan is the completion of the Keystone XL and Dakota Access pipelines, which he cited as examples of his administration’s commitment to strengthen America’s energy infrastructure. “Nobody thought any politician would have the guts to approve that final leg,” Trump said. The White House statement indicated that Trump will dedicate $200 billion in his budget this year to energy infrastructure. The completion of these energy pipeline projects will bring welcome relief to small, family-owned businesses.
Improving America’s energy infrastructure can help to reduce energy costs for family businesses by making it easier for energy resources to come to market. Transporting crude oil via pipeline reduces the cost of transportation by 50-60 percent compared to rail transport. In addition to energy transportation infrastructure, the development of more energy efficient electrical grids will also reduce the cost of energy for family businesses across the country. As we begin to overhaul and expand our energy infrastructure it is important that we do so in a way that helps reduce energy costs prepares us for the future ways we will use energy.
When your business is subject to the whims of boom-and-bust cycles the way the oil industry is, making money with less effort is very appealing. With that in mind, oil companies are using technology to cut costs while still turning a profit in the downturn.
“This is about reshaping the industry,” said Muqsit Ashraf, energy strategy consultant with the firm Accenture. He points out tech advances can keep workers safe.
But technology changes will also affect the workforce itself.
“The profile of the employees will change,” he said. “There would be a shift in terms of head count on the field to head count that might be sitting in remote operations centers making decisions.”
Technology is replacing energy workers. For example, oilfield services company Schlumberger has estimated one of its newer, more automated drilling rigs could cut the number of work hours needed to finish a well by more than 30 percent. But in the long term, the effect on jobs is hard to predict, according to Rice University’s Mark Agerton.
“It really depends on whether the technology is going to lower the cost of extraction and make us extract more oil and gas, and hire more people to do that, or if the technology is going to allow us to replace people with machines,” he said.
A more digitized industry also means companies will need more educated, higher-skilled workers to operate new technologies.
These advances are helping drillers in Texas make money even with low oil prices. But another boom could slow the innovation. If prices shoot back up, companies might decide to revert back to more time-tested ways of moving oil.