Summer Heat Brings Higher Fuel Costs

For most American’s summer means high heat and higher gas prices, and 2018 will likely be no exception. According to AAA, motorists across the country are on the brink of $3 per gallon for regular gasoline, with diesel fuel running $3.20. While these prices are a far cry from the $4-plus prices of 2008, the price increases for fuel are a real concern for small businesses across the country. The common reaction to gas price increases is to point to Congress and the administration for the added pain at the pump, however, the answer is a bit more complex than one would expect. As Nicolas Loris at the Heritage Foundation pointed out, “Because oil is a globally traded commodity, different factors around the world affect the supply of and demand for oil, which in turn affects the price Americans pay at the pump.”

In some ways, increased demand is a “good problem” to have. Fuel price increases can indicate that demand is high, businesses need fuel to function, and the market is reflecting the demand for more. However, that’s not the end of the equation. On the supply side, OPEC nations have been gradually reducing output, with 21 countries reducing production by a total of nearly 1.8 million barrels per day. This decrease in supply and increase in demand is driving up fuel prices. The increase in fuel prices has practical ramifications for small businesses. Tight margins and limited resources can cause small business owners to sweat, particularly when they can’t predict the future costs of fuel.

While increased domestic production alone may not solve the expense in the near term, it can help insulate the United States from price volatility in the future. The U.S. is poised to overtake Saudi Arabia and Russia as the world’s largest oil producers. The latest projection from the EIA estimates that U.S. production could reach nearly 12 million barrels per day in 2019. America’s energy revolution is a remarkable story that demonstrates the benefits of human ingenuity and entrepreneurial passion. FBAE continues to support policies that make it easier for the US to produce more fuel domestically because it will help keep fuel prices low into the future.

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Offshore Energy Exploration Could Be The Next Bakken Oil Boom

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.

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Blog: President Trump Kicks Off “Energy Week”

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.

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Energy companies look to tech to make oil production easier and cheaper


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.

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Blog: President Trump’s budget supports affordable energy

On Tuesday, President Trump released his 2018 budget. While the President’s annual budget usually isn’t enacted into law, it provides an important blueprint of where the administration will be focusing its efforts. If ratified, president Trump’s proposal would fulfill several key campaign promises, namely, the increasing funding for energy production, defense, and homeland security initiatives.

From an energy perspective, the President placed the highest priority on reducing energy costs and developing America’s natural resources, stating “A consistent, long-term supply of lower-cost American energy brings with it a much larger economy, more jobs, and greater security for the American people.” In addition to relaxing offshore drilling restrictions, the administration’s budget document includes a plan to open Alaska’s Arctic National Wildlife Refuge (ANWR) for oil drilling by 2022. Such a plan, if enacted, would raise $1.8 billion by 2027.

The Department of Energy faced reductions under the President’s budget, with cuts of $3.1 billion, or 18 percent. One component of that cut is the largely bipartisan federal renewable energy program known as the Advanced Research Projects Agency—Energy, or ARPA-E.  A hallmark of bipartisan cooperation since it was created less than a decade ago, ARPA-E was launched under President George W. Bush as part of a broader package to encourage American innovation.

Fortunately for the President, several congressional Republicans are already on board with many his priorities, eager to roll back the preceding administration’s activism. Arizona Representative Paul Gosar commented, “Kudos to the Trump Administration for reducing bureaucratic blight within the EPA by supporting a true all-of-the-above energy strategy and providing much-needed relief to rural communities and local stakeholders.”

One idea that some Congressional Republicans are less excited about is the President’s proposal to sell off half of the Strategic Petroleum Reserve. Another revenue raiser for the federal government, the budget predicts sales would raise $16.5 billion over 10 years. However, many on the right are anxious about the national security ramifications of such a plan given the unstable geopolitical climate.

Ultimately, the President’s budget is interpreted by Congress as a strong suggestion. We will likely see Congressional appropriations bills that will reflect many of his energy priorities.

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Improved technology is helping boost domestic oil production

by Adam Wilmoth

A better understanding of data and technology has transformed the U.S. oil and natural gas industry and promises to help meet the global growing demand for oil, Oklahoma executives said Thursday.

Speaking at the Oklahoma State University Energy Conference, Devon Energy Corp. CEO Dave Hager said a better understanding of geology, well control and drilling technology has boosted production and lowered costs throughout the industry.

“How can we survive at $50 oil instead of $90? The use of advanced technology is helping us do that,” Hager said.

By connecting producing wells to the internet and allowing field employees to better target problem wells — often before a problem is noticeable — the company has slowed the annual production declines on its wells.

Improved technology also has allowed the company to more precisely control horizontal drilling, ensuring the well stays in the formation and is as straight as possible.

“We’re now drilling to a 10-foot tolerance in a well that 10,000 feet long,” Hager said.

Together, the efforts have helped boost initial production rates by 300 percent from 2012 to 2016.

“The biggest challenge was to get all the historical data in a usable form,” Hager said. “Then for the new data, it’s just like any other industry. We get so much data. How do you sort through the data and make meaningful use of that data? That’s where a lot of the software we’re developing is helping.”

The improved technology has allowed companies to reopen older oil fields throughout the country and double U.S. production in less than a decade. Too much production flooded the market and led to the industry downturn, but the increased oil may be needed if global demand continues to rise.

Despite the recent U.S. production gains, new discoveries still are necessary, said Frank Patterson, executive vice president of exploration and production at Chesapeake Energy Corp.

Growing consumption

Global consumption is more than 35 billion barrels of oil annually, and more than 80 percent of the world’s proven reserves are in OPEC countries. Many of those countries have unstable governments and unrest.

At current consumption, OPEC has 34 years of reserves, and all non-OPEC nations together have less than eight years of reserves.

At the same time, spending on large-scale deepwater projects has dried up during the downturn over the past three years. Those projects typically take up to a decade to reach full production.

Increased U.S. production will help meet global demand in the short run, but it’s not enough to offset growing consumption and declining global production, Patterson said.

“We will buy time for those big projects to come on, but the question is what can we ramp up to in the United States,” Patterson said. “I’m not trying to be doom and gloom. But we have to step back and ask where we’re going and how do we get there. We have to start thinking not about tomorrow, but about 2025 and 2030.”

Patterson said companies need to continue efforts to find the next big field, even though the new oil isn’t needed today.

“I think there’s a lot left to be had, but we have to think differently,” he said. “What you see is everybody go exactly where everybody else is going. You need some people out there in the front, pacesetting right now.”

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Zinke rolls back restrictions on offshore energy research

by John Siciliano

Interior Secretary Ryan Zinke took new actions on Wednesday to reverse the Obama administration’s restrictions on mapping the nation’s offshore oil and natural gas resources.

The White House got out ahead of Zinke in announcing actions to open up the Atlantic Ocean and the outer-continental shelf to companies ready to begin deepwater surveying to understand how much oil and natural gas is actually there.

Zinke’s action was the latest step in implementing President Trump’s America First offshore energy strategy by “reversing an Obama administration action to halt scientific research in the outer-continental shelf,” said White House deputy press secretary Sarah Sanders.

Zinke later said the move would restore research about the nation’s offshore resources after a more than 30-year hiatus on conducting seismic surveys and other forms of scientific research.

“Allowing this scientific pursuit enables us to safely identify and evaluate resources that belong to the American people. This will play an important role in the president’s strategy to create jobs and reduce our dependence on foreign energy resources,” Zinke said.

Wednesday’s action by the Interior Department reverses a decision made by the Obama administration’s Bureau of Ocean Energy Management “to deny the permit applications” for companies looking to conduct seismic surveys off the Atlantic coast, the agency said.

Zinke will await a remand by the Interior Board of Land Appeals of the permit denials made by the Obama administration, which will begin the review process toward approving them. Environmental groups have been opposed to the use of seismic survey tools because they say they harm marine mammals. But the Interior Department said for nearly 20 years it has “invested over $50 million on protected species and noise-related research, including marine mammals.”

The agency added that the seismic surveys “are not expected to have significant impacts on marine mammal populations or the environment given the use of advanced technology and other safeguards that are currently required.” It said the agency employs measures and safeguards to “reduce or eliminate” harm to marine life.

The Bureau of Ocean Energy Management’s “mission is to manage the development of our nation’s offshore resources in an environmentally and economically responsible way,” said the bureau’s acting director, Walter Cruickshank. “We will continue to keep the public informed as we renew our efforts to evaluate these permits.”

The bureau estimates that offshore reserves equal nearly 90 billion barrels of recoverable oil and 327 trillion cubic feet of natural gas. In 2016, offshore drilling accounted for 72 percent of the oil and 27 percent of natural gas produced on federal lands.

The effort is part of a laundry list of reviews and regulatory repeals that Zinke has been directed to conduct under executive orders Trump signed late last month.

Zinke finished the third of a four-day visit Utah on Wednesday. The trip is meant to hear from groups in the state through a series of public listening sessions. The sessions will be used to make decisions on potentially reversing former President Barack Obama’s controversial designation of the Bears Ears national monument in Utah.

The Trump administration said Obama’s decision to name the monument was rushed and did not take the time to hear from groups in the state before making a decision that curtails the use of the land for other purposes.

Zinke’s agency will be in Arizona next week as part of an effort to save the Navajo Generating Station, the largest coal-fired power plant in the West.

The department will host four listening sessions, May 15-19, in Arizona, where members of the public and local, state and tribal officials will speak on the future of the power plant. The plant is slated to close at the end of 2019.

The power plant has proven too expensive to operate given increased competition from other power plants that use natural gas to produce electricity. The owners of the plant have been in talks with Zinke and the Navajo Nation, which leases the land the plant is on, to find a way to keep it operating. Keeping the coal plant running is part of the president’s plan to restore coal jobs.

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Pipelines can provide a path to good-paying jobs


In February, a congressional subcommittee held a hearing on challenges and opportunities to promoting energy infrastructure projects. Members made statements, witnesses gave testimony and the value of new infrastructure was debated.

In response to questioning on the value of energy infrastructure, a witness responded: “The wages and compensation packages that our members receive while working on these projects underpin not only their ability to keep a roof over their families’ heads and food on the table, but they also provide for private healthcare coverage and the ability of members to earn credits toward a defined benefit pension plan.”

The energy infrastructure projects driving these comments? Pipelines. The witness making this statement? The general president of a major labor trade union.

Both industry and labor agree that pipeline projects are a major source of good-paying jobs.

Federal review of a major crude oil pipeline found the project would directly and indirectly provide tens of thousands U.S. jobs and billions of dollars in U.S. worker payroll.

While the pipeline would support 6,800 construction jobs with $420 million in payroll, it would also lead to 4,600 manufacturing jobs with $309 million in payroll; 4,400 jobs in trade with $172 million in payroll; 2,200 jobs in finance and insurance with $131 million in payroll; 5,100 jobs in other professional services with $343 million in payroll; 2,700 jobs in health services with $141 million in payroll; and 5,700 jobs in food and accommodations with $278 million in payroll.

Good-paying jobs, not just in construction, but also in manufacturing and service sectors, are the benefit of every pipeline project.

Whenever a major pipeline project is proposed, across our northern border or anywhere within the United States, thousands of jobs with millions of dollars in worker payroll can follow.

In addition, the benefits of a pipeline project will continue long after construction is completed.

Communities along the route of a pipeline will gain property tax revenue that can fund school budgets, police and fire departments, and local government needs.

Rural communities near pipelines with small budgets will benefit the most from this new influx of revenues.

Consumers across the country will benefit from the downward pressure on gasoline and diesel prices new crude oil supplies bring.

Those same government studies analyzing project benefits also find building a pipeline would do more to protect the environment and avoid greenhouse gas emissions than any alternative, including rejecting the pipeline.

According to U.S. government statistics, over 99.9 percent of petroleum products shipped by pipeline reach their destination safely. Government review found the alternatives to not building the pipeline and forcing that crude oil onto other modes of transportation would result in 2.6 times more crude oil released and 832 times more releases per year.

Transporting crude oil by pipeline also results in fewer greenhouse gas emissions. Government environmental review of a major pipeline project found that when stacked against the alternatives, operating the pipeline would result in 42 percent less carbon dioxide equivalent per year emitted than the leading alternative mode of transportation.

These statistics are why the labor union leader responded to subcommittee questioning with, “[t]hese state-of-the-art pipelines are safer, more environmentally sound, and emit fewer greenhouse gases than any other method of transporting energy resources.”

Good-paying, family-supporting jobs, lasting benefits to communities and consumers, more environmentally protective than the alternatives; all of these benefits await the constituents of congressional members if they can pass infrastructure legislation that promotes pipelines.

Black is president and CEO of the Association of Oil Pipe Lines.

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