A Willing Partner

Megan Bloomgren
Posted March 17, 2022

As she did in December, in a speech to the National Petroleum Council, U.S. Energy Secretary Jennifer Granholm offered encouragement this month to an audience of natural gas and oil leaders at the big CERAWeek conference in Houston. Granholm said the Biden administration wants more production of American oil and gas and encouraged producers to do so, “right now, where and if you can.”

It was an important break in the recent public debate over leases, drilling permits, and access to natural gas and oil on federal lands and waters – an invitation to look ahead, to focus on the future.

To which we say, invitation accepted.

The American natural gas and oil industry is ready for a new, forward-looking dialogue with the administration on the country’s energy security and future – including ways that safely and responsibly produced U.S. oil and gas can help meet the challenges of the current global energy crunch, underscored by Russia’s war against Ukraine. API President and CEO Mike Sommers, in an interview last week:

“[J]ust in the last year, we've increased production by almost a million barrels to meet the moment, to make sure that American consumers have access to oil and gas made right here in the United States. … We understand that this is a crisis moment for the world, and the United States needs to lead the way. … We're going to do what we need to do to support the world during this time of crisis.”

Our industry’s history is filled with examples of innovating and problem-solving to tackle challenges facing our country – marked most recently by technological advances that launched the American energy revolution and made the U.S. the world’s leading producer of oil and natural gas. America has been strongest when there has been robust energy-sector leadership. Now is no different.

In the spirit of Granholm’s remarks, the industry is poised to produce more natural gas and oil, and to do so in a manner that protects the environment and helps build a lower-carbon future. As noted in API’s Climate Action Framework, this is a generational opportunity that industry, governments and Americans must rise to seize together. As detailed in the framework the natural gas and oil industry is committed to:

• Accelerating technology and innovation to further reduce emissions while meeting growing energy needs. For example, the industry wants to fast-track the commercial deployment of carbon capture, utilization and storage – useful not only to our industry but also to other industries that rely on high heat or have process emissions, for example, cement and steel manufacturing. A number of API’s members also are involved in advancing hydrogen technology and other innovations.
• Further mitigating emissions from industry operations. More than a year ago API called for the direct regulation of methane from new and existing sources and is actively involved today with EPA’s new methane regulation, submitting comments focused on effective strategies to reduce emissions, safety, feasibility and operability – recommending alternative approaches where appropriate.
• Supporting an economywide carbon price policy. It is the most impactful and transparent way to achieve meaningful progress on carbon reduction.
• Advancing cleaner fuels. This includes the production of natural gas, the increased use of which is a key reason U.S. power-related carbon dioxide emissions are at their lowest levels in a generation. It also includes continued advancement of cleaner vehicle fuels.
• Driving climate reporting. We’re helping establish the timely and accurate reporting of greenhouse gas emissions from all emitting sectors of the economy, for a transparent fact base that can lead to market-based solutions and government policy. Last fall API updated its Compendium of GHG Emissions Methodologies for the Natural Gas and Oil Industry, used as a reference by companies and governments across the world – including for API’s climate-related reporting template released earlier in the year.

These commitments represent a significant investment of financial resources and intellectual capital to address the dual challenge of meeting increasing global demand for oil and gas while also protecting the environment and helping build a lower-carbon future. They also signal industry’s intent to be part of an evolving energy conversation going forward.

Respectfully, here are five suggestions for administration officials that we think will help support and increase American-made energy – to strengthen U.S. security and the economy while also helping the administration meet critical energy-related challenges:

Schedule a New Federal Lease Sale

The administration should resume federal lease sales. This week the 5^th U.S. Circuit Court of Appeals dismissed a lower court’s injunction that prevented the administration from using a metric on climate impacts in its regulations. The U.S. Interior Department had put lease sales on hold because of the lower court ruling, but with the 5^th Circuit action, there’s no reason for Interior not to schedule new sales. It would send a powerful message on future American oil and gas development.

Build a New Five-Year Federal Offshore Leasing Program

With nearly 25% of America’s total oil production coming from federal lands and waters – and most of that from the offshore – it’s important for the Interior Department to assemble a new five-year leasing program so that producers have a better sense of when and where offshore tracts will be available for bid.

The program is an essential tool for the long-term planning and investment of projects that can take seven to 10 years to complete and begin production. As importantly, issuing a new, robust offshore program would signal the administration’s support for offshore energy development.

Approve Pending Applications for LNG Export Projects

As noted in this recent API briefing, the U.S. Energy Department (DOE) could approve pending applications for liquefied natural gas (LNG) projects. DOE and the Federal Energy Regulatory Commission can set clear and consistent timelines for approving new applications going forward. This would indicate the administration’s recognition of the relevance of American natural gas exports today and well into the future – the importance of which has been underscored by the war in Ukraine.

Support Energy Infrastructure

There’s been a lot of talk about the Keystone XL pipeline lately, given that Keystone was slated to be built in 2012 and would have had reliable Canadian oil volumes on par with U.S. daily imports from Russia last year. While our goal isn’t to refight that particular project, it is worth considering this as an opportunity for the administration to make clear that big, important pipelines and other key energy infrastructure can and will move forward in America. Companies that build infrastructure and the investors that finance multi-billion-dollar projects need such reassurances.

Support American Oil and Natural Gas

In Houston, Secretary Granholm said encouraging things about increasing American oil and gas production. It would be helpful if there are follow-up policy actions.

Indeed, in the past, increased American production has helped put downward pressure on the cost of crude oil, the No. 1 factor in fuel pump prices. It also has been a stabilizer for global energy markets, particularly during periods of disruption. Writing in the Wall Street Journal, Continental Resources Founder and Chairman Harold Hamm said the administration should, among other things, “announce the intent to bring on more supply of oil and gas in the U.S.” and while recognizing that the largest strategic reserve in the world is “under our feet.”

The administration could acknowledge what the International Energy Agency and U.S. Energy Information Administration both have said – that oil and natural gas are the leading energy sources today and will be for decades to come. Again, this will speak to producers as well as financial markets and help address a continuing lag in energy capital investment. As Dr. Dean Foreman noted in his recent post, the consensus 2022 capital expenditure investment forecast for integrated oils and independent exploration and production companies, reported by Bloomberg, is below 2018 and 2019 levels. Returning energy investment to proper levels is essential, and the administration can help. Sommers, commenting to the Wall Street Journal:

“I think that both the industry, and I think Wall Street needs the signal that the White House wants this industry to be producing more at a time of national crisis.”

Secretary Granholm told the CERAWeek audience the Biden administration wants to partner with the energy industry. In this, the administration will find a willing party. Sommers, interviewed at CERAWeek by Fox Business, said producers are ready to provide abundant, reliable energy now and in the future:

“I think there's a new recognition of how important it is that the United States reclaim its role as the world energy leader during times of crisis, like this. I think there's been too much focus over the course of the last many years on downplaying that important role. We need to return to that position.”