Every president since Richard Nixon has chanted the mantra of energy independence. But this time, it could actually happen. Thanks to hydraulic fracturing in shale plays and deep water drilling in the Gulf of Mexico, domestic oil production reached its highest level since 1991 last year while natural gas output set a record for the fifth consecutive year. Five years ago we were importing 60 percent of our oil needs, but today the percentage is about 43 percent with less than a fifth of our imports coming from outside the western hemisphere. Friendly Canada is by far our largest supplier of imported crude, and the oil sands of Alberta are estimated to hold the second largest reserves in the world.
In 2009, President Barack ObamaBarack ObamaWebb: After the debate Why not Gary Johnson? Donald Trump, the Russian candidate MORE referred to oil and gas as “yesterday’s energy” and touted renewables as the energy of “tomorrow.” To that end, wind, solar, biofuels and electric vehicles have received $150 billion in subsidies since Mr. Obama took office. Then a year ago the president stated he was committed to an “all-of-the-above” energy strategy. But in his second inaugural address last month he reiterated his commitment to “sustainable energy sources” while not even mentioning the resurgence of domestic oil and gas production that has come about without any new subsidies. Will President Obama double-down on renewables during his second term, or will he acknowledge that fossil fuels will remain our primary energy sources for the foreseeable future and support policies that encourage their development?
The White House’s decision on the Keystone XL pipeline, expected sometime in April, will indicate whether or not the president is serious about an “all-of-the-above” energy strategy. This pipeline, which will enable Canada to send more of its oil from Alberta to refineries along the Texas Gulf Coast, is a critical component of North America’s energy infrastructure. What’s more, it will enable Gulf Coast refiners to substitute reliable Canadian crude for unreliable Venezuelan crude. This decision will be particularly telling because for the environmental community, who uniformly oppose the pipeline, Keystone has become their litmus test for the President’s commitment to green energy.
Last year, the administration opened up part of the eastern Gulf of Mexico for lease sales but indicated the entire Atlantic and Pacific seaboards, as well as most of Alaska, would remain off limits to drilling until at least 2017. This is unfortunate since upwards of 120 billion barrels of oil and oil-equivalent natural gas are estimated to lie under the outer continental shelf (OCS). It remains to be seen whether the administration will change its mind and allow some limited drilling on the OCS.
On the natural gas front, the Environment Protection Agency is champing at the bit to get into the business of overseeing hydraulic fracturing, though there is no evidence the states are doing an inadequate job. Imposing an additional layer of unnecessary federal regulation would simply drive up compliance costs at a time when prices are near historic lows, thanks to the shale bas boom. The administration, and the economy, would be better served by approving the dozen pending applications for liquefaction plants and export terminals for liquefied natural gas (LNG).
In view of growing political unrest and uncertainty in the Middle East, and an uptick in terrorist attacks against oil and gas facilities in the Maghreb, the prospect of North American energy independence should be embraced by politicians and pundits of all stripes. By approving the Keystone XL pipeline, removing unreasonable restrictions on offshore drilling, reining in the EPA, and encouraging LNG exports, the White House can accelerate the timeline for North American energy independence while simultaneously stimulating our moribund economy.
Weinstein is associate director of the Maguire Energy Institute in Southern Methodist University’s Cox School of Business and a fellow with the George W. Bush Institute.