Security for U.S. and Europe begins with new energy policy

It is high time that the U.S. forges a new energy policy, based on facts and common sense. Before Tuesday’s decision to halt the import of Russian oil and gas, the Biden Administration had put more sanctions on U.S. oil and gas than on Russian oil and gas. Public lands have been made off-limits for drilling. The cancellation of the Keystone XL pipeline, and restrictions on other pipelines, have blocked the efficient U.S. distribution and export of energy.  FERC approvals and EPA requirements have hampered the development of several gas export projects. Only the Russian assault on Ukraine has stopped Nord Stream 2, and that from Germany—not the U.S.

Supply. It’s been nice imagining that we can power a modern economy with windmills and solar farms, but Russian energy power politics have smashed this pleasant dream.  Oil and natural gas are necessary to make modern economies function, permitting us to heat our homes, transport food and essentials, and make important items, such as medicine and materials.  As I write this from London, the cost of natural gas heat for residences, here in the UK, has doubled in the last year, and natural gas is trading at 10 times its cost a year ago.  Brent is trading today well above $115, and it seems to be making its way to eventually surpassing the record price of $147.50, set in 2008.

As in the U.S. with soaring gasoline prices, this hits the middle class particularly hard. 

The release of oil from the strategic oil reserves on March 1 was a largely symbolic gesture, as crude oil prices continued their march upward. 

Security. There is no substitute for increasing oil and natural gas production in the U.S. and Europe for energy security. 

The United States has great reserves of both crude and natural gas, in the form of unconventionals and conventionals. Estimated, proved natural gas reserves are 473.4 Tcf, as of the end of 2020, per the U.S. EIA.  Through the policies of the current administration, U.S. oil production has remained at levels roughly 2.0 MMbpd below pre-pandemic levels.  Natural gas production has slipped as well, due largely to a decrease in associated gas production and restriction of new pipelines from the Marcellus shale.

Before the Russian invasion of Ukraine, Russia exported 7 MMbpd of oil and oil products, and accounted for 25% of Europe’s oil supply and 40% of its gas supply. The United States can take the place of much of the Russian supply to Europe, but the industry is being purposefully restricted for a policy based largely on energy poverty, that is, restricting the primary source of energy, oil and natural gas.

In 1982, then-U.S. President Ronald Reagan warned German Chancellor Helmut Schmidt that the new Trans-Siberian pipeline, bringing Russian gas through Ukraine to Germany, would make the country and Europe subject to Russian dependence and, therefore, manipulation. The European and U.S. muted response to Russia’s criminal act in Ukraine is due to the dependence of Europe on Russian gas, and the U.S. on imported oil.

Policy changes. The U.S. has the resources to largely replace Russian gas and oil. In order to replace Russian oil and gas on the world market, and bring the price back down, the following steps must be taken:

• Open exploration of U.S. lands, and renew exploration and development of the North Sea. There is still a lot of life left in the Gulf of Mexico and the North Sea. Additionally, the Arctic National Wildlife Refuge (ANWR) in the U.S. is conventional oil that can take the place of dirty Russian crude. Like the U.S. government, Norwegian officials have put their policy behind the development of renewables, but what Europe needs is more production of oil and natural gas, both at home and in the U.S. The North Sea still holds 20-30 billion boe of potential, according to a recent study by PWC.  The Gulf of Mexico, which has been declared dead on many occasions, holds as much or more potential.  And ANWR holds a potential of 10 billion boe.
• Make capital for energy projects more readily available. Banks in the U.S., and especially Europe, are shying away from financing any hydrocarbon projects. In fact, I have heard directly from many European bankers that they cannot be associated with the words “oil” or “gas” or “petroleum” for publicity purposes.  Governments must restate that we need oil and gas for our economies and instruct banks to move forward with oil and gas project financing.  Banks must move forward with financing of exploration, and development of energy infrastructure, such as pipelines and LNG export and import terminals.
• Drop restrictions on U.S. energy infrastructure. The Keystone XL pipeline will allow roughly 800,000 bpd of heavy oil to make it from the oil sands of Canada to the refineries of the U.S. Gulf Coast.  This, alone, will take the place of Russian imports, and will largely make the U.S. and Canada self-sufficient in energy.  Just as important, and what has remained largely unreported:  the restrictions on U.S. interstate pipelines, particularly on the East Coast of the U.S., have not allowed the natural gas resources of the Marcellus to be properly developed.

It makes no sense that the Exelon LNG facility in Boston exists as an import facility, when one of the world’s largest gas fields (the Marcellus) is only 300 miles away.  Only the resistance to natural gas pipelines on the East Coast of the U.S. has prevented this import facility from becoming an export facility.

U.S. Environmental Protection Agency restrictions, which are meant to stop industry development, must be repealed immediately.  Moreover, the Biden decision to stop lease sales on federal lands yet again for environmental reasons must be reversed ; and the “invalidation” of the most recent offshore lease sale in the Gulf of Mexico has now cast a pall over all future lease sale attempts.  For midstream infrastructure, including pipelines and LNG export facilities, FERC approvals and non-stop legal challenges have prohibited construction.  The federal government has not cleared any of these obstacles, rather the opposite.

President Biden has made the claim repeatedly that his administration has not stood in the way of U.S. oil and gas production, distribution, and refining.  However, the actions of the Biden Administration drown out the words.  It’s time for the U.S. to change its energy policy, not only for the sake of Americans, but for Europe as well.