Thomas Pyle is the president of the Institute for Energy Research.
It surprises many people when they learn that the United States is the world's third largest oil producer and that only Russia and Saudi Arabia produce more oil than we do. The United States has large oil resources that could be used to create more domestic energy and keep energy prices lower. Making more of anything at home means more jobs, more economic growth, and more tax revenue for the federal government. But instead of encouraging energy production, politics is keeping these resources off limits and the president is once again taking pot shots at the people who work to make energy here at home. The saga of one company that is attempting to produce oil off the coast of Alaska is a good example of the obstacles placed in the path of domestic energy development on federally-controlled lands.
In 2008, Shell paid a whopping $2.1 billion for the right to drill for oil beneath the Chukchi Sea off the coast of Alaska some 4,500 miles from Washington, D.C. This amount surprised many people, including the experts at the Department of Interior—the agency in charge of federal energy leasing. The agency assumed that the lease sale would raise a small fraction of that.
Shell's bid was so large because there are vast oil and gas resources beneath the seas off the coast of Alaska. The Department of Interior estimates that there are 27 billion barrels of oil and 132 trillion cubic feet of natural gas. For perspective, that is more than U.S. proven oil reserves, and the oil is worth over $2.3 trillion to America's economy.
Producing these enormous oil resources would be an economic boon, especially during these difficult times. A University of Alaska study estimates that new offshore oil development would produce 35,000 jobs over the next 50 years for the state of Alaska alone with a total payroll of $72 billion over that period. Not only would the oil development produce jobs in Alaska, but in other states as well. Another University of Alaska study found that this development would produce nearly 55,000 jobs nationwide with a total payroll of $145 billion over 50 years.
The development of these homegrown energy resources would put people to work in good paying jobs and would produce $200 billion in new revenues for federal, state, and local governments.
Despite the great jobs and economic potential of these oil and natural gas resources, the federal government has been dragging its feet. Since 2005, the federal government has awarded over 600 leases to drill for oil and natural gas off the Alaska coast, but they have yet to permit a single well to be drilled.
Shell's attempt to produce energy off Alaska's coast is illustrative. After Shell spent over $2 billion for the right to drill, they still needed to secure 30 different permits before they could actually begin construction. The studies, planning, and investment necessary for the permits cost another $2 billion (including defending against multiple lawsuits from anti-energy pressure groups that present laws coddle). By 2010, Shell had all of the necessary permits and was set to drill an exploratory well to see if their multibillion dollar bet in Alaska would pay off.
But a few months before Shell was set to move forward, EPA pulled the rug out from under the company. Shell had all of the necessary ships and personnel contracted and ready to go, but EPA withdrew an air permit they had previously awarded. The regulators reasoned that even though air pollution would not violate any limits and the air would still be healthy, Shell could not proceed. Government "green tape" kept more Americans from working and increased our reliance on imports from unstable foreign regimes.
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