Energy Prices Soared in 2011

Other lowlights for the year include Obama's offshore drilling plan and the attack on fracking.

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Tom Pyle is the president of the Institute for Energy Research.

The year of 2011 had few fond memories for energy consumers. Drivers paid the highest portion of their income in gasoline since 1981, and electricity bills have climbed $300 over the past 5 years. Here are some other lowlights of the past year.

[Check out 2011: The Year in Cartoons.]

The Obama Administration's Five Year Offshore Drilling Plan

Despite high gasoline prices and declining oil and natural gas production on federal lands, the Obama administration's new five year offshore drilling plan puts the vast majority of the Outer Continental Shelf off limits. When President Obama was elected, the vast majority of offshore areas were available for leasing, but today most are off limits.

Under the president's plan, both the Atlantic and Pacific coasts are off the table. This has onerous implications for states wanting to derive revenue from energy production. In the Commonwealth of Virginia, there is strong bipartisan support for a lease sale for tracts off its coast, but this has been ignored in the plan. Even the state's Democratic senators have expressed support for drilling with Sen. Jim Webb stating that "oil and gas exploration within the Virginia Outer Continental Shelf—if coupled with an equitable formula for sharing revenues between the state and federal governments—would boost domestic energy production, while benefiting the commonwealth's economy."

[See a collection of political cartoons on energy policy.]

The Obama Administration Holds the First Offshore Lease Sale in More Than a Year

In 2008, the federal government brought in $10 billion by selling oil and gas leases. In other words, oil and gas companies paid the federal government $10 billion just to be able to look for oil and gas on federal lands. In fiscal year 2011, the federal government brought in zero dollars. Zero. Zilch. Nada. A few days ago the administration held its first lease sale in nearly two years. This is a step forward, but it is just a baby step.

The Attack on Hydraulic Fracturing

According to data from the Energy Information Administration, energy production on federal lands has decreased by over 40 percent the past decade. Luckily production is increasing on private and state lands. In large part, this is because of the production of oil and gas from shale plays that is only possible because of hydraulic fracturing combined with new drilling techniques. Investors would rather not do business with the federal government because of their notorious delays, red tape, and uncertainty.

[Read the U.S. News debate on fracking.]

Two states with booming energy production are Pennsylvania and North Dakota. These two states are sitting on two massive energy resources—the Marcellus and Bakken Shale Formations. The level of job creation in areas of production is unprecedented in this economy. North Dakota has an unemployment rate of 3.4 percent, the lowest in the country.

Despite the massive benefits resulting from developing these energy resources, the Environmental Protection Agency has sought to regulate hydraulic fracturing around the country based on claims that hydraulic fracturing is contaminating groundwater. But by any objective measure, hydraulic fracturing has proven to be very safe. The technique has been used in more than one million wells since the 1940s with no confirmed cases of groundwater contamination. In fact, EPA Administrator Lisa Jackson has stated on record that she was "not aware of any proven case where the fracking process itself has affected water."

[See the 10 priciest years for gasoline.]

The EPA recently released a draft study in which it claims that is has evidence of groundwater contamination in Wyoming from shallow hydraulic fracturing. However, Wyoming's environmental agency has strongly criticized the report, pointing out many flaws in their methods and showing that the final report has not been peer reviewed.

The EPA has failed to demonstrate that state regulators have done a poor job with the regulation of hydraulic fracturing, but still carry on with their attempt at federal control of this economy boosting technology.

Hopefully 2012 Will Be Better

Hopefully things will be better for energy consumers in 2012. The United States has vast energy resources that could be accessed if the federal government would permit access to more lands. As it currently stands, only 3 percent of federal lands are leased for energy production. If more lands are leased, we could produce more energy, create more jobs, and see energy prices decrease.

  • See the 10 priciest years in history for gas.
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  • See a collection of political cartoons on gas prices.