The last barrel

Some elements in nature can be commingled to create a better end product. For example, chocolate and peanut butter. Corn chips and chili. However, there are some elements that don’t mix well, such as oil and water. Others, if combined, produce a toxic by-product that can seriously harm humans, like accidentally combining certain household cleaning products. And, as witnessed by the catastrophic failure of Texas’ power grid during Feb. 15-19, it has become increasing apparent that mixing partisan politics with green energy policy is toxic and harmful to humans, as well.

Actions without foresight. On his first day in office, President Biden revoked the permit for the Keystone XL pipeline and rejoined the Paris Agreement. Biden also wants to suspend/stop the sale of leases on federal land, which accounts for 10% of U.S. supplies. The moratorium is set to be unveiled, along with various other climate policies later this year.

Push-back. While most of the industry advocacy groups have simply made statements about how Biden’s moratorium is essentially an “import more foreign oil policy,” the Western Energy Alliance actually has filed action in Wyoming federal court. The Alliance, which represents 200 producers, said the administration’s suspension of leases is unsupported and unnecessary, and an overreach by the U.S. Bureau of Land Management.

“Presidents don’t have authority to ban leasing on public lands,” said Western Energy Alliance President Kathleen Sgamma in a statement. Sgamma’s position was supported by a two-page court petition stating, “that the president’s order is a violation of the Mineral Leasing Act, the National Environmental Policy Act and the Federal Lands Policy and Management Act.” Previously, the group successfully challenged President Obama’s rule governing gas venting and flaring.

Likely outcome of leasing ban. In 2020, the U.S. finally achieved energy independence. EIA estimates that 2020 marked the first year that the U.S. exported more petroleum than it imported, on an annual basis. However, U.S. production declined an estimated 900,000 bopd (8%) to 11.3 MMbopd in 2020 because of well curtailment and a drop in drilling activity related to low crude prices. These declines are expected to deepen in 2021 and 2022.

In its February 2021 STEO report, EIA forecasts that decreased domestic output will drive an influx in net petroleum imports during 2021 and 2022, and more than offset changes in refined product net trade. EIA forecasts that net oil imports will increase from its 2020 average of 2.7 MMbopd to 3.7 MMbopd 2021 and up to 4.4 MMbopd in 2022. The dramatic decline in domestic production will force the U.S. to import 62% more crude by 2022. And with the Biden’s administration plan to get the U.S. to net zero greenhouse gas emissions by 2050, these import estimates could be low.

Renewables leave Texas shivering. As most of you know, Texas experienced a major failure of its power grid around Feb. 15-19. While the cause and circumstances of the failure are still being debated, the main lesson to glean from the near-disaster is to stop placing green politics over energy reliability. An insightful op-ed by Texas Railroad Commissioner Wayne Christian outlined the recklessness of putting climate change politics above energy reliability.

“Everything is so politicized these days, that it is tough to decipher facts from opinions about what happened this week with the winter storm. It’s easy to blame the ERCOT for the blackouts. But the full story is more complex. One night of bad decisions would not have had such devastating consequences, had it not been for decades of poor policy decisions prioritizing unreliable renewable energy sources at the expense of reliable electricity.” 

“I have seen media reports claiming the issue was a decrease in power generated from natural gas, but when you look at the numbers that is just not true,” continued Christian. According to EIA, the hourly average of net power generation from gas went from 17,602 mw before the storm to 33,310 during the storm, meaning generation from natural gas basically doubled, as demand increased.

Many are blaming fossil fuels, because wind power was expected to make up only a fraction of what the state had planned for during the winter. This is the problem. Investments in infrastructure are paid for by electricity customers and taxpayers, and Texas has invested $7 billion to build-out the CREZ Transmission Lines for wind and solar generation, Christian continued. This means resources that could have otherwise been spent making the grid more resilient to weather—or adding reliable generation from natural gas, nuclear or clean coal—were, instead, spent on building out transmission lines for intermittent forms of energy.

Green politics, again. The issue isn’t the existence of renewable energy, but that it has displaced reliable generation—not through natural free-market forces, but through massive subsidies and punitive regulatory policies from progressives in Washington D.C. In 2009, coal-fired plants generated nearly 37% of the state’s electricity, while wind provided about 6%. Since then, three Texas coal-fired plants have been closed. In the same period, our energy consumption rose 20%.

Although coal is perceived as dirty, and nuclear as too scary, these energy sources are extraordinarily safe and dependable in adverse weather conditions, because they feature on-site storage. 

There is no single reason for this mess. “However, every time the government picks
winners and losers in business and innovation, it’s the average citizens that lose.” The failure in Texas was a wakeup call that there is more to energy policy than the politics of climate change, Christian concluded.

Let’s learn from our mistakes. A geological axiom states that geoscientists can draw inferences from the past to help predict future events. Maybe one of Biden’s guys has a degree in geology? Probably not. 

About the Authors

Craig Fleming

World Oil

Craig Fleming Craig.Fleming@WorldOil.com