July 8 2014

The Energy Biz: Getting Pumped Up Over Local Solutions

Abby Schachter

In an Issue Brief headlined “Prime the Pump: The Case for Repealing America’s Oil Export Ban,” the Manhattan Institute’s Mark P. Mills writes:

[T]he time has come to revoke the 40-year-old [Energy Policy and Conservation Act]’s ban on oil exports. Such action would open up world markets to all of the small, mid-sized, and large American oil companies (not merely the occasional few that win Washington’s regulatory lottery), unleashing yet more production, generating billions of dollars of tax revenues, creating millions more jobs, and reshaping global geopolitics.

The Energy Policy and Conservation Act, signed into law by President Gerald Ford, was passed two years  after the 1973 Arab oil embargo that led to shortages and long lines at the filling station in the U.S. But the world has changed, Milles argues, and so the law is outdated. “Continually evolving technology, and the transformation of global markets—wherein America has converted from a growing consumer to an expanding producer—has permanently restructured today’s world order,” explains Mills.

This is great news for the small and medium-sized businesses that are the backbone of oil and gas exploration and extraction in places like North Dakota and Pennsylvania and as ever Texas. It goes without saying that we want to use environmentally sound procedures to extract the oil and gas and to move it to where it needs to go.

One of the places we see the enormous economic potential and the challenges in extracting and transporting energy is in North Dakota’s Bakken shale oil field.  A recent report in the business section of the Wall Street Journal reported that some stabilizers, essential safety equipment, had not been installed in the early stages of developing the Bakken field.  

The Wall Street Journal notes of the booming Bakken field:

About a million barrels a day are pumped from the Bakken, an oil field that has grown so fast that few pipelines exist to transport the crude. Instead, about 630,000 barrels a day travel by train to refineries on the East, West and Gulf coasts, a trend that is growing because the energy industry has found rail shipments to be more flexible than fixed pipelines.

The question is how to solve for that volatility in a way that doesn’t hurt the industry so much that extraction isn’t cost effective, but takes reasonable precautions to protect people and the environment.

Texas found the solution by stabilizing the oil and then transporting it to a centralized location:

The situation in the Bakken contrasts with the Eagle Ford Shale in South Texas. In 2012, there was basically no equipment to stabilize the crude. But companies have spent hundreds of millions of dollars to build centralized facilities and pipelines to move the resulting propane and butane to a Gulf Coast petrochemical complex….. ‘Over a two-year period of time, the vast majority of the problem went away,’ [says Rusty Braziel, an industry consultant]

The important point is that a local solution was found. When safety rules were needed, they did not come from Washington, D.C. The rules proved effective. North Dakota is, as it should be, working on figuring out a solution—just as was done in Texas and Pennsylvania, with rules to protect the environment and yet not destroy an industry that can provide huge benefits to the U.S. economy.

Where the federal government can and should act is to remove the obstacles to exporting oil and gas and help the industry to create jobs, and grow the economy. 

 

 

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