How government restrictions on domestic drilling are driving up gas prices

Federal government restrictions on the extraction and transportation of oil and gas can play a huge role in driving up gasoline and diesel prices for American families and businesses, and the more the government seeks to exert power, the more these impacts are felt by all of us. Here are some examples of the impact of government policy on prices.

The Energy, Climate and Environment Information Center

Article series: What you need to know about gasoline prices
This is #4 in a series of five articles exploring many aspects of gasoline prices – from what goes into the price of a gallon of gasoline to recommendations for policymakers to bring prices down. Click HERE or see the bottom of this article to see other articles in this series.

Blocking Access to Federal Minerals and Energy

The term “mining estate” refers to the ownership of minerals, including oil and natural gas, beneath the Earth’s surface. The federal mining domain contains 2.46 billion acres consisting of 1.76 billion acres in the outer continental shelf (the ocean floors off the US coast) and 700 million acres underground onshore.

The mining area of ​​public and private lands is about 1.5 billion acres in comparison. Even though the federal domain is almost a billion acres larger than the public and private mining domain, most of our oil and natural gas comes from private and state lands. For perspective, a billion acres is about six times the size of Texas.

The United States is simply not allowing the energy potential of this vast federal domain to be unleashed. Historically, oil from federal lands (onshore and offshore) consistently accounted for less than 20% of total US production until the late 1990s. Thereafter, production percentages increased (mostly offshore) to over 30% in the early 2000s and peaked in 2009, coinciding with declining production on non-federal lands in Alaska and other states.

But the numbers have come down. According to the Department of the Interior and the Energy Information Administration, federal offshore oil production was only about 15% of total U.S. oil production in 2020 and federal onshore production was only about 8 %.

Those low numbers are set to get worse for American consumers due to President Joe Biden’s moratorium that has essentially stopped most new rentals on land and water owned by American taxpayers. They will also decline due to increased fees, rents and royalties – as well as regulations – that he has imposed on oil and gas producers through executive actions and that Congress has imposed through the through the so-called Inflation Reduction Act.

The fact is, trying to generate power from federal lands is unnecessarily difficult, which is why the most notable states that led the energy revolution – Texas, North Dakota and Pennsylvania – have a low federal land ownership of 1.4%, 4.2% and 2.5%, respectively.

The impacts of who owns and manages the land are staggering. For example, from 2009 to 2013, oil production from state and private lands increased by 61%, but on lands controlled by the federal government, oil production fell by 6%.

States and private landowners are not required by remote landowners and Washington- or Manhattan-based “green” interest groups to consider any objections their lawyers may raise to halt investment projects. Instead, they negotiate the terms and conditions of leases, reclamation and environmental protection knowing that it is their land, water and air that will be affected.

Apparently, states and landowners agree that mutually beneficial contracts are superior to the byzantine rules and regulations of the federal government and all their guesswork, armchair maneuvering and denial by delays.

Permit

The government also impacts gas prices by authorizing the pipelines needed to transport energy in the most efficient, economical and environmentally friendly way. America has – literally – millions of miles of energy pipelines, out of sight and safe from surface accidents.

Although not related to the price of gasoline at the pump, it should be noted that the natural gas system alone has over 3 million miles. Petroleum and petroleum product pipelines account for an additional approximately 225,000 miles. Allowing these pipelines minimizes surface transportation incidents with trucks and trains, reduces environmental impacts, and is the most economical mode of transportation.

Denying building permits simply forces products into already overstretched surface transportation systems, as in the case of Biden’s cancellation of the cross-border Keystone XL Pipeline permit on his first day in office. The pipeline would have economically transported nearly one million barrels per day of Canadian and North Dakota oil to refiners on the Gulf Coast, prompting Canada to invest more in developing its huge oil reserves. oil sands.

Alberta Premier Jason Kenney has said his province could supply an additional 1 million barrels a day of oil to the United States within two years if a pipeline is allowed to be built.

Instead of draining our strategic oil reserve of 1 million barrels per day of emergency supply like the Biden administration did in an attempt to temporarily reduce gas prices, a pipeline would be a strategic investment with the one of our closest allies that would benefit both parties. of the border. It would also ensure decades of additional safe and secure energy supplies equivalent to 5% of our current oil consumption.

Government signals

Often those who oppose the use of oil and gas – and who also recognize that the more we produce of the two in North America, the lower their prices will be – will say that each individual project will not make a difference or that they will be too long to come. This is just plain nonsense and proven by historical facts and evidence.

In July 2008, before the horizontal drilling/fracking revolution that more than doubled US oil production and gave us energy self-sufficiency in 2019, oil was approaching $150 a barrel under President George W. Bush. . On July 14, 2008, the President announced the repeal of a decades-old moratorium on drilling over most of the outer continental shelf first put in place by his father.

Even though all leased, discovered and produced oil would not hit the market for another 10 years, due to stringent federal laws and regulations, the price of oil fell $9.36 immediately after it was announced, to $136 a barrel. .

Incidentally, none of these areas open for lease have been leased to date and are still awaiting action from the federal government to lease them.

Oil (and natural gas) are bought in markets that look to signals from the government as to which direction the pendulum is swinging in its attitude regarding future supplies. If the government wants more oil production and takes action to make it happen domestically, prices will fall. If, on the other hand, the government seeks to regulate, legislate and raise the costs of domestic energy production, the price will rise.

Conclusion

The federal government plays a huge role in the price families and businesses pay for their energy, including what they pay at the pump.

When it comes to energy, more energy means lower prices. Imagine if the federal government adopted increased energy production on the huge federal estate and a larger network of pipelines that could transport it more quickly, efficiently, and economically to refineries and its final destinations in an environmentally friendly way. The benefits in terms of lower prices would probably be huge.

The Daily Signal publishes a variety of perspectives. Nothing written here should be construed as representing the views of The Heritage Foundation.

Do you have an opinion on this article ? To ring, please email [email protected], and we’ll consider posting your edited remarks in our regular “We hear you” column. Don’t forget to include the URL or title of the article as well as your name and city and/or state.

Other articles in this series:

Who is hurt by high gasoline and diesel prices? There is more harm than you think.

What Goes Into Gas Prices at the Pump: Lessons from Across the Petroleum Supply Chain

The Wrong Way to Respond to High Gas Prices: From Federal Gas Tax Exemptions to Price Hike Claims

9 policy goals to unleash domestic oil production and help lower gas prices

Comments are closed.