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Dave Summers

Dave Summers

David (Dave) Summers is a Curators' Professor Emeritus of Mining Engineering at Missouri University of Science and Technology (he retired in 2010). He directed the…

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A Look at Governor Perry's Energy Plan

One of the relevant facets of the current Republican debates at the start of this Presidential Race has been the Energy Plan that Governor Perry put forward the other day. Because it actually gets specific about where some of the projected 1.2 million jobs he anticipates adding to the American economy will come from, but given that detail has not got a lot of publicity, I plan to briefly review it here, together with some of the source documents that were used to generate it. Please note that this is not an endorsement, but rather an illustration of one of the plans that have been suggested. Here is the summary illustration.

Jobs created by energy plan
The jobs anticipated by Governor Perry’s Energy Plan

The entire plan is available, as a 40-page pdf, and in its shortest summary version was condensed into

My “Energizing American Jobs and Security” plan will commence or expand energy exploration from the Atlantic coast to the western seas off Alaska. We will end the bureaucratic foot-dragging that has reduced offshore drilling permits in the Gulf of Mexico by eighty percent. We will tap the full potential of the Marcellus Shale in Pennsylvania, Ohio and West Virginia. We will unleash exploration in our Western states, which have the potential to produce more energy than what we import from Saudi Arabia, Iraq, Kuwait, Venezuela, Columbia, Algeria, Nigeria and Russia combined.

The Governor puts current U.S. production at roughly 19 mbd with domestic supplies producing around 7.5 mbd. The nation runs on oil with transportation using 72% of the oil, and 96% of the countries transportation fuel needs are supplied by oil and gas. (I am not sure that the Governor has seen the latest import numbers from Saudi Arabia).

The Governor inserts a quote from Governor Jindal of Louisiana that states:

According to a recent study by IHS CERA, in 2012 alone the Gulf of Mexico could create 230,000 jobs, increase revenues and royalty payments to state and federal treasuries by $12 billion, and contribute some 400,000 barrels per day of oil production towards US energy independence if the federal government accelerates the pace of permitting activity to a level that reflects the industry's capacity to invest.

This quote refers to the report “Gulf of Mexico - Restarting the Engine” by CERA which tabulates the difference achievable between a slow permitting environment, and an enhanced one over the next two years, and uses it (in more specific detail) to develop the summary table:

Gains with enhanced permitting
Projected gain in opportunities in the GOM with an enhanced permitting process (CERA )

(It should be noted that roughly 94% of this in 2011, 97% in 2012 and all of the 2013 opportunities would be in the Deepwater offshore, for which it would be first necessary to find the available drilling rigs).

In looking next at Alaska, the Governor sees the opportunity to develop the National Petroleum Reserve, with its 896 million barrels of oil and 53 Tcf of natural gas, as well as the Alaskan Outer Continental Shelf, (under the Chukchi and Beaufort Seas) which may contain as much as 10.2 billion barrels. The report by Northern Economics to Shell is quoted that anticipates some 55,000 jobs around the entire country coming from the development, with some 35,000 jobs being in Alaska. (Of this the breakdown would be 30,000 from the Beaufort UCS and 25,000 from the Chukchi Sea OCS. It is anticipated that the increased production will fill the Alaskan pipeline again, with jobs being generated to make the connections. Which is why the 1.2 million job figure is only reached over time. Wood Mackenzie produced a report for API that is also used as a reference for the Governor, and it shows the job growth (broken down a little by source) as:

Growth in jobs related to changes in Energy Plans
Growth in jobs related to changes in Energy Plans (Wood Mackenzie)

I am assuming that the increased production from Alaska would fit in the “Increased Access” category. And please note that the Wood Mac report carries out to 2030, while the Governor is only talking of the jobs through 2020 (which is the 1.2 million number).

And while the Governor is largely discussing this plan in terms of jobs, this is, after all, an Energy site, and so I will also add the anticipated change in oil production that is foreseen from this change in the situation – again from Wood Mackenzie.

Gains in Production from changing regulations and access
Gains in Production from changing regulations and access (Wood Mackenzie)

The jobs numbers were derived as a count of specific jobs generated in the industry, and then using a 2.5 multiplier to add their effect on the general economy. (This they consider to be conservative, given that in cases it might be as high as 5). The overall addition of oil to the national reserve is considered to be roughly 60 billion barrels of oil, broken down as follows:

Anticipated gains in reserves added through changes in regulation and access
Anticipated gains in reserves added through changes in regulation and access. (Wood Mackenzie)

The Governor is a little more conservative in the oil that he anticipates coming from the Atlantic OCS, anticipating only some 3.2 billion barrels of oil and 28Tcf of natural gas, as well as creating some 10,000 new jobs. He references a report from the Consumer Energy Alliance as his source for some of this information. Note that, in contrast to the Alliance, he only anticipates that drilling would occur offshore Virginia and the Carolinas.

Looking at increasing production of oil in the Western States, he cites the Blueprint for Western Energy Prosperity (site registration required) from the Western Energy Alliance. This projects that some 500,000 jobs could be created, along with the production of 1.3 mbd of oil and an additional 1 Tcf of natural gas from Western Resources.

The increase in oil production is anticipated to come from the Bakken fields (currently at 289 kbd and anticipated to increase to 650 kbd by 2020, and it also anticipates development of the Niobara formation in Colorado and Wyoming which, from sensibly zero, has recently started to be developed and is anticipated to produce some 286 kbd by 2020. However the total gain in production from the two, over existing production in the West, is anticipated to be 529 kbd.

Natural gas, transported through the Rockies Express and Ruby pipelines is expected to add 1 Tcf of production, which the Alliance shows divided between the Western States.

Anticipated future gas production from the Western States
Anticipated future gas production from the Western States (Western Energy Alliance)

The Alliance makes the point, as does the Governor, that reaching these levels requires a reduction in legislation, and regulation, and improved access to federal lands.

Approval of the Keystone Pipeline (a topic of current debate) is expected to add 20,000 new jobs, which only leaves the allowance of increased development of the Marcellus and Eagle Ford shales (dependent on the allowed use of fracking the shale) to add respectively 250,000 jobs in the New York, Pennsylvania, Ohio region, and 68,000 jobs in Southwest Texas, and you have the Governors 1.2 million.

The jobs anticipated by Governor Perry’s Energy Plan
The jobs anticipated by Governor Perry’s Energy Plan

To achieve this the Governor proposes:

1. Immediately return to pre-Obama levels of permitting in the Gulf, followed by responsibly making more of the Gulf available for energy production.
2. Open the ANWR Coastal Plain (1002), National Petroleum Reserve Alaska (NPR-A), and the Alaskan OCS (Beaufort and Chukchi Seas) for development.
3. Open the Southern Atlantic OCS off-shore resources for development.
4. Immediately approve the Keystone XL Pipeline.
5. Expand on-shore oil and gas development in Utah, Colorado, North Dakota, Montana, New Mexico, and Wyoming, authorizing more development on federal lands.
6. Oppose federal restrictions on natural gas production, including hydraulic or nitrogen fracturing and horizontal drilling.

We shall see how all this goes, but the Plan fits into the theme of recent posts where I have been looking at the various reserves that are available around the United States, and does lay out one plan for their development.

By. Dave Summers

David (Dave) Summers is a Curators' Professor Emeritus of Mining Engineering at Missouri University of Science and Technology (he retired in 2010). He directed the Rock Mechanics and Explosives Research Center at MO S&T off and on from 1976 to 2008, leading research teams that developed new mining and extraction technologies, mainly developing the use of high-pressure waterjets into a broad range of industrial uses. While one of the founders of The Oil Drum, back in 2005, he now also writes separately at Bit Tooth Energy.




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  • Anonymous on October 23 2011 said:
    I am not a convinced believer in Governor Perry's energy plan, but at least he has an energy plan, and should be commended for thinking in those terms.That the US has the potential to produce more energy than imported - or can be or will be imported - from the countries mentioned sounds fruitcake or misleading to me, although I hesitate to be too negative because there are too many 'influential' people who have appointed themselves energy experts, and invariably believe that bad energy news is just around the corner.I see no reason to comment at the present time on the six 'points' presented at the end of the article, but some of the thinking behine those six points strikes me as having a 'pie in the sky' aroma.

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