ENERGY REALITY 101

25
Fossil fuel power plant in operation, aerial view

Another school year has begun, and there is a new appreciation among teachers and students for the (once taken for granted) simple opportunity of being able to meet in person in a classroom. I can detect a palpable level of enthusiasm among my law-school students that comes from a realization that it was different last year. Already in my eighth year as a law-school professor, I have taught enough students over that time to be able to observe that students in my Oil and Gas Law I course are typically uninformed, not only about the role and importance of oil and gas in our past and present economy but about energy in general; an unfortunate condition I describe as energy illiteracy. Even students who better understand the subject are often surprised at some of the information I provide regarding the seemingly countless benefits we enjoy — and rely on — because of oil and gas. 

To be honest, were it not for my current position as a professor, it is quite likely that I would not even be aware of some of what I now intentionally make sure my students hear. So, I suppose it should not be surprising that most Americans are likely in the same condition of energy illiteracy. It is the natural consequence of a wealthy nation. We enjoy the end product of someone else’s labor and pay little to no attention to how it came to be. Unless it is something in which we are actively involved that gives us a reason to be more informed, the product or service we enjoy (or, more likely, demand) is simply one more thing that comes from the “magic store.” We pay little mind to the many steps of creation, production, and manufacturing that made it available and affordable to us.

Before we dive into principles of oil-and-gas law, I spend the first couple of classes providing some background, history and orientation regarding the significant role that oil and gas have played, and continue to play, in our modern-day economy. Because my students have heard nothing but the negatives of oil and gas and the positives of other energy sources throughout their academic lives, it is hard for them not to be conditioned to believe that further dependence on oil and gas is an albatross to be shed of immediately, if not sooner. But then, I tell them what they have never heard before.

The U.S. currently gets 80% of its energy (electricity, fuel, etc.) from fossil fuels — oil, gas, and coal. That figure has remained the same for years, if not decades. As coal has diminished, natural gas has increased, resulting in the same 80% figure. The remaining 20% comes from nuclear and renewables. Only 3.8% actually comes from wind and solar. So, when someone demands that we immediately replace oil and gas with wind and solar, you have to conclude that he is unaware of even this most fundamental reality. As I tell my students — it is perfectly fine to desire a particular energy policy or strive for a certain energy policy or pursue technological advancement or innovation to achieve a certain energy policy; but it is dangerous to do any of that without a basic grasp of our current energy reality.

Not only does the U.S. get 80% of our energy from fossil fuels, but so does the rest of the world. It is almost uncanny how every region of the world breaks down in this very same way. Some countries depend more on coal than natural gas, but the overall percentage for fossil fuels nevertheless comes out the same. That energy reality raises an even larger question, with the constant drumbeat regarding the need to eliminate all oil and gas and replace them with wind and solar — how? And why would any country ever want to do that? 

Indeed, China and India continue to build coal-fired power plants as well as gas-fired power plants. In other words, they do not seem to be ignoring reality and the immediate needs of their populations. They might pay lip-service to the concerns of climate change, but they are not allowing those concerns to interfere with what they consider to be in the best interests of their domestic economies.

Conversely, the U.S. is now embarked on domestic policies that are consciously and intentionally designed to accelerate the elimination of oil and gas as energy sources for our economy. The Biden administration has ceased leasing any federal lands for oil-and-gas development. The federal government owns about 25% of all onshore lands throughout the fifty states — a pretty staggering percentage that my students typically have never heard or known. So, when the federal government no longer wants to allow new oil-and-gas leasing on 25% of our land, that is a significant policy change. In addition, the federal government owns 87% of all offshore areas. Although the Trump administration had started taking steps to open up more areas for oil-and-gas development, that is clearly no longer the case with the new administration. Again, declaring 87% of our offshore area off limits is significant.  

There are many other, curious initiatives in progress across the U.S. designed to artificially, involuntarily push oil and gas off the energy stage. Some 76 cities, mostly in California and the Northeast, have enacted ordinances prohibiting natural gas in new commercial and residential construction. Environmental organizations have taken to pressuring banks, investment firms, pension funds and other companies to stop doing business with oil-and-gas companies. Some advertising agencies have formed a coalition to refuse doing any further work for oil-and-gas companies. Some Democrat elected officials now characterize the oil-and-gas industry as a criminal enterprise that should be forced to pay massive penalties for causing climate change. In the 2020 campaign, many of them refused contributions from those affiliated with oil-and-gas companies. Even a group of Yale law students handed out failing grades to top-tier law firms that do work for oil-and-gas companies and encouraged their peers to boycott working for those firms. The head of the Rockefeller Family Fund (as in John D. Rockefeller of Standard Oil Company fame) chastised the U.S. in a 2019 op-ed by asking — why are we still looking for oil?

There is a disconnection in all of this that is hard to miss. Why should we continue looking for and using oil and gas? Because we get 67% of our energy and thousands of important manufactured products from them (80% with coal), because we need it to continue having a modern economy, and because none of that is going away.   

About the author: Bill Keffer is a contributing columnist to SHALE Oil & Gas Business Magazine. He teaches at the Texas Tech University School of Law and continues to consult. He also served in the Texas Legislature from 2003 to 2007.

LEAVE A REPLY

Please enter your comment!
Please enter your name here