Why Shale Companies Shouldn't Sit Out On The War On Coal

Why Shale Companies Shouldn’t Sit Out the War on Coal

First, they came for the coal industry, and I did not speak out — Because I was not in the coal industry.

The battle over carbon will play a significant role in the long-term development of the tight oil plays in the United States. There is yet another push for a carbon tax underway in Washington, D.C. and in some states. Congressman Ted Deutch (D-Fla.) is leading the way in the House of Representatives with Reps. Francis Rooney (R-Fla.), Brian Fitzpatrick (R-Pa.), John Delaney (D-Md.), and Charlie Crist (D-Fla.) as co-sponsors. The Deutch proposal, officially “The Energy Innovation and Carbon Dividend Act,” would establish a carbon tax of $15 per ton of carbon dioxide equivalent in 2019, set to increase by $10 every year thereafter. The tax would be imposed mostly at the midstream level on the use, sale or transfer for use of “Covered Fuels,” such as crude oil, natural gas, coal and derived products.

Shale operators are focused on continuing advancements in drilling, recovery and the infrastructure constraints that directly affect the bottom line. But they would be wise to keep an eye on the anti-carbon movement. The current administration has cut regulations that hampered energy development and, early in December, the Environmental Protection Agency (EPA) announced that it will revise an Obama-era rule on carbon capture and sequestration. While this rule is aimed at the coal industry, oil and gas producers should support the move. The reduction of regulations is welcomed by the energy industry, but the continuing push for a carbon tax should remind the industry to be engaged, vigilant and united.

Pro-energy policymakers in Washington, and around the country, are increasingly frustrated by the support some members of the natural gas industry are giving to the carbon tax proposals. These actions, quietly and not-so-quietly, echo the words of Niemöller, and while the natural gas industry can see some short-term benefit by supporting carbon tax efforts, in the long term they are simply fashioning their own noose.

Large multi-national energy companies have touted themselves as “green” for years, investing in renewables and causes unrelated to their core business. Their reward? Lawsuits and bad publicity. Independent energy companies should avoid this game; the rules are not in their favor and the deck is stacked against them.

Even the success of the shale revolution sends mixed messages. While it is true that the shale revolution has drastically reduced CO2 emissions, since 2005 CO2 emissions in the U.S. have dropped by 14 percent, yet global emissions increased by 17 percent. But touting that fact only gives credibility to the idea that carbon is bad. If environmental groups actually cared about a reduction in CO2 emissions, they would embrace the shale revolution, but they do not.

A carbon tax will directly impact the Bakken and other tight-oil plays. Fewer than 14,000 unconventional wells have been drilled to date in the Bakken. That is less than 25 percent of the total number of wells that will be drilled to fully develop the shale play in North Dakota. Depending on demand and the price of oil, the North Dakota Department of Minerals Resources expects that it will take another 40 or 50 years to complete the drilling activity in the Bakken. But, if implemented, an escalating carbon tax will dramatically increase costs and reduce demand negatively impacting the economics of the tight-oil plays. Make no mistake, that is the goal.

The Moral Road

Energy producers have nothing to be ashamed of — carbon-based energy has improved the lives of billions of people across the planet. Abundant food and inexpensive and reliable energy continue to improve quality of life. It is time for the entire energy industry to take the moral high ground. The U.S. National Society of Engineering states that societal electrification (by coal) was the greatest engineering achievement of the 20th century, providing security and improved quality of life wherever it stretched. Today six out of seven people on this planet live in underdeveloped nations. A carbon tax will not help these people, it will shackle them.

In the U.S., environmental activists wage the war on carbon against “big coal” and “big oil” but it is the consumer — the citizens — who pay the cost. Hardest hit are the elderly, the poor and the children who benefit greatly from abundant, secure and inexpensive heat, electricity and transportation. On these faces is the true cost of the war on carbon.

Access to energy has increased life spans, improved health and living conditions and improved the economy, providing jobs. Our farmers, who feed the world, are heavily dependent on the oil and gas industry for the production and security of our nation’s food supply. Increased levels of CO2 are greening the planet, increasing the quality and quantity of food produced.

Some see the vital role that carbon-based energy must continue to play for future generations. Kirk Johnson from the National Rural Electric Cooperative Association (NRECA) represents 900 consumer-owned utility cooperatives, supplying electricity to one out of eight Americans. EPA rules should reflect the technology that exists today. The previous regulation didn’t do that, so we opposed it. We are researching new technologies including Carbon Capture and Storage (CCS), and the Dry Fork Station in Wyoming which is a test center for CCS research. We provide electricity to 42 milliom Americans, and 93 percent of persistent poverty areas.

The War on Carbon — Pick a Side

Shale producers should care about the war on carbon — it is vital to the long-term survival of the industry, and, more importantly, it is the right and moral thing to do.

The current administration in Washington supports the energy industry, but there is no guarantee that it will stay that way. Elections have consequences and those in power in the future could change things back and do more damage to the oil industry than before. All fossil fuels are targets — and if all in the industry do not stand together, then all will surely fall.

About the author: Bette Grande is a Research Fellow for energy and environment issues at The Heartland Institute. She served as a North Dakota state Representative from 1996–2014. Grande was a member of the House Appropriations Committee, Education and Environment Division. She was born and raised in Williston, North Dakota.

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