Young Voices in Energy: Essays on Innovation and Regulation in Energy

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Working oil pump in deserted district in the bright of the moon

Innovation and Energy

By Peyton Jenkins

In the wake of the announcement by the Biden campaign of their goal of a 100% carbon-free country by the year 2050, many states are scrambling to come up with the best, and in some unfortunate cases, most expensive and least affordable new energy plans.

States (including Texas) are working on multi-billion-dollar projects focused on renewable energy sources such as wind and solar. Some localities are taking it one step further with a ban on natural gas in all new buildings.

This might be a step in the right direction, or it might not. But one thing is for sure. A gross misunderstanding of the oil and natural gas business is pervasive throughout the country as some try to find new energies instead of improving the affordable, reliable and plentiful sources that we already have.

Oil, natural gas and coal are the backbone of the modern world. The world we have created came from creativity and innovation primarily (although not entirely) in the energy sector, not from government mandates.

The world as we know it is brought to us by oil and natural gas — the two primary sources for energy that are commonly thought of as “old” and not susceptible to improvement. People have it in their minds that we use oil, natural gas and coal the same way we used it 100 years ago with absolutely no innovation.

While climate change is a real concern for some, the notion that we are running out of oil and natural gas is just propaganda.

For years, students have been taught that the U.S. is running out of oil and using it for another few years would surely make the whole world melt. However, with new technologies came more ways to find and produce energy. That has resulted in the oil and gas industries being the most productive they have ever been.

At the same time, branding is a problem. It does not help that this type of energy is referred to as “traditional” energy and “fossil” fuels rather than organic energy. 

With respect to the environment, companies transforming the oil and natural gas industries are also working to minimize their environmental footprint.

One example of this can be found in Texas. There, oil and natural gas companies are improving processes to have fewer methane emissions and use carbon capture to help the environment. Companies have spent billions to reduce emissions.

Although sometimes met with criticism from the left, oil and natural gas industries are doing their part to make their industry better and safer while maintaining production, efficiency and affordability.

One concrete example of these industries doing their part is the Texas Methane and Flaring Coalition. This coalition consists of 40 Texas operators who plan to reduce methane emissions during production. These companies are not afraid to spend money to improve their environmental performance. 

In recent years, global oil and gas industries and producers have invested more than $300 billion toward greenhouse gas mitigation technology. ExxonMobil alone has invested $3 billion in the last five years in carbon capture projects intended to address climate change. Nationally, methane emissions from U.S. energy production have declined by 17%. 

These improvements should be recognized but instead are criticized by supporters of the new plans for “green” energy. 

In the past, companies and nations have lowered emissions through technology and innovation, not federal mandates. The air quality in the U.S. has improved dramatically over the last 40 years because of greater efficiency. In the last 25 years, greenhouse gas emissions in the U.S. have been flat or falling. This is a direct consequence of the creation and implementation of better technologies. 

Simply put, the ability of American citizens and companies to imagine, create and innovate means the best thing we can do right now for the environment is to continue to grow our knowledge and look for ways to improve.

We need to avoid expensive “solutions” that potentially compromise environmental gains. For renewable energy to equal the energy from oil and gas industries, solar panels and wind turbines would need to take up one-third of the land in the United States. This means that protected lands, thousands of trees and environmentally protected/endangered species would need to be destroyed to make room for giant panels and turbines.

An example of a renewable project gone awry is the Battle Born Solar Project in Mormon Mesa, Nevada. This project would cover 14 square miles, or 7,000 football fields, with solar panels. Not surprisingly, neighbors and environmental groups are united over their opposition to the plan, saying it would destroy their views and protected land.

As a reminder, these billion-dollar solar and wind projects, as well as electric vehicle production, are all subsidized by the taxpayers in the government’s attempt to have a “green” country.

In short, taxpayers are paying to cover one-third of the country with panels and wind turbines and the rest with electric vehicles.

How does such a thing happen?

The tactic that the Biden administration has adopted is to set an environmental goal so far in the future so that they will not be around when it is not achieved. They have created arbitrary dates and benchmarks that are vague enough that no one understands the actual costs needed for implementation, but the idea is solid enough to discuss as if it is real.

The best anyone can tell, President Biden’s energy plan would cost about $180 billion each year.

That means each American household, on average, will have to pay about $1400 a year to address climate change. Interestingly, when opinion researchers ask voters how much they are willing to spend on climate change, the median answer hovers around $20 a year. Most voters are unwilling to pay for or consider anything that looks like what the Biden administration has in mind.

Rather, voters think that innovation and consumer demand will drive whatever change may be necessary.

A survey done by MWR Strategies in February 2021 found that more than half of voters believe innovators, entrepreneurs or consumer demand are more likely to solve the problem of climate change rather than government action. Three in five Americans said that solutions to climate change will involve technological breakthroughs that will help the economy and create new economic opportunities.

Interestingly, when voters were asked whether the federal government should mandate the kind of car they buy, 80% said no.

The issue facing energy and climate change is that lawmakers are quick to impose regulations without allowing people the chance to reflect on how important reliable and affordable energy is to them, especially relative to the importance they place on climate change.

People do not want the government to tell them what to do, whether we are talking about choice of car or choice of energy resource.

Regulation and Energy

By Chandler Rebel

With a new administration that leans very much against the organic fuel industry, one might think that major corporations such as Exxon, Texaco and BP would be prepared to aggressively advocate for themselves and their products in Congress and elsewhere.

One might think that slashing restrictions and advocating for the free market would be at the top of the agenda. 

Surprisingly, this is and has not been the case. Unfortunately, many of these large corporations are involved in misguided proposals for things like carbon taxes and have spent millions of dollars in lobbying without directing their efforts at the actions of the Biden Administration. 

Whether this is their way of appeasing climate change activists or whether the companies truly care about their emissions profiles is uncertain. It seems unlikely, however, that such actions are the product of completely pure motivations.

While taxes and regulations affect every entity differently, one common factor is that the more money and the more lawyers one has (or can afford), the better chance they have of surviving under any regulatory regime.

Mid-sized and smaller operations are not so lucky. They are compelled to play by the same rules and regulations but rarely have the same capital or the same number of lawyers needed to compete and, in some instances, stay afloat.

In a sense, a modern-day oil oligarchy has formed and is trying to take advantage of the different classes, sizes, and wealth of natural gas and drilling operations. When lobbyists for the integrated majors set the rules and regulations, the smaller players in the industry face the risks.

In such an environment, capitalism cannot function properly. These major players take advantage of their assets to sometimes impoverish their competitors. In circumstances where competition is essential to creativity and innovation, this approach is a problem.

In many instances, increased regulation makes it a challenge to find ways to explore for and produce more oil and natural gas and to find ways that make such production sustainable and environmentally advantageous.

Existing regulations limit innovation and help preserve the status quo. Powerful, well-capitalized companies own much of the supply chain. It is difficult to oppose their preferences.

Smaller, less well-capitalized companies are under constant stress as they try to live within the constraints set by the government or the marketplace, oftentimes with substantial input from their larger competitors.

In 2020 alone, over 100 oil and gas companies declared bankruptcy, and more are unfortunately poised to join them. Though much of this can be attributed to various factors, including COVID-19, this is not a new phenomenon.

Hobbling competition and one’s competitors will always end poorly, and the inability of some to think even a few years into the future almost guarantees sub-optimal outcomes for everyone.

Slowing innovation for the sake of profit is a selfish tactic that damages the entire industry and nation. It should surprise no one that these companies that seek to exploit regulatory processes are hedging their bets by investing some of their resources into alternative energy.

It is as if they have already decided and prepared for an inevitable collapse of the oil and gas market.

The Authors:

Peyton Jenkins is a rising senior at the University of Georgia and has just completed an internship at the American Energy Alliance.

Chandler Rebel is a rising senior at the University of Georgia and has just completed an internship at the American Energy Alliance.

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