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Weinstein: Revenge of the hydrocarbons


The following appeared in the Feb. 23, 2012, edition of Fort Worth Star-Telegram. Economist Bernard Weinstein provided expertise for this story.

March 5, 2012

By Bernard L. Weinstein

Special to the Star-Telegram

 Last month, citing safety and environmental concerns, President Barack Obama vetoed construction of the $7 billion Keystone XL pipeline, though he did invite TransCanada to reapply for a permit using a different alignment. This decision continues a series of actions and inactions by the White House to make life difficult for America's fossil fuel industries.

It's no secret that the anti-carbon crowd wants to kill the Keystone XL pipeline, not because there are any serious issues regarding safety but because they hope that by stopping the pipeline they'll kill the Alberta oil sands. This is sheer nonsense. If the Canadians can't sell the oil to us, they'll sell it to Japan and China. And we can continue to rely on our friends in Venezuela to supply most of the crude oil to Gulf Coast refineries.

Though the president put in a plug for natural gas in his recent State of the Union address, more than a half dozen federal agencies, including the Environmental Protection Agency, want to regulate hydraulic fracturing, which has revolutionized natural gas production in the U.S., created more than 600,000 jobs, and helped reduce our dependence on imported energy.

Speaking of the EPA, we also have new regulations coming down the pike like the Cross State Air Pollution Rule (CSAPR) and the Utility Maximum Achievable Control Technology Rule (Utility MACT) that threaten to shutter dozens of coal-fired power generating plants by 2015 that provide almost 10 percent of the nation's electricity.

In addition, the president argues constantly that we need to hike taxes on the oil and gas industry to level the playing field for renewables like solar and wind. In fact, 76 percent of all energy tax breaks currently go to renewables though they account for only 2 percent of electric power generation. For every megawatt produced by solar today, the subsidy amounts to $776. For wind, it's $56. For fossil fuels, it's 64 cents.

The great irony is that despite the administration's war against fossil fuels, the industry is thriving. Last year was the third in a row that domestic oil production increased, a phenomenon we've not seen since the 1970s, when Alaskan oil came on stream. The 18 percent increase since 2008 is largely due to the application of hydraulic fracturing and other recovery techniques to oil shales in South Texas and North Dakota. Consequently, petroleum imports have dropped from 60 percent of domestic consumption in 2005 to about 45 percent today.

Domestic production of environmentally friendly natural gas also has been on a tear, growing in each of the last six years and reaching an all-time peak in 2011. Rising output has been accompanied by falling prices that have helped to hold down electricity costs and home-heating bills. Growing supplies of natural-gas liquids such as ethane, propane and butane are reviving the U.S. petrochemical industry, which had been suffering for years from high input costs.

America's fossil fuel industry has blossomed in spite of, rather than because of, policy interventions -- and without any new tax breaks or subsidies. Imagine what it would look like if the Obama administration embraced economic reality rather than its pipe dream of a completely carbon-free energy future?

We simply cannot meet all of the nation's future energy needs through renewables, efficiency and conservation alone. In reality, we need to continue investing in fossil fuels to power the American economy.

Bernard L. Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics in the Cox School of Business at Southern Methodist University in Dallas.
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