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More Biodiesel Fraud Uncovered as RFS Deadline Looms

January 22, 2014 by 1 Comment

Two more biodiesel companies have been accused of fraud less than two weeks before the Environmental Protection Agency (EPA) will likely soon finalize regulations mandating how much biodiesel must be blended into gasoline this year. According to the Associated Press, the two companies are accused of generating fake ethanol credits, known as Renewable Identification Numbers (RINs), and selling them for $37 million:

Federal prosecutors say a 63-year-old Las Vegas man and a 64-year-old Australian citizen who lived in Canada have been indicted in Nevada on charges that they bilked a U.S. biodiesel fuel program out of more than $37 million.

A 57-count indictment unsealed Wednesday in U.S. District Court in Las Vegas accuses James Jariv and Nathan Stoliar of charges including conspiracy, wire fraud, obstruction of justice and conspiracy to launder money.

Jariv was arrested Tuesday in Las Vegas, where federal authorities say they froze bank accounts and seized property. Stoliar lives in Australia.

Jariv and Stoliar are accused of using two firms — City Farm Biofuel in Vancouver, Canada, and Global E Marketing in Las Vegas — to generate millions of dollars’ worth of federally-funded credits known as renewable identification numbers.

This marks the sixth company accused of biodiesel fraud since 2012. Under the Renewable Fuel Standard (RFS), refiners are required to purchase and blend increasing amounts of biofuels, including biodiesel, into the nation’s fuel supply. Failure to do so can result in hefty fines, even when the fuels do not actually exist. These fines are ultimately borne by consumers in the form of higher gasoline prices.

Even if refiners purchase the required fuel, they’re not out of the woods yet. To demonstrate compliance with the mandate, federal law forces refiners to buy and trade RINs, a string of numbers used for identification when the ethanol industry produces a gallon of ethanol. But refiners who unknowingly purchase fraudulent RINs can still face fines simply for trying to comply with federal law. Once again, these costs result in higher prices at the pump for American motorists.

A creation of government regulation, the RIN market serves no purpose other than to demonstrate compliance with the RFS, making it ripe for abuse. The federal ethanol mandate has created a system in which refiners can be fined either for failing to purchase fuels that do not exist or for unknowingly purchasing fraudulent fuel credits. Both of which raise gasoline prices on Americans.

With the public comment period for the 2014 RFS closing next week, the EPA should waive all compliance requirements for refiners this year. That would bring temporary relief for American motorists. Ultimately, the only permanent solution is for Congress to repeal the RFS.

If you agree that the RFS is broken, take action by signing our petition.

Filed Under: Facts, News, Products and Power, Renewable Fuel Standard, Threats Tagged With: , , , , ,

POLL: Spending Issues Still Reign Supreme

January 17, 2014 by Leave a Comment

WASHINGTON – With a number of spending issues on the horizon such as what to do with green energy subsidies and the $1 trillion farm bill, which is currently moving through Congress, the American Energy Alliance (AEA) today released a new poll focusing on government spending. MWR Strategies conducted the nationwide survey with a sample of 1000 likely voters and a margin of error of 3.1 percent.

Results show that overall, voters—especially those who support Republicans—want Washington to remain focused on economic and fiscal issues. While other issues such as Obamacare continue to be top priorities, they are ultimately rooted in larger concerns about the nation’s fiscal and economic health.  An overwhelming 86 percent of Republican voters believe Congress can work on health care and spending issues at the same time.

AEA President Thomas Pyle released the following statement:

“The message to lawmakers from this poll is that their constituents expect them to walk and chew gum at the same time.  They shouldn’t use the disastrous impact of Obamacare or other major issues as an excuse to abandon commonsense, fiscal responsibility.  Americans want Washington to get out of the way of job creators, increase our supply of affordable energy and cut wasteful spending regardless of the political calendar.  There’s no reason to trade our nation’s long-term fiscal health for a short-term political wins.”

Reducing spending is still a top priority on the minds of Americans and Congress can take important steps toward achieving that goal. For example, they must ensure there is accountability and oversight in the farm bill’s energy title and they must prevent the retroactive extension of the Wind Production Tax Credit.

In addition, they should work towards ending the billions in special interest giveaways to failing “green” energy companies and replace such harmful policies with pro-growth initiatives that encourage the development of America’s vast energy resources, which would create millions of new jobs and improve the nation’s fiscal and economic outlook well into the future.

Key Findings:

  • As voters look toward the new year, four out of five (79 percent) said that Congress and the President should make jobs and the economy one of their top priorities for 2014.
  • Other top priorities included health care (60 percent) and federal spending (59 percent).
  • 35 percent of voters thought attention should be on energy independence.
  • About one-quarter (26 percent) believed that the farm bill should be among top action items for Washington.
  • By a margin of 86 percent to 10 percent, Republican voters think it is possible for Republicans in Congress to work both on spending issues and health care issues at the same time.
  • Eighty-two percent of Republican voters think that Republicans in Congress should use the need to raise the debt limit as an opportunity to make progress toward meaningful reductions in government spending.
  • Only a plurality (47 percent) of Republican voters support the farm bill. By and large, Republican voters favor the House’s approach to the farm bill that makes much of the spending in the farm bill optional – as opposed to mandatory (54 percent to 19 percent).

This survey of 1,000 likely voters was conducted using landline (n=535), cell phone (n=115), and online interviews (n=350). It was fielded Dec 29-30, 2013 and Jan 2-4, 2013.The survey has a margin of error of +/-3.1% at the 95% confidence interval.

To read the full memo, click here.
To see the results of the survey, click here.

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Filed Under: Press Releases Tagged With: , , ,

AEA Suspends Carbon Tax Accountability Ads

January 13, 2014 by Leave a Comment

WASHINGTON – Following a chemical spill in West Virginia’s Elk River, the American Energy Alliance has decided to temporarily suspend a $350K accountability initiative targeting Congressman Nick Rahall (D-W.Va.) for his past support of a carbon tax. AEA President Thomas Pyle released the following statement:

“Given the more pressing concern facing West Virginians as a result of the recent chemical spill in the Elk River, the American Energy Alliance is pulling our three week initiative to promote accountability for Rep. Nick Rahall over his vote to support a carbon tax. While we remain staunchly opposed to a carbon tax and committed to holding public officials accountable for the actions, now is not the time for this advertisement. Our efforts in the next several weeks in West Virginia are more rightly directed at helping the families in the affected region.”

The American Energy Alliance is encouraging its nationwide activist network to contribute to charitable organizations, like the Americans for Prosperity Foundation, who are on the ground in West Virginia helping to distribute water and other essential supplies to those affected by the chemical spill.

To help the families in West Virginia, click here.

To view the pulled AEA advertisement, click here.

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Filed Under: Press Releases Tagged With: , ,

'Cleantech Crash' Highlights Obama's Failed Energy Agenda

January 13, 2014 by 1 Comment

Reality is starting to set in for President Obama’s plans to radically alter the energy economy. On Sunday, 60 Minutes, which had previously been a cheerleader for subsidized “green” energy, ran a piece titled “The Cleantech Crash.” Meanwhile, the Wall Street Journal ran a story which shows that trucks and SUVs are driving increases in auto sales, not green cars as Obama envisioned. President Obama’s highly-subsidized green energy economy is just not happening.

Since 2009, the administration has funneled billions of taxpayer dollars to politically-connected companies pushing “green” energy chimeras that customers don’t want. After all, if consumers really wanted the products, there would be no need for the government subsidies and handouts. 60 Minutes documents the rise and fall of green energy in a recent segment CBS News Correspondent Leslie Stahl introduces the segment thusly:

About a decade ago, the smart people who funded the Internet turned their attention to the energy sector, rallying tech engineers to invent ways to get us off fossil fuels, devise powerful solar panels, clean cars, and futuristic batteries. The idea got a catchy name: “Cleantech.”

Silicon Valley got Washington excited about it. President Bush was an early supporter, but the federal purse strings truly loosened under President Obama.  Hoping to create innovation and jobs, he committed north of a $100 billion in loans, grants and tax breaks to Cleantech.  But instead of breakthroughs, the sector suffered a string of expensive tax-funded flops. Suddenly Cleantech was a dirty word.

The piece focuses on Vinod Khosla, dubbed “the father of the Cleantech revolution.” Stahl toured of one Khosla’s green energy ventures, KiOR, an advanced biofuel plant in Columbus, Mississippi. Despite Kholsa’s insistence that “there is no downside” to cellulosic biofuel, Stahl correctly points out that “[Khosla’s] clean green gasoline costs much more than what you pay at the pump.  And despite hundreds of millions of dollars invested—including 165 million of Khosla’s own money, KiOR is still in the red, and the manufacturing is so complex, it is riddled with delays.”

As IER has explained on these pages, KiOR’s stock tumbled after the company missed its second quarter production targets for 2013 by a whopping 75 percent. Not long after, a KiOR investor filed a lawsuit accusing the company of issuing “false and misleading statements and omissions,” even as Khosla tried to “reassure investors” that production was on schedule. Khosla’s KiOR plant was one of two cellulosic biofuel facilities on which the Environmental Protection Agency (EPA) based its unrealistic cellulosic biofuel mandate for last year.

For 2013, EPA essentially mandated the production of 4 million gallons of cellulosic ethanol, but cellulosic producers such as KiOR only managed to produce 353,673 “gallons”[1] from January through November of last year.

It is now obvious, as the 60 Minutes piece explored, that the Cleantech revolution is not ready for reality. Spending billions of dollars and creating special mandates for companies like KiOR has been a massive waste of taxpayer dollars.

Another massive waste of taxpayer dollars in the Administration’s attempt to “green” the U.S. automobile fleet. In President Obama’s 2011 State of the Union, he called for America to “become the first country to have a million electric vehicles on the road by 2015.” But according to the recently-released automotive sales data for 2013, sales of trucks and SUVs are leading the way, not “green cars.” In fact, the sales of light trucks (such as the Ford F-series and GMC Sierra) and SUVs outsold passenger cars in 2013. The Wall Street Journal reports:

But as gas prices drifted lower last year, U.S. consumers trading old vehicles for new favored pricey pickup trucks, SUVs and luxury cars. Ford, for example, boosted sales of its F-150 pickup by 8.4% in December over a year ago, while sales of its subcompact Fiesta and compact Focus cars plunged by 20% and 31% respectively.

For the 32nd year in a row, Ford’s F-series was the best-selling model line in the U.S., delivering 763,403 vehicles. By comparison, Ford sold just 35,210 of its C-Max hybrid models last year, while GM sold just 23,094 plug-in hybrid Chevrolet Volts.

The reality is that President Obama’s vision for what cars he thinks Americans should drive is fundamentally different from what Americans actually want to drive. While the full electric and plug-in electric vehicles that President Obama has lavishly subsidized increased in sales in 2013, they only tallied 96,000 vehicles, or 0.6 percent of total sales.

Americans want comfortable, safe, reliable vehicles that provide people with flexibly to take care of their families and work responsibilities. Super fuel efficient or electric cars are much smaller than trucks or SUVs and do not provide the needed flexibly for the vast majority of Americans.

The 60 Minutes piece demonstrates that subsides and mandates of themselves cannot create economically-viable products. The same is true for the automotive market. The American people aren’t dumb. We use the products use we use and drive the cars and trucks we drive for the simple reason that they work best for our lives. We want the best products at the best prices, but sadly Washington bureaucrats have other ideas in mind.

[1] Technically cellulosic RINs.

Filed Under: Facts, News, Products and Power, Threats Tagged With: , , , ,

How the Ethanol Lobby 'Celebrates' Mandates on Americans

January 10, 2014 by Leave a Comment

On the sixth anniversary of the expansion of the Renewable Fuel Standard (RFS) in 2007, the Renewable Fuels Association (RFA) issued a “celebratory” document explaining why they were so thrilled with the mandates on American refiners. The funny thing is, we don’t need to consult outside sources to see what’s wrong with the RFS or the claims of its proponents; we need only highlight certain parts of the RFA’s own release.

As the RFA’s document itself puts it, the expanded Renewable Fuel Standard (RFS) “required rapid growth in the consumption of renewable fuels, culminating in 36 billion gallons in 2022,” and furthermore “required renewable fuels to meet certain environmental performance thresholds and created specific categories for cellulosic and advanced biofuels.” Prima facie, a mandate that forces people to buy something they don’t want is suspect, but let’s see how the RFA folks justify it. They write:

Just six years later, tremendous progress has been made toward achieving the original objectives of the expanded RFS. Renewable fuel production and consumption have grown dramatically. Dependence on petroleum—particularly imports of refined products—is down significantly. Greenhouse gas emissions from the transportation sector have fallen. The value of agricultural products is up appreciably. And communities across the country have benefited from the job creation, increased tax revenue, and heightened household income that stem from the construction and operation of a biorefinery. [Bold added.]

Yikes! They come right out and say that one of the “original objectives” of the RFS was to increase the value of agricultural products—in other words, to force Americans to pay more for products from farmers. Indeed, later in their report they even have a nice table to quantify their success: 

So, “net farm income” is up 87 percent relative to the year before the financial crisis. Is that true for other sectors of America’s workforce?

But wait, it gets funnier. Look at how the RFA deals with the problem of gasoline prices. Remember, one of the main arguments for an expansion of ethanol is that it will (allegedly) reduce prices at the pump:

This brief analysis examines how the world has changed since passage of the expanded RFS in 2007. And while substantial progress has been made toward accomplishing the goals of EISA, the RFS has just gotten started. More work remains to be done, especially in terms of reducing petroleum imports and lowering prices at the pump. [Bold added.]

Now from that phrasing—saying “More work remains to be done”—the writers make it sound as if yes, the expansion of ethanol has indeed made driving more affordable, but shucks it’s just not good enough for the folks at RFA.

In reality, however, gasoline prices have gone up since the RFS was strengthened, and even wholesale ethanol prices are up more than 10 percent:

Another problem is that the RFA tries to take credit for the large reduction in crude oil imports. Yet this has little to do with ethanol, and much to do with increasing domestic U.S. oil production. According to EIA, average U.S. crude oil production in 2007 was 5.1 million barrels per day, but by October 2013 it had risen to 7.8 million barrels per day. On the other hand, crude oil imports in 2007 averaged 10.0 million barrels per day, but by October 2013 had dropped to 7.5 million barrels per day. In other words, during the period that RFA wants to evaluate the “success” of the Renewable Fuel Standard, domestic crude oil production went up by 2.7 million barrels per day, while crude oil imports fell by 2.5 million barrels per day. The change in oil imports is thus entirely explained by expanded domestic production, not by “weaning ourselves from oil.”

We could go on and on. For example, the RFA document pooh-poohs claims that the ethanol mandates have put pressure on food prices. Yet its own table shows that from 2007-2013, world food prices increased 7.8%, while U.S. food prices increased 13.8%. So that means food prices increased some 75% more in the U.S. than in the world as a whole, during the period when the RFS ramped up in the U.S. (but was not applicable to the rest of the world, of course). How is this supposed to reassure the reader that the RFS didn’t increase food prices?

In conclusion, even the Renewable Fuels Association’s own data destroy the story they’re trying to spin: The only real thing to “celebrate” about the RFS is that it made a certain group richer at the expense of others. No one denied that the government had the power to redistribute wealth. The objection to the RFS and other mandates is that they make the economy less efficient and hence make Americans poorer on average.

IER Senior Economist Robert P. Murphy authored this post.

Filed Under: Facts, News, Products and Power, Renewable Fuel Standard, Threats Tagged With: , , , , , ,

RAHALL CANNOT ESCAPE HIS RECORD

January 8, 2014 by Leave a Comment
AEA Holds W.V. Congressman Accountable for Carbon Tax Budget Vote

WASHINGTON – The American Energy Alliance began today airing three weeks of radio and television advertisements holding West Virginia Congressman Nick Rahall (D) accountable for his controversial support of a budget that includes a carbon tax. West Virginia is the second largest producer of coal in the United States and the state’s electricity needs are met almost entirely by coal-fired power plants. If enacted, a carbon tax would be detrimental to Congressman Rahall’s constituents and the West Virginia economy.
AEA President Thomas Pyle released the following statement:

“When Congressman Rahall cast his vote in favor of a carbon tax, he clearly voted against the interests of West Virginians. Coal is the lifeblood of the West Virginia economy, but a carbon tax would kill coal and harm West Virginia families and all Americans. Not only do West Virginians rely primarily on coal for affordable electricity, but the coal industry also provides tens of thousands of good paying jobs in the state. By supporting a carbon tax, Congressman Rahall has shown his disregard for these jobs and the well being of his constituents.

“Actions speak louder than words. And by denying his actions in support of a carbon tax, Rahall is not only hurting his constituents in coal country, but adding insult to injury. West Virginia families deserve better from their elected officials.”

The television advertisements will air in the West Virginia markets of Bluefield-Beckley-Oak, Charleston-Huntington, Clarksburg-Weston, and Roanoke-Lynchburg. The radio ads will air in Beckley, Bluefield, Huntington-Ashland, and throughout other parts of the state. The total cost of the ad buy is approximately $350,000.

To read the fact sheet supporting AEA’s “Let’s See” ad, click here.

To view AEA’s “Let’s See” television ad, click here.

To read the fact sheet supporting AEA’s “Play Straight” ad, click here.

To listen to AEA’s “Play Straight” radio ad, click here.

To view AEA’s previous carbon tax ads, click here and here.

Filed Under: Press Releases

DOE to Americans: Want Heat? Pay More.

January 8, 2014 by Leave a Comment

Working through the auspices of the Regulatory Studies Program of the Mercatus Center, I have recently published a public comment on the Department of Energy’s proposed energy efficiency standards for residential furnace fans. Truly interested readers can follow the link and read the (brief) comment in its entirety, but in the present post I want to highlight some of the gaping holes in the government’s cost/benefit analysis to (attempt to) justify the regulation. The two takeaway messages are: (1) The government ignored its own procedural guidelines when calculating the alleged benefits from reduced carbon dioxide emissions. (2) The government admits it will make furnaces more expensive for many consumers—for a total incremental cost of either $3.1 billion or $5.8 billion, depending on the discount rate used—but is forcing that outcome anyway because those consumers can’t be trusted to make rational decisions when considering energy efficiency.

First let’s deal with the alleged benefits of reduced carbon dioxide emissions. Because the proposed rule would make furnace fans more energy efficient, DOE claims that the rule will, over time, lead to less energy use and hence lower emissions. To put a dollar value on the social benefits of that reduction in emissions, DOE uses the so-called “social cost of carbon,” which was estimated by the Obama Administration’s Interagency Working Group. The DOE claimed that the benefits from the emission reductions would be some $11.5 billion in present-value terms.

In my testimony to the Senate, I walked through the numerous problems with the Working Group’s analysis. For one thing, their estimate of the “social cost of carbon” fails to follow the guidelines on calculating economic impacts put out by the White House Office of Management and Budget (OMB). Specifically, OMB (the office in the White House that oversees the creation of new regulations) requires that regulatory cost/benefit analyses be performed using both a 3 percent and a 7 percent discount rate, and that the values be calculated from a domestic (not a global) perspective.

This puts the DOE and other federal agencies in an impossible situation. They are required to conduct cost/benefit analyses using a 7 percent discount rate, but they haven’t been provided with an appropriate estimate of the social cost of carbon using such a rate. We thus have the hilarious situation in which federal agencies have to report figures at “7 percent” but then explain in a footnote explaining that they’re actually using a different number. I already blogged about this in reference to a previous federal analysis, but the same pattern holds true with regard to DOE’s proposed rule for furnace fans.

Overall, the DOE’s analysis claims either $23.2 billion or $43.8 billion in total benefits from the proposed rule (depending on the discount rate used), contrasted with either $$3.1 billion or $5.8 billion in incremental furnace costs to consumers. Of those total benefits, $11.5 billion are attributed to reduced carbon dioxide emissions. Adjusting for just the two issues I’ve described above (the more accurate discount rate and domestic versus global calculations) would reduce the benefits from emission reductions to a mere $547 million, an enormous change.

Yet things get worse. At least half (depending on the discount rate used) of the alleged benefits from the DOE’s proposed rule on furnace fans comes not from reduced emissions, but from alleged cost savings to consumers. In other words, the DOE is arguing that imposing minimum energy efficiency standards on residential furnace fans will make Americans richer, because the higher initial price of the units will eventually “pay for itself” by lower energy bills.

Note that this isn’t even a “negative externality” argument such as they use with carbon emissions. No, here the DOE is engaging in pure paternalism, saying that American consumers are too shortsighted to recognize the benefits of lower energy bills. There are several academic papers explaining what’s wrong with this line of attack (which I reference in the formal comment linked above). In a nutshell, there are various reasons that consumers might quite “rationally” buy cheaper furnaces, even knowing that in the long run they will have higher energy bills. For just one example: Consumers might not be able to buy furnaces at a 3 percent finance rate, which the DOE analysis assumes (in one set of calculations).

For those wishing to see just how strained the federal government’s arguments are for imposing new regulations on American businesses and consumers, I encourage you to skim my public comment. It’s not fun reading, but it is instructive.

IER Senior Economist Robert P. Murphy authored this post.

Filed Under: Emissions Standards, Facts, News, Products and Power, Threats Tagged With: , , , ,

The Latest Case of Ethanol Fraud

January 6, 2014 by Leave a Comment

The Environmental Protection Agency (EPA) has accused another biofuel company of generating and selling fraudulent Renewable Identification Numbers (RINs), marking the fourth case of RIN fraud since the federal ethanol mandate was passed in 2005.

A RIN is a string of numbers used for identification when the ethanol industry produces a gallon of ethanol. Refiners acquire RINs as proof of purchase when they buy ethanol from producers, as required by federal law. These RINs—a creation of government regulation—have no intrinsic value other than to demonstrate compliance with the federal ethanol mandate, making them ripe for abuse.

Which is exactly what has happened. In a notice of violation issued on December 18, EPA claims that e-Biofuels, LLC, a subsidiary of Imperial Petroleum, Inc., generated and sold more than 33.5 million invalid biodiesel RINs between July 2010 and June 2011. EPA claims the company never produced the biodiesel.

The Renewable Fuel Standard (RFS) requires refiners to purchase and blend increasing amounts of biofuels into gasoline. Refiners who unknowingly purchase fraudulent RINs, which are required to demonstrate compliance with the biofuel mandate, can be held financially responsible for the illegal activity of biofuel producers. As Charles Drevna, president of the American Fuel & Petrochemical Manufacturers (AFPM), explains:

EPA unfortunately continues to hold obligated parties responsible for illegal activities perpetrated by biodiesel producers such as E-Biofuels. Following the EPA’s initial imposition of penalties against obligated parties who innocently relied upon buying government-mandated quantities of biodiesel from EPA-registered producers on an EPA-controlled trading system, the industry developed due diligence programs designed to reduce the risk of purchasing fraudulent RINs. In the absence of an EPA-approved affirmative defense tied to reasonable due diligence standards, the industry remains unfairly exposed to a system that actually penalizes the victim of fraud rather than focusing on the perpetrator of the crime. This most recent indictment increases the total number of invalid RINs to over 170 million.

EPA has entered settlement agreements with numerous refiners who were sold invalid RINs, many of which require refiners to pay significant civil penalties simply for trying to comply with federal law. Refiners have also been fined for failing to purchase and blend cellulosic biofuels, even though none existed at the time.

This latest violation comes after the U.S. Justice Department indicted in September six individuals, including four executives at e-Biofuels, on 88 counts including wire fraud, money laundering, and securities fraud for selling invalid biodiesel RINs. According to the indictment, e-Biofuels defrauded customers out of more than $55 million while the company collected as much as $35 million in federal tax credits. The Justice Department called it “the largest tax and securities fraud scheme in Indiana history.”

Other alleged violators include Green Diesel, LLC, Absolute Fuels, LLC, and Clean Green Fuels, LLC. These three companies are accused of generating and selling more than 140 million RINs for biodiesel that was never produced. Officials at Absolute Fuels and Clean Green Fuels were sentenced to prison and ordered to pay restitution for their crimes.

The latest RIN fraud case provides further evidence that the federal ethanol mandate is fundamentally flawed. Under the RFS, refiners can be fined either for purchasing RINs that they did not know were invalid or for failing to purchase fuels that do not exist. This creates a lose-lose scenario for refiners who are simply trying to comply with federal law. The only permanent solution is for Congress to repeal the RFS.

IER Policy Associate Alex Fitzsimmons authored this post. 

Filed Under: Facts, News, Products and Power, Renewable Fuel Standard, Threats Tagged With: , , , , ,

For America, 2013 Was The Year of Energy

January 3, 2014 by Leave a Comment

United States oil production has passed yet another milestone, reaching its highest level in 25 years. According to the EIA, the oil industry produced 8.075 million barrels per day in the first week of December, the most since October of 1988. This increase in production is largely occurring on state and private lands and has been a rare bright spot for an otherwise struggling economy.

Technological strides in hydraulic fracturing and horizontal drilling have made it possible and economical for oil producers to tap into America’s vast shale resources. North Dakota is one of the states leading the way. Development of the Bakken shale play, which covers much of the western part of the state, has transformed North Dakota into one of the nation’s top oil producing states. This past October, North Dakota’s oil production reached a record high of 941,000 barrels per day and state officials believe that production will surpass one million barrels per day early in 2014. This dramatic increase is remarkable, especially given that the state produced just 124,000 barrels per day in 2007.

Texas, already America’s biggest oil producer, has also been a key contributor to the domestic shale revolution. The Lone Star State saw its oil production skyrocket from 1,072,000 barrels per day in 2007 to 2,726,000 barrels per day in September 2013, a 154 percent increase.  These record setting increases have put America on pace to surpass Saudi Arabia as the world’s leading oil producer in 2015.

The surge in oil production has not only put the U.S. on a path toward greater energy security, but it has also created a new frontier for Americans looking for work. From 2007 to 2012, the oil and gas industry added 162,000 jobs, a forty percent increase, compared to just a one percent increase in total private sector employment. The largest job growth has been in the support sector, which includes exploration, excavation, and well construction. The support sector alone has added 102,000 jobs since 2007, employing a total of 286,000 people by the end of 2012.

The areas where this increased production is occurring are enjoying low unemployment compared to other areas of the country. Once again, North Dakota is the most striking case of this, as the state is enjoying a 2.7 percent unemployment rate.

Although the Obama administration has taken credit for the uptick in production and jobs, this has actually occurred in spite of the administration’s policies. As an IER study shows, the amount of oil and natural gas currently being blocked from production by the federal government is staggering. According to the report, unlocking federal lands and waters to energy development would result in the following:

  • A GDP increase of $450 billion annually in the next 30 years.
  • $14.4 trillion cumulative increase in economic activity over the next 37 years.
  • Nearly 2 million jobs annually over the next thirty years.

In other words, the U.S. is just scratching the surface of its energy production potential. Opening up federal lands and waters to energy production would spur true economic growth, and not just in the energy sector. As the chart below demonstrates, domestic energy production is the catalyst for job creation throughout the economy.

This most recent milestone demonstrates once again that America is a world leader in energy production. On top of this milestone, the U.S. recently surpassed Russia as the world’s top producer of oil and natural gas. This energy renaissance has created hundreds of thousands of jobs and brought affordable energy to the American people, but it is just a glimpse of the U.S.’s energy potential. Unfortunately, as long as the Obama administration keeps federal lands and waters under lock and key, the U.S. will not fully reach that potential.

IER Press Secretary Chris Warren authored this post.

Filed Under: Facts, News, Products and Power Tagged With: , , , ,

Is the Administration Trying to Regulate Hydraulic Fracturing Through OSHA?

December 19, 2013 by Leave a Comment

The federal rulemaking process depends on sound science, especially when human lives are at stake. A proposed rule from the Occupational Safety and Health Administration (OSHA) would stiffen regulations for crystalline silica, a group of minerals used in numerous industries, including hydraulic fracturing. Prolonged exposure to respirable crystalline silica is associated with silicosis, an incurable disease that causes impaired respiratory function and scarring of the lungs. Unfortunately, OSHA’s proposed rule fails the sound science test.

OSHA’s rule relies on outdated data and ignores declines in silicosis mortality rates, according to Susan Dudley and Andrew Morriss of The George Washington University Regulatory Studies Center. Moreover, the rule would impose enormous costs on American manufacturers, including oil and gas companies involved in hydraulic fracturing.  As Dudley and Morriss explain in a public interest comment submitted to OSHA:

OSHA faces multiple challenges in devising a regulatory approach that will meet its statutory goal of reducing significant risk. However, the greatest challenge to reducing risks associated with silica exposure is not lack of will (on the part of employers or employees) but rather lack of information. Unfortunately, OSHA’s proposed rule contributes little in the way of new information, particularly since it is largely based on information that is at least a decade old, which is significant given the rapidly changing conditions observed between 1981 and 2004. [Emphasis added]

In addition to using old data, OSHA “does not recognize or attempt to explain the decline in silicosis mortality” over the last three decades, according to Dudley and Morriss. As the following chart from the Centers for Disease Control shows, silicosis deaths dropped 93 percent between 1968 and 2002.

 OSHA graph

By ignoring the precipitous decline in silicosis mortality, OSHA “misses opportunities to identify and encourage successful risk-reducing practices,” according to Dudley and Morriss. In other words, OSHA’s incomplete analysis has the potential to hurt the very workers it is designed to protect.

Dudley and Morriss also find that OSHA’s flawed approach is “certain to overstate the risk-reduction benefits attributable to the rule,” adding that “OSHA’s estimated benefits (of the stricter standards) are less than what would be projected if past trends were simply to continue.” The problem, of course, is that it is impossible to properly assess costs and benefits without recent data.

OSHA’s proposed rule represents the Obama administration’s latest attempt to undermine America’s shale energy renaissance, which would not be possible without hydraulic fracturing. By OSHA’s own calculations, the proposed rule would impose as much as $658 million in annual compliance costs, with the hydraulic fracturing industry incurring annual costs of up to $28.6 million.

OSHA has a statutory obligation to protect workers. But regulations, particularly those designed to protect human health, should be based on sound science and thorough analysis. OSHA fails on both counts, relying on outdated data and failing to discuss declining silicosis mortality rates. OSHA’s proposed rule not only threatens to undermine hydraulic fracturing operations responsible for America’s domestic energy boom, but it is also a disservice to the workers that OSHA is obligated to protect.

IER Policy Associate Alex Fitzsimmons authored this post.

Filed Under: Facts, News, Products and Power, Threats Tagged With: , , ,
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