Report estimates losses if US adopts ‘keep-it-in-the-ground’ policy

It would cost the US an estimated $11.3 billion/year of royalties, 380,000 jobs, and $70 billion/year of gross domestic product if proposals to stop oil, natural gas, and coal extraction from federal lands and offshore water were adopted, the US Chamber of Commerce’s Institute for 21st Century Energy said in a recent report.

Twenty-five percent of US oil, gas, and coal production would be halted under such policies that have been advanced by a number of environmental organizations, the institute said.

“American voters deserve to understand the real-world impacts of the proposals that candidates and their allies make,” said Karen A. Harbert, the Energy Institute’s president as the organization released the first report in its Energy Accountability Series on Aug. 24.

“In an effort to appeal to the ‘keep-it-in-the-ground’ movement, a number of prominent politicians have proposed ending energy production on federal lands, onshore and off,” Harbert said. “Their proposals will have a direct, harmful effect on the American economy, and in particular decimate several states that rely heavily on revenues from federal land production. Given the implications, these policy proposals should not be taken lightly.”

Certain states and regions would be disproportionately affected by a cessation on federal-lands energy development, the report noted. For instance, Wyoming would lose $900 million in annual royalty collections, which represents 20% of the state’s annual expenditures. New Mexico could lose $500 million, 8% of its total General Fund revenues. Colorado would lose 50,000 jobs, while the Gulf states—Texas, Louisiana, Mississippi, and Alabama—would lose 110,000, it said.

“Since 2010, the share of energy production on federal lands has dipped because of increasing regulatory hurdles from the Obama administration,” Harbert said. “Nevertheless, production on federal lands and waters still accounts for a quarter of all oil, gas, and coal produced. If that were to end, it would hit western and Gulf Coast states particularly hard, and could result in production moving overseas, which would harm our national security and affect prices.”

Two scenarios presented

The report provides two scenarios. The first examines the economic output that would be lost or placed at risk if energy development was immediately stopped on all federal acreage. The second analyzes the cumulative impacts of immediately ceasing new leasing while leaving existing leases in place.

While the aforementioned figures apply to the first scenario, the second also has major impacts, with $6 billion in lost revenues over the next 15 years, and nearly 270,000 jobs lost, the Energy Institute said.

The report uses publically available data on jobs, royalties, and production levels and the IMPLAN macroeconomic model. A technical appendix explains the methodology and sources of data.

The Energy Institute said that the report is the first in a series that will attempt “to better understand (and quantify where possible) the real world, economy-wide consequences of living in a world in which candidates’ rhetoric on critical energy issues were to become reality.

“Too often, there is a temptation to dismiss statements made by candidates as things said “off the cuff, or in the ‘heat of the moment,’ or offered up merely to ‘appeal to their base.’ This is incredibly cynical, and it needs to change,” it said. “A candidate’s views and the things he or she says and does to win the support of interest groups have a real impact on how policy is shaped, and ultimately implemented.

“That is especially true on energy issues today, as groups continue to advance a ‘Keep It In the Ground’ agenda that, if adopted, would force our country to surrender the enormous domestic benefits and clear, global competitive advantages that increased energy development here at home have made possible,” the Energy Institute said. “Accordingly, candidates and public opinion leaders should be taken at their word, and this series will evaluate what those words mean.”

Contact Nick Snow at nicks@pennwell.com.

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