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1

Message from the


President and CEO
The State of American Energy represents the oil and natural gas industry’s
perspectives on the vital issues surrounding energy and environmental policy
at a critical time to our nation’s economy.

Through this report, we examine ways in which the oil and natural gas industry
is contributing to U.S. economic growth, job creation and energy security—and
areas where we will contribute further. We also provide recommendations on how
industry and policymakers can work together to address our energy and economic
challenges through a combination of industry commitments and investments, as
well as sound legislative and regulatory policies.
About the American Petroleum Institute (API): API and our member companies remain committed to working with all stakeholders
in pursuing and implementing a thoughtful energy agenda. We look forward to a
API represents more than 450 oil and natural gas companies, productive and successful year.

leaders of a technology-driven industry that supplies most of


Sincerely,
America’s energy, supports more than 9.2 million U.S. jobs and
7.7 percent of the U.S. economy, and, since 2000, has invested
nearly $2 trillion in U.S. capital projects to advance all forms
Jack Gerard
of energy, including alternatives, while reducing the industry’s President and CEO
environmental footprint. API
The State of American Energy

Table of Contents
4 Overview

8 Energy and the Economy


The oil and natural gas industry is vital to the nation’s economy, supporting
more than $1 trillion in annual contributions to the U.S. economy and
9.2 million American jobs, and powering economic growth by delivering
affordable, reliable energy to American businesses and families alike. Our
industry can play an even greater role in economic growth and job creation
through the careful development of more of America’s oil and natural gas
resources. We are committed to working with policymakers to support
decisions that encourage the safe and reliable production of domestic
energy resources.

16 Meeting the Challenges


Our nation needs energy policies that protect the environment and provide
for growing the U.S. economy, creating jobs and enhancing energy security.
Oil and natural gas companies are at the forefront of developing advanced
energy technologies, increasing energy efficiency and diversifying our energy
resources—including alternatives and renewables. We are committed to
effective partnerships with key stakeholders to establish sound energy
policies and a sustainable future.

26 Conclusion Overview

2
Our Role in Economic Growth,
Job Creation and Providing
for the Future

growing the creating jobs providing for


The new year can herald a new focus on energy policy—and our energy
future. The oil and natural gas industry is committed to providing the
economy the future
safe, reliable and affordable energy the United States needs to grow the
economy, create jobs and enhance our energy security.  The industry supports more  The oil and natural gas  The United States will
than $1 trillion in annual industry supports more require more energy of all
Sensible energy policy is a goal both political parties support, and we
contributions to the U.S. than 9.2 million U.S. jobs;6 types, including oil and
remain committed to working with all policymakers to identify solutions
economy, or 7.7 percent natural gas, to meet future
that will advance our country’s economic interests and sustain our  Developing U.S. oil and
of Gross Domestic energy demands—a challenge
way of life. natural gas resources
Product (GDP);
1
and opportunity that will be
currently off-limits in the
America’s oil and natural gas companies will continue to play met through continued industry
 The industry has invested Outer Continental Shelf (OCS),
a crucial role in the U.S. economy through tremendous investments in technology
$1.66 trillion2 in U.S. capital the Arctic National Wildlife
contributions in three key areas:  and innovation;
projects in the last decade; Refuge (ANWR) and the Rockies
could create 530,000 new  The industry has invested
 The industry paid $95.6 billion3
jobs by 2025;
7
$194 billion10 since 1990
in 2008 income taxes alone;
toward improving the
 Expanding Marcellus Shale
 The industry paid more than environmental performance
natural gas development could
$178 billion4 to the U.S. of its products, facilities
add 280,000 jobs8 over the
government in rent, royalty and operations; and
next decade;
and bonus payments from
 The industry has invested
1982 through 2009; and  Greater Canadian oil sands
$58.4 billion 11 in low-
production could create more
 Increased access to U.S. and zero-carbon emissions
than 340,000 new jobs9 in the
oil and natural gas resources technologies from 2000 to
United States alone; and
currently off-limits could 2008—more than either the
generate an additional  Many other opportunities federal government or all
$1.7 trillion in government
5
exist to create jobs through other U.S.-based private
Jake B., 5th Grader
One of the 25 million students who ride a revenue over the life of increased energy production industries combined.
diesel-powered bus to school every day. the resources. in the United States.
Source: Did You Know?, American School Bus Council,
November 2010.

4 5
Allowing access to oil and
natural gas resources currently
developing billion to the federal government,
states and Native American tribes
Energy and the Economy off-limits could generate an america’s energy from on- and offshore energy
production. Nearly $22 billion
additional $1.7 trillion in
government revenue over resources came from oil and natural
gas production;14
Given worldwide economic and The United States will need energy Providing these resources safely to
the life of the resources. Given the critical role of oil and
population growth, U.S. and global from all commercial energy sources, consumers is a core value of our • Oil and natural gas companies paid
energy demand are rising significantly. including fossil fuels and renewable and industry, and each day we deliver It is clear that the economic growth natural gas in driving economic growth $95.6 billion in 2008 income taxes
This is encouraging news, since growing alternative energy supplies, to meet millions of gallons of oil and billions opportunities associated with oil here at home and around the world, and $1 trillion15 in total income
demand leads to additional economic our increased demand. We will also of cubic feet of natural gas to fuel the and natural gas development are we need policies that encourage new taxes from 1980 through 2008;
growth and a better quality of life for need a greater commitment to American economy and way of life. significant; yet the opportunity cost domestic oil and natural gas produc-
billions of people around the world. increased energy efficiency and Oil and natural gas exploration and of failing to develop this energy is tion. While it is true that our nation • Oil and natural gas companies paid
conservation. Based on government production have been conducted in not always well understood. will require energy from abroad to more than $178 billion16 to the
An International Energy Agency projections, however, oil and natural gas the United States for more than 150 meet growing demand in the future, government in rent, royalty and bonus
(IEA) report on energy and poverty will continue to provide more than half years; the industry has a long history of Too often policymakers have sought domestic oil and natural gas is vital to payments from 1982 through 2009;
demonstrates this point and stresses of total U.S. and global energy needs in demonstrated safety performance and to raise revenue by taxing the oil and creating jobs, generating government
just how critical access to modern 2035—and for the foreseeable future. technological advancement. natural gas industry, but a new study revenue and providing reliable supplies • The industry paid $30 billion17
energy services is to economic growth from Wood Mackenzie shows the to American consumers. in land use fees to federal, state and
and social development. The report Thankfully, America has vast domestic New technologies are continuously danger in that approach. local governments in 2008 and 2009,
says that energy access “is essential energy resources—enough oil and being developed that will allow us to The oil and natural gas industry’s over $5 billion18 more than the
for the provision of clean water, natural gas on federal lands alone to efficiently and safely recover more oil Wood Mackenzie compared the current impact on the U.S. economy 2009 budgeted discretionary
sanitation and healthcare—and power 65 million cars for 60 years and natural gas, making our energy impacts of two scenarios: the first is significant, supporting more than spending for the Department
provides great benefits to development and heat 60 million households for resources go farther and last longer. would raise government revenues $1 trillion in contributions to the U.S. of Energy (DOE);
through the provision of reliable and 160 years.12 Developing these resources is essential from fees and payments associated economy annually, or 7.7 percent of
efficient lighting, heating, cooking, to economic growth and generating with increased access to areas that are GDP, and supporting more than • The oil and natural gas industry
mechanical power, transport and Allowing access to oil revenue for federal, state and currently off-limits to development, 9.2 million U.S. jobs. provides the U.S. Treasury,
telecommunication services.” local governments. and the second would raise govern- on average, with well over
and natural gas resources Economic contributions from the $95 million19 each day; and
ment revenues from an additional
Countries around the world are looking currently off-limits would $5 billion per year in taxes on the oil and natural gas industry include:
for affordable and reliable energy to increase U.S. crude oil • The industry has invested nearly
industry. The results show that not • In 2008, the U.S. Interior Department $2 trillion in U.S. capital projects
power their economies well into the production by as much as all revenue is created equal. (DOI) distributed a record $23.4 in the last decade.
future. The International Energy
Outlook (IEO) 2010 projects that world
two million barrels per day Comparing the total government
energy consumption will grow nearly 50 in 2030, offsetting nearly a revenue impact from the two scenarios
The Economic Impacts of the Oil and Natural Gas
percent between 2007 and 2035. fifth of the nation’s imports.13 (access versus taxes, 2011 to 2025)
shows increased access generates an Industry on the U.S. Economy in 2007 by Industry
estimated $194 billion in additional Labor Income Value Added
Industry Employment
government revenue. Under the higher ( $ millions) ( $ millions)
Future Global Energy Demand taxation scenario, net revenues are Direct Impact of the Oil and Natural Gas Industry 2,123,291 199,344 456,971
(The world will require 49 percent more energy in 2035 than in 2007.)
estimated to decrease by $128 billion. Indirect and Induced Impacts on Other Industries 7,114,090 358,916 580,089
800 Nuclear The negative economic consequences Services 3,399,474 149,462 181,720
Renewables 2035 of higher taxes will, in the long run, Wholesale and Retail Trade 1,174,762 49,711 80,915
700 6.4%
Natural Gas more than offset any short-term tax Finance, Insurance, Real Estate, Rental and Leasing 828,904 47,487 73,322
600 Coal revenue gains. Manufacturing 680,834 49,936 73,322
Oil 13.5%
Transportation and Warehousing 276,492 13,892 18,746
Quadrillion BTU

500 2007 More importantly, as millions of Construction 220,923 11,185 13,722


5.5% 21.9%
400 1980 Americans struggle to find jobs, Information 165,859 15,206 29,324
7.4% 9.9% total additional direct, indirect and
300 22.6% 27.9% Agriculture 122,542 2,193 5,197
2.7% induced jobs in 2025 could exceed
24.8% Utilities 26,272 4,309 14,652
200 22.6% 530,000 in the increased access
19.0% Mining 10,898 1,037 2,068
100
scenario. The higher tax scenario
35.3% 30.3% Other 207,130 14,499 16,122
46.2% would result in a loss of jobs,
0 Total Impact 9,237,381 558,260 1,037,060
estimated at almost 170,000 in
1980 2007 2035 As a % of U.S. Total 5.2% 6.3% 7.5%
the peak job loss year of 2014. Source: PricewaterhouseCoopers, “The Economic Impacts of the Oil and Natural Gas Industry on the U.S. Economy,” September 2009.
Source: EIA International Energy Outlook 2010.

8 9
With approximately 30 percent of the
Who Owns “Big Oil?” (Holdings of Oil Stocks, 2007) nation’s total domestic oil production U.S. Crude Oil (Bbl) and Natural Gas (Tcf) Resources
and 13 percent of domestic natural (Undiscovered Technically Recoverable Federal Resources)*
gas production coming from the
Gulf of Mexico,23 offshore resources
are essential to our nation’s energy
portfolio. Additionally, deepwater Pacific Offshore
areas of the Gulf will continue to play a 10.5 Bbl
major role in our nation’s energy future. 18.3 Tcf

Looking ahead: Lower 48, Onshore Atlantic Offshore


11.7 Bbl 3.8 Bbl
145.9 Tcf 37.0 Tcf
• The eastern Gulf of Mexico alone
could hold 3.8 billion barrels of
Source: SONECON, “The Distribution of Ownership of U.S. Oil
oil and 21.5 trillion cubic feet Alaska Onshore
and Natural Gas Companies,” September 2007.
of natural gas.24 18.8 Bbl
85.1Tcf
Gulf Offshore/Deepwater
• Opening the Atlantic coastline 44.9 Bbl
These taxes, royalties, rental payments To put this in perspective: For example, North Dakota has could make available another Alaska Offshore
232.5 Tcf

and other revenues fund community been breaking oil production records 3.8 billion barrels of oil and 37 23.6 Bbl
The number of people directly trillion cubic feet of natural gas.25 132.1 Tcf 116.4 billion barrels is enough oil to power
needs, including roads, schools and and sits atop Gallup’s Job Creation over 65 million cars for 60 years.
parks. Furthermore, millions of employed by the oil and natural gas Index. The Index also shows that “the
industry–2.1 million–is larger than • The U.S. Geological Survey (USGS)
Americans benefit from the strong energy-producing states of Louisiana, *Figures may not add exactly to total due to rounding. 650.9 trillion cubic feet is enough natural gas
the populations of 15 states.20 And a estimates that the National Petro- Source: MMS, BLM and API calculations. to heat 60 million homes for 160 years.
economic performance of American Oklahoma and Texas are in the top 10 leum Reserve in Alaska and adjacent
oil and natural gas companies, from Gallup poll from last year found that state job markets for the first half of
energy-producing states are among the state waters hold 896 million barrels
ownership in the companies through 2010, as they were in 2008 and 2009.” of undiscovered oil and about 53
pension plans, mutual funds, IRAs best in job creation.21 Alaska, another state where energy trillion cubic feet of undiscovered
and 401k plans. development is crucial, made the list natural gas.
in addition to Pennsylvania and West
Thousands of U.S. businesses large Virginia—two states that saw 57,000 • 10.5 billion barrels of oil are “With oil use projected to grow in the coming decades, America definitely
and small depend on oil and natural new jobs last year from Marcellus estimated to exist along the
gas operations. The industry supports Shale development.22 Pacific coast.26
needs its offshore resources on the Outer Continental Shelf...the
businesses well outside the Gulf government needs to redouble its efforts to expand oil and gas
region—vendors that provide services Developing domestic oil And these estimates are most likely
to Gulf operations are located as far conservative given the industry’s development as well as alternative energy sources if this country
and natural gas resources will
away as Pennsylvania and Illinois. AK NH proven ability to advance technologies is to ensure that it has adequate energy supplies. This would stimulate
help meet growing demand,
DE NM that over time enable us to produce
As one of the largest employers in the HI RI create jobs, provide revenue the economy, provide well-paying jobs and reduce dependence on
much more than originally projected.
country, a strong American oil and ID SD to federal and state governments, imported fuel.”
natural gas industry is a key driver of job ME VT Similar to offshore development,
and enhance the nation’s energy
creation throughout the U.S. economy. MT WV production of resources from federal
ND WY security. Our industry remains ­– J. Allen Wampler, Former Assistant Secretary for Fossil Fuels,
lands onshore is essential to providing
NE committed to reliably providing the oil and natural gas necessary to U.S. Department of Energy, May 8, 2010
the energy our nation needs meet our growing energy demand.
U.S. Census Bureau, “Annual Estimates of the Resident Population for the
United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2009
(NST-EST2009-01).”
in a safe, environmentally North Dakota’s Bakken Shale deposit
sound manner. is one of the fastest-growing oil-pro-
ducing areas in the United States
with 80 million barrels produced in
2009.27 If the government opened up
access to non-park federal land in both
Alaska and a portion of the Rocky
Mountain States, the United States
could produce an additional 1.125
million barrels of oil and 2.4
billion cubic feet of natural gas
per day in 2030.28

10 11
The Marcellus Shale Assessment Unit. The area assessed is generally to the east of the DSS AU.
U.S. Shale Plays The MAU includes the Millboro Shale in Southwestern Virginia and adjacent Virginia.

Marcellus Isopach (feet)


0
50
100
150
200
250

Extent of Devonian shale;


area in gray shows the Marcellus
Shale (including Millboro Shale)

DSS AU

Sources: Marcellus Shale as data from de Witt and others, 1993.

Marcellus Shale natural gas Colorado, Utah and Wyoming contain


800 billion barrels32 of recoverable Oil Reserves of Saudi Arabia
production alone could add
Source: EIA based on data from various published studies.
oil—more than three times the proven vs. Western U.S. Oil Shale
$6 billion in new tax revenues reserves of Saudi Arabia.
to local, state and federal gov- 1000
ernments over the next decade.31 Increased oil shale production 800

Billions Bbls
“We’ve got, I think, broad agreement that we’ve got terrific could add as many as 100,000 600
Hydraulic fracturing—a 60-year-old
new jobs from a 2 million-
natural gas resources in this country. Are we doing everything technology for extracting oil and 400

natural gas from deep underground barrel-per-day oil shale industry.33 200
we can to develop those?” shale formations—is enabling access The DOE estimates that, in
0
to massive new supplies. This process, addition to tax revenues, federal Saudi Arabia Potential recoverable
– President Barack Obama, November 4, 2010 combined with horizontal drilling, proved reserves
and state governments could (267 billion Bbls)
from Western
U.S. Oil Shale
has led to new finds and improved
our ability to access more of our
receive royalties and lease pay- (800 Billion Bbls)
According to an MIT study, clean- consumers versus alternatives, and
burning natural gas is predicted to will produce up to 60 percent fewer natural gas resources that will help ments topping $2 billion a year.
double its share of the energy market, greenhouse gas emissions than a generate electricity, heat homes and
These domestic on- and offshore oil
from 20 percent to 40 percent, conventional coal-fired plant. power vehicles for generations to come.
and natural gas resources are vital to
by 2040.29 In recent years, in fact, our nation, but they are not the only
America has been dubbed the Saudi New combinations and Our industry has a long history of
refinements in technologies nearby resources that can provide the
Arabia of natural gas. working with federal, state and local energy and jobs our nation needs.
for natural gas discovery regulators to address environmental
This same MIT study says the and development have With vast reserves second only to
protection. API has developed standards Saudi Arabia, Canada’s abundant
United States has a significant natural created an opportunity and best practice documents for
gas resource base (including shale to access this domestic, and reliable oil sands are crucial to
natural gas drilling to ensure safe improving U.S. energy security and
gas), thought to exceed 2,000 trillion clean-burning energy and environmentally responsible
cubic feet—enough to meet 100 source for our nation— meeting energy demand.
operations—and we are continuously
percent of current domestic demand and further enhance making improvements. These robust Canada is our nation’s top supplier of
for nearly a century. Developing this our economic and documents cover all aspects of opera- imported oil and offers a close, reliable,
domestic natural gas will mean billions energy security. tions, including hydraulic fracturing, safe and readily available supply of
of dollars in government revenue and well materials and construction, safe secure energy that can be transported
reductions in greenhouse gas emissions. Tanhee G., Chemist disposition of fluids, water testing, and into the United States via pipeline.
One of 9.2 million Americans whose job is chemical recordkeeping and reporting. There are economic and national
According to a Deutsche Bank Climate supported by the oil and natural gas industry.
Change Advisors report,30 natural gas security benefits to importing oil
used for electricity production has In addition to natural gas from shale from a friendly, nearby neighbor
Source: The Economic Impacts of the Oil and Natural Gas
significant cost advantages for Industry on the U.S. Economy, PricewaterhouseCoopers LLP, formations, the DOE conservatively like Canada.
September 2009. estimates that oil shale reserves in

12 13
According to a Canadian Energy
Research Institute (CERI) study, greater creating jobs U.S. workers exploring, producing,
refining, transporting and marketing
production of Canada’s oil sands is oil and natural gas—and supports
Increased domestic oil and natural
expected to stimulate economic activity an additional 7.1 million jobs38
gas development means billions of
in both countries, creating more than through the purchases of other
340,000 new jobs in the United States dollars in revenues and U.S. economic goods and services that support the
alone. As production and investment growth—and growing the U.S. industry’s operations. Equipment
rise, the demand for U.S. goods and economy leads to the creation suppliers, construction companies,
services also increases—adding an of American jobs. management specialists and food
estimated $34 billion to the U.S. service businesses are all tied to the
In addition to the 9.2 million U.S.
GDP in 2015 and $42.2 billion industry. These businesses, in turn,
jobs supported by our industry,
in 2025.34 purchase other goods and services
allowing access to oil and natural gas that support other jobs throughout
By 2025, Canadian oil sands resources currently off-limits could the nation.
create an additional 530,000 jobs
production is expected to
by 2025. Finally, industry jobs are highly
rise from about 1.4 million desirable: in 2008 and 2009, oil and
barrels per day to about 3.5 This doesn’t take into account the natural gas industry salaries in the
million barrels per day—and hundreds of thousands of jobs that exploration and production sectors
the economic impact of this could be created from increased were more than double the national
development of natural gas from average for all U.S. jobs.39
development is a boon for
shale formations or oil sands:
the U.S. economy.35 The oil and natural gas industry can
Marcellus Shale natural enhance America’s energy security and
From an environmental impacts
help solve our economic problems by
perspective, a Cambridge Energy gas production could create increasing production of our nation’s
Research Associates (CERA) study finds 280,000 new American jobs vast oil and natural gas resources.
that life cycle greenhouse gas emissions
(GHG) from oil sands are not much
over the next decade. And More access to oil and natural gas will
according to CERI, greater mean more energy for America, more
different than other heavy crudes
well-paying jobs, and trillions of
already refined in the United States.36 production of Canada’s oil dollars of much-needed revenue that
Since 1990, GHG emissions associated
sands could create more than will help federal, state and local
with every barrel of oil sands crude
340,000 new jobs in the governments pay for critical services.
produced have been reduced by 39
percent,37 according to the Canadian United States.
government. Furthermore, transporting
oil sands crudes to the United States Affordable and reliable domestic
via pipeline generates fewer emissions energy is critical for our nation and
than shipping oil from overseas supports U.S. business activity.
by tanker. The industry employs 2.1 million

Meeting the Challenges

14 15
16 17
Diversifying our
Carbon Mitigation Investment by Investor Group
(2000-2008) Energy Resources “...the industry has increased refinery efficiency and reduced emissions
$133 Billion While providing the oil and natural through the use of combined heat and power technology...this reflects
gas needed to fuel our economy now our ongoing commitment to improving environmental performance even
$58.4
Billion
and in the future, companies are also
(44%)
$55.3 $19.2 pioneers in developing and expanding as we produce more energy, more efficiently to power our economy and
Billion Billion
(42%) (14%)
the use of alternative and renewable improve our lives.”
forms of energy—from geothermal
to wind, from solar to biofuels, from – Jack Gerard, October 22, 2010
hydrogen power to the lithium ion
Oil and Natural Other Private Federal battery for next-generation cars.
Gas Industry Industries Government In June 2006, industry refiners began
One study found that U.S.-based reducing the amount of sulfur in
Source: T2 & Associates and CEE, June 2009. oil and natural gas company invest- diesel fuel to make Ultra-Low Sulfur
ments in renewable energy accounted Diesel (ULSD), which has supplanted
for nearly one-fourth of the money traditional diesel fuel formulations
To date, our companies have invested The industry has invested: These investments have already reaped invested in renewables by all U.S.- during a transition period determined
hundreds of billions of dollars in the significant rewards: a study found that based private industry and the federal by the Environmental Protection
technology that enables America’s • $194 billion since 1990 toward GHG emissions from the U.S. oil and government over the past nine years. Agency (EPA).
oil and natural gas companies to improving the environmental natural gas industry were reduced More than $6.7 billion went toward the
performance of its products, development of energy sources such as • According to a study on heavy-duty
access more resources more efficiently, from baseline projections by more than
facilities and operations; and wind, biofuels and solar power.41 diesel engines used in large trucks
with significantly less impact on 48 million metric tons of carbon
and buses, the fuel/engine combi-
the environment. dioxide equivalent from 2007 to 2008, The oil and natural gas industry also
• $58.4 billion in low- and zero-carbon nation is reducing most pollutants
a reduction comparable to taking accounts for 73 percent of all the
Our industry is a leader in technology emissions technologies from 2000 to from tailpipes by more than 90
9.7 million cars off the roads.40 North American investments made
and innovation; oil and natural gas 2008—more than either the federal percent. The fine particulate matter
companies are at the forefront of: government or all other U.S.-based in fuel substitution technologies (soot) emission has been reduced by
private industries combined. since 2000—more than $21 billion 99 percent from the allowable level
• Employing technologies such as developing substitute fuels, such as in 2004, and is even 90 percent
cogeneration—the re-use of excess liquefied natural gas and reducing lower than 2007 requirements.43
heat from refinery processes to fugitive methane emissions.
U.S. Environmental Expenditures since 1990 • Other air emissions are also much
produce additional energy—to (by sector*)
become more efficient, reducing Further, the nation’s air quality has im- below the required levels. Nitrogen
both energy use and emissions; proved markedly over the past several oxide, which can contribute to the
decades. It would take 100 of today’s formation of smog, is 10 percent
• Developing carbon capture and $25.0 cars to equal the air emissions from below the required level.
storage technology, or CCS, just one car from the 1970s, thanks to
$20.0 improvements in both advanced auto-
to reduce carbon dioxide (CO2)
emissions by storing them under- mobile technology and the introduc-
$15.0
ground, a process also used to assist tion of cleaner burning gasoline, and
in the recovery of oil and natural gas; $10.0 major changes in diesel fuel.42

• Utilizing advanced drilling $5.0


technologies such as 4-D visualiza-
tion (using seismic imaging) and $0.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
directional drilling to more accurately
“see” underground and pinpoint Exploration and Production Transportation Refining Marketing R&D and Corporate Programs

energy resources; and


Do Kim C., Homeowner
• Researching, developing and *Remediation & Spills expenditures are included in the sector numbers and are reported data only.
One of the 168 million Americans who keeps her
The remaining sector expenditures are estimated for the entire industry.
marketing alternative energies, Source: API Statistics, Environmental Expenditures by Oil and Gas Industry, February 2010.
home warm thanks to oil and natural gas.
including solar, geothermal, biofuels,
fuel cells, hydrogen power and Source: Short Term Energy Outlook Table WF.01,
wind energy. U.S. Energy Information Administration, October 2010.

18 19
what policymakers Policymakers should encourage
investment and allow the responsible
Offshore Drilling

• Re-examine and reconsider limits to


should do development of our nation’s vast
domestic energy resources, which offshore exploration and production
will create well-paying jobs and spur in the eastern Gulf of Mexico, and
Consistent government forecasts in the Atlantic and Pacific;
economic growth. The administration’s
predict that the United States will require
announcement reversing its decision to
more energy from all sources in the • Expeditiously process and approve
open new areas and maintain existing
future; however, oil and natural gas will drilling plans and permits for
Improving Efficiency continue to meet the majority of our
areas for offshore oil and natural gas
Future U.S. Energy Demand per Dollar of GDP – Growing Efficiency exploration was disappointing. It will
pending and future lease areas;
In addition to investments in renewable energy needs in the coming decades.
cost jobs, stifle economic growth and • Ensure that there are adequate
energy and advanced fuels, we must 18.00 First and foremost, we must responsibly
undermine our energy security. We are numbers of trained personnel
also recognize that the greatest “new” explore for and produce America’s
16.00 committed to working with policy- and sufficient resources in place to

Thousand BTU per Chained (2000) Dollar


energy source available for use is the own natural resources. Our economic
14.00 makers to refocus our nation’s energy enforce drilling rules and regulations;
reduced demand brought about by and energy security depend upon a
agenda. We need to get back on track
greater energy efficiency and conser-
12.00 regulatory system that supports domestic
and support domestic production of • Support exploration in Alaska;
vation. We use about half as much 10.00 energy production and provides
the energy America needs.
energy today for every dollar of GDP 8.00
certainty for U.S. investments so that • Support and encourage Atlantic
as we did back in 1973.44 jobs and revenues stay here in the seismic studies to obtain a more
6.00
United States.
Looking forward, our nation must take 4.00
Develop America’s accurate picture of oil and natural
gas reserves, leading to future
energy efficiency even more seriously, 2.00 History Forecast
While the federal government and Energy Resources exploration and development;
and the oil and natural gas industry is industry have taken significant steps to
0.00
doing its part. improve safety and address questions Congress and the administration • Move forward with the permitting
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
raised by the incident in the Gulf, it should support increased develop- plans and lease sale for offshore
Source: EIA, International Energy Outlook 2010.
now requires an effective partnership ment of North America’s oil and Virginia; and
between government and industry natural gas resources, including
to expeditiously approve pending federal lands both on- and offshore, • Maintain the flexibility necessary
plans and permits in the Gulf of vast shale gas resources and for well design and equipment
Through such technologies as
Mexico and Alaska. We must also Canadian oil sands. Specifically, standards. Safety and engineering
combined heat and power, also Number of Refineries Declines but Capacity Expands
take the additional steps necessary to policymakers should: experts must consider the unique
known as cogeneration—the re-use
move forward with production of our characteristics of each individual
of excess heat from refinery processes 250 20,000
*Operable Capacity* oil and natural gas resources, including well site and are in the best position
to produce additional energy—refiners Thousands of Barrels Per Day 18,000
completing the necessary environmental to determine technology needs and
are becoming more efficient, reducing 200 16,000
analyses and recommencing offshore situation specifics.
both energy use and emissions. 14,000
leasing. Responsible development
Number of Refineries*

Since 1985, U.S. refining capacity has


150 12,000 of our domestic energy resources
increased by 11 percent,45 and while 10,000 today will ensure we will be able to
increasing capacity, refineries also 100 8,000 meet tomorrow’s energy needs.
invested $108 billion since 1990 to 6,000

make cleaner burning fuels. Moreover, 50 4,000


a number of refiners are expanding 2,000
and upgrading equipment to handle 0 0
increased processing of heavier crude 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

oils, including oil derived from *Operable as of January 1st of each year.
Source: EIA, Petroleum Supply Annual.
Canadian oil sands.

20 21
• Reduce domestic production by them, their local community or the
Income Tax Expense as as much as 600,000 barrels of national economy.
Share of Net Income Before oil equivalent per day;
Income Taxes (2009) Raising energy taxes could eliminate
• Put an estimated $15 billion in American jobs and hurt businesses,
capital at risk in 2011 alone and discourage investment in energy
Natural Gas Canadian Oil Sands almost $130 billion over the production, compromise energy
48.4%
next 10 years; security and decrease U.S. competitive-
• Recognize the environmental, • Promote and advance supportive ness abroad. Adding research and
economic and efficiency benefits policies and a regulatory environ- 28.1% • Put 165,000 jobs47 at risk development incentives for renewable
of natural gas; ment that will accommodate growth in 2020; and and alternative energy is a good idea,
for and free trade of Canadian oil but not at the expense of oil and
• Policymakers should foster a level sands and related products; and • Reduce wages by $68 billion
playing field that ensures all energy Oil and Natural S&P Industries Ex Oil natural gas companies via higher taxes.
Gas Industry & Gas Companies nationwide.48
options are free to compete in • Support the approval of key pipeline Policymakers should pursue tax policies
an open market, rather than and refining infrastructure projects Source: Compustat North America This is no surprise: historically,
Database (January 2010 update). that encourage U.S. businesses to grow
approaches that foreclose options that will help create jobs in both the higher taxes have resulted in less
and invest, creating new jobs here at
through an arbitrary selection of United States and Canada. domestic energy, and restrained supplies
home and making U.S. companies
winners and losers. Avoid Punitive often lead to higher energy costs for
more competitive around the world.
consumers. In today’s economy, that
• Allow states to continue New Energy Taxes could not only stifle recovery and This agenda should support invest-
their effective regulation of growth, but also result in fewer jobs ments in new energy projects, as well as:
hydraulic fracturing; With policies that create and sustain
Oil Sands Areas in Alberta and leave Americans more dependent • Support oil companies’ ability to
a level playing field for all energy
on foreign energy sources. Americans expense Intangible Drilling Costs;
• Congress should await completion options, the oil and natural gas
overwhelmingly oppose raising taxes
of EPA’s hydraulic fracturing industry will create new jobs and
on America’s oil and natural gas • Continue to make the Section 199
study before considering whether help fuel the nation’s economy.
industry, and most agree higher taxes manufacturing deduction and the
additional regulations are Conversely, adding billions of
could threaten jobs. In a recent Harris Dual Capacity Tax Credit available
necessary. dollars in new and punitive taxes
Interactive poll of 1,000 U.S. voters, to all businesses, including oil and
on our industry will have a
• Support hydraulic fracturing, which 60 percent opposed an increase in natural gas companies;
devastating impact on American
has been safely used in one million taxes on the industry, with 40 percent
jobs and economic growth. • Support a viable oil spill liability
wells over the past 60 years, has a strongly opposing such a move.
trust fund. Unreasonable increases
proven track record and provides for The oil and natural gas industry
In addition, with 15 million Americans in liability limits would threaten
tremendous economic potential of pays more than its fair share in taxes.
unemployed and millions more the viability of offshore operations,
new natural gas finds; Over the last five years, industry
underemployed, 54 percent of voters significantly reduce U.S. produc-
earnings have been in line with fear that raising industry taxes could
• Avoid unnecessary legislation or tion, put 145,000 jobs at risk and
U.S. manufacturing industries— destroy jobs across the country.49
onerous regulations that could threaten our energy security;50 and
averaging just 7 cents for every Americans understand that raising
have dire economic consequences: dollar of sales—and oil and natural taxes on an industry that provides most • Encourage energy policies that
killing jobs, impeding natural gas companies pay an effective of their energy and supports more create and protect U.S. jobs and
gas development and threatening tax rate of 48.4 percent compared than 9.2 million jobs is not good for energy security.
our economy. to 28.1 percent for all other S&P
Industrial companies.46

Yet, there are nearly annual calls for


Source: Alberta Department of Energy.
billions of dollars of increased taxes
on the oil and natural gas industry. “...current tax preferences for oil and gas procedures are hardly subsides.
The continued threat of new taxes and They are instead methods that allow private companies to keep more of
fees each year creates an uncertain busi-
ness environment for U.S. companies. the money they earn while providing low-cost energy to the American
consumer...(tax penalties on the oil and natural gas industry) is not
• According to studies by Wood
Mackenzie and Louisiana State punishing fossil fuel producers as much as American consumers.”
University economist Dr. Joseph
Mason, some of the tax – Mackubin Thomas Owens, Professor of National Security Affairs,
proposals could: Naval War College; Editor, Orbis, February 16, 2010

22 23
Smart Energy Policy = Sound Economic Principles
Because of the interconnectedness of energy to all aspects of our economy, energy policy and regulatory decisions have
an enormous potential impact on Americans and their ability to find jobs and purchase goods.

Burdensome and unnecessary proposals could erode industry environmental and efficiency gains and have unintended
consequences for the U.S. economy, including sharply raising energy costs, reducing household buying power and resulting
in the destruction of millions of American jobs.

Yet the EPA is moving forward with a number of proposed regulations that could impact our ability to deliver energy resources, cost
millions of jobs, hurt consumers and put U.S. businesses at a competitive disadvantage globally.

national ambient air quality standards gasoline-ethanol blends (E15) greenhouse gas emissions
(naaqs)/higher ozone standards regulation (ghg)
The oil and natural gas industry
Ground-level ozone is one of six supports the responsible development As of this writing, EPA rules regulating
pollutants regulated by National of ethanol and other alternative fuels GHG emissions under the Clean Air
Ambient Air Quality Standards that can contribute as economic, Act are scheduled to go into effect
(NAAQS)—standards set by EPA reliable and affordable energy options on Jan. 2, 2011. These rules could
to monitor and regulate air pollutants in the marketplace. However, EPA’s impose a significant burden on the
considered harmful to public health. recent approval of a waiver that U.S. economy, requiring substantial
NAAQS are reviewed on a five-year allows for 15 percent ethanol blends investments and diverting capital that
cycle; nevertheless, EPA is pushing in gasoline (E15), up from 10 percent might otherwise create jobs and assist
forward with a planned final rule only for 2007 and newer vehicles only, is our economic recovery. More than six
three years after its previous review, premature, lacks statutory authority million businesses could be required
despite the fact that no new data exist and puts consumers at risk. to obtain permits to expand or merely
on which to base new standards. continue operating. State agencies
Ongoing testing by our industry, charged with issuing permits could
Despite a recent six-month post- automakers and the DOE to determine be swamped, leading to long delays
ponement, EPA has indicated it will whether E15 is safe is not yet complete. in business growth and job creation.
tighten ozone standards so close to Results so far have revealed potential
current background levels that not even safety and performance problems API believes any climate
pristine areas like Yellowstone National that could affect consumers and the
investments they’ve made in their
policy must be established
Park could comply with the proposed
air quality standards. automobiles.52 Thus, the partial waiver by Congress and should
could threaten vehicle performance and incorporate the principles
More stringent standards would be the environment, void warranties, con- of a fair, efficient and market-
costly, unattainable and unnecessary— fuse consumers—and possibly create a based strategy that minimizes
and impose a severe burden on American public backlash against renewable fuels.
manufacturers, the U.S. economy, the burden on consumers
and American jobs and consumers. EPA should extend its and jobs.
A Manufacturers Alliance/MAPI study review six months or more
finds that the proposal could result in
to allow scientific testing to
the loss of 7.3 million U.S. jobs by
2020; add $1 trillion in new regulatory be completed. Approving the
costs per year between 2020 and 2030; use of E15 without adequate
and sharply reduce the nation’s produc- and complete testing puts
tivity. GDP could be reduced by $676.8 American consumers at risk.
billion—or 3.6 percent—in 2020.51

EPA should withdraw its rule-


making and allow the normal
five-year review of the ozone Conclusion
standard to continue.

24
Oil and natural gas have been and will Choosing to decrease domestic We should learn from the past—and
continue to be engines of economic production—including higher take some positive steps to ensure we
Conclusion development around the world. For at
least the next several decades, we will
energy taxes and unnecessary
regulations—only contributes to
meet America’s energy needs in the
decades ahead. As a society, we cannot
continue to rely on oil and natural gas volatile prices, slower economic remain passive to energy, the environ-
to meet growing energy demand, even growth and American job losses. ment or economic growth. Each will
as we improve energy efficiency, and We need commonsense policies and fall short of its fullest promise, absent
as renewables and alternatives play regulations administered efficiently, constructive industry-government
an increasingly important role in a and sound and fair tax policies that partnerships committed to providing
changing energy landscape. allow American companies to compete our nation with a workable energy
on an even footing around the world. security policy.
A vital link exists between the oil
and natural gas industry and the We need increased access to where We need a public policy framework
U.S. economy. The industry supports oil and natural gas are found, while to ensure future energy security for
more than 9.2 million U.S. jobs and protecting national parks and fragile our nation. We need policymakers who
more than $1 trillion in economic ecosystems. Government policies understand the energy realities and the
contributions. Developing U.S. oil should harmonize our energy and energy challenges we face. We need to
and natural gas resources currently environmental goals, encouraging get it right on energy. Too much is at
Policy Choices Needed to Ensure off-limits could create hundreds of
thousands of new jobs and generate
responsible development that creates
jobs and helps drive our economy.
stake for our nation to do otherwise.

Future Energy Security more than $1.7 trillion in new


government revenue. Our nation’s history is replete with
short-term “fixes” and searches for
Given this energy reality, in the “silver bullets” to solve our energy
months and years ahead, the nation challenges. Price controls, limitations
Our leaders must pursue a thoughtful, commonsense energy agenda that has important decisions to make on oil and natural gas development,
promotes U.S. job creation, economic growth and energy security—and about its energy future. What we need picking winners and losers among
today—and tomorrow—are policy fuels, and increasing taxes have all been
avoids harmful taxes or regulations. We encourage policymakers to: choices that increase, not decrease, tried by government—but we have
energy production. failed to develop a comprehensive
 Increase energy production by supporting policies that promote national energy policy to benefit
all energy sources; American consumers and businesses.

 Pursue policies that encourage investment in new energy projects


and provide market-based solutions to meet energy demand; We essentially have two choices:
 Reject new energy taxes and turn aside unnecessary regulations
on oil and natural gas development; and Choice #1
Encourage more domestic oil and natural gas production to
 Abandon efforts by the EPA to regulate greenhouse gases under the help meet future demand, putting more Americans to work
Clean Air Act; instead, allow Congress to establish and incorporate and delivering substantial government revenue to benefit
all Americans; or
principles of a fair, efficient and market-based climate strategy that
minimizes the burden on consumers and jobs.
Choice #2
Accept policies that discourage development at home,
forcing us to import more energy. That means spending
more overseas for oil and natural gas, weakening U.S. Melva T., Lease Records
energy security, reducing U.S. jobs and diminishing One of 9.2 million Americans whose job is
supported by the oil and natural gas industry.
U.S. economic growth.
Source: The Economic Impacts of the Oil and Natural Gas
Industry on the U.S. Economy, PricewaterhouseCoopers LLP,
September 2009.

26 27
Sources
1 26
PricewaterhouseCoopers LLP, “The Economic Impacts of the Oil and Natural Gas Industry on the U.S. Economy in 2009: Employment, MMS, “2006 Planning Area Resources Addendum to Assessment of Undiscovered Technically Recoverable Oil and Gas Resources
Labor Income, and Value Added,” May 2011. of the Nation’s OCS.”
2 27
Oil and Gas Journal, “Capital Spending Outlook,” 2001-2010 (Spring). WSJ, “Oil Industry Booms - In North Dakota.” February 26, 2010,
3 http://online.wsj.com/article/SB10001424052748703795004575087623756596514.html.
Energy Information Administration, Form EIA-28 (Financial Reporting System).
28
4 ICF International, “Strengthening Our Economy: The Untapped U.S. Oil and Gas Resources,” December 5, 2008.
MMS, Office of Natural Resources Revenue (ONRR).
29
5 MIT Energy Initiative, “The Future of Natural Gas,” June 2010.
ICF International, “Strengthening Our Economy: The Untapped U.S. Oil and Gas Resources,” December 5, 2008.
30
6 Deutsche Bank Climate Change Advisors, “Natural Gas and Renewables: A Secure Low Carbon Future Energy Plan
PricewaterhouseCoopers LLP, “The Economic Impacts of the Oil and Natural Gas Industry on the U.S. Economy: Employment, Labor Income
for the United States,” November 17, 2010.
and Value Added,” September 8, 2009.
31
7 Timothy J. Considine, Ph.D., Natural Resource Economics, “The Economic Impacts of the Marcellus Shale: Implications for New York,
Wood Mackenzie, “Assessing the Impacts of Increased Access Versus Higher Taxes on U.S. Oil and Natural Gas Production,” January 4, 2011.
Pennsylvania, and West Virginia,” July 2010.
8
Timothy J. Considine, Ph.D., Natural Resource Economics, “The Economic Impacts of the Marcellus Shale: Implications for New York, 32
BLM, “Western Oil Shale Potential: 800 Billion Barrels of Recoverable Oil,” July 22, 2008.
Pennsylvania, and West Virginia,” July 2010.
33
9 National Center for Policy Analysis, “Oil from Stone: Securing America’s Energy Future,” July 9, 2009.
Canadian Energy Research Institute, “The Impacts of Canadian Oil Sands Development on the United States’ Economy,” October 2009.
34
10 Canadian Energy Research Institute, “The Impact of Canadian Oil Sands Development of the United States’ Economy.” October 2009.
API Statistics, Environmental Expenditures by Oil and Gas Industry, February 2010.
35
11 Canadian Association of Petroleum Producers, “The Oil Sands Fact Book,” October 7, 2010.
T2 and Associates, “Emission Reductions Associated with U.S. Oil and Gas Industry Investments in Greenhouse Gas Mitigation
36
Technologies,” March 2010. Cambridge Energy Research Associates, “Growth in the Canadian Oil Sands,” 2009.
12 37
MMS, BLM, and API calculations. Canadian Association of Petroleum Producers, “The Oil Sands Fact Book,” October 7, 2010.
13 38
ICF International, “Strengthening Our Economy: The Untapped U.S. Oil and Gas Resources,” December 5, 2008. PricewaterhouseCoopers LLP, “The Economic Impacts of the Oil And Natural Gas Industry on the U.S. Economy: Employment, Labor Income
14 And Value Added,” September 8, 2009.
Minerals Management Service (BOEMRE), November 20, 2008.
39
15 United States Department of Labor, Quarterly Census of Employment and Wages, 2008-2009.
EIA, Energy Finance Data Tables, T-12. Income Taxes,
40
http://tonto.eia.doe.gov/cfapps/frs/excel.cfm?tableNumber=12&startYear=1977&endYear=2008. T2 and Associates, “Emission Reductions Associated with U.S. Oil and Gas Industry Investments in Greenhouse Gas Mitigation
16
Office of Natural Resources Revenue, http://www.onrr.gov/ onrrWebStats/default.aspx. Technologies,” March 2010.
41
17 T2 and Associates, “Key Investments in Greenhouse Gas Mitigation Technologies by Energy Firms, Other Industry and the
US DOT, Federal Highway Administration, “Highway Statistics,” http://www.fhwa.dot.gov/policy/ohpi/hss/hsspubs.cfm
Federal Government,” June 15, 2009.
(data compiled by API using schedule MF-1, http://www.irs.gov/pub/irs-soi/histab20.xls.)
42
18 Auto Alliance, “Clean Car Facts,”
Budget of the United States Government, Fiscal Year 2009, http://www.gpoaccess.gov/usbudget/fy09/pdf/budget/tables.pdf.
http://www.autoalliance.org/INDEX.CFM?OBJECTID=EF278000-6806-11DF-B63D000C296BA163.
19
API calculations based on data from EIA (http://tonto.eia.doe.gov/cfapps/frs/frstables.cfm?tableNumber=12 <http://tonto.eia.doe.gov/ 43
Health Effects Institute, “Extensive Emissions Tests of Newest Diesel Truck and Bus Engines
cfapps/frs/frstables.cfm?tableNumber=12>) and DOI, Office of Natural Resources Revenue (http://www.onrr.gov/ONRRWebStats/Home.
Finds Dramatically Lower Emissions of Key Pollutants,” July 18, 2009.
aspx <http://www.onrr.gov/ONRRWebStats/Home.aspx>) and direct request.
44
20 EIA, Annual Energy Review 2010 and EIA, Annual Energy Outlook 2010.
U.S. Census Bureau, “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico:
45
April 1, 2000 to July 1, 2009.” EIA Refining Capacity Report, June 25, 2010.
21 46
Gallup, Poll: “Energy, Federal Government States Provide Best Job Markets,” July 21, 2010. Compustat North America Database (January 2010 update).
22 47
Timothy J. Considine, Ph.D., Natural Resource Economics, “The Economic Impacts of the Marcellus Shale: Implications for New York, API Comments based on Wood Mackenzie, “Evaluation of Proposed Tax Changes on the US Oil & Gas Industry,” August 2010.
Pennsylvania, and West Virginia,” July 2010. 48
Dr. Joseph Mason, “The Regional and National Economic Impact of Repealing the Section 199 Tax Deduction and Dual Capacity Tax Credit
23
EIA, “Special Report: Gulf of Mexico Fact Sheet.” October 25, 2010. for Oil and Gas Producers,” September 13, 2010.
24 49
MMS, “2006 Planning Area Resources Addendum to Assessment of Undiscovered Technically Recoverable Oil and Gas Resources Harris Interactive poll, November 29, 2010, http://www.api.org/Newsroom/poll-oppose-taxes.cfm.
of the Nation’s OCS.” 50
API Calculations based on IMPLAN modeling.
25
MMS, “2006 Planning Area Resources Addendum to Assessment of Undiscovered Technically Recoverable Oil and Gas Resources 51
Manufacturers Alliance/MAPI, September 2010.
of the Nation’s OCS.”
52
Coordinating Research Council, “Research Program on Intermediate Ethanol Blends,”
http://www.crcao.org/news/Mid%20Level%20Ethanol%20program/index.html.

28 29
www.energytomorrow.org

30 Union
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