Will America’s energy independence be jeopardised as the Biden administration passes new legislation on more drilling restrictions on public land? Quick backstory on America’s energy journey.
The US was a net energy exporter until 1973. Once we used up all the ‘easy-access’ oil, we became the world’s largest oil importer, peaking in the mid-2000s. Then the Shale Revolution changed everything.
The ‘Shale Revolution’ refers to the combination of hydraulic fracturing and horizontal drilling that enabled the United States to significantly increase its oil and natural gas production, particularly from tight oil formations, which now account for 36% of total U.S. crude oil production.
Fracking gave the US access to a boatload of new oil (this technology has been around for a while but was popularised in the early 2000s).
Fast forward to today, and the US is once again energy independent (minus a little COVID hiccup).The first natural gas well in North America was a shale well in Fredonia, NY, developed in 1821–38 years before “Colonel” Edwin L. Drake Drake drilled his famous oil well in Titusville, Pennsylvania, in 1859.
In 1821 in Fredonia, New York, William A. Hart drilled a 27-foot deep well to get a more significant gas flow from a surface seepage of natural gas. This was the first well intentionally drilled to obtain natural gas.
Biden Administration New Restrictions
What will this new legislation mean for the United States with Biden administration’s new restrictions on public land drilling set us back again? Oil from public lands accounts for such a marginal amount of the total US output that any of these regulations aren’t going to move the needle much.
Biden administration officials have stressed that new bonding requirements that ensure money is set aside when companies go bust are needed to ensure future oil wells are not abandoned on the taxpayers’ money.
The Biden administration, working with Democrats and Republicans on Capitol Hill in 2021, passed a $4.7 billion fund to clean up the up to 800,000 orphaned oil wells some estimate exist across the country.
Interior Department raises royalty rates for oil drilling by more than one-third, to 16.67%, per the sweeping climate law approved by Congress last year.
The previous rate of 12.5% paid by oil and gas companies for federal drilling rights had remained unchanged for a century.
The new royalty rate set by the climate law is expected to remain in place until August 2032, after which it can be increased.
According to the Interior Department, the higher rate would increase costs for oil and gas companies by an estimated $1.8 billion in that period.
The rule also would increase the minimum leasing bond paid by energy companies to $150,000, up from the previous $10,000 established in 1960.
The higher bonding requirement is intended to ensure that companies meet their obligations to clean up drilling sites after they are done or cap wells that are abandoned.
The federal rate was significantly lower than many states, and private landowners charged for drilling leases on state or private lands.
This shouldn’t be an issue as long as there’s an incentive for these private landowners to be prosperous.
Offshore drilling is a little different.
The quick and dirty is that short-term market moves aren’t the primary motivator in this space, so more extended approval periods and stricter regulations are of little concern.
American Foreign Policy
As we understand, international trade and globalisation only exist due to the American security blanket and protection of global shipping lanes, which the US is guaranteed in exchange for an alliance and setting their allies’ foreign policy decision-making.
A great example is how the French and the British, in 1956 during the Suez Crisis, tried to take control of the Suez Canal from the Egyptian government.
The United States stepped in and dictated to both great European powers.
They could do this for two reasons: the French and the English needed American support to face off against the Soviet Union, and both nations greatly benefited from the international system that enabled modern-day prosperity.
Also was only three years since the Korean War and 11 years since the end of the Second World War, and neither nation was economically, militarily or socially wanting to return to the bad old days before World War II.
The United States currently, since the election of Bill Clinton in 1992, has grown increasingly isolationist and is less interested in global affairs, particularly during America’s longest war from 2001 to 2021, engaged in bloody conflicts in the Middle East, mainly the war on terror and the war in Afghanistan.
Energy Independence and Foreign Policy
The United States has engaged in a proxy war with the Russian Federation in their attempt since 2014 and the Russian invasion of Ukraine in February 2022 to gain control over that nation.
The United States is energy independent, therefore not relying on the Russians, which control 13% of global oil/petroleum and Saudi Arabia, which controls 17% of global petroleum.
Saudi Arabia’s oil production amounted to some 12.14 million barrels per day in 2022, up from 10.95 in the previous year.
Between 1998 and 2021, the world’s most important oil-producing country saw its production volume increase by 2.6 million barrels per day and peaked at 12.4 million barrels per day in 2016.
The enemies of the United States and its allies like Saudi Arabia, which it tolerates due to their ability to affect the price of global oil, which will affect inflation should the price of petroleum decrease or increase, which would negatively impact the US allies.
One of the primary reasons why the United States will maintain its energy independence is not wanting Saudi Arabia, and others have influenced the American economy.
So, no matter what laws will be passed, no American president would have their nation dependent on foreign powers is not the political DNA of the United States.
It is why US foreign policy for over 200 years is to be independent of nations outside of the North American continent.
This can be seen with the American Monroe Doctrine.
President James Monroe’s 1823 annual message to Congress contained the Monroe Doctrine, which warned European powers not to interfere in the affairs of the Western Hemisphere.
Understandably, the United States has always taken a particular interest in its closest neighbours — the nations of the Western Hemisphere.
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