The introduction of the Energy Permitting Reform Act of 2024 into debate in the United States Senate brings to the fore the whole regulatory format of the energy industry, which has over 11,000 federal rules governing it.
Introduced by Democratic Sen. Joe Manchin of West Virginia and Republican Sen. John Barrasso of Wyoming, the bill was approved by the Senate Energy and Natural Resources Committee with a bipartisan vote in July and it is currently pending before the full Senate in Washington, D.C.
Proponents say it would reduce permitting wait times, remove the liquefied natural gas export ban, strengthen the nation’s electric grid, restore certainty to the leasing process on federal properties and increase American energy security.
Odessa oilman Kirk Edwards, State Rep. Brooks Landgraf and Waco economist Ray Perryman say any improvement should be significant.
“To me the interpretation of federal regulations has created a wide-open playing field depending upon who is in the White House and how friendly or unfriendly they are to the oil and gas industry,” Edwards said. “One must remember that Texas has no federal lands and therefore cannot be regulated under certain federal rules and the interpretation of those rules that drastically affect our friends in New Mexico and in some parts of Oklahoma and Colorado, among other states.
“The federal interpretation of endangered wildlife species comes to mind the most in West Texas as environmental advocates have found a seedy loophole in that legislation to invoke havoc on the Permian Basin by simply suing the federal government and claiming something may be endangered when in fact there is no evidence of that at all.”
Edwards said it is a complicated topic and worth re-study, but each presidential administration uses those laws to get the changes they want implemented either for or against the domestic energy industry.
Landgraf said the energy industry, particularly oil and gas, is the economic engine that powers the nation.
“In Texas alone the industry employs more than 480,000 hardworking men and women, generates billions of dollars in tax revenue and most importantly keeps the lights on for millions of households across the country,” said the Odessa Republican, who chairs the Texas House Energy Regulation Committee In Austin.
“Unfortunately in recent years under the Biden Administration, we have seen an escalation of overreaching and aggressive regulations on oil and gas.”
As of 2022, Landgraf said, oil and gas production was subject to more than 11,000 federal regulations and that number has continued to grow, making it one of the heaviest-regulated American industries.
“Many of these new rules are not focused on safeguarding the environment but rather on stunting production for political gain under the guise of the Green New Deal,” he said.
“For instance despite the Permian Basin achieving a 76-percent reduction in methane emissions over the past decade through technological advancements, the Environmental Protection Agency recently introduced radical new methane emission rules that may force production to be curtailed.
“These regulations disregard the significant environmental progress being made by the industry and instead impose burdens that threaten our hard-earned energy independence.”
Perryman cited an experience of his as a father to make an industry-related analogy.
“Many years ago when my kids were young, we took them and a large group of their friends bowling one Saturday morning,” Perryman said. “It wasn’t long before the crying and frustrations of the younger ones in seeing their balls repeatedly roll into the gutter reached an unsustainable zenith.
“In the nick of time the manager took pity on us and put bumpers in the lanes they were using. Suddenly the balls caromed off the sides and knocked down a few pins and the tears quickly changed to joy.”
He said that experience provided a metaphor for the proper role of regulation in a market economy.
“Producers need a wide lane to innovate and create value but one with bumpers on the sides to prevent them from running things into the ditch,” Perryman said. “The oil and gas industry is highly regulated, as are a number of others.
“Industries which potentially pose substantial risks to human health and the environment are naturally more likely to be subject to extensive regulation. For example air transportation and pharmaceutical manufacturing fall into this category.”
He said constraints are essential to protecting consumers in other sectors like finance.
“The absence of bumpers in this lane was a major factor in the mortgage crisis and Great Recession of 2008,” Perryman said. “It is essential that oil and gas extraction and production be given the flexibility to meet our energy needs, but some bumpers are needed to avoid the potential problems which could occur during those processes such as safety hazards or major environmental harms.
“Regulations if done properly define the rules and protect all involved without unduly limiting beneficial activity. The same is true of the power grid and other forms of primary energy production.”
He said regulation can become unnecessarily burdensome by accumulating excessively over time or being used inappropriately to further political agendas that are not based on optimal market outcomes.
“Eliminating superfluous regulation can provide an economic boost by enhancing efficiencies and reducing costs,” Perryman said. “The proposed Energy Permitting Reform Act of 2024 has the potential to streamline many aspects of the energy industry from oil and gas to electric power transmission to liquefied natural gas.
“It also sets forth time limitations for certain types of permits to enable crucial infrastructure to be constructed in a more timely manner. It is being proposed in a bipartisan manner with its primary architects being U.S. senators from energy-producing states.
“It will have to go through some additional rounds of negotiations to become a reality, but the intent is desirable.”
With respect to oil and gas, Perryman said, record levels of production are occurring and the U.S. has emerged as the dominant global supplier.
“Nonetheless, threats in such forms as species regulation or limitations on federal lands are creating potential future challenges,” he said. “There have also been difficulties in permitting needed pipelines, LNG facilities and other much-needed midstream and downstream assets.
“There have been bottlenecks in developing additional power grid capacity in the face of rising demand. Ensuring sufficient, reliable energy is crucial not only to quality of life but also to geopolitical security.
“The Energy Permitting Reform Act could help to make that process more efficient, providing wide lanes for critical activity while keeping the necessary bumpers on the lanes.”
