The energy security risks of the United States worsened significantly in 2010 and could remain uncomfortably high for the next 25 years without changes to “a bewildering set of energy policies and layers of complex regulations,” according to the second edition of an annual report by the U.S. Chamber of Commerce’s Institute for 21st Century Energy.
Karen Harbert, the institute’s CEO, told reporters Thursday that the Energy Security Risk Index (ESRI) for 2010 was 98.0, up 6.5 points from the revised score of 91.5 reached in 2009. The 98.0 mark is the fourth-highest ESRI since 1970.
“The score was from higher primarily because of energy prices and price volatility,” Harbert said. “This has been the worst year for risks since the 1980s and the Iranian hostage crisis. That’s not good news. The message this sends to policy makers is that we’ve got get more serious about having a vibrant and viable domestic energy policy. And that the time to get one is now.”
The Chamber’s report, “Index of U.S. Energy Security Risk 2011,” predicts that for the next 25 years the nation’s energy security situation will remain extremely risky due to rising energy costs — especially oil — coupled with lower crude oil output from Alaska and the Gulf of Mexico (GOM).
The report also cites an Energy Information Administration (EIA) forecast that said crude oil output would fall 1.3 million b/d below previous expectations by 2035, adding to market insecurity.
Asked to elaborate on the GOM, Harbert said, “What we are seeing is that there is an increase in production on private land, not on federal land. It’s a result of being unable to access those lands and those waters that are under the domain and the authority of the federal government. We’re only seeing about one permit a month in the deepwater, which is a huge drop off. We are not back up to full capacity pre-moratorium.
“Private land is the only place the private sector can get to right now. It’s good news for production capacity, but bad news because the really rich offshore reserves are constrained.”
Conflicting accounts of the current GOM permitting climate have been publicized recently, with industry accusing the government of creating costly delays and the government countering that the industry’s accusations are inaccurate (see Daily GPI, Aug. 4; July 22). In October the Obama administration lifted a de facto moratorium on drilling, which was enacted following the disastrous Macondo well blowout and oil leak in late April 2010 (see Daily GPI, April 22, 2010).
“Clearly if there is expanded production in the GOM it helps the risk index,” Harbert said. “However, the industry forecasts are different from the EIA because they look at the accumulated production loss from the past year, then the accumulated loss from the reduced activity based on the moratorium and the new permitting process. If you take all of that into account it tells a different story.”
She added that EIA forecasting was based on a model that assumes the GOM is “open for business.”
“We’re seeing that’s not happening,” Harbert said.
Steve Eule, the institute’s vice president, mentioned efforts by TransCanada Corp. to build the 1,700-mile Keystone XL Pipeline extension. If approved by the federal government, the pipeline would transport crude oil from the Alberta oilsands to Texas for processing (see Daily GPI, July 5; June 9).
“One of the measures that we look at is risk to international crude oil reserves,” Eule said. “The Canadian oilsands have really reduced that risk. So we are very concerned about what’s going on with the Keystone Pipeline because that will have a direct impact on lowering our energy security risks as it pertains to crude oil.”
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