issue: Energy & Environment

The Hill: The Keystone distraction

Posted on by The Progressive Policy Institute

The Senate will vote soon on what the GOP has made their top legislative priority: expedited approval of the Keystone XL pipeline. Given the realities of today’s crude oil market, the political wrangling over Keystone has a decidedly retro feel.

The United States has experienced an energy revolution since the Keystone XL pipeline was first proposed seven years ago. Most important is America’s shale oil and gas boom, which has contributed to a sharp drop in global oil prices. With U.S. oil production in particular surging, why do Republicans persist in claiming that Keystone is a matter of such urgent national interest?

The answer clearly has more to do with politics than with the new realities of U.S. energy abundance.

The energy sector has become an important driver of U.S. investment during our painfully slow economic recovery. Investment is projected to total $890 billion over the next two decades. And all this investment is spawning good, middle-class jobs for Americans. Unfortunately, inadequate infrastructure constrains our ability to take full advantage of such investment and job growth.

Continue reading at The Hill.

Pipeline Politics: The Keystone Distraction

Posted on by The Progressive Policy Institute

The decision by Senate and House Republicans to make approval of the Keystone XL Pipeline their first legislative priority has a decidedly retro feel. Much has changed since the Keystone project was first proposed in 2008. Most important is America’s shale oil and gas boom, which has contributed to a sharp drop in global oil prices. With U.S. oil production in particular surging, why do Republicans persist in claiming that Keystone is a matter of such urgent national interest?

The answer clearly has more to do with politics than with the new realities of U.S. energy abundance. Republicans see Keystone as a classic wedge issue that splits two important Democratic constituencies, labor and environmentalists. So much for claims by Senate Majority Leader Mitch McConnell and others that the GOP will use its new Congressional majority to govern responsibly and put problem-solving over partisanship.

That’s a shame, because the Keystone debate is a distraction from a bigger and more important issue: How to move America’s shale windfall to market. A good portion of U.S. production is happening in places like North Dakota, which is far outside America’s original “oil patch.” When Keystone was first proposed, about 60% of domestic production came from Alaska, Texas, and the Gulf of Mexico, where significant oil and gas infrastructure is located. However, with production now occurring in shale developments like North Dakota, surpluses are developing at storage and transportation hubs making it difficult to get to market.

Download “2015.01-Freeman_Pipeline-Politics_The-Keystone-Distraction.pdf/”

PRESS RELEASE: PPI Statement On New York State Fracking Ban

Posted on by The Progressive Policy Institute

WASHINGTON—Derrick Freeman, Director of the Energy Innovation Project at the Progressive Policy Institute, today released the following statement after New York Governor Andrew Cuomo announced Wednesday that his administration would ban hydraulic fracturing in New York State:

“For the past five years, the shale boom has provided the United States with a vibrant new source of economic prosperity. States across the country have experienced soaring economic growth and expanded job creation from utilizing hydraulic fracturing, while conclusively illustrating that it can be performed safely and in an environmentally sustainable fashion. That’s why today’s decision by Governor Cuomo to ban fracking in New York State is so baffling.

“If political constraints and government interference on this proven technology continue, we risk shutting down investment and innovation in one of the most productive areas of the American economy. PPI strongly urges Governor Cuomo to avert such a disaster and reconsider his decision.”

Free Energy Trade: Time to Lift the Oil Export Ban

Posted on by The Progressive Policy Institute

In July 2014, the United States passed Saudi Arabia and Russia to become the world’s biggest oil producer for the first time since 1970. This dramatic turn of events marked the end of an era in U.S. energy policy—an era that began in the 1970s with two oil embargoes, soaring gas prices, and growing dependence on imported oil, especially from the Middle East.

For better or worse—and some environmentalists think it’s definitely for worse—America unexpectedly finds itself richly endowed with fossil fuels again. The question now is how can we take advantage of this new energy abundance without accelerating global warming?

The answer, in PPI’s view, lies in a balanced national energy strategy that promotes both economic growth and a healthy environment. Such a strategy would capitalize on the domestic shale oil and gas boom while also enabling America to meet its international commitments to reduce greenhouse gas emissions. There are two ways to square that circle. One is to boost public investment in energy-related research and development. The other is to price carbon accurately, which will spur more investment in efficiency, clean tech innovation, and renewable and nuclear energy.

This approach steers a pragmatic course between “drill baby drill” conservatives, who ignore or deny the overwhelming scientific evidence for climate change, and extreme environmentalists who imagine that Americans will go along with their demands to keep the nation’s shale bounty “in the ground.”

Download “2014.12-Freeman_Free-Energy-Trade_Time-to-Lift-the-Oil-Export-Ban.pdf/”

Exporting U.S. Natural Gas: The Benefits Outweigh the Risk

Posted on by The Progressive Policy Institute

In a remarkably brief period, America has become awash in oil and natural gas. According to the U.S. Energy Information Agency (EIA) we have surpassed Russia as the world’s leading energy superpower, producing more oil and natural gas combined than any other country. This newfound abundance has turned old assumptions about U.S. energy scarcity and security on their head. For the first time since the energy crisis of the 1970s, there is mounting pressure—both domestically and abroad—for the United States to once again become a major energy exporter.

According to the EIA, America’s proved reserves of natural gas have increased in each of the last 15 years to a total of 308.4 trillion cubic feet (Tcf) in 2013, up 84% from 1999 estimates. The agency also estimates that unproved natural gas resources were at an increased level of 1,903.7 Tcf in 2009. These U.S. government estimates are in line with other assessments reported by several respected sources.

Most of these reserves are unconventional resources like coal bed methane, tight gas, and shale that have become more accessible due to significant advances in gas extraction technologies. As a result, the oil and gas industry, including expanding gas and oil production, have accounted for more than 9 million full- and part-time American jobs over the past few years.

The energy revolution also shows up in the results of the Progressive Policy Institute’s recently released 2014 U.S. Investment Heroes, an annual survey of the top 25 U.S. companies that invest most in the United States. On that list are 10 energy companies, involved in the exploration and production of oil and gas or energy distribution and power, that invested a total of $57 billion in 2013, representing 37% of the top 25 investment.

Download “2014.10-Freeman_Exporting-Natural-Gas“

Energy investment boom drives economic recovery

Posted on by The Progressive Policy Institute

Americans seem to have a love-hate relationship with major energy companies. On the one hand, our iconic brands are global leaders and symbols of U.S. technological and economic prowess. On the other hand, Big Energy takes the heat when the public gets restive over rising gas prices, or there’s an extended power outage.

A new Progressive Policy Institute (PPI) report highlights an underappreciated fact about energy companies—they are huge investors in the U.S. economy. In fact, along with telecoms and Internet-based businesses, they are leading our economic recovery.

Each year, PPI economists Michael Mandel and Diana Carew rank America’s top 25 “Investment Heroes”—the U.S. companies (excluding finance) that are making the biggest capital investments in economic innovation and jobs here at home. This year’s report shows that 10 U.S. energy companies made the list. These companies, involved in the exploration and production of oil and gas, or in energy distribution and power, invested a total of $57 billion in domestic capital expenditures last year. That figure represents 37 percent of the $152 billion that all 25 companies pumped into the U.S. economy in 2013. The energy companies on the list included many household names—Exxon (3), Chevron (4), ConocoPhillips (8), Exelon (10), and Duke Energy (11). But some lesser-known firms made the cut too, including Energy Transfer Equity (16), Enterprise Product Partners (18), and FreeportMcMoRan (24). All are helping to spur America’s energy transformation by investing in the nation’s shale oil and gas boom.

Continue reading at the Hill.

U.S. Investment Heroes of 2014: Investing at Home in a Connected World

Posted on by The Progressive Policy Institute

In this era of globalization, goods, services, money, people, and data all cross national borders with ease. Indeed, connectedness to the rest of the world is now essential for the data-driven economy we find ourselves in to thrive. It follows that our tax, trade, immigration, and regulatory policies must be oriented to encourage that connectedness.

But perhaps paradoxically, prospering in a connected world requires a dedication to investing at home. It is impossible to participate as a full partner in the global economy unless we are investing in digital communications networks, education, infrastructure, research, energy production, product development, content, and security domestically. Investment generates increased productivity, higher incomes, new jobs, and more opportunities for the economic mobility and growth that we all desire.

Such prosperity-enhancing investment comes in many flavors, both private and public. In this report, we focus on identifying the U.S.-based corporations with the highest levels of domestic capital expenditures, as defined by spending on plants, property, and equipment in the United States. Currently, accounting rules do not require companies to report their U.S. capital spending separately, although some do. We fill in this gap in available knowledge using a methodology outlined at the end of this paper, based on estimates derived from published data from nonfinancial Fortune 150 companies.

To understand which companies are betting on America’s future, we rank the top 25 companies by their estimated domestic investment. We believe this list can help inform good policy for encouraging continued and renewed investment domestically.

Download “2014.09 Carew_Mandel_US-Investment-Heroes-of-2014_Investing-at-Home-in-a-Connected-World“

USA Today: AT&T, Verizon, Exxon are top corporate spenders

Posted on by The Progressive Policy Institute

PPI Economist Diana Carew was quoted in a USA Today exclusive covering PPI’s newest report, U.S. Investment Heroes of 2014: Investing at Home in a Connected World. Carew co-authored the report with PPI Senior Economic Strategist Michael Mandel.

PPI economist Diana Carew says the government should promote faster capital spending growth and contributions from more industries through policies that encourage investment.

Last year, three sectors — telecommunications and cable, Internet and technology, and energy — accounted for 83% of the top 25 firms’ total investment.

“Policies need to make investment an explicit focus,” Carew says.

Continue reading on USA Today.

MSNBC: Hillary Clinton’s hard choices on energy

Posted on by The Progressive Policy Institute

PPI President Will Marshall was quoted by MSNBC’s Alex Seitz-Wald on the Democratic Party’s divide on energy policy.

One salutary effect of Republican radicalism is to unify Democrats,” said Will Marshall, president of the Progressive Policy Institute, a moderate Democratic think tank that helped feed Bill Clinton’s White House with new policy ideas. “Having said that, there are some important fault lines that will become apparent as we move into the next presidential election cycle.”

…

Both sides are members in good standing of the Democratic coalition, and have legitimate claims, so it may require some Clintonian triangulation. “Anybody who wants to be the Democratic nominee will have to strike a balance between the needs of the economy and concerns about the environmental impact of energy production,” Marshall told msnbc. “It’s a fault line, so you’ve got to walk a line.”

Read the entire article at MSNBC.

The Hill: Don’t reform the tax code on the backs of over-taxed energy producers

Posted on by The Progressive Policy Institute

William F. Shughart II, writing for the Hill, referenced an observation made by the Progressive Policy Institute that major U.S. energy companies are “Investment Heroes.”

A high-growth strategy requires strong investment — private and public — in our nation’s productive and knowledge capacities.

To read the rest of the article, visit The Hill’s website here.

Bringing U.S. Energy Policy Into the 21st Century

Posted on by The Progressive Policy Institute

U.S. lawmakers don’t drive around in 1970s-era cars, yet they don’t seem to mind energy policies that are equally out of date. Attempts to export shale oil and gas, for example, have run smack into legal and regulatory barriers as old as a Gran Torino.

Energy companies have been urging Congress to lift the lid on exports and start treating oil and gas again like any other commodity that’s freely traded in world markets. Tapping global demand for U.S. shale oil and gas, they say, will spur domestic production and create even more jobs in a sector that’s already racked up robust employment gains.

Russia’s naked power play in wresting Crimea from Ukraine has given fresh impetus to the export push.

From outraged Republicans to eastern Europeans living anxiously in Moscow’s shadow come calls to use America’s shale windfall to wean Europe off dependence on Russian gas, oil and coal.

The idea that surging U.S. gas and oil production is a new source of geopolitical power is a seductive one, though there are practical difficulties inherent in using energy as an instrument of foreign policy.

Vladimir Putin’s Russia is not as scary as the Soviet Union, but it remains an energy superpower. Moscow supplies Europe on average with roughly a third of its energy; many Baltic and central European countries rely almost completely on Russian gas, oil and coal. Some observers think such realities have muted Europe’s reaction to Putin’s aggression.

Taking market share from Moscow would diminish its political leverage, while also weakening its petro-centric economy. Energy accounts for as much as a quarter of Russia’s GDP, 60 percent of its exports, and the lion’s share of its revenues. The problem, of course, is that Washington doesn’t export oil and gas, companies do. They go where the profits are, not where geopolitics dictates.

In any event, U.S. gas and oil exports are stalled by old laws and rules as well as potent domestic opposition. For example, the 1975 Energy Policy and Conservation Act bars most exports of U.S. crude oil. Exporting natural gas isn’t illegal, but it requires getting the U.S. Department of Energy’s approval to build terminals for liquefying the gas so it can be shipped overseas. Amid industry complaints that the Department of Energy is slow-walking approvals, Congress recently held hearings on ways to expedite LNG export licenses.

America’s import-oriented energy policies are a legacy of the 1970s energy crises. They are predicated on an assumption of fossil fuel scarcity and U.S. vulnerability to volatile global oil markets. Today’s reality is abundance, thanks to horizontal drilling techniques and shale fracturing, aka, “fracking.” Next year, the United States is expected to overtake Saudi Arabia as the world’s largest oil producer.

The energy world has been turned on its head, but U.S. policies haven’t changed. Powerful interests are invested in preserving the status quo. Chemical companies, which use natural gas as a feed stock, say ramping up exports would raise domestic gas prices and thereby threaten a revival in U.S. manufacturing. Some analysts say we’d be better off using more natural gas in the transportation sector, for cars as well as heavy-duty trucks, because this would cut both carbon emissions and oil imports.

The fiercest opposition to exporting oil and gas comes from environmental activists. In an open letter (PDF) to President Obama, a coalition of environmental groups led by anti-XL Pipeline crusader Bill McKibben, slammed the administration’s plans for building LNG terminals along U.S. coastlines. “We believe that the implementation of a massive LNG export plan would lock in place infrastructure and economic dynamics that will make it almost impossible for the world to avoid catastrophic climate change,” the letter asserts. Most of the nation’s fossil fuel reserves, it adds, should stay “in the ground.”

It’s highly unlikely, though, that the public will support attempts to stuff the shale genie back in its bottle. According to the U.S. Energy Information Administration, jobs in the oil and natural gas industry grew by 32 percent between 2007 and 2012, even as overall employment fell 11.4 percent. The glut of cheap gas is also a boon to energy-intensive industries in the United States, which are beginning to attract significant investment from Europe, where energy costs are much higher.

Moreover, it’s not a foregone conclusion that taking advantage of America’s shale bonanza will bring on an environmental catastrophe. On the contrary, fuel switching in the electricity sector from coal to natural gas already has brought a 10 percent decline in U.S. greenhouse gas emissions, according to the Environmental Protection Agency. If gas catches on as a transport fuel, that also would yield lower emissions. In any event, fossil fuels will continue to be a major part of America’s fuel mix for decades to come, green fantasies notwithstanding, and lawmakers must manage the nation’s energy portfolio — including zero-carbon-emitting nuclear energy—in a way that both spurs economic growth and reduces the risks of global warming.

In truth, no one really knows what will happen if America once again becomes a major energy exporter. We can’t say for sure whether domestic prices will spike, or how global markets would react to an influx of U.S. oil, or what the net effect on global carbon emissions would be. Nor is it certain that exports by energy companies would buttress U.S. diplomacy. The sensible course is to experiment—to lift restrictions on oil and gas exports at a measured pace, measure economic and environmental impacts, and make adjustments as we go. That should be part of a political bargain in which Democrats agree to ease export controls in return for GOP support for more public investment in research and development of renewable fuels and clean technology.

What makes no sense is to let the dead hand of 40-year-old energy policies constrain America’s freedom of action today. As the shale revolution approaches its 10th anniversary, it’s time to bring U.S. energy policy into the 21st century.

This piece was originally published at the Daily Beast.

Keep Nuclear Energy On The Table

Posted on by The Progressive Policy Institute

On Tuesday, President Obama’s State of the Union address touched briefly on the all-of-the-above energy strategy that his administration has made a priority for the past few years. However, one thing missing from his remarks about energy was nuclear power. Nuclear energy production must remain an important component of any successful U.S. energy strategy and part of the global climate change solution.

As President Obama rightly noted, “[America’s] energy policy is creating jobs and leading to a cleaner, safer planet.” Nuclear power isn’t the only answer to American energy needs, nor should it be. But it is an important part of the well-balanced solution. The United States is leading the way to safer and more economical plants and the sector continues to innovate and improve the technology for the next generation of nuclear energy facilities. Progressives must not run from supporting nuclear energy and should continue to consider it a viable clean energy alternative as part of a comprehensive energy plan.

Energy is an Important Driver of U.S. Investment

Posted on by The Progressive Policy Institute

Given the ongoing boom in oil and natural gas production, it’s no surprise that U.S. and non-U.S. energy companies are among the top companies investing in America. Still, the sheer magnitude of the investments by these companies means the contribution of the energy sector to economic growth should not be ignored or discounted in the larger conversation.

Of the U.S. companies highlighted in our new U.S. Investment Heroes report, eight of our top 25 U.S. Investment Heroes of 2013 were energy companies. Together, we estimate these eight companies invested a total $56 billion over the last year in plants, property, and equipment in the United States, comprising almost 40 percent of the total $150 billion invested by the top 25 companies. Exxon Mobil, the top energy company on our list, invested over $12 billion in the U.S. in 2012 alone.

Due to incomparability across financial statements, our non-U.S. Investment Heroes report separately considered companies in energy production, automotive manufacturing, and industrial manufacturing.

Still, our research found that of the three categories, energy companies were by far making the biggest bet on America’s future.  Global energy giant BP was the top non-U.S. Investment Hero out of all the companies we considered across the three categories, putting a combined $19.3 billion into the U.S. economy in 2011 and 2012. (To the best of our knowledge, these funds did not include any payouts related to the Deepwater Horizon oil spill.) Together, the top four energy non-U.S. energy companies we considered invested an estimated $58.7 billion in 2011 and 2012.

At a time of weakness in other industries, these studies highlight that energy production is a bright spot for U.S. business investment. That this message is clear in both our U.S. Investment Heroes and non-U.S. Investment Heroes reports suggests energy will continue to be a driver of U.S. growth and job creation.

Who are the U.S. Investment Heroes of 2013?

Posted on by The Progressive Policy Institute

In our newest report, “U.S. Investment Heroes of 2013: The Companies Betting on America’s Future,” we highlight the top U.S. Investment Heroes of 2013, as ranked by their U.S. investment.

PPI’s ranking of U.S. Investment Heroes for 2013 is led by AT&T, which invested almost $20 billion in the U.S. in 2012. The top five are rounded out by Verizon, Exxon, Chevron, and Intel, and together these five companies invested over $66 billion in the U.S. during the last year.* Total U.S. investment by the top 25 companies amounted to almost $150 billion last year, spent on high-speed broadband deployment, oil and natural gas production, and new corporate and retail facilities.

Telecommunications and cable, energy, and technology dominated this year’s Investment Heroes list, comprising 18 out of our top 25 companies. The fact that these three sectors are driving U.S. private fixed investment reflects their importance in driving U.S. economic growth.

Given the importance of investment as a path to sustainable growth, it is essential our economic policies make domestic business investment a priority. In our report we put forward four ways to encourage more U.S. investment: simplify the corporate tax system, invest in workforce training, don’t over-regulate innovative industries, and free up more spectrum.

*See full report for complete methodology and definitions.

 

U.S. Investment Heroes of 2013: The Companies Betting on America’s Future

Posted on by The Progressive Policy Institute

For too long, U.S. policymakers have focused narrowly on boosting consumers’ buying power, assuming that the productive end of the economy will take care of itself. Yet the last decade of slow growth shows that debt-driven consumption is not a sustainable strategy for expanding economic opportunity or lifting U.S. living standards. In contrast, a high-growth strategy requires strong investment—private and public—in our nation’s productive and knowledge capacities.

It’s time for progressives to rebalance the consumption-investment equation. Total domestic investment fell drastically during the recession and has yet to fully recover. A big part of the problem is the public sector. With gridlock in Washington and financial troubles at the state and local level, government real spending on productive assets from highways and bridges to computer equipment, net of depreciation, is down by half compared to the average level of the 2000s.

Investment by the private sector is doing better, but taken as a whole still falls way short of what the country needs to generate jobs and growth. As shown in Figure 1, business investment, outside of housing, is still 20 percent below its long-term trend. There are several reasons why private business investment is failing to reach its potential. Globalization, weak demand, deleveraging and a shortage of workers with technical skills all contributed to the investment fall-out and subsequent investment gap. And as PPI has documented elsewhere, the sheer accumulation of regulations over time can discourage capital investment and innovation.

Within this gloomy picture, however, are some bright spots—companies that continue to place big bets on America’s future, creating jobs and raising productivity in the process. Surprisingly, in a world of information overload, identifying these major contributors to the U.S. economy is not an easy task, since most companies do not break out their domestic capital spending. That’s why we undertook our second annual report on “U.S. Investment Heroes,” making a systematic analysis of publicly available information to rank nonfinancial companies by their capital spending in the U.S.

PPI’s ranking of U.S. Investment Heroes for 2013 is once again led by AT&T, which invested almost $20 billion in the U.S. in 2012. The list then follows with Verizon, Exxon, Chevron, Intel and Walmart. Together, we estimate these companies invested almost $75 billion in the U.S. in 2012, an astonishing total almost twice the GDP of Wyoming. Over the last year, these companies have poured capital investment into the deployment of high-speed broadband, oil and natural gas production, and new corporate and retail facilities.

As a general principle such spending provides both direct and indirect benefits to Americans. For example, a variety of studies suggest that investment in fixed and mobile broadband creates jobs. In fact, PPI Chief Economic Strategist Michael Mandel estimates that since Apple introduced the iPhone in 2007, the economy has created over 750,000 jobs related to mobile apps.

Indeed, telecommunications and cable companies are a major driver of U.S. investment today, sparking the rise of what we call “the data-driven economy.” The digital transformation of the U.S. economy would not be possible if high-speed fixed and mobile broadband networks were not in place. That’s why encouraging private investment in our nation’s broadband infrastructure is rightly a major priority for the Obama administration. Beyond that, robust private investment in smart devices, sensors, and “big data” analytics is sparking the emergence of the “Internet of Everything,” which could boost productivity and job creation in ‘physical’ industries such as manufacturing and transportation.

Our ranking of U.S. companies investing in America also shows the tremendous role energy—oil and natural gas production and power generation—has on U.S. economic growth. The shale oil and gas boom has turned old assumptions about energy scarcity on their head. It is lowering input costs for U.S. chemical companies and helping to revive U.S. manufacturing. It may also turn the United States into a major energy exporter, while creating jobs at home.

This report is the third in PPI’s “Investment Heroes: Who’s Betting on America’s Future” research series. That so many companies are choosing to invest elsewhere—or not at all—makes it all the more important to recognize those that are placing their bets on America’s future.

Download the memo.

 

PPI Releases New Report on U.S. Energy, Motor Vehicles Attracting Foreign Investors

Posted on by The Progressive Policy Institute

U.S. Energy, Motor Vehicles Attracting Foreign Investors

WASHINGTON — Seeking to capitalize on America’s shale gas boom, foreign companies are making major investments in the U.S. energy sector, a new PPI study shows. And while foreign investors still see making motor vehicles in the United States as good business, they seem less willing to place their bets on America’s greatly heralded manufacturing renaissance.

These are key findings of “Non-US Investment Heroes: Foreign Companies Betting on America” by PPI Economist Diana G. Carew. In the first study of its kind, Carew identified the top non-US based companies in three key industries – energy, motor vehicles, and industrial manufacturing – by their level of U.S. investment in 2011 and 2012.

In energy, the top company investing in America by their cumulative 2011 and 2012 capital expenditures was BP, followed by Shell, Statoil, and Total.

In the two remaining industries, we could not produce a ranking due to limitations in publicly available financial data. Still, we identified six motor vehicle and industrial manufacturers that had significant U.S. investment in 2011 and 2012 (listed in alphabetical order): BMW, Honda, Robert Bosch, Samsung, ThyssenKrupp, and Volvo. To obtain these results, PPI analyzed publicly available financial statements.

In general, the report found that foreign direct investment in the United States is still well below its pre-recession high of $310 billion. “We need investment from overseas to propel the U.S. economy, but we continue to be stuck in an investment drought,” Carew says.

However, as Carew notes, a paucity of good data on investment from many non-U.S. based companies, particularly those outside of the energy sector, presents a challenge for designing effective U.S. investment policy.

This report is part of our “Investment Heroes” series, and follows from our 2012 report “U.S. Investment Heroes: Who’s Betting on America’s Future?”