U.S. Oil and Natural Gas Transformation and Effects

U.S. Oil and Natural Gas Transformation and Effects

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December 3, 2018
U.S. Oil and Natural Gas Transformation and Effects
Overview
have diminished as more liquefied natural gas (LNG) has
U.S. oil and natural gas production has increased
become available to global buyers.
substantially since 2008 (Figure 1). These increases have
important policy implications for energy markets,
Federal Lands. The rise in production of oil and natural
infrastructure, security, and the environment. These
gas has taken place mostly onshore and on nonfederal
complex and interrelated implications have been both
lands. Crude oil production from nonfederal land has
positive and negative, depending on perspectives, resulting
doubled over the past decade. Although production on
in a variety of conflicts as well as enormous opportunities.
federal land has increased, it has not grown as fast as oil
Stakeholders, at times, turn to the courts to address
production on nonfederal land, causing the federal share of
conflicts, such as ensuring that fuel production and
total (onshore and offshore) U.S. crude oil production to
consumption comply with federal environmental laws.
fall from its peak of nearly 36% in 2009 to about 24% in
2017. U.S. natural gas production shifted even more
In the 115th Congress, the House and Senate debated major
dramatically, with total U.S. production growing 33% since
energy legislation addressing expanding production,
2008, whereas gross withdrawals on federal lands (onshore
pipeline permitting, exports, and energy development on
and offshore) declined by almost 32% over the same time
federal land, among other topics.
period. The federal share of total gross withdrawals
decreased from 25% in 2008 to 13% in 2017. Through
Oil and Natural Gas
executive orders and subsequent implementing actions, the
The U.S. oil and natural gas industry has gone through a
Trump Administration has set a federal lands agenda
“renaissance” of production. Technological improvements
focused on U.S. energy dominance. Even with such a focus,
in hydraulic fracturing and horizontal drilling, among other
any increases in production on federal lands may be
factors, have unlocked enormous oil and natural gas
outpaced by increases on nonfederal lands, particularly
resources from unconventional formations, such as shale.
because the shale formations, where most of the growth is
Oil has surpassed levels of production not seen since the
occurring, lie primarily on nonfederal lands.
1970s. Natural gas has set new production records almost
every year since 2000. And the United States is the world’s
Balancing energy production on federal lands against other
top producer of both commodities.
resource values has long been a fundamental question for
Congress. The 115th Congress debated this balance with
Figure 1. U.S. Natural Gas and Crude Oil Production
respect to, among other issues, the Administration’s
proposed five-year program (2019-2024) for offshore oil
and gas leasing; access to certain onshore federal lands for
conventional or renewable energy development (including
enactment of an oil and gas program for the Arctic National
Wildlife Refuge); proposed changes to environmental and
safety regulations; and efforts to streamline permitting. In
court, stakeholder groups have challenged, and will likely
continue to challenge, the federal leasing program for oil
and gas development on federal lands. For example, some
lawsuits seek to invalidate federal leases or leasing
decisions or require the leasing agency to analyze risks to
public health and the environment further.

Source: Energy Information Administration (EIA). Prepared by CRS.
Exports. As domestic production rose, industry sought to
export more U.S. oil and natural gas (see Figure 2). The
long-term prospects for further increases in either export
Commodity Prices. The expansion of natural gas supply
remain unclear. With growing U.S. crude oil production
since 2008 has led to a dramatic drop in prices, with
and falling prices, there was interest in Congress in
implications for many different sectors, including electricity
eliminating a 40-year limitation on exports of most U.S.-
generation and manufacturing. Over that time, oil prices
produced crude oil. In December 2015, Congress passed the
remained relatively volatile, but dropped in late 2014, and
Consolidated Appropriations Act for FY2016, which
have remained lower since then. Note that while oil is
included a repeal of the oil export ban. Since the ban was
traded on a global market, natural gas is much more of a
lifted, exports of crude have reached over a million barrels
regional commodity due primarily to transportation
per day or 10% of production. Additionally, U.S. exports of
challenges. International price disparities for natural gas
petroleum products, which were not limited by the law,
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U.S. Oil and Natural Gas Transformation and Effects
have also increased significantly, almost tripling during the
from reliance on fossil fuels and resulting greenhouse gas
time period to 5.2 million barrels per day from almost zero.
(GHG) emissions.
Total U.S. exports of 6.4 million barrels per day are still
less than exports from Saudi Arabia.
States are the primary regulators of oil and gas production
on nonfederal lands, but various federal environmental
The first U.S. LNG exports from the lower-48 states began
statutes can apply to certain activities in the sector. (For
in February 2016, but most LNG export projects remain in
example, the Clean Water Act regulates surface discharges
the construction or planning phases. Nevertheless, the
of water associated with natural gas drilling and production
United States became a net natural gas exporter in 2017, the
as well as contaminated storm water runoff from production
first time in more than 50 years, mainly driven by increased
sites; the Safe Drinking Water Act regulates the
pipeline exports to Mexico. Proposals have been introduced
underground injection of wastewater from crude oil and
in the 115th Congress to expedite DOE’s approval process.
natural gas production and the underground injection of
fluids used in hydraulic fracturing if the fluids contain
Figure 2. U.S. Natural Gas and Petroleum Exports
diesel fuel; and the Clean Air Act limits emissions from
associated engines and gas processing equipment as well as
some natural gas extraction, production, and processing
activities.) However, legislative proposals to address federal
regulation have been highly controversial. Some advocates
of a larger federal role point to a wide range of differences
among state regulatory regimes and argue that a national
framework is needed to ensure a consistent minimum level
of protection. Others argue against more federal
involvement and point to the long-established state
regulatory programs, regional differences in geology and
water resources, and concern over regulatory redundancy.
While congressional debate continues, the Trump
Administration has pursued a number of deregulatory
Source: Energy Information Administration (EIA). Prepared by CRS.
initiatives to promote oil and gas production. Executive
Notes: Natural gas exports include LNG and pipeline. Petroleum
Order 13783, “Promoting Energy Independence and
exports include crude oil and petroleum products.
Economic Growth” directs federal agencies to “review
existing regulations that potentially burden the development
Infrastructure. Increased North American oil and gas
or use of domestically produced energy resources and
production, particularly in areas that historically were not
appropriately suspend, revise, or rescind” them. The
major producers, has led to growth in demand to transport
executive order specifically cites several Obama-era
those commodities to market. Oil shipments by rail and
rulemakings that regulated oil and gas production activities
barge have increased significantly. Massive investments
(e.g., the Environmental Protection Agency’s methane
have been made in oil and gas pipelines, although
standards and the Bureau of Land Management’s waste
controversy has arisen around projects such as the Dakota
prevention rule). Several states and other stakeholders have
Access Pipeline and the Keystone XL Pipeline. As noted
sought judicial review of the Trump Administration’s
above, many projects aim to export LNG: these projects
efforts to delay, revise, or repeal existing environmental
would encompass new terminal facilities at U.S. ports. In
regulations.
the 115th Congress, various bills would have amended rail
safety standards, approved the Keystone XL pipeline, or
States’ Roles
promoted other oil and gas infrastructure. In addition,
Many decisions about energy markets, infrastructure, and
various legal challenges have tried to halt construction of
regulation are implemented at the state level. Regardless of
pipelines and terminals to ensure adequate environmental
whether the federal government takes a more or less active
review prior to construction.
role in the future, state and regional decisions often have
national impacts. For example, California’s 2002 decision
Environmental Concerns. The use of unconventional oil
to regulate GHG emissions from automobiles has affected
and gas production has resulted in some significant
other states. The interaction of state and local policies with
environmental benefits (e.g., reduced air pollution from the
national decisions is often complex and can raise
substitution of natural gas for coal in power generation), but
constitutional issues regarding the relationship between
it has also raised concerns about other potential
state and federal laws.
environmental and health effects. These concerns centered
initially on water quality issues, including the potential
For more information, see CRS Report R44854, 21st
contamination of groundwater and surface water from
Century U.S. Energy Sources: A Primer.
hydraulic fracturing and related production activities.
Concerns have since incorporated other issues, such as
Michael Ratner, Specialist in Energy Policy
water management practices (both consumption and
Laura B. Comay, Specialist in Natural Resources Policy
discharge), land use changes, endangered species impacts,
Richard K. Lattanzio, Specialist in Environmental Policy
induced seismicity, and air pollution. Others have raised
Linda Tsang, Legislative Attorney
concerns about potential long-term and indirect impacts
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U.S. Oil and Natural Gas Transformation and Effects

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