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Energy as a Solution, Not a Problem

Article by Robert Asahina September 16, 2013 //   3 minute read

At the Conference on Energy Regulation at the Bush Center last week, everyone could agree on one vital point: Energy, once seen as part of the problem for economic growth, is now part of the solution.

As Karen Harbert, President and Chief Executive Officer, Institute for 21st Century Energy, U.S. Chamber of Commerce, reminded the audience in the opening session, American energy policy for the past four decades was shaped by the experience of oil shortages and strategic vulnerability in the 1970s. But this backwards-looking perspective of scarcity now confronts an era of plenty. Horizontal drilling and hydraulic fracturing have tapped vast new reservoirs of shale oil. Once dependent on oil from the Middle East and the OPEC cartel, America is now first in the world in natural-gas production, first in nuclear power, and first in renewable energy. And within a few years, the U.S. will pass Russia and Saudi Arabia and become the world's no. 1 producer of oil as well.

"It is worth noting," Bernard Weinstein reminds us in The Energy Logjam, a handbook published for the conference, "that his newfound abundance of oil and natural gas has been developed with private capital, not government assistance." In fact, "the surge in domestic oil and gas employment and output has come during a period of expanding federal, state, and local regulations and restrictions on drilling activities."

States like California and New York have struggled economically, not because they lack energy resources but because their regulations have stifled the mining sector and throttled its potential contribution to growth in general. Meanwhile, states where regulation is balanced, inclusive, and predictable — such as North Dakota and Texas — have prospered.

As Governor Sam Brownback of Kansas noted, there are two economic models being advanced by state governments: the red state model (Texas and North Dakota) and the blue state model (New York and California). "I think the red state model is going to win," Brownback told the audience at the Bush Center. And the evidence — North Dakota has experienced more than 15 times the national average GDP growth in the past four years — supports Brownback's view.

If America is to break free of the economic doldrums that have swamped growth for the past five years (0.6% average annual real GDP growth nationally since 2008), the country's vast energy resources must be unleashed. And the result will be not just economic, but geopolitical, as the U.S. moves closer to true energy independence.