Energy Talking Points by Alex Epstein

Alex Epstein

Dear Chairman Smith and Chairman Crapo:

We, the undersigned American energy producers and investors, write to voice our principled support for full repeal of the Inflation Reduction Act’s (IRA) energy subsidies, including subsidies that would appear to be to our firms’ and industry’s benefit. This is the only moral and practical path forward if we are to truly unleash American energy.

In recent weeks, Congress has been embroiled in battles over which, if any, of the IRA energy subsidies to cut. Lobbyists representing every corner of the energy landscape, including trade groups that many of us are part of, are jockeying to preserve their own piece of the pie, claiming that it is uniquely valuable.

We have oil lobbyists fighting to keep carbon capture and hydrogen subsidies, solar and wind lobbyists fighting to keep solar and wind subsidies, biofuel lobbyists fighting to keep biofuel subsidies, and EV lobbyists fighting to keep EV subsidies.

If this continues, we will likely preserve most if not all of the subsidies, which, deep down, everyone knows are not good for America.

The fundamental truth about subsidies is very simple. For any product, including energy, a subsidy is just a way of taking money from more efficient producers—and from taxpayers—and giving it to less efficient producers. The result is always less efficient production and therefore higher costs or lower quality for Americans.

The most egregious example of subsidies’ destructiveness is the IRA’s solar and wind subsidies, which pay electric utilities to invest much more money in solar and wind than they otherwise would, and thus much less in coal and gas than they otherwise would. Ultimately this means higher electricity prices and certainly less electricity reliability for Americans.

The IRA subsidies’ devastating harm to American energy is more than enough to compel us, as energy producers, to oppose them.

But their harm goes far beyond energy, as they will dramatically increase our debt and ultimately undermine every aspect of our economy.

A central Congressional priority is to curb the national debt during the upcoming budget reconciliation exercise. But according to credible estimates, the IRA will cost over $1 trillion over the next decade and trillions more after that. Worse, the IRA subsidies are expected to misallocate, into uncompetitive business and jobs, $3 trillion of investment by 2032 and $11 trillion by 2050. That’s a disaster for our economy, and for real job opportunities.

Clearly, the right thing to do is to eliminate all these subsidies. When lobbyists say that these subsidies are essential for America, what they’re really saying is that their backers have made investments in projects that have no near term cost-effectiveness and that are totally dependent on indefinite subsidies to sustain themselves.

Most people know the truth, but are afraid to say it due to institutional pressures. Too many Congressmen are afraid of alienating trade groups. Too many trade groups are afraid of alienating their large and vocal members who have made investments hoping for indefinite subsidies. All the while, too few are talking about freedom.

That’s why we invite our colleagues to do the right thing: level with the American people, say that we made a mistake, and that those who built subsidy-dependent businesses took on the kind of risk that we do not want to reward.

Keeping the IRA subsidies—despite all the evidence that they benefit only special interests at the expense of America—risks making our nation ever more like Europe, where industries do not succeed by providing the best value to consumers, but by providing the best favors to politicians. That’s not the America we want to work in.

Sincerely,

Bud Brigham, Founder, Atlas Energy Services and Brigham Exploration

David Albin, Managing Partner, Spectra Holdings

Adam Anderson, CEO, Innovex International

Thurmon Andress, Chairman and CEO, Andress Oil

Don Bennett, Managing Partner, Bennett Ventures LP

Greg Bird, CEO and President, Jetta Operating Company

David de Roode, Partner, Lockton

Andy Eidson, CEO, Alpha Metallurgical Resources

Matt Gallagher, President and CEO, Greenlake Energy

Mike Howard, CEO, Howard Energy

Justin Thompson, CEO, Iron Senergy

Ed Kovalik, CEO, Prairie Operating Company

Thomas E. Knauff, Executive Chairman, EDP

Lance Langford, CEO, Langford Energy Partners

Mickey McKee, CEO, Kodiak Gas Services

Mike O’Shaughnessy, CEO, Lario Oil and Gas Company

D. Martin Phillips, Founder, EnCap Investments LP

Karl Pfluger, midstream executive

David Rees-Jones, President, Chief Energy

Rob Roosa, CEO, Brigham Royalties

Bobby Shackouls, Former CEO, Burlington Resources

Ross Stevens, Founder and CEO, Stone Ridge Holdings Group

Kyle Stallings, CEO, Desert Royalty Company

Justin Thompson, CEO, Iron Senergy

Mike Wallace, Partner, Wallace Family Partnership

Ladd Wilks, CEO, ProFrac

Denzil West, CEO, Admiral Permian Operating

Bill Zartler, Founder and CEO, Solaris Oilfield Infrastructure

Additional signatories (email [email protected] to add yours):

Jimmy Brock, Executive Chairman, Core Natural Resources

Ted Williams, President and CEO, Rockport Energy Solutions LLC

To make sure as many politicians as possible see this letter, help us by sharing on Twitter/X and tagging your Congressmen! Congress is currently undecided about what to do about the IRA subsidies, so now is the moment to make your voice heard.

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From the Canadian Energy Centre

By Deborah Jaremko

Q&A with Mike Verney, executive vice-president, McDaniel & Associates

New analysis commissioned by the Alberta Energy Regulator has increased the province’s natural gas reserves by 440 per cent, bumping Canada into the global top 10.

Alberta’s oil reserves – already fourth in the world – also increased by seven billion barrels.

The report was conducted by Calgary-based consultancy McDaniel & Associates. Executive vice-president Mike Verney explains what it means.

CEC: What are “reserves” and why do they matter?

Verney: ​​Reserves are commercial quantities of oil and gas to be recovered in the future. They are key indicators of future production potential.

For companies, that’s a way of representing the future value of their operations. And for countries, it’s important to showcase the runway they have in terms of the future of their oil and gas.

Some countries that have exploited a lot of their resource in the past have low reserves remaining. Canada is in a position where we still have a lot of meat on the bone in terms of those remaining quantities.

CEC: How long has it been since Alberta’s oil and gas reserves were comprehensively assessed?

Verney: Our understanding is the last fully comprehensive review was over a decade ago.

CEC: Does improvement in technology and innovation increase reserves?

Verney: Technological advancements and innovation play a crucial role in increasing reserves. New technologies such as advanced drilling techniques (e.g., hydraulic fracturing, horizontal drilling), enhanced seismic imaging and improved extraction methods enable companies to discover and access previously inaccessible reserves.

As these reserves get developed, the evolution of technology helps companies develop them better and better every year.

CEC: Why have Alberta’s natural gas reserves increased?

Verney: Most importantly, hydraulic fracturing has unlocked material volume, and that’s one of the principal reasons why the new gas estimate is so much higher than what it was in the past.

The performance of the wells that are being drilled has also gotten better since the last comprehensive study.

The Montney competes with every American tight oil and gas play, so we’re recognizing the future potential of that with the gas reserves that are being assigned.

In addition, operators continue to expand the footprint of the Alberta Deep Basin.

CEC: Why have Alberta’s oil reserves increased?

Verney: We discovered over two billion barrels of oil reserves associated with multilateral wells, which is a new technology. In a multilateral well, you drill one vertical well to get to the zone and then once you hit the zone you drill multiple legs off of that one vertical spot. It has been a very positive game-changer.

Performance in the oil sands since the last comprehensive update has also gone better than expected. We’ve got 22 thermal oil sands projects that are operating, and in general, expectations in terms of recovery are higher than they were a decade ago.

Oil sands production has grown substantially in the past decade, up 70 per cent, from two million to 3.4 million barrels per day. The growth of several projects has increased confidence in the commercial viability of developing additional lands.

CEC: What are the implications of Alberta’s reserves in terms of the province’s position as a world energy supplier?

Verney: We’re seeing LNG take off in the United States, and we’re seeing lots of demand from data centers. Our estimate is that North America will need at least 30 billion cubic feet per day of more gas supply in the next few years, based on everything that’s been announced. That is a very material number, considering the United States’ total natural gas production is a little over 100 billion cubic feet per day.

In terms of oil, since the shale revolution in 2008 there’s been massive growth from North America, and the rest of the world hasn’t grown oil production. We’re now seeing that the tight plays in the U.S. aren’t infinite and are showing signs of plateauing.

Specifically, when we look at the United States’ largest oil play, the Permian, it has essentially been flat at 5.5 million barrels per day since December 2023. Flat production from the Permian is contrary to the previous decade, where we saw tight oil production grow by half a million barrels per day per year.

Oil demand has gone up by about a million barrels a day per year for the past several decades, and at this point we do expect that to continue, at the very least in the near term.

Given the growing demand for oil and the stagnation in supply growth since the shale revolution, it’s expected that Alberta’s oil sands reserves will become increasingly critical. As global oil demand continues to rise, and with limited growth in production from other sources, oil sands reserves will be relied upon more heavily.