Year in Review: U.S. Oil and Gas Industry Continues to Innovate Despite Headwinds in 2023
Amidst attacks on U.S. energy production and continued global instability, the U.S. oil and natural gas industry managed to not only meet but exceed expectations in 2023. The industry broke production records and supplied critical energy resources at home and abroad, all while reducing methane emissions.
Oil and Gas Industry Continues to Innovate Amid Record Production
In 2023, the oil and natural gas sectors continued to innovate and reach record breaking levels of production. After becoming a net energy exporter in 2019, the United States has emerged as a behemoth in the global energy market, hitting prolific levels of oil and natural gas production and exports in the past year.
Source: The New York Times
Source: The New York Times
U.S. liquified natural gas (LNG) had a tremendous year with the United States becoming the top LNG exporter in the world.
Source: Energy Information Agency
These record-breaking levels of production have not come at the expense of Americans as some activists claim. To the contrary, record energy production levels have successfully been able to meet both domestic and international demand, providing crucial energy security at home and abroad, all while keeping prices stable.
Data from the Environmental Protection Agency also showed stunning drops in total methane emissions across the board, meaning that even with record production, U.S. operators continue to produce oil and gas responsibly and with an eye toward methane reduction.
In particular, natural gas has led the charge in driving massive emissions reduction in the power sector, showing that natural gas is one of the best tools that industry and policymakers have in their toolbox for widespread emissions reductions.
In 2023, the American oil and natural gas industry continued to prioritize environmental progress. Voluntary initiatives like the Environmental Partnership, which represents nearly 70 percent of U.S. onshore oil and gas operations, showcases the industry’s commitment to responsible operations through innovation and collaboration.
In their 2023 report, the Environmental Partnership highlighted an additional 14 percent reduction in total flare volumes and a 2.4 percent reduction in flare intensity from the previous year – building on the work to cut flaring intensity nearly in half in 2022 – even as U.S. oil and gas production grew.
Source: The Environmental Partnership
The dedication to emissions reductions does not stop there. At the global climate conference COP28, 50 of the largest oil and gas producers in the world including ExxonMobil, Occidental Petroleum, Shell, Repsol, BP, and EQT signed an UN-sponsored pledge to all but eliminate methane emissions from their operations by 2030.
Administration Hurdles Ignore Important Role of Industry
These accomplishments and innovations are even more impressive when taking into account the uncertain regulatory environment under the Biden administration and the onslaught of attacks from activists. Nowhere was this more apparent than in the administration’s illegal actions regarding onshore and offshore leasing.
The Biden administration was met with widespread pushback from industry and bipartisan lawmakers as the White House aggressively blocked offshore energy production, threatening energy security, consumer prices, and emission reductions goals.
Much of the criticism was focused on the administration’s refusal to release a timely or comprehensive five-year program for offshore oil and natural gas leasing. Once the program was finally released – 450 days late – it included the fewest number of lease sales in history.
U.S. Senator Joe Manchin (D-WV), Chairman of the Senate Energy and Natural Resources Committee, blasted the move:
“…this Administration has once again decided to put their radical political agenda over American energy security, and the American people will pay the price.”
Similarly, Jeff Eshelman, President and CEO of the Independent Petroleum Association of America weighed in saying:
“A plan with only three leases in five years will not only hamper American production but jeopardizes our energy security and will result in hundreds of millions of dollars of lost revenue to coastal states and the federal treasury.”
Adding to the regulatory circus of offshore leasing, the administration’s efforts to use the Endangered Species Act to limit Lease Sale 261 under the guise of protecting the Rice’s Whale also resulted in widespread criticism and legal challenges. Ultimately, a federal appeals court ruled against the Biden administration and ordered the Department of Interior to hold a lease sale in the Gulf of Mexico before the end of the year.
These moves, and others like it, resulted in record low levels of offshore drilling permits issued.
The same attacks on offshore drilling were felt onshore as well. The Department of the Interior (DOI) canceled the only active leases in Alaska’s Arctic National Wildlife Refuge (ANWR). At the same time, the DOI announced new rules to prevent future oil and natural gas development in a separate 13-million-acre swath of the state: the National Petroleum Reserve — Alaska (NPR-A). Both of these moves have been heavily criticized by leaders in both the public and private space, from Tribal landowners, bipartisan politicians and businesses large and small.
In New Mexico, DOI similarly ignored Native tribes’ opposition to the agency’s slow-moving lease sale process. And in North Dakota, DOI attempted to stop leasing altogether but was stymied by a federal judge yet again.
All of these moves threaten the industry’s ability to invest and operate which in turn undermines American energy security.
Activist Claims Fall Flat While Role of Natural Gas Put in Spotlight
As we’ve seen in year’s past, rhetoric around “peak oil” and a “fossil fuel phase-out” escalated in the leadup to COP28. However, the past is prologue, and once again, these claims fell flat, particularly when stacked up against the economic and environmental benefits of natural gas.
This year, energy research firm Rystad Energy forecasted a need for “rapid growth” in natural gas supply to meet continuing global gas demand, even in aggressive decarbonization scenarios. According to Aatisha Mahajan, Vice President of Exploration with Rystad Energy:
“Gas is increasingly considered a crucial stepping stone to a sustainable future. With reduced emissions and regional energy security goals aligned, gas is poised to play a pivotal role in the global energy transition.”
Federal Energy Regulatory Commission (FERC) Acting Chairman Willie L. Phillips, a Biden appointee, unequivocally echoed the belief in natural gas’ longevity:
“I don’t see a tension between the steps we have taken to fight climate change and the use of natural gas and LNG. Natural gas and LNG will be a feature of our energy mix far into the future. When it comes to considering new projects, one of the key things I consider is the impact that these projects will have on the climate. There will be no transition of our energy system without natural gas.” (emphasis added)
Meanwhile, the International Energy Agency (IEA) continued sending mixed messages. The IEA forecasted that global oil demand will peak within the next decade, but also confirmed that fossil fuels are necessary for the “secure operation of the overall energy system for many years to come.”
Notably, the role of oil and natural gas in future energy systems was reiterated at COP28, where these crucial resources were praised for their “[R]ole in facilitating the energy transition while ensuring energy security.”
Bottom Line: A thriving American oil and gas industry means increased energy security and progress toward global emission reduction goals. While activists and administration regulatory hurdles have made for a challenging year, 2023 proved once again that the United States continues to lead the way in producing record-setting, responsible oil and natural gas.
2024 Look Ahead
As we look to 2024, election politics will take center stage. We’ve already seen debunked claims of price gouging resurface as some politicians look to paint energy producers as the “foe.” However, as we saw in 2022, candidates and voters on both sides of the aisle overwhelmingly support increased oil and gas production that helps to lower prices at the pump and promote energy security. EID will be sure to keep an eye on these trends in the New Year.