Pelican Institute Commemorates Life of Friedman with Discourse on Energy Policy
On July 30th, the Pelican Institute celebrated Milton Friedman’s Legacy for Freedom with a luncheon and guest lecture from Chris John, president of the Louisiana Mid-Continent Oil and Gas Association.
Kevin Kane, the institute’s president, opened the event and explained how Friedman’s work remains relevant and how his presence is missed in the ongoing battle for liberty and progress. The Foundation for Educational Choice, founded by Milton and Rose Friedman, supported the event and is just one example of that legacy. Kane also noted that post-Katrina education reforms have made school choice particularly relevant to the people of New Orleans.
After a short video on the life of Friedman, Kane set the scene for Chris John and contested the prevailing attitude that “we are addicted to oil.”
“[Addicted] implies that oil is something that harms us and that we use it against our own best interests, and I think that’s clearly nonsense. Certainly, it’s critical that we understand and minimize the harmful effects that come along with our usage of fossil fuels, and of course it will be terrific someday when we can develop new technologies that offer the same upsides with fewer downsides.”
“But in the meantime I think there is a tendency to take the incredible benefits we experience for granted… We tend to think ‘Oh well if we didn’t use oil, we’d all return to this bucolic past where we wouldn’t have any environmental problems,’ but it’s easy to overlook how dramatically our lives have been improved in so many ways by our access to affordable energy.”
With the backdrop of the recent Gulf of Mexico oil spill, John, a former Democratic Congressman from Louisiana, packed a varied display of current and historical data, along with future projections, into forty minutes. LMOGA, his organization, is the oldest of its kind in the state and represents “all of the integrated oil and gas companies of Louisiana,” including BP, Exxon, Marathon, Shell, and Chevron, and he included his assessment of the political struggle that the energy sector faces.
John enumerated the importance of the oil and gas industry to the people of Louisiana – $70 billion in annual revenue, 320,000 jobs, and $1.4B in state tax revenues (14 percent of the total) – and to all Americans. “78 percent of our energy needs come from fossil fuels” (30 percent produced domestically). On the other hand, wind, solar, and geothermal together provide two percent. And yet “we are in the challenge of our lives in our industry.”
“You can’t slight this incident (the Gulf spill); it was tragic; it was terrible for the environment; people died… but we’ve drilled 42,000 wells in theGulf of Mexico since 1947, including 2,500 in the deepwater (more than 1,000 feet), and this is the first time anything has happened. It’s a significant point to consider when we talk about the future of this industry.”
Whether we like it or not, “80 percent of our fuel needs for the next 50 years are going to come from crude oil – fossil fuels.” According to John, economists across the board believe that our need for fossil fuels is unlikely to change in the near future.
Until the Gulf spill, John also believes the industry was making progress in the United States. Some companies had brought their rigs home from African waters, perhaps for “more political stability,” and there had been record bids in auctions for drilling rights. Even on the legislative front, some states had moved to allow drilling in their waters, and President Barrack Obama had gone further than his predecessors to expand offshore drilling access.
However, the drawn out response and changed political climate has been “very frustrating,” and he is pessimistic regarding when the findings of the National Oil Spill Commission will become available. Six months, given his experience with commissions of this sort, will come and go before any results are published and acted upon. The sole “silver-lining” was the learning experience – “the kind of technology that has to be used and the challenges that we have at that depth.”
“Obviously the moratorium has had an enormous impact on Louisiana… and I believe that the pushback [against] his blanket moratorium on the Gulf coast, [Barrack Obama] didn’t predict… from people not just from Louisiana, but from all over who understand the energy reality of this country… but boy has it been a see-saw.”
With the legal battle and changed face of the moratorium, John wants people “to understand the uncertainty that this has caused… Think about the board of directors’ room… With a stroke a pen [Obama] put them out of business. A judge went back and said ‘no, you can’t do that,’ and then he just said ‘Okay, I’m going to revise my moratorium,’ and with another stroke of the pen he put it off limits. The uncertainty is what’s killing and could more detrimental to this industry than the actual [legal status].”
“We don’t have to talk about ifs anymore… Right now two drilling rigs (of the 33) have left the Gulf… Now these are billion dollar pieces of equipment… Each one of these rigs employs 240 people. Two of them are gone. That’s 480 people who have lost their job… and these are about $90,000 a year jobs… They may come back, but it’s not going to be anytime soon.”
On the day of the event, Congress was debating the CLEAR Act, and John described it as “a far reaching, very negative piece of legislation on our oil and gas industry.” He wanted to be clear that the removal of a cap on liability, which this legislation is set to enact, would “run all of the independents out” due to a lack of insurance coverage. “It’s going to narrow the scope of who can operate out in the Gulf and make it more expensive to do that.”
This brought him to the political reality of the oil and gas producing states. “[We] are a in the minority in a big way, with only 55 members of congress. The numbers are not on our side… and the only way we fight that is with the economics of it and the energy security of it.”
Finally, he called people to set aside political rhetoric and work together. “We need to get past that because… energy security provides economic security which provides what we all want: national security.”