As President Biden looks to provide Europe with viable options for energy security and enable our allies to join a sanctions effort that would bring the Russian petrostate to its knees, he has summoned the spirit of America’s foremost pioneer of transatlantic relations, George C. Marshall. However, a more fitting pioneer would be George P. Mitchell.
George Mitchell revolutionized the world, not through federally backed programs to reconstruct the European continent after World War II, but through the development of hydraulic fracturing. This innovation, coupled with advancements in horizontal drilling, changed not only the way the world looked at energy – putting to rest the notion of peak oil – but changed the way the world viewed the United States.
The “Shale Revolution” paved the way for the United States to become energy independent and a leading exporter of oil and natural gas, and the largest exporter of liquefied natural gas (LNG) – another U.S. innovation.
President Biden has certainly not hidden his desire to eliminate fossil fuels from the global economy, and his administration continues to advocate for climate brinksmanship – leveraging the current energy crisis to force a rapid clean energy transition. This approach, however, has overlooked the near-term security and environmental benefits of plentiful U.S. shale resources, particularly the benefits for Europe.
This will need to be changed, if not significantly curbed. A plan to aid our European allies and punish Russia’s aggression will require an unhindered market capable of attracting the necessary capital and resources to increase production and grow export operations.
Despite repeated warnings from the United States over the years, Europe finally recognized the threat posed by its dependence on Russian energy supplies and announced a plan to eliminate this dependence in 5 years. Just last week, President Biden announced the creation of a joint U.S.-EU task force to help achieve this.
This will undoubtedly require investment, construction, and the expansion of energy trade with key oil and natural gas suppliers. However, the task force President Biden should focus on is already assembled in the Permian Basin and the Marcellus and Utica shale plays; they just need the green light from his administration.
U.S. shale operators, both majors, and independents alike, have the willingness to meet demand, and the price incentive certainly exists, but they still face challenges in the supply chain, including labor and capital investment shortages. The same is true for those seeking to develop export operations from the Atlantic seaboard to the Gulf of Mexico. Perhaps most importantly, they face government red tape that threatens to stall development and significantly increase operational costs.
President Biden should recognize the critical role that shale operators could play in the near term. These resources, being less capital intensive and quicker to come online, can serve as nimble, high-yield operations, both in terms of market impact and capital returns for investors recovering from the pandemic and a year of regulatory assault under President Biden.
Producers will require expeditious permitting on the part of the federal government, particularly those developing shale resources. While nimble, these resources decline in production rapidly by comparison to traditional extraction methods. Permitting and regulatory procedures, particularly as mandated by the Biden administration, are not conducive to growth.
A Mitchell Plan should also include innovation in how the U.S. views exports. Beyond streamlining the approval of export operations by the Department of Energy and Federal Energy Regulatory Commission, the Biden administration should reexamine how it leverages its export financing.
The U.S. Export-Import Bank, a federal financial institution that promotes U.S. industry exports, requires “U.S. content” for public funds to support a proposed commercial transaction. However, EXIM’s policies have been prejudiced against the oil and natural gas sectors for years. The Biden administration should expand the definition of U.S. content to include U.S.-produced molecules. This would help create long-term commercial relationships and underpin a key driver of economic growth – affordable, reliable energy.
Suspending the Treasury Department’s prohibition on financial support for domestic and overseas fossil fuel projects will prove to be an essential starting point in unleashing the full potential of American producers. The Biden administration should also recommit to President Trump’s announcement of “up to $1 billion” through the U.S. Development and Finance Corporation for Central and Eastern European energy infrastructure as a part of U.S. support for the Three Seas Initiative.
The United States can once again play the role of a swing producer to alleviate market pressures and underpin the energy security of our European allies, but it requires rightsized government involvement in the marketplace, if not outright encouragement. The energy revolution that George Mitchell unleashed proved that American resources could spur growth, create new levels of energy security, and contribute to global emissions reduction goals.
The United States and its European allies need options, flexibility, and security if they wish to levy impactful sanctions upon Putin’s regime. A Mitchell Plan that creates unhindered markets with an eye toward energy exports would help achieve the required aim of the West.
Rick Perry served as the 14th secretary of Energy and the 47th governor of Texas. He currently serves as the Chair of AFPI’s Center for Energy Independence.