Is This Joe Manchin's Moment?

Is This Joe Manchin's Moment?

March 16 2022

Senator Joe Manchin is the pivotal 50th democratic vote, so he is the de facto leader of US energy and climate policies going forward. We paid close attention to his remarks and questioned him at his presentation at the CERA conference held last week in Houston. It was disappointing to learn in person that he doesn’t have an effective energy or climate policy, especially with the Ukraine war and global energy crisis. So, we propose one we hope he can embrace. But first, some background.

There’s a strong case for more domestic shale oil and gas production because the US consumes 20 million barrels of crude per day, but only produces about 12 million. To fill the gap, we import a lot from Canada and Mexico, but we also must import from Russia/OPEC.

The core impediment to bringing on domestic production is that investors have lost fortunes investing in shale oil and gas production over the past decade. Shale/fracking took us from seven million barrels a day to 12 million and it’s the main source of further domestic production growth, but it costs around $40 a barrel to frack oil out of the Permian and the other US basins. Investors in domestic oil/gas want 20% plus returns on top of $40 a barrel on their invested capital. They know that oil/gas prices are very high right now, but what about next year? In 2020, when the pandemic started, the Russians and OPEC were slow to reduce their production and the price of oil went below zero. US producers got wiped out. This has happened before.

To stimulate significant new domestic production, we hereby propose "The Manchin Domestic Oil and Gas Production Support Act.” For the next 10 years, as the Clean Energy Transition progresses, the federal government will guarantee a minimum price for domestic oil production of $55 a barrel AND, in return, split profits when oil goes over $65. The same concept could be used for natural gas. With a full faith and credit guarantee from the US government, capital would flow to the domestic oil/gas sector reducing the cost of capital. Domestic oil and gas production would balloon at the expense of imports, creating US jobs, bolstering energy independence, and reducing our dependence on despots.

Emission reduction policies would accompany the guarantee, to keep the US on track to dramatically cut emissions by the early 2030s. Manchin supports US hydrogen fuel and carbon capture and sequestration; both are opportunities that US fossil fuel companies would like to exploit as the core competencies overlap nicely with their current businesses.

With the demise of Build Back Better, Congress needs to get its act together and create real bipartisan solutions. As much as it shocks us to say it, Senator Manchin’s time has come… Let’s hope he’s up to the task.

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