- - Thursday, December 19, 2013

The International Energy Agency (IEA) made a mistake. Formed in 1974 at the behest of Secretary of State Henry Kissinger and headquartered in Paris, the IEA was designed to be the organization for energy-consuming countries, countering OPEC, the organization representing the producers. It never really had much of a political role, and these days, its value lies in its statistics and energy predictions. Each fall, the IEA produces its “World Energy Outlook,” and in 2012, the IEA estimated that “by around 2020 the U.S. is projected to become the largest global oil producer.”

However, it looks like IEA’s prediction was way off. In fact, this year, the IEA has predicted that the United States would take the lead in 2015, not 2020. We shouldn’t be too hard on the IEA’s number crunchers, though. Almost everyone who has looked at the American energy revolution has been on the low side, leading to a scramble to make revisions upward. Just this week, the U.S. Department of Energy’s Energy Information Administration (EIA) predicted that U.S. oil production would near a “historic high” by 2016. By this time next year, we may find that projections from both the IEA and the EIA were still too low.

“Historic high”? “Largest global oil producer”? That’s pretty heady stuff, given that less than a decade ago, the United States was looking at a death spiral in oil and gas production, and experts were making very good livings predicting the imminent arrival of “peak oil.” Statistics and predictions are all very well, but how does this play on the ground?

Reality check I: Let’s look at Atascosa County, Texas. It’s the closest county south of San Antonio. Until five years ago, it was struggling and had been for decades. There was not a lot of economic activity, and the young people who could, left the county for San Antonio or elsewhere. Twenty percent or so of the population was below the poverty level. Average income was below $15,000 per year.

Atascosa County sits on the northern edge of the Eagle Ford shale development. Interstate 37 from Corpus Christi to San Antonio and the railroad line from the Port of Corpus Christi to the railroad hub in San Antonio pass right through the county. This has now made it attractive for companies servicing the Eagle Ford to locate there. Almost every week, Leon Zabava, the oil and gas editor for the Pleasanton Express (Atascosa’s weekly newspaper), reports on another new oil and gas company moving in. Commercial and residential construction is booming, new families are arriving, and the county is studying the idea of building a new high school.

On Dec. 9, Atascosa County commissioners held their regular meeting. According to the Pleasanton Express, when Judge Diana Bautista called the meeting to order, two new deputy tax collectors were approved, badly needed with all the money flooding into the county. The Murphy Exploration and Production Co. wanted county permission to make tests along a county road, and that was granted. The county treasurer announced that the county had more than $30 million in invested assets and about $2.7 million in debts, an asset-to-debt ratio of about 12 to one. Not many U.S. jurisdictions enjoy that sort of financial cushion.

The Express also reports the hiring of Roy Olivares as a car and truck salesman by the local Chevrolet dealer. Ford, GM and Dodge are doing well this year, and pickups are leading the charge. Given the demand for new trucks in the shale country, Mr. Olivares is likely to be very busy.

Thanks to the American shale revolution, Atascosa County’s economic boom is being replicated in other small towns in western North Dakota, West Virginia, Pennsylvania and Ohio, all of which have seen hard times until now.

Reality check II: Critics of the American energy revolution are hailing the appointment of John Podesta of the Center for American Progress to a senior White House position beginning in January. Recently, the center released its list of 55 corporate sponsors, none of which is in the oil and gas business. What the center did not do is draw attention to its left-wing billionaire contributors, including Tom Steyer. Last year, Mr. Steyer and Mr. Podesta co-wrote an attack on the Keystone XL Pipeline project in The Wall Street Journal. As The National Review recently put it, “Podesta is the vehicle through which a radical billionaire’s energy policies are about to enter the Oval Office.”

Would the White House really shut down the American shale revolution? We can only look at the record: President Obama has thrown the world’s leading health care system into chaos. Never mind that high officials of other countries, including Canada, come to the United States for advanced treatment or that health care makes up a sixth of the American economy.

As with Obamacare, the shale revolution is entering uncharted waters now.

William C. Triplett II is a former chief Republican counsel to the Senate Foreign Relations Committee.

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