"Twenty-first century businesses need 21st century infrastructure” is one of President Obama’s favorite observations about American infrastructure—one he has made in numerous speeches, including this year’s State of the Union address. In addition to the taxpayer-funded projects the president listed in his speech to Congress (“modern ports, stronger bridges, faster trains and the fastest Internet”), energy infrastructure represents a vital opportunity for economic growth. 

In fact, a 2013 study conducted by IHS for the American Petroleum Institute shows that during the next 10 years, the country has a nearly $1.15 trillion investment opportunity to build the infrastructure that will secure America’s status as an energy superpower—if regulatory barriers do not stand in the way.

This economic opportunity exists because U.S. energy production has expanded significantly and placed higher demand on the current infrastructure system. U.S. crude oil production has increased 72 percent since 2008, surging from five million barrels per day to an average of more than eight and a half million barrels per day in the first 11 months of 2014. Natural gas production has increased 35 percent since 2005, and the U.S. Energy Information Administration projects the United States will transition from being a net importer of 1.5 trillion cubic feet of natural gas in 2012 to a net exporter of 5.8 trillion cubic feet in 2040.

Updating midstream and downstream infrastructure—pipelines, storage, processing, rail and marine components—is essential for ensuring the efficient movement of oil and natural gas to refineries and on to consumers and businesses. 

Built decades before the United States emerged as the world’s leading natural gas producer and soon-to-be leading oil producer, the current pipeline grid was primarily designed to transport imported crude oil and petroleum products from the Gulf Coast to points north. Now that advances in hydraulic fracturing and horizontal drilling have unlocked shale energy, surging production in the northeastern United States and in states like North Dakota requires not only a commitment to maintaining the current infrastructure, but also the expansion and development of new infrastructure.

Pipeline shipments of crude oil from the Gulf Coast to the Midwest decreased 500,000 barrels per day from 2008 to 2013 while shipments in the opposite direction (from the Midwest to the Gulf) jumped from just 50,000 barrels per day in 2008 to more than 380,000 barrels per day in 2013.

IHS estimates capital spending on oil and gas infrastructure increased 60 percent in just three years: from $56.3 billion in 2010 to $89.6 billion in 2013. America’s pipeline system covers roughly 2.6 million miles, including 305,000 miles of interstate and intrastate natural gas pipelines. During the past 10 years, the nation has added nearly 12,000 miles of crude oil and 11,000 miles of new natural gas pipelines.

The Keystone XL pipeline may be the most famous and most thoroughly studied energy infrastructure project in history, but it’s not the only opportunity. Its $2.3 billion, 487 mile-long southern leg was constructed on time and is fully operational, transporting 700,000 barrels of oil per day from Cushing, Okla., to Nederland, Texas, and then on to Gulf Coast refineries. Billions of dollars worth of other shovel-ready, private sector-funded projects include:

  • constructing, expanding, reversing or converting more than 18,000 miles of major crude oil pipelines;
  • developing a large central transportation corridor running from North to South through the Midcontinent region;
  • connecting the Bakken and other regions to this central corridor; and
  • developing a second major corridor running horizontally from West Texas, connecting Eagle Ford production to refineries in the Texas and Louisiana Gulf Coast. 

These vital investments will help alleviate infrastructure constraints that impact producers and consumers alike. For producers, inadequate transportation infrastructure creates bottlenecks that can raise production costs and depress revenue. The lack of efficient access to markets can lead to lower well-head values and reduced revenues for royalty owners, as well as local, state and federal governments. Failure to address these limitations could discourage production investment, along with the associated employment and economic advantages that have benefited consumers nationwide. 

According to the IHS study, infrastructure investment could support up to an average of 1.15 million jobs annually between 2014 and 2025, paying $75 billion per year in income. During the same period, infrastructure development could generate average yearly economic growth of up to $120 billion, plus up to $27.5 billion in average annual government revenue. Pipeline investment alone could support up to 830,000 average annual jobs.

According to an April 2014 poll conducted by HarrisInteractive, 94 percent of registered voters agree that increased development of energy infrastructure would help create jobs, while 89 percent say energy infrastructure development is good for American consumers.

Significant energy infrastructure investments will be needed to build the pipelines, pumps and other infrastructure to keep pace with expected increases in domestic oil and natural gas production. Streamlining the regulatory and permitting process for energy infrastructure will ensure there are no unnecessary delays or obstacles to keeping American energy—and jobs—flowing.

Kyle Isakower is vice president for regulatory and economic policy at the American Petroleum Institute. For more information, visit www.api.org.