(Bloomberg) — The nation’s biggest fossil-fuel trade group
delivered its annual state-of-the-industry report Tuesday. True
to form, it included a whack at President Barack Obama’s
policies — even though oil and gas have flourished on his
watch.
U.S. oil production has surged 82 percent to near-record
levels in the past seven years and natural gas is up by nearly
one-quarter. Instead of shutting down the hydraulic fracturing
process that has unlocked natural gas from dense rock
formations, Obama has promoted the fuel as a stepping stone to a
greener, renewable future.
The administration has also permitted drilling in the
Arctic Ocean over the objections of environmentalists and opened
the door to a new generation of oil and gas drilling in Atlantic
waters hugging the East Coast. He also signed, with
reservations, a measure to lift a 40-year-old ban on the export
of most U.S. crude.
“Given an administration that was so committed to combating
climate change, they have coexisted pretty peacefully with the
industry, despite all the protestations,” said David Goldwyn, a
consultant who for two years served as the State Department’s
top energy diplomat under Obama. “And the best metric is just
look at the production.”
Regulatory Burden
That hasn’t stopped the American Petroleum Institute from
taking aim at Obama in its annual addresses on the industry —
such as the one API president, Jack Gerard, delivered in
Washington.
Gerard complained about an “already heavy regulatory
burden” on the industry, with “almost 100 pending regulations
and counting.”
And he took aim at the Clean Power Plan, which slashes
greenhouse gas emissions from the power sector. The policy,
“under the guise of environmental protection, does in fact, seek
to pick winners and losers in the energy market, not based on
market conditions, consumer preference or economic reality,” he
told a room filled with industry lobbyists, trade group leaders
and at least one oil company executive.
Environmentalists’ Anger
But the Obama administration’s approach to fossil fuels —
including his endorsement of natural gas in State of the Union
addresses and in a landmark climate change speech in 2013 — has
drawn anger from environmentalists.
“From day one of the administration and accelerating into
the present, this administration and this White House has viewed
the natural gas and oil bonanza in this country as an economic
opportunity, and they have ridden it and ridden it hard,” said
Bill Snape, senior counsel for the Center for Biological
Diversity. “They greased the skids for too much natural gas, oil
and fracking in this country.”
The administration’s strategy, which Kevin Book, managing
director of ClearView Energy Partners, calls a “give-a-little,
take-a-little” approach to energy, reflects the president’s
conflicted relationship with oil and gas. On one hand, fossil
fuels are a major impediment to his green goals and his hope to
thwart the worst effects of climate change. At the same time,
their production has delivered big economic benefits to the
country.
Ed Hirs, an energy expert at the University of Houston who
is managing director of Hillhouse Resources LLC, an independent
oil and gas company, says Obama took a lighter touch on fracking
after the worst environmental fears of the process failed to
materialize.
“No one in the Obama administration can deny the massive
positive impact on GDP that oil from the shale plays has
brought,” Hirs said in an e-mail.
Stifling Production
Oil industry leaders say Obama has driven strangling
regulation, stifling U.S. energy production and blocking
companies from plumbing new areas in search of crude. To the
American Petroleum Institute, the domestic drilling boom has
happened in spite of the Obama administration, not because of
it.
“This isn’t happening because of the administration. Prices
aren’t down because of the administration,” API executive vice
president Louis Finkel said in an interview. “This is happening
on private land because of thoughtful and balanced state
regulatory regimes that balance economic growth and production
of oil and natural gas with environmental stewardship. In many
ways, this administration has missed the opportunity to seize on
that.”
Finkel cited the Obama administration’s decision to reject
the Canada-to-U.S. Keystone XL pipeline, impose stricter ozone
limits and clamp down on potent heat-trapping methane emissions
that are the primary component of natural gas.
“The only reason consumers haven’t been buried by these
costs yet is because our industry continues to innovate and
increase efficiency,” he said.
In recent months, market forces have delivered a major blow
to the U.S. oil and gas industry in the form of the biggest
price slump in decades. That’s resulted in job losses and a
downturn in drilling.
Spokesmen for the White House, Interior Department and
Environmental Protection Agency declined to comment for this
story.
Power Plan
Gas will take on new importance under the administration’s
Clean Power Plan, accelerating a shift away from coal-fired
power. The international climate accord reached in Paris last
year also sets up a framework for more worldwide demand for
natural gas. And Obama’s Energy Department has now approved 13
licenses to broadly export 14.04 billion cubic feet per day of
liquefied natural gas, despite initial permitting delays.
Obama has moved to regulate hydraulic fracturing, the
process of pumping water, sand and chemicals underground to
unlock oil and gas in dense rock formations, but those efforts
have hit roadblocks. His Interior Department imposed new
mandates on fracking last March, but the requirements only apply
to wells on public land and have since been blocked by a federal
court.
A 2012 EPA rule to force energy companies to use “green
completion” equipment that can pare methane emissions at natural
gas wells applies only to new and modified sites — and largely
tracks what the industry was doing already. The agency is
working to finalize similar requirements for existing natural
gas wells and infrastructure. The Interior Department is working
on its own plan to crack down on methane released when energy
companies burn or vent natural gas flowing from oil wells.
Wish List
“API has plenty to celebrate. The flaring rule is behind
schedule, the methane rule is a half-measure that covers only
new sources, and 2015 ended with the oil lobby notching their
biggest policy victory in years with the repeal of the crude oil
export ban,” said Lukas Ross, a climate campaigner with the
environmental group Friends of the Earth.
To be sure, the oil industry hasn’t secured everything on
its wish list. The American Petroleum Institute has pushed for
more territory to drill, both onshore and off. And while a draft
plan for selling offshore oil and gas leases from 2017 to 2022
opens the door to eventual Atlantic drilling, the government’s
auctions may be scaled back. The Obama administration also has
walled off drilling in some areas, including 12 million acres of
the Arctic National Wildlife Refuge.
And Obama’s Interior Department in October also canceled
two planned auctions of drilling rights in the Arctic Ocean,
citing low industry interest.
“We would strongly urge the administration to look at what
are you doing, why are we doing it and is there a better way to
accomplish the objective without all of the cost, all of the
delay,” Gerard said.
Some moves by this administration also will live on after
Obama leaves office — affecting oil and gas companies’ fortunes
for years to come, Book said.
Social Costs
They include the international climate deal, broader
environmental reviews of proposed government actions folding in
climate change considerations, embedding a “social cost of
carbon” into rule making and the Environmental Protection
Agency’s conclusion that carbon dioxide is a dangerous pollutant
that must be regulated.
“Those four things, irrespective of the regulations they
produced, still provide a fairly compelling green agenda as a
legacy — some form of which is likely to endure,” Book said.
Environmentalists are hoping Obama will build on those
developments this year. He still has the opportunity, Snape
said.
“If this president wants to go down with the legacy of
being the climate president – the president who really changed
course — it’s clear to me and clear to us, he’s going to have
to truly wrestle fracking down and not be wrestled down by it.”
To contact the reporter on this story:
Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net
To contact the editors responsible for this story:
Jon Morgan at jmorgan97@bloomberg.net
Michael Shepard