Despite Protests, Oil Industry Thrives Under Obama Agenda

(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

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