Industry-backed studies cite need for new federal policy approach

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, July 11 -- Changes in federal government policies to encourage more US oil and gas exploration and development would create thousands of new jobs, improve US energy security, and increase federal, state, and local government revenue, two studies commissioned by oil and gas industry associations show.

By 2013, an estimated 190,000 jobs could be created, capital expenditures could rise by 140%, and operating outlays could increase by 70% offshore if the Obama administration found a way to return to permitting rates before the Macondo well accident and oil spill, a Quest Offshore Resources Inc. study indicated.

US offshore oil and gas employment would reach nearly 430,000 jobs, capital spending would be $15.7 billion, and operating expenditures would hit $25.7 billion, with total contributions to the US gross domestic product reaching $44.5 billion, the study commissioned by the National Ocean Industries Association and American Petroleum Institute said.

A second study by EIS Solutions, with data analysis by ICF International, for the Western Energy Alliance in Denver, said if producers in six Rocky Mountain states were allowed to develop vast resources on public lands there, investment in the region would double to $58 billion/year by 2020 and direct, indirect, and induced jobs would increase by 16%.

The studies, which were separately released on July 11, reflected general US oil and gas industry frustration with the Obama administration’s simultaneously calling for more US production while increasing restrictions and delays. “The president has said he wants ideas for putting Americans back to work right now,” API Pres. Jack N. Gerard said during a July 11 teleconference. “We urge him to approve policies that would encourage more domestic oil and gas development.”

60,000 jobs lost
The Quest study showed that while the US offshore industry in the gulf lost about 60,000 jobs in 2010 due to the economic downturn, a moratorium on federal deepwater permits, and a subsequent slower pace in issuing permits, NOIA Pres. Randall B. Luthi said.

Even so, the industry in the gulf provided some 242,000 direct, indirect, and induced jobs last year, Luthi noted.

Luthi said current federal policies permit exploration of only about 15% of the US Outer Continental Shelf, or two thirds of the gulf. “Certainly, the eastern gulf looks as if it could be developed relatively quickly because it would be near known reserves,” Luthi said. “There also is some hope offshore Alaska, although that doesn’t appear to be moving quickly.”

Returning offshore permit and exploration plan approvals to their early 2010 rate would provide economic and energy benefits relatively quickly, he and Gerard emphasized. “As the economy remains weak and unemployment edges up yet again, this study highlights the contribution the oil and gas industry can make,” API’s president said. “It already contributes more than $86 million/day to the federal treasury in taxes, royalties and fees.” Virginia’s US senators introduced a bill on July 6 urging the administration to include a lease sale off the state’s coast in the next 5-year OCS program, he pointed out.

Told that the US Department of the Interior took early steps on July 11 toward developing wind energy off the Atlantic Coast by requesting comments on a draft environmental assessment, Luthi said that the news was interesting and that he recognizes the need to pursue all domestic energy options. “But as the Quest study points out, domestic offshore oil and gas is a source of ready energy and jobs,” he added.

‘Dangerously close’
NOIA’s president, who was US Minerals Management Service director from July 2007 to January 2009, also warned that time was running short for the Obama administration to finalize the next 5-year OCS program before the current one expires on June 30, 2012. “As you compare what was originally proposed in for the 2012-17 period, it’s very different from the administration has settled in on,” he said.

The WEA-sponsored study, The Blueprint for Western Energy Prosperity, said Rocky Mountain oil and condensate production could reach 1.3 million b/d and natural gas production could hit 6.2 tcf/year by 2020 if more constructive federal policies are adopted. Investment in western energy development could more than double from 2010 levels to $58 billion/year by 2010, and the number of direct, indirect, and induced jobs in oil and gas grow by 16% to 504,120 during the same period. Annual state severance tax collections in the six states in the Rockies also could grow from $2.1 billion in 2010 to $5.6 billion 10 years later, the study indicated.

It also noted that to achieve these benefits, a thorough review of the entire federal onshore oil and gas leasing, environmental analysis, and permitting process would be required. A moratorium on new regulations, limits to litigation that unreasonably obstruct domestic energy development, and changes to renewable portfolio standards so gas could compete to generate more electricity also would be necessary, it said.

“If we are serious about realizing the full promise of western energy production, regulatory policies must be realigned to support, not hinder, responsible and timely access to oil and natural gas resources on federal lands,” WEA Pres. Tom Sheffield, who also leads Pioneer Natural Resources Co.’s US western operations, said on July 11.

“The industry is committed to continued environmental improvements and balanced use of our federal lands, but in order to continue supplying domestic energy and helping to rebuild our economy, we need a more efficient and predictable regulatory environment,” he maintained. “The current and ever-expanding maze of haphazard federal regulation must be reformed if our industry is to help solve America’s pressing economic and energy challenge.”

Contact Nick Snow at nicks@pennwell.com.

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