SOTU: Obama pledges to open more offshore acreage, promote gas

US President Barack Obama will direct his administration to open more than 75% of the nation’s potential offshore oil and gas resources for development, he said in his 2012 State of the Union address. “We have a supply of natural gas that can last America nearly 100 years, and my administration will do everything it can to safely develop this energy,” he added.

US crude oil production is at an 8-year peak, and the country relied on foreign oil less in 2011 than it had in the previous 16 years, the president said. “But with only 2% of the world’s oil reserves, oil isn’t enough,” he continued. “This country needs an all-out, all-of-the-above strategy that develops every available source of American energy—a strategy that’s cleaner, cheaper, and full of new jobs.”

Experts believe more aggressive gas development in the US will support more than 600,000 jobs by the end of the decade, he told a joint session of the 112th US Congress on Jan. 24. To ensure more US gas is produced without risking the public’s health and safety, he said he would require all companies drilling for it on public land to disclose the chemicals they use.

“[It] will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy,” Obama said. “And by the way, it was public research dollars, over the course of 30 years, that helped develop the technologies to extract all this gas from shale rock, reminding us that government support is critical in helping businesses get new energy ideas off the ground.”

He also called for continued federal support of clean energy research and development. “In 3 years, our partnership with the private sector has already positioned America to be the world’s leading manufacturer of high-tech batteries,” he said. “Because of federal investments, renewable energy use has nearly doubled, and thousands of Americans have jobs because of it.”

Clean energy’s promise

Obama said the US experience with shale gas technology “shows us that the payoffs on these public investments don’t always come right away. But I will not walk away from the promise of clean energy…. We have subsidized oil companies for a century. That’s long enough. It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising.”

Oil and gas industry association leaders’ responses to Obama’s address were mixed. Some were pleased with his US gas development stance, while others questioned his commitment in light of his administration’s previous actions.

“Advocating greater energy production, but penalizing those who provide that energy is not a sound energy policy, but a contradiction,” American Petroleum Institute Pres. Jack N. Gerard said. “The president’s tax plan sounds like something Jimmy Carter would have supported back in the ‘70s. It would raise energy costs, cut energy production, sacrifice jobs, and increase imports. Our industry already pays higher effective tax rates than other industries.”

Independent Petroleum Association of America Chairwoman Virginia Lazenby said Obama correctly noted that as the US continues to increase its oil and gas production, thousands of well-paying, private sector jobs are being created, providing much-needed relief for consumers and stimulating an otherwise anemic economy. “But the truth behind this veil is that this tremendous, broad-based economic and energy security success is largely in spite of this administration’s, at times, harshly antioil and gas policies, not because of them,” she added.

Smaller upstream independents across the US West were encouraged by Obama’s remarks about gas, but remained only cautiously optimistic because his frequent pledge to reduce government regulations has not been realized, according to Tim Wigley, president of the Western Energy Alliance in Denver. “The reality is that his own administration’s bureaucracies and broken policies are making energy development in the West increasingly difficult, time-consuming, and cost-prohibitive,” he declared. “It’s actually delaying the economic recovery he seeks.”

Abundant supplies’ benefits

Leaders of associations geared more to gas development were more positive. “A range of US industries and their workers are more competitive today thanks to our nation's vast, affordable gas supplies,” observed Regina Hopper, president of America’s Natural Gas Alliance (ANGA). “Along with these opportunities come lower energy costs for consumers and cleaner air. In fact, Nucor recently broke ground on a major new facility in Louisiana, creating more American jobs, in part because of our nation’s abundance of gas.”

ANGA member companies already disclose chemicals they use to recover gas on private as well as public land through the Interstate Oil & Gas Compact Commission and Groundwater Protection Council’s Frac-Focus online registry, she continued. “We have supported state regulation as they have adopted this model and embraced disclosure,” Hopper said.

Noting that Obama called for using every available US energy source, American Gas Association Pres. Dave McCurdy said gas is a clear leader when it comes to clean, efficient, affordable US energy. “By continuing to increase [its] use, we can make progress on our national priorities of helping to improve our economy, reduce environmental impacts, and secure our nation’s energy future,” he said. Putting millions of Americans to work and increasing US energy security by reducing reliance on imported oil with more natural gas vehicles also makes gas a part of the solution, he added.

Marcellus Shale Coalition Pres. Kathryn Klaber said MSC also was encouraged by Obama’s statements about gas. “And while presidents of both parties have made a clarion call for more American energy over the past 4 decades, it is our genuine hope that President Obama’s remarks tonight are reflected in his administration’s policies that are rooted in sound science and move forward with an aim of leveraging our nation’s abundant gas resources on behalf of consumers, families, and small businesses,” she said. “American natural gas will continue to make our nation stronger and more secure."

Interstate Natural Gas Association of America Pres. Donald F. Santa also commended Obama for recognizing US gas’s importance and urged him to remember the role pipelines play in bringing it to market. “We urge the president and regulators at all levels—federal, state, and local—to support policies that promote the prudent and safe construction and operation of midstream infrastructure, including pipelines, storage, processing, and other facilities,” he said. “Without pipelines, the economic, environmental, and energy security benefits of producing domestic natural gas resources will not be realized.”

‘Undermines commitment’

Other business groups contrasted Obama’s statements with his administration’s record. “Tonight the president focused on the need to create jobs, shore up our energy security through increased domestic production, and revive manufacturing in America,” said National Association of Manufacturers Pres. Jay Timmons. “Yet his decision last week to reject the Keystone XL pipeline project killed the promise of nearly 20,000 manufacturing and construction jobs along with the 118,000 indirect jobs that would ripple across our economy. The Keystone XL pipeline could have accomplished the goals espoused in tonight’s speech and its rejection undermines the president’s commitment to them.”

Indiana Gov. Mitch Daniels, in the Republicans’ response to Obama’s address, also questioned the president’s energy policy record. “The extremism that stifles the development of homegrown energy, or cancels a perfectly safe pipeline that would employ tens of thousands, or jacks up consumer utility bills for no improvement in either human health or world temperature, is a pro-poverty policy,” he maintained. “It must be replaced by a passionate pro-growth approach that breaks all ties and calls all close ones in favor of private sector jobs that restore opportunity for all and generate the public revenues to pay our bills.

“That means a dramatically simpler tax system of fewer loopholes and lower rates [and] a pause in the mindless piling on of expensive new regulations that devour dollars that otherwise could be used to hire somebody,” Daniels said. “It means maximizing on the new domestic energy technologies that are the best break our economy has gotten in years.”

Mary L. Landrieu (D-La.), a US Senate Energy and Natural Resources Committee member, noted, “I was glad to see the president focus on domestic energy production—it is something we have been focused on in Louisiana for decades and it is one of the reasons that our state unemployment rate is significantly below the national average. However, the pace of drilling permits for the OCS continues to be far too slow, maintaining uncertainly in an industry that employs hundreds of thousands of Louisianans and contributes billions of dollars a year to the US economy.”

David Holt, president of the Consumer Energy Alliance in Houston, said he hoped Obama administration regulators follow through on the president’s statements concerning more US oil and gas production. “CEA hopes that the president’s words tonight will result in federal agency deeds,” he said. “America needs less regulatory oversight and more domestic energy production. Without a doubt, it will mark a tremendous change of direction for this administration if he does.”

Contact Nick Snow at nicks@pennwell.com.

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