Industry leaders dispute Obama's energy policy characterization

US President Barack Obama said on Feb. 23 that the best weapon against rising gasoline prices is the comprehensive energy strategy he outlined in his State of the Union address, which is already producing results including more oil and gas production. Industry leaders and others immediately challenged that characterization.

“We can’t just allow ourselves to be held hostage to the ups and downs of the world oil market,” Obama told a University of Miami audience. “We've got to keep developing new sources of energy. We've got to develop new technology that helps us use less energy, and use energy smarter. We've got to rely on American know-how and young engineers right here at the [university] who are focused on energy. That is our future.”

After reiterating that it will take more than simply drilling for more oil and gas to solve US energy problems, the president conceded that this still is part of the solution, along with wind, solar, nuclear, biofuels, and energy efficiency improvements.

“Now, it starts with the need for safe, responsible oil production here in America. We’re not going to transition out of oil anytime soon. And that’s why under my administration, America is producing more oil today than at any time in the last 8 years. That’s why we have a record number of oil rigs operating right now—more working oil and gas rigs than the rest of the world combined,” he asserted.

Obama noted that in its first 3 years in office, his administration has approved “dozens of new pipelines, including from Canada,” and opened millions of acres for oil and gas exploration. “Last week, we announced the next steps toward further energy exploration in the Arctic,” he said. “Earlier this week, we joined Mexico in an agreement that will make more than 1.5 million acres in the [Gulf of Mexico] available for exploration and production, which contains an estimated 172 million bbl of oil and 304 bcf of natural gas.”

Signs of progress

The country is making progress in reducing its reliance on foreign oil, which fell below 50% in 2010 for the first time in a decade, he maintained. “In 2011, the United States relied less on foreign oil than in any of the last 16 years,” Obama continued. “That's the good news…. We’re taking every possible action to develop, safely, a near hundred-year supply of natural gas in this country—something that experts believe will support more than 600,000 jobs by the end of the decade.”

He also cited support for the country’s first new nuclear power plant in 30 years, research and development investments that have nearly doubled US renewable energy use, and cooperation with the private sector to help make the US the global leader in manufacturing batteries to run electric cars.

In the long run, an “all-of-the-above” energy strategy must have priorities which encourage investments in new energy technologies and dispense with provisions which are no longer necessary, he said. “I'll give you an example. Right now, $4 billion of your tax dollars subsidize the oil industry every year—$4 billion. They don't need a subsidy. They're making near-record profits.

“These are the same oil companies that have been making record profits off the money you spend at the pump for several years now,” Obama declared. “How do they deserve another $4 billion from taxpayers and subsidies? It’s outrageous. It’s inexcusable. And every politician who’s been fighting to keep those subsidies in place should explain to the American people why the oil industry needs more of their money—especially at a time like this.”

Industry and other business leaders quickly responded. “President Obama says he’s committed to domestic oil and natural gas production, but the fact is his record shows otherwise,” American Petroleum Institute Pres. Jack N. Gerard noted on Feb. 23.

‘Jekyll and Hyde’

“Since taking office, he has declared 85% of our offshore areas off limits, decreased oil and gas leases in the Rockies by 70%, rejected the Keystone XL pipeline, and has 10 federal agencies planning more regulation of hydraulic fracturing…. The president’s ‘Jekyll and Hyde’ approach to energy security is hurting consumers.”

Independent Petroleum Association of America Pres. Barry Russell suggested that Floridians expecting to hear commonsense solutions from the president must have been disappointed. “Unfortunately, the president’s skewed idea of an ‘all-of-the-above’ energy plan ensures that unelected Washington bureaucrats can determine, through massive tax hikes and taxpayer handouts, which forms of American energy should win and which should lose,” he said.

“In this case, the president has chosen to penalize our American oil and natural gas industry with massive tax hikes that benefit no one—especially the consumer,” Russell said. “His proposed billion-dollar tax hikes on the industry are a direct contrast to his statements that he wants to encourage domestic oil and gas production.”

American Fuel & Petrochemical Manufacturers Association Pres. Charles T. Drevna said the organization supports a balanced approach to meeting the nation’s energy needs, but opposes many of the Obama administration’s proposals. “Eliminating tax deductions that every other American manufacturer receives and supporting tax hikes on energy that Americans use every day in order to subsidize other forms of energy that can’t compete on their own in a free market is not the right approach,” he observed.

“President Obama is once again seeking discriminatory energy tax increases that will hurt American consumers and endanger manufacturing jobs of American workers,” Drevna said. “Instead of trying to slow our economy down with more taxes and higher unemployment, the president should approve the Keystone XL pipeline to immediately create 20,000 American jobs and provide the American people with a sure and steady supply of oil to serve them for generations.”

‘Fleeting words’

The Obama administration’s actions hindering US oil and gas production eclipse any of its “fleeting words of support,” according to National Ocean Industries Association Pres. Randall B. Luthi. “While it is true that production is up in the US, it is not a surprise to learn that the increase is attributable to actions taken before this administration took office and on state and private lands onshore,” he said on Feb. 23.

“While there is indeed no silver bullet to immediately fix high [gasoline] prices, the country certainly would have been better served had the administration moved to facilitate new offshore access following the lifting of the moratoriums in 2008,” Luthi added. “Instead, we are left with the fact that not one new acre outside the areas already opened has been leased, and the administration’s plan for the next 5 years would not allow for the opening of any truly new areas…. Simply saying areas are ‘new’ does not make it so. Apparently ‘all-of-the-above’ doesn’t include any truly new sources of offshore oil and natural gas.”

Karen A. Harbert, president of the Institute for 21st Century Energy at the US Chamber of Commerce, said the administration actually has a “just say no” energy policy. “President Obama’s administration has issued 50.7% fewer annual leases on public lands than President [Bill] Clinton’s did. Gulf of Mexico energy production is down 16% since 2009 and is projected to decrease even further in 2012,” she indicated. “President Obama denied the Keystone XL pipeline permit, which would have created thousands of jobs and provided all Americans with a steady supply of oil from a friendly ally. He also has banned new offshore areas from oil and gas exploration, and recently his administration took one million acres of onshore land rich with oil shale off the table.

“The American people can see that the current approach is not working,” Harbert said. “But we cannot have a constructive conversation about energy policy as long as this administration fails to put forward any new ideas, relying instead on four year old campaign rhetoric. It isn’t enough just to be for an ‘all-of-the-above’ energy policy in a speech. It’s time to actually propose one.”

En route with the president to Florida on Feb. 23, White House Press Secretary Jay Carney told reporters: “There’s no question that the president’s commitment to expanding domestic production of oil and gas has been a priority since he took office, and it is simply an unsustainable argument to suggest otherwise.

“The numbers here don't lie,” he continued. “Whatever the policies were that were in place prior to him taking office, he has instituted policies that have resulted in a focus on increasing production: selling of leases…in the gulf, expanding production and development of fossil fuels in Alaska and elsewhere, the approval for the first time in 30 years of a permit to build a nuclear reactor, and the substantial increase in investment in alternative energy sources. His approach is an all-of-the-above approach…and the facts here are pretty clear.”

Contact Nick Snow at nicks@pennwell.com.

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