US President Barack Obama likes domestic exploration and production. He really does. Really. The activities just have to be responsible. Got that?
"Any notion that my administration has shut down oil production might make for a good political sound bite," Obama said in a Mar. 11 press conference. "But it doesn't match up with reality."
The president's evidence? US oil production reached its highest level since 2003 last year, when "oil production from federal waters in the Gulf of Mexico reached an all-time high." Obama proclaimed, "We are encouraging offshore exploration and production. We're just doing it responsibly."
Reversing the gains
Federal permitting in the Gulf of Mexico is so "responsibly" slow that the Energy Information Administration expects gulf production to fall by 240,000 b/d this year and by a further 200,000 b/d in 2012. Last year's production triumph in fact reflects policies set during past administrations. Obama's policy of proceeding "responsibly" has reversed the gains.
No one expected the administration to revert to business as usual after the Macondo blowout and spill of last April. Caution and tighter regulation remain in order. But the administration has acted as though Macondo's tragic lapses condemn all deepwater drilling and that only painfully reluctant permitting can prevent a recurrence. History and swift improvement to spill readiness by the offshore industry say otherwise.
Obama shows scant concern for industry realities. In the press conference, he complained, "The industry holds leases on tens of millions of acres—both offshore and on land—where they aren't producing a thing." At his direction, the Interior Department will assess nonproducing leases "so that we can encourage companies to develop the leases they hold and produce American energy."
This contrivance is not new and makes no more sense now than ever. The reality is that companies don't pay bonuses and rental fees for the fun of it. They develop leases that warrant development as quickly as they can. Not all leases warrant development. And not all leases warranting development can be developed at once. If not Obama himself, someone in his administration should know this. Obama is using the inescapable fact of undeveloped leases as an excuse to gouge producers and retard leasing.
His maneuver fits a pattern. The administration has slowed or cancelled federal oil and gas leasing at every opportunity. It has rescinded existing leases. Even its pre-Macondo talk of scheduling a lease sale off the East Coast was hollow. With the possible exception of Virginia, states there would have blocked federal leasing by ruling it inconsistent with coastal management plans. Obama's energy advisors knew this. If they didn't, they're really as unknowledgeable as they so frequently behave.
At his press conference, Obama was delivering yet another feint, sounding supportive of domestic oil and gas while acting otherwise. Everything Obama says and does on energy should be viewed in the context of oil and gas provisions of his proposal for the fiscal 2012 federal budget. In it, as he has each year of his presidency, he proposes to repeal tax preferences important to oil and gas producers and to raise a number of fees. The effect, according to Republicans on the House Natural Resources Committee, would be to remove more than $60 billion from oil and gas investment over 10 years.
Less work
According to Obama's Treasury Department, the targeted provisions encourage excessive investment in oil and gas. "This market distortion is detrimental to long-term energy security and is also inconsistent with the administration's policy of supporting a clean-energy economy, reducing our reliance on oil, and cutting carbon pollution," says Treasury's budget narrative. The proposal and rationale contradict Obama's Mar. 11 declaration that "we need to continue to boost domestic production of oil and gas."
The Obama administration acts as though responsible oil and gas work means consistently less work. The notion that this crowd is shutting down oil production is more than a sound bite.
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