Government-industry teamwork key to meaningful energy policy

Federal leaders and the oil and gas industry will need to cooperate closely if the US expects to develop a comprehensive energy policy, according to three members of Congress and a trade association leader.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Mar. 25 -- Federal leaders and the US oil and gas industry will need to cooperate closely if the US expects to develop a comprehensive energy policy, three members of the 111th Congress and a trade association leader agreed on Mar. 24.

"This administration and most of Congress support more oil and gas drilling, but it will be done responsibly and with more care to avoid the abuses of the past and to maximize returns to the public," US House Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) said during the "Energy Policy Perspectives for Congress and a New Administration" forum cosponsored by Newsweek magazine and the American Petroleum Institute.

Rahill noted that subcommittees within his committee already have held six hearings in 2009 examining aspects of energy development on the US Outer Continental Shelf, including alternative and renewable technologies as well as oil and gas.

"Now that the moratoriums have been lifted, we've been asking whether the American people want drilling as close as 3 miles offshore in some cases, whether some areas should be off limits, and how to improve royalty collections and management. Transparency and accountability are our guiding principles," Rahall said.

Other panelists warned that imposing billions of dollars in new taxes and fees on oil and gas producers, as the Obama administration proposed in its fiscal 2010 budget request, would have the worst impact at the wrong time if US producers are expected to contribute to a general economic recovery. "We cannot tax our way out of energy problems. New taxes ultimately mean less energy. They would simply make a bad situation worse," API President Jack N. Gerard said.

'Counterproductive'
"To pull the rug out from under this industry at the time we're trying to encourage oil and gas, as well as wind, solar, and tidal energy development is counterproductive," said US Sen. Mary L. Landrieu (D-La.), a member of the Energy and Natural Resources Committee. "Americans want to be energy secure. They're tired of being held hostage by foreign oil suppliers," she said.

Rep. Doc Hastings (R-Wash.), the Natural Resources Committee's ranking minority member, said more members of Congress must realize that their decisions have a major impact on energy development. He said he plans to encourage more access and development of domestic resources. "In 2 short months, the Obama administration has established a clear record of opposing domestic oil and gas development," he added.

A fifth panelist, Jonathan Alter, a Newsweek senior editor and columnist, said that there have been major changes in Obama's energy strategy since the presidential campaign, when the candidate proposed spending $150 billion on renewable energy technology development and deployment over 10 years. The economic stimulus package, passed soon after Obama became president, contains $60 billion for renewables, which effectively puts it in the fourth year of his earlier program, he noted.

Alter also said that political sentiment is strong for OCS energy development, which Obama reluctantly endorsed as a candidate. "The 'all of the above' notion has the political momentum. I think we'll see some foot dragging but, eventually, some drilling," he predicted.

Landrieu said she is encouraged by US Interior Secretary Ken Salazar's declaration that he supports development of more domestic oil and gas. The latest federal OCS lease sale firmly established revenue-sharing with affected states and coastal communities as a precedent, she pointed out. "I'm excited about these smarter partnerships. I hope we can pursue possibilities off the coasts of Virginia, South Carolina, and even California," she said.

Keeping what we spend
"High oil prices are a problem for everybody. But when the oil is produced domestically, we keep the money we spend in our US economy," Landrieu observed, adding that she hopes the Obama administration backs down on its proposal to add new oil and gas taxes and fees.

Panelists were less optimistic for the prospects of an ambitious cap-and-trade bill aimed at capturing greenhouse gases. Rahall said that, unlike 2008 when major bills originated in the Senate, "we're jumping out first in the House." But he added that overly aggressive legislation does not have a very good chance because it would serious disrupt coal and heavy industry.

"I think we should avoid imposing deadlines too quickly before we've developed the technology," Rahill said. He predicted that a bill could emerge from the House Energy and Commerce Committee by Memorial Day and pass the entire House by the August recess. Rahall said he hopes any climate change bill includes a carbon capture and storage (CCS) provision. He noted that a bill Rep. Rick Boucher (D-Va.) introduced on Mar. 24 would collect $1 billion annually from electricity producers for a fund that would award grants to large-scale projects advancing commercial CCS projects.

API's Gerard indicated that the oil and gas industry has been in the CCS business for 40 years because it uses it for enhanced oil recovery. He also did not give an ambitious cap-and-trade program a very good chance of becoming law. "This will be very difficult because it's a complex issue at a time when we're having economic problems. A positive energy policy would make a much more positive contribution," he said.

"People are very scared that gasoline prices will go back up. Putting a cap-and-trade program on top of a comprehensive energy policy would make things too complicated. I realize we have to do something about greenhouse gases, but we have to learn to walk before we run," Landrieu said.

Restore balance
Rahall said he expects the Natural Resources Committee to address two main issues this session: OCS energy development, and energy development on other public lands. Both will need to include alternatives and renewables because it's time to restore some balance after years of policies tilted toward oil and gas at the US Department of the Interior, he maintained.

He also disputed the idea that the US is not aggressively producing oil and gas already, noting that the nation is the third largest global oil producer and is No. 2 in gas. "We are actively going after our own resources. But the amount of drilling we do has little to do with the price of gasoline. In reality, the price of oil and gas determines the amount of drilling, which has fallen with prices the past few months," Rahall said.

Landrieu agreed that producers have scaled back their plans. "But there's so much uncertainty about future policies, particularly with the president's tax proposals, that the industry has grown nervous," she said.

Following the forum Gerard said the oil and gas industry is not where it was 6 months ago, but is down-sizing and cutting back in response to falling demand. He said one major oil company's chief executive told him recently that he was deficit-spending this year to keep his employees on board so that they and the company will be ready when the economy rebounds.

"If you want real revenue, you promote development of domestic oil and gas resources. That creates jobs and fills government coffers," API's president said.

Contact Nick Snow at nicks@pennwell.com.

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