OTC: Industry execs criticize Obama's energy policy

Sam Fletcher
OGJ Senior Writer

HOUSTON, May 6 -- Three energy executives questioned US President Barack Obama's energy policy in a roundtable discussion of access to oil and gas resources on the US Outer Continental Shelf at the Offshore Technology Conference.

In prepared remarks, Gary P. Luquette, president of Chevron North America Exploration & Production Co., said May 5, "There are people in positions of power that want the US to move off oil as quickly as possible, and they want us to pay for it through increased taxes and fees."

Luquette noted Obama's "aggressive agenda" that could drastically reduce the industry's ability to explore, develop, and produce oil and natural gas in the US. He said, "This administration—and for that matter, a large sector of the population—think we must abandon traditional oil and gas development for the sake of the environment. This is simply not true."

Larry Nichols, chairman and chief executive officer of Devon Energy Corp., derided the myth that environmentally friendly and renewable energy sources are imminent. He questioned Obama's goal of having renewable energy resources provide 20% of US energy production by 2030. Even the Department of Energy's estimate is for only 11%.

Tim Cejka, president of ExxonMobil Exploration Co., said in prepared remarks, "Oil and gas are indeed finite resources. And alternative energy sources, such as wind, nuclear power, and biofuels, play an important and growing role in meeting global energy needs. But although oil and gas resources are finite, they are far from finished."

The US Geological Survey estimates more than 3 trillion bbl of conventional oil is ultimately recoverable worldwide. On top of that are huge unconventional resources such as heavy oil and shale oil yet to be developed. By comparison, an estimated 1 trillion bbl has been produced to date in all of human history.

Based on surveys conducted by the US Minerals Management Service, the OCS holds an estimated 85 billion bbl of recoverable oil and 419 tcf of recoverable gas, with almost 18 billion bbl of oil and 76 tcf of gas in the areas previously or still off limits.

Environmentally responsible
Despite the expansion of offshore drilling since 1980, MMS has calculated less than one one-thousandth percent of oil produced in federal waters has been spilled. The energy executives acknowledged any harmful incident "can and will be used against us by those that want to see oil and gas operations cease." Luquette said, "Let's not give them anything to work with."

The oil executives emphasized their industry repeatedly has proven over the last 25 years it has the technical capability and procedures to minimize adverse risks to the natural environment. "We can operate in an environmentally responsible manner and in a way that accommodates joint use of federal lands and waters for other activities," Luquette said.

Cejka said, "To consumers of our products, the importance of innovation to the oil industry is often not readily apparent. Gasoline may not appear as technically sophisticated as many consumer electronic goods, for example. But…technology is the lifeblood of our industry. Technology infuses the entire supply chain, from the producing reservoirs to the service station. If you just walk around the exhibit floor here at OTC, you can see the incredible depth and breadth of the technology found in the oil and gas industry."

Major and independent producers have long supported a sustained energy policy that combines conservation and development of alternative and renewable fuels along with expansion of traditional energy sources such as oil and gas.

Luquette defended the Deepwater Royalties Relief Act (DWRRA) that has been attacked as a mere subsidy to offshore oil and gas producers. He said, "Not only was DWRR a success, it was a home run that revitalized production from the Gulf of Mexico. It was passed at a time of historically low crude oil prices as a means to increase domestic production and sustain jobs in a struggling industry." Because DWRRA provided near-term royalty relief for long-term production, more than 3,000 leases were issued in 1996-2000 in water depths exceeding 200 m. It helped increase deepwater gulf production by 50% in less than a decade.

Since Chevron is one of the largest leaseholders in the gulf, Luquette said, "We are troubled by the Department of Interior's decision to delay the MMS 5-year plan process, which was designed to address the critical energy concerns facing our nation." The decision, he said, ignores the fact more than two thirds of the US public have supported in polls the development of domestic resources. He said, "This delay means that development of US offshore resources could be stalled, depriving the nation of tens of thousands of new jobs, billions of dollars in revenues to federal, state, and local governments, and greater energy security."

Environmental regulations
Separately, a Washington coalition of US oil and natural gas producers released May 6 the findings of a major research initiative that concludes new federal environmental regulations—especially related to hydraulic fracturing—could have disastrous economic consequences and increase our dependence on foreign sources of oil.

"Implementing new federal regulations that threaten domestic energy production and increase costs—without creating any additional environmental benefits—is the wrong policy course for the country, and could cost thousands of hard-working Americans their jobs," said Lee Fuller, vice-president of government relations for the Independent Petroleum Association of America, one of the coalition organizers.

The coalition said that saddling producers with new, unnecessary, and ineffective environmental regulations could put them out of business, destroy jobs, and increase US dependence on foreign sources of energy. It added that this would be especially true if lawmakers in Congress move forward with plans to target hydraulic fracturing.

Contact Sam Fletcher at [email protected].