Energy policy shifts likely

RICHARD D. SLACK |

GOP LAWMAKERS HOPE TO REMOVE CONSTRAINTS OFF THE DEVELOPMENT AND PROGRESS OF US PRODUCTION

RICHARD D. SLACK, OILDEX, DENVER

THE UNITED STATES has long felt exposed to the economic and political upheavals in countries that traditionally produce oil. As a result, political leaders for the past few decades have urged a reduction in dependency on foreign oil by means of increasing domestic production.

In the past five years, we've seen American producers ramp up efforts by investing in advanced technologies and new methods, such as hydraulic fracturing. However, this rise in production has caused a flood of oil on the commodities market and oil prices have declined as a result to >$50 per barrel.

Economists and experts now predict that the price of oil will remain low, under $100 per barrel and most likely will hover around $60 per barrel, for the next few years. As a result, producers are re-adjusting their economic and business strategies to combat the volatile market changes in the global energy landscape.

In addition to the new economic barriers and challenges that the industry is facing, there will soon be new domestic political dynamics to contend with. In January of this year, Republicans took control of the Senate and gained additional seats in Congress. This change was a reprieve for many in the sector who view current environmental and governmental regulations as outdated. Republicans have outlined many goals, but of special interest to the sector are the expected changes regarding the advancement of the Keystone XL Pipeline, the acceleration of US crude oil exports, limitations on the control of the Environmental Protection Agency, and the opening of additional public land for oil and gas production.

Many oil and gas proponents are hopeful that with new leadership in place, lawmakers can begin to remove constraints from the development and progress of production in the US and assist in the advancement of sector benefitting projects. Republicans have made it clear that a top legislative priority is approval for the construction of the Keystone XL Pipeline as the Senate scheduled a vote as one of its first measures.

As for Obama, he has signaled that he will stay firm on his Keystone XL Pipeline stance and will veto any bill that arrives at his desk. The administration continues to push for a State Department review process which is currently on hold pending a Nebraska Supreme Court ruling on a challenge to the pipeline's route through the state. Republicans are gearing up to make a move after the President's initial veto.

At the top of their list is an attempt to override the decision through a two-thirds vote in both the House and Senate. Republican leaders have warned Obama recently that he is "sadly mistaken" if he thinks a veto is the end of the fight. Supporters claim that the construction of the pipeline is beneficial for the country as it would provide a more stable energy supply to help protect against price increases.

The acceleration of exports of American oil and natural gas supplies to foreign markets is another top priority in the Republican leadership's energy agenda. In addition to tackling efforts to fast track the permit process for LNG exports, the Senate will likely contemplate lifting the ban on crude oil exports. The movement has the support of Senator Lisa Murkowski (R-AK) who is now the head of the Senate Energy and Natural Resources Committee and who is quoted as saying that she expects to start by "holding hearings, pressuring Obama administration officials, and testing the level of support from party leadership."

Many Republicans have also voiced support in limiting the Obama administration's environmental rules and regulations. The GOP has long hoped for the opportunity to roll back particular rules from the EPA, which they say cripple the economy and cause confusion about the real effects of climate change. Senate Majority Leader Mitch McConnell (R-KY), who is particularly concerned over regulations regarding mercury, air toxins, ground level ozone, and mountain mining restrictions, has said that his top priority is to "try to do what I can to get the EPA reigned in." The Interior Department is facing similar pressure from the Republican majority regarding rules on hydraulic fracturing on public land and the protection of streams from mining waste.

Lastly, the Republican majority has vowed to move forward on leasing public lands for oil development while working to increase permits for offshore drilling. Earlier this year, the House passed a bill authorizing the sale of new leases to drill in the Atlantic and off the shore of California while limiting environmental reviews and public comment on lease sales. Additionally, the legislation required the Bureau of Land Management to auction off more public lands for drilling. Republicans plan to push additional legislative tactics to allow producers to access additional land.

Republican leaders are expected to aggressively pursue initiatives that would benefit the oil and gas industry. With control of both legislative chambers, the GOP now has the power to make substantial policy changes and the numbers to potentially override presidential vetoes with minimal support from Democrats. The Republican political presence has the ability to alleviate a multitude of challenges that the sector is currently facing and put at ease the growing number of producers in the US who have been economically impacted in the last year.

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