Obama Stance on Fossil Fuel Angers Industry

President Barack Obama is taking credit for higher U.S. oil and gas production and lower imports, angering industry groups and Republicans who say he is working against domestic energy production.

American energy will be a major theme of Obama’s State of the Union address to Congress tonight, Jay Carney, the White House spokesman, said in a briefing yesterday. In his first campaign ad this year, Obama boasts that U.S. dependence on foreign oil is below 50 percent for the first time in 13 years.

Since Obama took office, U.S. natural gas production averaged 1.89 trillion cubic feet a month through October, 13 percent higher than the average during President George W. Bush’s two terms, according to Energy Department data. Crude oil production is 2 percent higher, the department said.

“To be sure that is not because the White House meant for that to happen,” said Pavel Molchanov, an analyst at Raymond James & Associates Inc.

Republicans say the numbers are misleading. Onshore oil and gas production on federal lands directly under Obama’s control is down 40 percent compared to 10 years ago, according to Spencer Pederson, a spokesman for Representative Doc Hastings, a Washington Republican and chairman of the House Natural Resources Committee. In 2010, the U.S. signed the fewest number of offshore drilling leases since 1984.

‘Drill Baby Drill’

“The president is responding to what America’s gut feeling is, that we should be less dependent on foreign oil, and he’s trying to take credit for it,” Hastings said in an interview. “His policies are exactly the opposite.”

Four years ago, Obama campaigned against Republican vice presidential nominee Sarah Palin’s rally to “Drill Baby Drill.” Today he is highlighting fossil fuel gains to blunt charges that his policies are contributing to higher energy costs, according to Tyson Slocum, energy program director for Public Citizen, a Washington-based consumer advocacy group, said in an interview.

“The Republican narrative is that Obama is shoveling huge amounts of money to his cronies in the renewable industry, and blocking the real energy that American needs,” Slocum said in an interview. “It’s a false narrative. The administration has been focused on green energy, but they haven’t been against fossil fuels.”

Federal Leases

In a January report, the American Petroleum Institute in Washington said that in two years the number of new leases to drill on federal lands declined 44 percent to 1,053 in 2010. The report blamed “new rules, policies and administrative actions that are not conducive to oil and natural gas production.”

American energy will be a major theme of Obama’s State of the Union address to Congress tonight, Jay Carney, the White House spokesman, said in a briefing yesterday. In his first campaign ad this year, Obama boasts that U.S. dependence on foreign oil is below 50 percent for the first time in 13 years. Photo: Matthew Staver/Bloomberg Close

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American energy will be a major theme of Obama’s State of the Union address to Congress tonight, Jay Carney, the White House spokesman, said in a briefing yesterday. In his first campaign ad this year, Obama boasts that U.S. dependence on foreign oil is below 50 percent for the first time in 13 years. Photo: Matthew Staver/Bloomberg

Lower imports are the result of lower demand, and increasing production has come despite Obama’s policies, according to Jack Gerard, American Petroleum Institute President. The U.S. needs a “course correction” on energy policy that includes faster permitting on federal lands in the West and in the Gulf of Mexico, he said.

The group, whose members include Exxon Mobil Corp., the largest U.S. oil company, convened a conference call with reporters today to comment on what Obama is expected to say on domestic energy in tonight’s address.

“We hope that the actions match the words,” Gerard said on the call. “The truth is that the administration has sometimes paid lip service to more domestic energy development, including more oil and natural gas development.”

Offshore Drilling

The American Enterprise Institute, a Washington group that supports free markets, called Obama’s Jan. 18 decision to deny a permit for TransCanada Corp. (TRP)’s $7 billion Keystone XL oil pipeline, part of his “crusade against fossil fuels.”

“The losses due to the Obama administration’s death-grip on offshore drilling and its unwillingness to open federal lands or issue timely permits for exploration far outweigh any energy gains that the White House may tout this week,” Thomas Pyle, president of the Washington-based Institute for Energy Research, said in a statement.

Obama last year called on Congress to eliminate “billions in taxpayer” subsidies for oil companies and to invest instead in renewable sources of power. In 2010, he proposed drilling for oil and natural gas off the U.S. East Coast, weeks before BP Plc (BP/)’s Macondo well in the Gulf of Mexico failed, spewing 4.9 million barrels of oil and triggering a temporary administration ban on offshore exploration.

Oil Production

Higher production of oil, gas and renewable fuels will reduce the share of net imports in total U.S. energy consumption to 13 percent by 2035 from 22 percent in 2010, the Energy Department said yesterday.

Much of the growth has come from North Dakota, where oil producers have spurred a fivefold increase in output by using intensive drilling practices in the Bakken, a geologic formation that stretches from southern Alberta to the northern U.S. Great Plains.

“If you’re in the White House when it happens, you should get the credit or the blame for it,” Joshua Freed, vice president for clean energy for Third Way, a Washington-based group that says it advocates policies that appeal to the political center, said in an interview.

U.S. oil production increased to 5.5 million barrels a day in 2010 from 5.1 million in 2007, according to the Energy Department. Over the next 10 years, gains in oil-shale and Gulf of Mexico output will lift domestic production to 6.7 million barrels a day, a level not seen since 1994.

To contact the reporters on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net; Aaron Clark in New York at aclark27@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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