Despite Protests, Oil Industry Thrives Under Obama Agenda

  • Trade group's annual address includes criticism of agenda
  • Gas, oil production boomed during the Obama administration

The nation’s biggest fossil-fuel trade group delivered its annual state-of-the-industry report Tuesday. True to form, it included a whack at President Barack Obama’s policies -- even though oil and gas have flourished on his watch.

U.S. oil production has surged 82 percent to near-record levels in the past seven years and natural gas is up by nearly one-quarter. Instead of shutting down the hydraulic fracturing process that has unlocked natural gas from dense rock formations, Obama has promoted the fuel as a stepping stone to a greener, renewable future.

The administration has also permitted drilling in the Arctic Ocean over the objections of environmentalists and opened the door to a new generation of oil and gas drilling in Atlantic waters hugging the East Coast. He also signed, with reservations, a measure to lift a 40-year-old ban on the export of most U.S. crude.

"Given an administration that was so committed to combating climate change, they have coexisted pretty peacefully with the industry, despite all the protestations," said David Goldwyn, a consultant who for two years served as the State Department’s top energy diplomat under Obama. "And the best metric is just look at the production."

Regulatory Burden

That hasn’t stopped the American Petroleum Institute from taking aim at Obama in its annual addresses on the industry -- such as the one API president, Jack Gerard, delivered in Washington.

Gerard complained about an "already heavy regulatory burden" on the industry, with "almost 100 pending regulations and counting." 

And he took aim at the Clean Power Plan, which slashes greenhouse gas emissions from the power sector. The policy, "under the guise of environmental protection, does in fact, seek to pick winners and losers in the energy market, not based on market conditions, consumer preference or economic reality," he told a room filled with industry lobbyists, trade group leaders and at least one oil company executive.

Environmentalists’ Anger

But the Obama administration’s approach to fossil fuels -- including his endorsement of natural gas in State of the Union addresses and in a landmark climate change speech in 2013 -- has drawn anger from environmentalists.

"From day one of the administration and accelerating into the present, this administration and this White House has viewed the natural gas and oil bonanza in this country as an economic opportunity, and they have ridden it and ridden it hard," said Bill Snape, senior counsel for the Center for Biological Diversity. "They greased the skids for too much natural gas, oil and fracking in this country."

The administration’s strategy, which Kevin Book, managing director of ClearView Energy Partners, calls a "give-a-little, take-a-little" approach to energy, reflects the president’s conflicted relationship with oil and gas. On one hand, fossil fuels are a major impediment to his green goals and his hope to thwart the worst effects of climate change. At the same time, their production has delivered big economic benefits to the country.

Ed Hirs, an energy expert at the University of Houston who is managing director of Hillhouse Resources LLC, an independent oil and gas company, says Obama took a lighter touch on fracking after the worst environmental fears of the process failed to materialize.

"No one in the Obama administration can deny the massive positive impact on GDP that oil from the shale plays has brought," Hirs said in an e-mail. 

Stifling Production

Oil industry leaders say Obama has driven strangling regulation, stifling U.S. energy production and blocking companies from plumbing new areas in search of crude. To the American Petroleum Institute, the domestic drilling boom has happened in spite of the Obama administration, not because of it.

"This isn’t happening because of the administration. Prices aren’t down because of the administration,” API executive vice president Louis Finkel said in an interview. “This is happening on private land because of thoughtful and balanced state regulatory regimes that balance economic growth and production of oil and natural gas with environmental stewardship. In many ways, this administration has missed the opportunity to seize on that."

Finkel cited the Obama administration’s decision to reject the Canada-to-U.S. Keystone XL pipeline, impose stricter ozone limits and clamp down on potent heat-trapping methane emissions that are the primary component of natural gas.

"The only reason consumers haven’t been buried by these costs yet is because our industry continues to innovate and increase efficiency,” he said.

In recent months, market forces have delivered a major blow to the U.S. oil and gas industry in the form of the biggest price slump in decades. That’s resulted in job losses and a downturn in drilling.

Spokesmen for the White House, Interior Department and Environmental Protection Agency declined to comment for this story.

Power Plan

Gas will take on new importance under the administration’s Clean Power Plan, accelerating a shift away from coal-fired power. The international climate accord reached in Paris last year also sets up a framework for more worldwide demand for natural gas. And Obama’s Energy Department has now approved 13 licenses to broadly export 14.04 billion cubic feet per day of liquefied natural gas, despite initial permitting delays.

Obama has moved to regulate hydraulic fracturing, the process of pumping water, sand and chemicals underground to unlock oil and gas in dense rock formations, but those efforts have hit roadblocks. His Interior Department imposed new mandates on fracking last March, but the requirements only apply to wells on public land and have since been blocked by a federal court.

A 2012 EPA rule to force energy companies to use "green completion" equipment that can pare methane emissions at natural gas wells applies only to new and modified sites -- and largely tracks what the industry was doing already. The agency is working to finalize similar requirements for existing natural gas wells and infrastructure. The Interior Department is working on its own plan to crack down on methane released when energy companies burn or vent natural gas flowing from oil wells.

Wish List

"API has plenty to celebrate. The flaring rule is behind schedule, the methane rule is a half-measure that covers only new sources, and 2015 ended with the oil lobby notching their biggest policy victory in years with the repeal of the crude oil export ban," said Lukas Ross, a climate campaigner with the environmental group Friends of the Earth.

To be sure, the oil industry hasn’t secured everything on its wish list. The American Petroleum Institute has pushed for more territory to drill, both onshore and off. And while a draft plan for selling offshore oil and gas leases from 2017 to 2022 opens the door to eventual Atlantic drilling, the government’s auctions may be scaled back. The Obama administration also has walled off drilling in some areas, including 12 million acres of the Arctic National Wildlife Refuge.

And Obama’s Interior Department in October also canceled two planned auctions of drilling rights in the Arctic Ocean, citing low industry interest.

"We would strongly urge the administration to look at what are you doing, why are we doing it and is there a better way to accomplish the objective without all of the cost, all of the delay," Gerard said.

Some moves by this administration also will live on after Obama leaves office -- affecting oil and gas companies’ fortunes for years to come, Book said.

Social Costs

They include the international climate deal, broader environmental reviews of proposed government actions folding in climate change considerations, embedding a "social cost of carbon" into rule making and the Environmental Protection Agency’s conclusion that carbon dioxide is a dangerous pollutant that must be regulated.  

"Those four things, irrespective of the regulations they produced, still provide a fairly compelling green agenda as a legacy -- some form of which is likely to endure," Book said.

Environmentalists are hoping Obama will build on those developments this year. He still has the opportunity, Snape said.

"If this president wants to go down with the legacy of being the climate president - the president who really changed course -- it’s clear to me and clear to us, he’s going to have to truly wrestle fracking down and not be wrestled down by it."

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