A Pivotal Policy Month for Oil & Gas

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May has been quite a month for the oil and natural gas industry. There have been several policies that could have serious impacts for the future of the United States in its role in the energy revolution that’s sweeping the entire globe.

Let’s start with the not-so-good. On May 16, the Department of Interior released the new draft of the Bureau of Land Management’s (BLM) rule for regulating hydraulic fracturing and well construction on federal lands. The BLM released the original draft last May, and IPAA took issue with it immediately because it created an extra level of federal bureaucracy to a regulatory system that the states are carrying out effectively. IPAA and the Western Energy Alliance submitted comments which detailed the many issues our members have with the rule. In this new draft, there were some changes that corresponded with IPAA’s comments on the draft, such as utilizing the efficient FracFocus system for chemical disclosure.

However, IPAA still rejects the premise that this federal, one-size-fits-all rule is necessary in the first place.  In a press release, IPAA President Barry Russell expressed independent producers’ concern. He explained that “the rule solves no existing problem, but creates additional burdens for independent producers and state regulators.” IPAA believes the proper role of the federal government is to “encourage energy development” but this rule “discourages the promise of new energy supplies, threatening jobs and the progress we’ve made on energy security.” IPAA asked the administration for more time to deliberate this rule through a comment period extension from 30 days (where it currently stands) to no less than 120 days. It’s expected that this will be granted, since all stakeholders involved have asked for more time.

Furthermore, there is a danger that this rule will become a policy precedent that eventually will extend beyond federal lands and be forced upon state and private land. It’s essentially a “rule in search of a problem.” Regulations without reason end up costing jobs, hinder innovation, and eliminate business expansion.

As IPAA board member Jack Ekstrom, Vice President of Government & Corporate Relations at Whiting Petroleum Corporation testified at the House Natural Resources hearing on energy development on federal lands, federal policy has a real impact for independent producers trying to develop energy on federal lands. Jack explained, “The federal government owns millions of acres prospective for oil and gas across the Inter-Mountain West. The unmistakable conclusion is that the prosperity, the jobs, the harvest of domestic resources – from unconventional oil and gas plays, enhanced recovery projects and technology breakthroughs to come – can only be realized to their potential by mandating the Department of the Interior devise and publicize a plan to: encourage development, provide leasing certainty and streamline oil and gas permitting.” IPAA appreciates the oversight work that the House of Representatives is doing to push back against this troublesome regulation.

LNG export facility in Louisiana

LNG export facility in Louisiana

Now here’s the good news. There has been a great deal of speculation in Washington over the past few months about how the Obama administration will act in regard to the future of natural gas exports. The great story here is that just a few years ago, the U.S. was considering how it could import natural gas, since we were in great demand of it. Liquified natural gas (LNG) import facilities were being constructed. Now, thanks to horizontal drilling and hydraulic fracturing, independent producers have unlocked an amazing abundance of natural gas — an abundance that has the U.S. supplied with natural gas for well over a hundred years! Really, the U.S. has so much that we are swimming in it, and companies want to switch these LNG import facilities to LNG export facilities, so countries that need it (and pay more for it) can get access to our excess natural gas.

This seems like a no-brainer policy decision, but unfortunately, as often happens, bad politics could stop this good distribution of resources. Some enviro groups are seeking to stop exports in order to limit additional development. They reason that if the price remains very low, producers won’t develop as much, and hydraulic fracturing will be limited. Some manufacturing companies have gotten mixed up as well – they would like to continue to take advantage of the low price of natural gas for their operations. The reality is that if the price remains so low, producers won’t develop, which will actually cause the price to rise, which will then make it worthwhile to develop again. However, good jobs, economic progress, and energy supply will be lost in the interim — and producers will be greatly damaged.

IPAA has long held the view that the federal government should not put an artificial limit on the energy market. In response to President Obama’s energy plan released in March, IPAA specifically criticized the President for remaining silent on the much-debated topic of liquefied natural gas (LNG) exports. After all, President Barry Russell explained, “exporting natural gas to countries that need it will ensure that more production takes place, which would grow our economy and assure its prominent place in our nation’s fuel mix.” In addition, IPAA submitted comments in praise of a Department of Energy report that actually said that exporting natural gas will be a net economic gain to the United States.

I always consider the question of LNG exports to be one of those facets of politics that one couldn’t make up. Hoarding something we have an abundance of (natural gas) to artificially control a price that cannot, in reality, be controlled by a domestic policy decision sounds like something out of an Onion article.

So it was good to hear the Department of Energy announce its decision to authorize the Freeport Liquefied Natural Gas (LNG) Terminal on Quintana Island, Texas. Also, good political timing. The Obama administration announced this the day after BLM HF was announced, strategic timing to try and soften the blow from to industry. IPAA sent out a press release supporting the administration’s decision to allow the export of natural gas. IPAA explained its support on behalf of independent producers: “Due to technologies pioneered by America’s independent oil and natural gas producers and service companies, the U.S. has been able to access its vast supply of natural gas. Exporting natural gas to countries that need it will encourage production, while strengthening the U.S. trade balance and creating thousands of jobs for Americans.” As an association, we will continue its efforts to promote regulatory and tax policies that encourage production of natural gas for all markets.

There’s a lot ahead. Last week, the Senate Energy and Natural Resources Committee has just convened its informal hearings on natural gas policy, so we’re likely to hear some legislative movements in regard to natural gas development from the Senate side.  Right now, we’re in a quick Memorial Day recess, so Hill action will resume in full force next week. Stay tuned.

Technology — and Policy — Transforming American Energy Outlook

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It’s no secret that the American energy picture is undergoing a transformation. The advent of multi-stage hydraulic fracturing combined with horizontal drilling has enabled independent producers to reach deeper, wider, and into once impenetrable shale rock, unleashing millions upon millions of barrels of new oil and natural gas supplies. This technology has allowed producers to tap into new plays such as the Marcellus in Pennsylvania and the Bakken in North Dakota.

IPAA’s oil education campaign, the Declaration of Independents, has been profiling the most prominent shale plays in the U.S. Most recently, they gave the history and the current outlook of the Permian Basin in West Texas. This is a region that encompasses plays upon plays, or “stacked plays” such as the Bonespring, Cline, Spraberry, Wolfcamp, and the combination plays nicknamed the “Wolfberry” and the “Wolfbone.”

What’s most notable about this play is its rich history. The first commercial well in the Permian was drilled in 1921. As the analysis noted, “This [first] discovery set off further drilling activity, with several notable finds, including Yates Field (1926), which is still producing today, and is still one of the top 50 fields for proved oil reserves in the United States. A number of major fields discovered in the 1930s, such as Wasson, Slaughter, and Seminole are still producing today, and are still ranked by the Energy Information Administration among the top 20 in the U.S. for remaining proved reserves.” 

Permian map 5-1-13

The Permian truly exemplifies the renewed life cycles that new technology and new generations of industry minds have given to these historic plays. As the profile concludes, the Permian Basin “is a story about combining the various talents of independents, majors, and service companies in using advancing technologies to sustain the lifespan of existing fields, to tap into zones that were previously uneconomic or inaccessible, and to increase the Permian’s proven reserves in a remarkable fashion.”

Check out these recent news articles that exemplify the state of shale in the United States.

  • Associated Press: Oil Drilling Technology Leaps, Clean Energy Lags. Technology created an energy revolution over the past decade — just not the one we expected…Oil companies big and small have used technology to find a bounty of oil and natural gas so large that worries about running out have melted away. New imaging technologies let drillers find oil and gas trapped miles underground and undersea. Oil rigs “walk” from one drill site to the next. And engineers in Houston use remote-controlled equipment to drill for gas in Pennsylvania.
  • Bloomberg News: Oil Shockwaves From U.S. Shale Boom Seen by IEA Ousting OPEC. The International Energy Agency (IEA) reported this week that North America will provide 40 percent of new supplies to 2018 through the development of light, tight oil and oil sands, while the contribution from the Organization of Petroleum Exporting Countries (OPEC) will slip to 30 percent.
  • CNBC: US Oil Production Nearly Even With Imports. The amount of oil produced in the U.S., now at a 21 year high, is nearly even with the amount being imported, and the gap is narrowing. The Energy Information Administration said Wednesday in its Short-Term Outlook that U.S. oil production averaged 7.1 million barrels per day in the first quarter, and that should rise to 8.5 million barrels per day by the fourth quarter of 2014.

The U.S. is in a critical position. Policymakers have a choice – either encourage this amazing rebirth of homegrown energy that the industry is safely developing or choose to turn away from this hopeful energy picture. Two critical issues are facing the Obama administration this month: the future of natural gas exports and hydraulic fracturing regulation on federal lands.

President Obama has said that he must make a decision soon (and we agree) on the future of LNG exports. Radical environmentalists urge to ban natural gas exports because it will increase the use of hydraulic fracturing. It’s no coincidence they are targeting the very technology that has spurred this shale revolution and expanded development of fossil fuels across the nation. Putting an artificial ban on the market of natural gas would hurt not do any favors to the American people, because it would restrict expanded development of natural gas. It would especially hurt independent producers, who seek a larger market for America’s natural gas supplies. Additionally the Department of Energy has stated in a report released in December that exporting natural gas to U.S. allies would be a net economic positive for the United States. It’s thought that the White House will adhere to DOE and approve at least some LNG export facilities in the coming weeks.

Additionally, the Department of Interior is set to release the Bureau of Land Management’s hydraulic fracturing and well construction rules for federal lands. IPAA came out strongly against the first version of the rule, originally released last May, which would cause unnecessary confusion for independent producers who are already struggling to operate on federal lands. The rule is expected to take into account some of industry’s concerns, but IPAA holds that any federal rule to regulate hydraulic fracturing, when the states are already successfully doing so, is burdensome and duplicative. Different plays in different states have varying geology and environmental issues – putting a one-size-fits-all blanket rule on top of the existing state regulatory regimes makes no sense, will only cause more bureaucracy and confusion, and will certainly further drive producers from federal lands. That rule is set to drop this week (possibly today).

Don’t Hold Oil & Gas Hostage for Political Points

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Washington is buzzing about the upcoming deadline for sequestration on March 1, which is just a little over one week away. Sequestration refers to a number of automatic spending cuts that will be made across the board unless they are renewed by the House, the Senate, and the White House.

The effects of sequestration are no joke. They would mean real cuts to programs and budgets that would translate into a loss of jobs for thousands of workers employed by the federal government. However, this deadline is being used inside the Beltway as a political contest – a game of chicken, if you will – whose ultimate end is to deflect blame onto the other political party. The White House and Democratic leaders in the Senate and House want to paint the Republicans as obstructionist and have called for a plan to raise taxes, again. Speaker John Boehner and House Republicans, by contrast, are trying to demonstrate to the American public that the Democrats are crying wolf – bemoaning a budget crisis that their spending policies got the U.S. into in the first place.

Yesterday, Rep. Markey, a liberal Democrat from Massachusetts known as an unceasing assailant against oil and natural gas development, used sequestration as a political flamethrower. He called Republicans “hypocritical” for not adhering to the White House’s proposal to avert the sequestration, because, he argued the effect of looming budget cuts would hamper the Department of Interior’s ability to issue permits for drilling. The White House affirmed this argument and has pushed to increase taxes on the industry.

edward-markey

“Republicans say they want to ‘drill baby drill’. Yet by letting the sequester go forward, Republicans in Congress will put the brakes on oil and gas development on public lands in America and reduce our ability to protect against another offshore drilling disaster.”

First of all, when has Markey been concerned about the Interior Department’s faulty record on issuing permits to drill? Markey is probably the most vocal opponent of natural gas and oil development in Congress.

Second of all, let’s address the as of now fully-funded Department of Interior’s record under President Obama. (Thanks to the House Natural Resources Committee on this one). Mind you, this is all according to government data from the Energy Information Administration.

  • Oil and natural gas production on federal lands is down by more than 40 percent compared to 10 years ago. The real increase in oil and gas production has occurred on private land, from the Eagle Ford in Texas to the Marcellus in Pennsylvania to the Bakken in North Dakota.
  • Under the Obama administration’s watch of the Department of Interior, 2010 had the lowest number of onshore leases issued since 1984.

The Democrats’ logic (ahem, politics) has a third fatal flaw. Markey, President Obama, and other Democrats in Congress have ignored the fundamental link between oil and natural gas development and government revenues. Just last week, Louisiana State University economist Joseph Mason published a study commissioned by the Institute for Energy Research that found that opening up restricted drilling areas on federal lands and offshore waters would add $35.8 billion dollars in the short run, and $99 billion dollars in the long run to the federal government. This is thanks to the millions of dollars paid by America’s oil and natural gas companies each day in taxes and royalties to the federal government from exploration and production of U.S. oil and natural gas. Republican leaders touted the study as a reason to utilize energy development to help raise revenue for the federal government.

To put the icing on the cake, President Obama announced today that he will speed up the permitting for renewable energy projects despite the looming sequestration and budget cuts. You decide where the hypocrisy stands in this round of politics.

Holding our nation’s energy supply in hostage to score a political point is a dangerous policy move. Instead of demonizing the oil and natural gas industry and blaming policymakers who want to avoid raising taxes on the American people and small businesses, President Obama should expand access to America’s vast oil and natural gas reserves. This would raise much-needed federal revenue to help avoid the sequester. Not to mention, it would create millions of jobs and add billions to the U.S. economy in the process. Any real solution our nation’s budget crisis includes a hefty policy pillar that encourages U.S. oil and natural gas development.

Regulatory Actions are a Dime a Dozen

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There are three major regulatory actions by the Obama administration that should be developing in the coming weeks.

President Obama visiting TransCanada Stillwater Pipe Yard in Cushing, Oklahoma

1. Keystone XL. The Obama administration made the infamous decision last January to reject TransCanada’s application to build the Keystone XL pipeline. The pipeline would start in Canada’s Alberta Oil Sands and go down to the refineries in Texas. This pipeline would create thousands of new blue-collar jobs, relieve the bottleneck from Bakken crude oil in Cushing, Oklahoma, and provide energy supply from our closest ally, Canada. To approve the pipeline should have been a no-brainer and the initial rejection revealed an anti-development bias in the Obama administration – which he got a lot of flak for. TransCanada has re-submitted its application with an alternative route, and the administration is set to make a decision in the coming weeks. This decision will give us an inkling of how anti-industry that administration’s second term may look like.

2. BLM Hydraulic Fracturing Rule. In May, the Obama administration released a proposed rule on hydraulic fracturing and well construction on federal lands. This sets a new precedent as the states historically handled the regulation of oil and natural gas development. This is due to the diverse geology and environmental issues that state regulators have better capacity to manage (both budget-wise and experience-wise). IPAA submitted comments expressing our concern about the federal scope of the rule that threatens to drive even more producers from federal land. More than 59,000 comments were submitted to the Bureau of Land Management on this proposed rule, from both sides of the issue. The administration will likely make a decision on BLM HF (as it’s been coined) before Christmas. Due to the controversy surrounding the implications of this broad rule, the rumors are right now that the administration will take into consideration the comment recommendations and propose a revised rule. We shall see what ends up happening (after all, rumors are only rumors) but this federal lands issue is of paramount importance for IPAA.

3. EPA Hydraulic Fracturing Study. The EPA has undergone a study of the impact of hydraulic fracturing on drinking water supplies. Industry has long had problems with this study. For one, it is retroactive in nature – which means it is looking at sites with history of hydraulic fracturing. It is hard to make causal assumptions when the study is putting together pieces of history. Second, the EPA’s methodologies in the past have been extremely flawed, undoubtedly political in nature and quest, and have contained serious faulty science. (Think Pavillion). The study was requested in 2010 and isn’t supposed to be released until 2014, but EPA plans to give a preliminary progress report by the week’s end. Also, at the end of the day, the EPA, Interior, and other top officials of the administration have said repeatedly that there has never been one case of groundwater contamination in the over 1 million wells that have been fracked since 1947. It looks like the EPA is trying to find a ghost that doesn’t exist yet won’t rest until it comes up with some sketchy, hastily-drawn conclusions. The report will give us some indication of the motives of EPA and will give us a preview about how political the full report will be.

Again, just this week, industry is dealing with three different federal agencies with three different high-profile examples of attempts to regulate oil and natural gas development. This is a good microcosm of the fact that in total, there are 14 different federal agencies trying to regulate the industry. These are just the high-profile regulatory cases that are on the top of IPAA’s agenda this week.

Taxes Targeted as Fiscal Cliff Looms

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Not much is certain in a post-election world, but two facts exist: President Obama will receive a second-term in the White House and the politics are far from dead inside the Beltway. Before we move on (because move on we must), here are IPAA Chairman Gigi Lazenby’s comments on the re-election of President Obama.

“IPAA appreciates President Obama’s affirmation of natural gas as an abundant and affordable energy source that will supply the United States for more than 100 years. However, IPAA has serious concerns about energy policies the Obama administration has implemented over the past four years, which taken together, demonstrate a fundamental misunderstanding of the natural gas and oil industry in the United States. America’s independent producers, which supply 54 percent of U.S. oil and 85 percent of U.S. natural gas, encourage President Obama to take a renewed, more positive approach to oil and natural gas development in the United States…

“President Obama has repeated his commitment to energy development in powering our economy and has promised to put Americans back to work. IPAA is committed to working with the President to deliver on this promise in his second term. We encourage the Obama administration to empower the states and implement a framework that allows independent producers to do what they do best – safely and responsibly find and develop American energy. If allowed to do so, oil and natural gas development will increase our nation’s energy security, create much-needed jobs, and give the American people the standard of life that petroleum creates.”

Click here to read the full press release. IPAA’s position was featured in Reuters, Houston Chronicle, Oil & Gas Journal, and other national media outlets.

Gigi’s comments give a good picture of where the oil and natural gas industry is at, and this was reflected at IPAA’s 83rd Annual Meeting, held in New Orleans last week – the day after the election. Essentially, IPAA is very cautious that the administration’s regulatory avalanche on oil and natural gas development will not only continue, but may even ramp up. However, we are also optimistic – optimistic because of our industry’s own great successes in creating jobs and supplying American energy.  

Just this week, the International Energy Agency released a new report that projected the United States will surpass Saudi Arabia to become the world’s number one producer of oil by 2020. By just 2015, the United States will be the number one producer of natural gas. Yesterday, the New York Times reported that the “prime mover [in sudden shift of world's energy supply] is a resurgence of oil and gas production in the United States, particularly the unlocking of new reserves of oil and gas found in shale rock. The widespread adoption of techniques like hydraulic fracturing and horizontal drilling has made those reserves much more accessible, and in the case of natural gas, resulted in a vast glut that has sent prices plunging.” The Wall Street Journal highlighted that the result would be “a continued fall in U.S. oil imports to the extent that North America becomes a net oil exporter around 2030.”

The  politics in DC are far from slowing down – in fact, with Congress back in town on Tuesday and the administration reinvigorated after the election, the politics may be just beginning. In just 6-8 weeks, the U.S. has the possibility of running right over the dreaded fiscal cliff.

What is the fiscal cliff, you ask?

It’s a combination of different policies, cuts, and programs that all come together to form one deadline – the end of the year. Three main policy areas must be dealt with by the end of 2012: 1) the vast array of tax cuts that have been put in place over the years are set to expire; 2) the bundle of domestic and defense cuts known as sequestration are about to set in, and 3) the debt limit is setting in – resurfacing the question of whether or not to raise the debt ceiling. Lawmakers and their staff on the Hill, the administration, and K Street may be wildly busy up until the wee hours of Christmas Eve even trying to negotiate and pass a package.

An often easy (and unfair) political target, the issue of the industry’s tax provisions is in the spotlight once again. The important provisions of intangible drilling costs and percentage depletion – which President Obama claims will raise billions in revenues each year – may be on the chopping block. IPAA’s number one priority is preserving these provisions. They are vital to reinvestment in new energy projects and critical to the health of the U.S. E&P industry — and thus, the recovery of the American economy. In fact, eliminating these provisions in the long run will actually end up reducing revenues to federal, state and local governments.

It’s important to remember, America’s oil and natural gas industry pays $86 million in taxes to the government every single day. And, our effective tax rate is higher than any other industry. Oil and natural gas companies pay an effective tax rate of 44%, while other industries on average pay 26%. We are certainly paying our fair share – and it’s the smaller, independent companies with limited resources that are going to pay the price if taxes are increased on them. Not to mention, the American consumer, the American job-seeker, and the American pension holder will undoubtedly suffer.

Cast Your Vote Where the Energy Is

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It’s game time.

Tomorrow is the day to put our money where our mouth is and VOTE.

If you are one of those dwindling batch of undecided voters, (“We hear a lot about our dependence on foreign oil, but just what is oil?”) here is a last-ditch effort to find out about the candidates’ policies on energy development:

Take a look at President Obama’s energy plan and Governor Romney’s energy plan. Here is IPAA’s reaction to Romney’s plan.

Read IPAA President and CEO Barry Russell’s op-ed, entitled “Obama’s Energy Strategy of Contradiction” featured in Roll Call this past April.

But under the public’s watchful eye, the president is continually contradicting himself inside the Beltway and on the campaign trail. Obama calls to expedite infrastructure projects, but in the wake of rejecting the Keystone XL pipeline. Obama claims increased oil and natural gas production on his watch, but then follows up with accusations that oil companies are profiting at the expense of the American people. Obama repeatedly calls for an “all of the above” energy strategy, but then singles out the oil and natural gas industry for new regulations and targeted tax attacks.

Something doesn’t add up. To discover Obama’s real feelings and policies toward American-made energy, we must look to areas that the administration actually has jurisdiction over: public lands, federal agencies and his own calls for legislative action…

…The public may be taking note of Obama’s energy policy contradictions. The 2012 election may rest upon the question: Can Obama have his energy cake and eat it, too?

And from National Journal Energy Experts blog:

Over the past three years, the Obama administration’s actions simply have not mirrored President Obama’s pro- oil and natural gas messages in last week’s State of the Union last week. In fact, the administration has done much to hamper development of America’s vast oil and natural gas reserves…

…Last fall, IPAA battled for the independent producers’ very livelihoods when Congress, at the behest of President Obama, tried to repeal these provisions. Thankfully, these elimination efforts fell flat and the business deductions that encourage crucial industry investment survived. However, there will certainly be more battles on taxes to come in 2012 as President Obama continues to misrepresent the productivity of the American oil and natural gas industry.

The presidential race is not the only important race this cycle. The House and Senate are up for grabs and the makeup of Congress will determine the laws (and level of gridlock) that will affect American energy for years to come.

IPAA endorsed more than 170 Members and candidates based on their pro-business agenda and their support for America’s independent oil and natural gas producers. Each Wildcatters selection was approved by the IPAA Wildcatters Fund Board member from that region and received final approval from the Congressional Candidate Review Committee (CCRC). Please visit our website to see the full list of Wildcatters Picks.

Not sure where to vote? Visit IPAA’s website and use the EZ Vote tool to find your polling location, get contact information for your state election offices.

 

To Tap or Not to Tap

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Last year, the International Energy Agency coordinated a release of oil from the U.S. Strategic Petroleum Reserve in light of the turmoil in Libya. The Obama administration chose to sell 30 million barrels from the SPR.  However, the unrest in Libya didn’t do too much damage to the world oil supply. Bloomberg recounted that “Gasoline prices retreated after that release, which was coordinated with the 27 other nations in the IEA. But the price at the pump declined by only 2 percent, for just a week, before rising again.” Many saw this decision as a strategic political decision – not a real practical response – in the face of pain at the pump. In essence, the shortage of oil was not feared as much as the wrath of consumers at the administration.

In fact, as IPAA’s Declaration of Independents reported last summer, it was America’s independent producers that really stepped up to increase production and cause the decrease in oil imports.

Now, the Obama administration is deliberating over this decision once again. The hurricane in Louisiana a few weeks ago prompted a great deal of talk about releasing reserves. However, thankfully, the hurricane did not do any real damage to the overall supply of oil, so the administration had little room to use that event as a reason.  In fact, rising cost of oil should never be a reason to release oil stocks, since it actually doesn’t solve any problems in the short-term. The only thing that happens is that the market gets excited for a time, before calming down.

This week, IPAA’s Declaration of Independents released an analysis on the definition of oil inventories and the original purpose of the government stockpiles of oil. It tracked the purpose and history of the U.S. Strategic Petroleum Reserve – including strategic points where administrations have utilized this asset.

“The U.S. SPR is part of a broader system of strategic stocks coordinated through the International Energy Agency (IEA), which also includes Canada, much of Europe, Japan, Australia, and South Korea. The IEA agreement calls for members to hold 90 days of imports in government and private stocks. Notably, outside the U.S., these strategic stocks include a greater share of product stocks in above-ground storage. IEA strategic stocks overall amount to about 1.5 billion barrels.”

The analysis also highlighted the fact that Non-Organisation for Economic Cooperation and Development (OECD) countries – countries like China and India – have also been developing their oil stocks.

Honestly, learning about the original purpose of the U.S. SPR –in response to “severe energy supply interruption”—puts these recent attempts into historical context. After all, trying to ease the public’s pain at the pump right before your administration is up for reelection is a pretty blatant political move. As Blake Clayton from the Council on Foreign Relations urged, caution must be key in using this strategic asset. We’ll see if the Obama administration follows through – and what Americans’ reactions will be. 

Conventional Wisdom: Oil & Gas Benefit the United States

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No matter how political and partisan our politics have become, one thing was undeniable in both Republican and Democratic conventions: Development of our nation’s oil and natural gas resources greatly benefit the United States.

As IPAA Vice President of Communications Jeff Eshelman told the Houston Chronicle, “It’s hard for any candidate or party to deny the positive contribution of domestic energy production.” In other words, the economic benefits of oil and natural gas development are so profound, and now so public, that it would be a political foible to ignore them in the conventions. And as predicted, the parties followed suit. Both party platforms called for an “all of the above” approach to energy policy and both talked about policies that would take us down a path toward energy independence.

The Republican convention featured IPAA board member Tad True, the Vice President of Belle Fourche and Bridger Pipelines, based in Wyoming. He made a compelling speech on the importance of American energy and outlined the stark contrast between policies that promote jobs and energy security and policies that stifle growth and encourage dependence. Cheers exploded in the crowd as Tad simply asked: ”Mr. President, where is the Keystone pipeline?” Watch the video.

While IPAA appreciates the emphasis on developing our energy resources in both parties’ platforms, it’s ironic that while the president takes credit for increased oil production, the Democratic platform includes a hackneyed shot at “Big Oil” who they say gains “at the expense of the middle class.” Massachusetts Senate candidate Elizabeth Warren echoed this divisive rhetoric. “Look around. Oil companies guzzle down billions in profits.” IPAA is tireless in its effort to fight back against these disingenuous attacks on an industry that provides energy, security, jobs, and revenues to the American people.  

They also failed to highlight the reality that the overwhelming majority of these gains are happening on private and state lands. In other words, these gains are occurring because of the activity of oil and natural gas companies in the private sector in spite of the administration’s efforts, not due to them.  

In many ways, the Democratic convention failed in their representation of the oil and natural gas industry. In reality, America’s independent producers drill 95% of the wells in the United States. These companies are not “Big Oil” but actually employ 12 people on average. The families that own these companies are truly operating small businesses. The people employed by the oil and natural gas industry are truly the middle class.

The only bright light in the dismal jobs report released today for August was America’s oil and natural gas sector. According to BLS data, oil and natural gas development jobs grew by 1,100 employees last month to 197,300 on a seasonally adjusted basis. That’s a 12 percent increase from last year. This week’s Declaration of Independents analysis reaffirmed that it’s the petroleum industry that’s delivering on the jobs.

Despite the fact that these years were marked by one of the worst recessions in history, the oil and natural gas industry – particularly the upstream sector – had dramatic effects on increased jobs. For the upstream alone employment has jumped by more than 60 percent, or nearly 194,000 jobs over the 2001-2011 period. Upstream petroleum employment has more than doubled in many states over the past ten years. The analysis reported on the major states with impressive gains in this period: North Dakota (9,500), Pennsylvania (15,000); Texas (84,000), Oklahoma (22,500); Colorado (14,900); Wyoming (6400); New Mexico (5,400); and Arkansas (5,100). America’s independent producers have every right to be proud of these contributions to the well-being of our nation – this is an incredible story for an economy that is otherwise struggling. Please click here to see original charts and to read the full analysis.

 

Look to Oil & Natural Gas Industry for Interior’s Contributions to Economy

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Yesterday, the Obama administration released a report on the Department of Interior’s contributions to the economy in 2011. According to the press release, the activities of Interior added $385 billion to the U.S. economy and supported more than 2 million jobs in 2011.

Those are indeed impressive numbers. But it’s a bold move to claim that the activities of Interior contributed these jobs and dollars. After all, what is the source of these jobs?

Energy. The report does acknowledge that “energy development and mining on Interior-managed lands and offshore areas supported about 1.5 million jobs and $275 billion in economic activity.” However – it’s not even just energy development as a whole. An overwhelming amount of those economic benefits stems from the work of America’s oil and natural gas companies.

Where is this federal lands job creation happening? Interior points to Texas, Wyoming, Louisiana, New Mexico, California, and Florida. No kidding! After all, almost all of these are HUGE oil and natural gas producing states. According to IPAA’s Oil & Gas Producing Industry in Your State (OPI), Texas, Wyoming, Louisiana, New Mexico, and California (all except Florida) rank in the top 10 producing states for either oil production, natural gas production – or both. So it’s no wonder that these states have sourced “most of these jobs.”

Western Energy Alliance, which represents Western independent oil and natural gas companies, crunched the numbers. They found that 62% of the total economic value and 56% of the total jobs that the Department of the Interior claims in its report actually comes from America’s oil and natural gas industry. That’s $238.5 billion in GDP and 1.3 million American jobs!

It would be one thing if the Obama administration was touting these jobs while truly creating a national energy policy that encouraged American energy production. But between Interior’s five year offshore plan which restricted offshore access and Interior’s draft rules for a blanket, one-size-fits-all standard for hydraulic fracturing and well construction on federal lands, it seems that this administration falls far short of promoting oil and natural gas development. Instead, Interior is creating an uncertain, burdensome business climate for the very industry whose jobs the department is claiming credit for.

These very jobs and economic growth are exactly what’s at stake in the energy policy battles of 2012. That’s why the oil and natural gas industry has pushed back against Interior’s new regulations. They threaten the future of energy development on federal lands – and the job creation and economic growth that come with it.

Energy Heats Up the 2012 G8 Summit

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At the 2012 Group of Eight (G8) Summit held this week in Camp David, energy held a prominent place on the world leaders’ agenda.

IPAA educated on the role of shale as a “global game changer” in G8: Camp David 2012, the official publication of the G8 Research Group that was distributed to heads of state, CEOs, financial institutions, and government representatives at the summit. IPAA highlighted how natural gas is a low-cost, abundant fuel that is pivotal for countries’ energy portfolios in the decades ahead. IPAA also demonstrated how the industry’s safe, game-changing completion process of hydraulic fracturing is playing an unparalleled role in creating jobs, enhancing energy security, and boosting economies of nations around the world.

“Despite speculation and propaganda, hydraulic fracturing is a proven-safe technology. In fact, out of the 1.2 million wells that have been fractured in the U.S., not a single case of groundwater contamination has ever been proven as a result of hydraulic fracturing. A study from the Energy Institute at the University of Texas at Austin reaffirmed this fact in February 2012. The study found “no evidence” of hydraulic fracturing ever leading to groundwater contamination.

“Like any other industrial process, industry is aware of the need for continual advancement to ensure the safety of the environment in communities where development is taking place.  From preliminary testing of the area via seismic data to restoration of the completed well site, industry places safety and the environment as a top priority in development.  Industry has stepped up to voluntary disclose chemicals used in over 11,410 wells across the United States. Safety, efficiency, water conservation, wellbore integrity, and environmental protection are key chapters in development.”

The feature also highlighted shale plays around the world – from European Union to China to South America. The proven benefits of development to the United States’ economy and job creation were also demonstrated.

IPAA concluded by discussing how natural gas from shale is an area which leaders from the different countries can and should work together to promote.

“The development of natural gas from shale presents an opportunity for global leaders to work together and provide our growing world with the energy it needs to expand, advance, and progress. From the Lower Saxony in Germany, to the Eagle Ford in Texas, across to the Cooper Basin in Australia, shale plays around the globe are redefining our world’s energy potential and providing countless economic benefits for local, federal, and global economies.”

This was a great opportunity for IPAA to advocate the amazing benefits of developing oil and natural gas from shale to an international audience. Please click here to see the full feature, which was circulated to more than 12,000 international policymakers. At the summit, the leaders released a 40-point declaration, in which the G8 leaders voiced their commitment to sharing best practices for energy production, particularly related to the technologies of hydraulic fracturing and deep water drilling.

Another energy issue brought up did not have a consensus as common-sense – tapping the strategic petroleum reserve. Last year, amid rising gasoline prices, President Obama used the Libyan crisis to justify tapping the Strategic Petroleum Reserve. IPAA responded that the administration’s action was “not a solution, yet another decision that will only prolong the nation’s vulnerability to swings in oil prices. Drilling for more oil at home will not only increase American oil supply, but will also create jobs and increase government revenues through taxes and royalties. Releasing oil from our strategic reserves cannot accomplish these other important goals.”

Now, with President Obama’s likely support, that option is on the table once again – this time in an election year for the president. In response to the volatility of world oil markets, G8 leaders agreed to “stand ready to call upon the International Energy Agency” to release oil from the Strategic Petroleum Reserve. Again, IPAA has long argued that tapping the Strategic Petroleum Reserve is a political play rather than a practical response to world supply disruptions. Instead of this knee-jerk reaction, the U.S. should spearhead a national energy policy that encourages production of American oil reserves by increasing access to federal lands and eliminating regulations that serve only as unnecessary red-tape.

For more information on energy at the G8 summit, read the White House’s fact sheet on G-8 Action on Energy and Climate Change.