Mar 2, 2016 Opinion: Sapping the strength of energy producers (The Washington Times)
“As this industry faces new uncertainties, it is critical that our leaders in Washington, both on Capitol Hill and in the White House, continue to advocate for a sound, secure energy policy that supports the continued operation of these businesses that are the backbone of the American economy.”
Sapping the strength of energy producers
Obama readies new regulations for the oil and gas industry
By Barry Russell, Independent Petroleum Association of America President
Washington Times Op-Ed
March 2, 2016
In the last five years, the success of America’s oil and natural gas industry has taken our nation from energy dependence and scarcity to security and abundance.
The United States has achieved status as a global energy leader and American families are enjoying the benefits of low energy costs. But despite this dramatic production, America’s independent oil and natural gas producers are confronted with significant new challenges in the form of unbalanced global commodity markets and excessive new regulatory roadblocks from the federal government. Further, President Obama’s budget proposal places our nation, once again, at a clear disadvantage against unfriendly nations and oil cartels.
Instead, America’s policies should promote our abundant energy riches. Strengthening, not degrading, American oil and natural gas production is a much better option for our country.
Unlike other energy-producing countries, the United States has an oil and natural gas industry made up of thousands of individual companies that are now facing rigorous competition from other countries such as Iran, Russia and Saudi Arabia that have state-owned energy companies. Many of these nations publicly brag about trying to drive American producers out of the marketplace, even drive them out of business.
Because of this global contest for market share, commodity prices have been in free fall; many U.S. oil producers have seen their corporate value diminish by 30 percent to 90 percent in the past 15 months. Several have been forced to declare bankruptcy. On top of this unprecedented international scenario, here at home, our industry is facing an onslaught of federal regulations that neither improve the environment nor promote our continued energy strength.
Any other country with such rich energy resources would ensure the health of this strategic asset base. But in this country, the president’s budget attacks the U.S. oil and natural gas industry and every American energy consumer, threatening the nation’s rank as one of the world’s energy leaders.
A strong American oil and natural gas industry secures our place as a world leader in energy production. It provides good-paying American jobs and lower transportation costs. Royalties and revenues from American oil and natural gas provide much-needed funds to local, state and federal treasuries. The use of American natural gas for electric generation has also resulted in cleaner air, supplying the reductions in America’s greenhouse gas emissions that are so important to Mr. Obama’s climate agenda.
However, in its final budget request, the Obama administration continues to propose repealing critical provisions in the tax code, like the Intangible Drilling Costs (IDC) deduction, which would prevent the industry from maximizing capital investments and maintaining production where feasible. These IDCs are just like tax deductions available to many American industries — to farmers for fertilizer and to technology companies for research and development — that help American businesses grow and thrive. Yet at a time when the industry is little able to take on new costs, the administration’s budget has continued its call to repeal this historical provision.
Dozens of federal agencies are considering new regulations — from duplicative restrictions on horizontal drilling to unnecessary methane reductions. Our industry is currently facing new regulatory proposals from federal agencies that include the Bureau of Land Management, Environmental Protection Agency, U.S. Fish and Wildlife Service, Bureau of Safety and Environmental Enforcement, Bureau of Ocean Energy Management, Occupational Safety and Health Administration, and the Pipeline and Hazardous Materials Safety Administration, to name a few. These new burdensome regulations will stifle energy production and create economic uncertainty for companies currently trying to keep the lights on and to keep Americans employed.
Despite these roadblocks to success, America’s independent oil and natural gas producers — businesses with an average of fewer than 20 employees that develop about 90 percent of America’s oil and natural gas wells — continue to provide the energy we all rely upon every day. The historic output of oil and natural gas from American shale plays has not only catapulted the United States to be a global leader in energy production, but has also enabled consumers to save hundreds of dollars in home heating and energy costs. In fact, thanks in large part to shale development over the last decade, U.S. net oil imports have decreased from roughly 60 percent of products supplied in 2005 to an estimated 27 percent in 2014 — less than half of its peak — all while supporting jobs for hardworking men and women across the country.
Yet to maintain strong U.S. production capacity in the face of these challenging times, it is crucial that our industry is not forced to bear costly, duplicative regulations and tax code revisions that further inhibit the ability of companies to operate and survive. As this industry faces new uncertainties, it is critical that our leaders in Washington, both on Capitol Hill and in the White House, continue to advocate for a sound, secure energy policy that supports the continued operation of these businesses that are the backbone of the American economy. At the very least, policymakers should do no further harm to an American-made industry currently under duress.
Barry Russell is the President and CEO of the Independent Petroleum Association of America, the leading, national upstream trade association representing oil and natural gas producers that drill 90 percent of the nation’s oil and natural gas wells. These companies account for 54 percent of America’s oil production, 85 percent of its natural gas production, and support more than 2.1 million American jobs. Learn more about IPAA by visiting www.ipaa.org and following @IPAAaccess on Twitter.