INSIGHT: Debate over Obama energy policy heats up

18 December 2009 16:27  [Source: ICIS news]

By Joe Kamalick

Debate over Obama energy policies begins to flareWASHINGTON (ICIS news)--The dispute between the Obama administration and the US energy sector over development of the nation’s vast domestic oil and gas resources is growing increasingly heated, and it may play a central role in next year’s national elections.

Recently it has gotten to the point that Interior Department Secretary Ken Salazar has vilified energy industry trade associations as liars and deceivers.

Energy producers and energy-dependent industries in turn charge that the administration is two-faced, making public statements in support of increased energy development while pursuing policies to limit and even rollback output.

In a recent teleconference with reporters, Salazar declared that the Obama administration is pursuing a comprehensive and robust energy policy that includes for the first time broad plans for renewable power developments onshore and offshore.

He also said that under President Barack Obama’s leadership, his department’s management of leasing for oil and gas resources on federal lands has restored balance to development of those assets, accusing the previous Bush administration of being reckless and neglectful of proper environmental procedures.

Salazar emphasised that despite the administration’s broader interest in developing solar, wind and geothermal power generation on federal lands and offshore, his department also is aggressively pursuing development of traditional oil and gas resources.

“But you wouldn’t know this from the untruths being issued by oil and gas industry representatives,” Salazar said.

“There has been a great deal of poison and deception from some of these industry trade groups,” he said, although he declined to identify any specific energy sector associations or particular instances of untruths.

Many in the energy sector and among energy-dependent industries such as petrochemicals have been critical of the Obama Interior Department’s policies, and a bipartisan group of members of Congress have joined industry in accusing the administration of go-slow tactics in energy development.

On the contrary, said Salazar, in the last year his department has held 32 onshore lease sales for federal lands’ oil and gas resources, “offering 2,346 parcels covering 2.7m acres in the West and sold 1,212 of those, generating more than $126m [€87m] in revenue for American taxpayers”.

Salazar noted that with the addition of offshore leased sales, his department has offered more than 55m acres of federal lands for oil and gas development, generating more than $931m in lease revenues.

But the energy industry charges that Salazar and the White House are engaging in a bit of slight-of-hand, all smoke and mirrors to give the impression of an aggressive energy development policy with little real substance.

The Institute for Energy Research (IER), a non-profit think-tank allied with energy producers, challenged Salazar’s claim to have an aggressive energy development policy and his department’s leasing record.

“Under the first year of the Obama administration’s ‘robust’ oil and gas leasing program, fewer onshore and offshore acres have been leased than in any previous year on record,” the institute said in a response to Salazar’s statements to news media.

“As a consequence, the Interior Department collected less than one-tenth the revenue from oil and gas lease sales this year than it did in 2008,” the last year of the Bush administration.

IER argues that Salazar’s touted figures for total acreage offered for lease and revenues realised are misleading.

“While these numbers may sound impressive,” the institute said, citing Salazar’s reference to 55m acres put for lease and $931m in revenues, “but a closer look at the data and US Treasury receipts reveals a different story.”

“Last year, oil and gas lease sales generated more than $10bn in revenues - which is more than ten times the amount of revenue generated from lease sales under the Obama administration in 2009,” the institute said.

Senator Lisa Murkowski, a Republican representing energy-rich Alaska, is among 60 or more members of Congress who have been voicing increasing criticism of what they term a go-slow energy policy pattern by the administration.

She cited long delays by the Environmental Protection Agency (EPA) for granting environmental permits for energy industry seismic vessels waiting to explore for oil and gas reserves in US portions of the Arctic Circle.

Murkowski also charged that Salazar’s long-delayed reconsideration of the five-year offshore leasing plan issued by the outgoing Bush administration is in effect maintaining a ban on energy development on the outer continental shelf (OCS) that was lifted by Congress a year ago.

She said plans by the Obama administration to impose development deferrals, lease area removals and off-limits buffer zones around offshore areas will put still more areas of the OCS regions beyond the reach of energy companies.

“These and other actions are undermining the regulatory certainty that energy companies need to invest in the US,” Murkowski said.

She warned that “the administration’s overly restrictive policies are handicapping US industry and the nation’s energy security”.

“The delay has gone on long enough,” she said in a letter to Salazar.

This increasingly acrimonious back-and-forth between the Obama administration on one hand and energy firms and industrial energy consumers on the other may be a prelude to a wider and more heated debate beginning in the middle of 2010.

The US will hold its mid-term congressional elections in November next year in which every seat in the House of Representatives and one-third of Senate seats are in contention.

The election campaign will begin to heat up in earnest by the second quarter next year, and that is about the time when economists expect US companies to begin to hire workers again as the economic recovery advances.

Higher employment will in turn drive greater demand for and consumption of gasoline. At the consumer level, most gasoline consumption is related to commuter travel by workers.

It was that sort of increasing commuter gasoline use that was cited for last month’s 14% jump in US gasoline prices at the wholesale level. And, as the economy continues to improve over the next six months and more, and more workers return to the workforce, gasoline prices are almost certain to climb still higher.

It was widespread popular outrage over high fuel costs that helped bring an end late last year to what until then had been a 27-year-long congressional ban on exploration and development in 85% of US offshore areas.

In the face of voter anger over high gasoline prices and increased oil and fuel imports, congressional backers of the long-standing offshore ban had to abandon it.

A similar uprising of voter ire over energy costs could well emerge in midyear and put Obama administration energy practices on the spot.

A recent survey by the respected Rasmussen Reports pollsters shows that nearly 70% of Americans favour offshore energy development. That percentage and voter anger are likely to rise as gasoline prices once again begin to climb in the new year.

($1 = €0.69)

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By: Joe Kamalick
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