INSIGHT: Obama’s energy blueprint blasted with red ink

31 March 2011 17:28  [Source: ICIS news]

By Joe Kamalick

Energy sector blasts Obama energy blueprint as phonyWASHINGTON (ICIS)--President Barack Obama this week announced steps to boost US alternative energy and increase domestic oil production to reduce foreign imports, but the energy sector and congressional leaders said the president was putting old wine in new bottles as he stymies US energy production.

With US retail gasoline prices edging toward $4/gal and likely to push past that consumer pain-point as the nation begins its peak summer driving season, Obama appeared to be making an effort to forestall further price increases at the pump - or to at least seem to be doing something.

He announced a new White House energy policy, titled a “Blueprint for a Secure Energy Future”, that he said would reduce US imports of foreign-sourced oil by one-third over the next ten years.

If it worked, the Obama plan would reduce current US daily crude imports from 11m bbl/day to around 7.4m bbl/day by 2021, a cutback of 3.6m

He said his plan would achieve reductions with two main tactics:  finding and producing more domestic US oil resources, and devoting more investments to alternative energy production and energy efficiencies.

The president’s energy plan was promptly greeted by howls of outrage by the nation’s energy producers, who charged that Obama has done more than any other president to reduce US oil and gas production and is on a course to cut output still further.

To reduce reliance on imports, Obama said, “my administration is encouraging offshore oil exploration and production - as long as it’s safe and responsible”.  And, he said, “we’re working to expedite new drilling permits” for exploration and development companies that meet the administration’s new offshore drilling environmental and safety requirements.

But Jim Noe, executive director of the Shallow Water Energy Security Coalition, was quick to charge that “the president failed to acknowledge the Gulf of Mexico permitting slow-down over which the BOEM [Bureau of Ocean Energy Management] has presided during the past year”.

The bureau is the arm of the US Department of the Interior (DOI) responsible for granting offshore oil and gas leases and drilling permits.

Noe cited recent congressional testimony by BOEM director Michael Bromwich claiming that his office was now issuing about six shallow-water drilling permits per month, a pace that Bromwich said was close the historical average of eight permits per month.

“While it is true that roughly eight shallow-water permits were issued per month in 2009,” Noe said, “that was a period of slow demand driven by low commodity prices and the severe economic recession”.

If the BOEM permitting pace was to be accurately compared to historical trends, Noe said, the administration’s rate of six permits per month pales next to the 30 or more permits that were issued monthly in the 2000-2009 period of more normal economic times.

Noe also pointed out that under the administration’s slow-walking drilling authorisation process, US offshore oil production has dropped significantly and was likely to fall still further.

He cited data from the Department of Energy’s (DOE) data and analysis arm, the Energy Information Administration (EIA), to the effect that “US energy output is slated to decrease by 250,000 bbl/year under the Administration’s current approach to domestic energy production”.

“In fact, the EIA’s own forecast shows Gulf of Mexico production declining 14% in each of 2011 and 2012, so that at the end of two years production of the Gulf will be approximately one-third of 2010 amounts,” he said.

Obama said his plan to cut imports and boost domestic production of oil would require energy firms to develop the leases they have more speedily, that his administration would be “pushing the oil industry to take advantage of the opportunities they already have”.

“Right now,” the president said, “the industry holds tens of millions of acres of leases where it’s not producing a drop - sitting on supplies of American energy just waiting to be tapped.”

Obama was referring to an Interior Department report issued on Tuesday that accused the energy industry of “sitting on” leases, leaving promising oil and gas reserves untapped and “inactive”.

Not so, countered the American Petroleum Institute (API) upstream director Erik Milito.

“The [department] report completely whitewashes the fact that in many cases, the reason these leases have no exploration plans is that BOEM is sitting on those plans,” Milito said, charging that the administration’s go-slow permitting process and multiple demands for environmental impact assessments have effectively frozen exploration and production activities.

“This is like leasing an apartment from the government for $20m, and then the government refuses to give you the keys to the apartment - and then complains that you’re not occupying the premises,” he said.

Congressman Fred Upton (Republican-Michigan), chairman of the House Energy and Commerce Committee, also took umbrage with Obama’s energy blueprint, charging that the president and his administration have pursued every possible option to block US development of its considerable oil and gas resources.

“For example, the Environmental Protection Agency’s [EPA] global-warming regulations include a new proposal that could make it more expensive to refine oil into gasoline,” he said.

“Even before Deepwater Horizon,” Upton said, referring to the March 2010 BP offshore oil rig explosion and subsequent massive oil leak, “the administration was closing the door on new onshore and offshore energy leases”.

The administration’s delaying tactics, Upton said, “were not just on new production; companies with existing leases are being hit by unprecedented permitting delays and other regulatory roadblocks”.

“The administration recently denied the go-ahead permitting that would help produce billions of barrels of oil in the Beaufort and Chukchi Seas in Alaska”, Upton said, adding that the White House also has been delaying permitting work on the Keystone XL pipeline system that, when completed, would bring more than a million barrels of oil per day into the US from Canada.

Upton also challenged the president’s goal of investing taxpayer funds in additional work toward non-carbon energy development, such as wind and solar power, advanced biofuel research and to incentivise the production and consumer purchase of electric vehicles.

He charged that the president repeatedly extols “clean” energy, “but he didn’t once mention ‘affordable’ energy”.

“Wishful thinking,” Upton added, “is not an energy source.”

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index

Related Articles