INSIGHT: US industries doubt Obama’s conversion to natgas

26 January 2012 16:22  [Source: ICIS news]

By Joe Kamalick

Obama calls for more US natgas productionWASHINGTON (ICIS)--US energy and refining officials have joined petrochemicals producers and downstream chemical makers in expressing some considerable scepticism about President Barack Obama’s election-year hallelujahs for hydrocarbons.

Essentially, industry said that it is all well and good for the president to declare his sudden conversion to faith in natural gas and other carbon-based energy resources and related manufacturing.

But where, they ask, are the good works that should demonstrate that belief?

It’s all show, according to some. All hat and no cattle, as they say in Texas.

In his annual state of the union speech to Congress on Tuesday, Obama declared that the US has natural gas resources “that can last America nearly 100 years”, and he called for full-bore production as part of an initiative to restore the US manufacturing sector.

“And my administration will take every possible action to safely develop this energy,” Obama said, referring in particular to shale gas.

But Charlie Drevna, president of the American Fuel & Petrochemical Manufacturers (AFPM), charged that Obama’s call for more development of domestic natural gas resources does not absolve the administration of past sins, an administration that he says has “embraced an anti-fossil fuels policy”.

Drevna said that while on one hand Obama pledged to accelerate natural gas development, with the other hand he characterises the energy industry as greedy, even evil, and well worthy of tax policy punishment.

“We saw an example of this demonisation of fossil fuels in the state of the union address,” Drevna said, referring to Obama’s annual speech to Congress, delivered late on Tuesday.

“President Obama called for an end to what he called ‘subsidies’ to oil companies, while at the same time saying America needs to support American manufacturers,” Drevna said.

“There are no ‘oil company subsidies’, just as there is no cellulosic ethanol,” he said, charging that the Obama administration’s anti-fossil fuel policies are “against the best interests of American consumers, American workers and America’s national security.”

“President Obama is correct that creating new manufacturing jobs and producing more domestic energy is critically important,” Drevna said, “but we wish he would work with us constructively to enact regulatory and tax policies to preserve existing manufacturing jobs held by Americans today in our industries and others.”

He urged the administration to eliminate “harmful and counterproductive federal overregulation, including seemingly endless permit delays that block America’s access to domestic oil and natural gas and make it difficult for fuel and petrochemical manufacturing plants to operate”.

He said that the Obama administration’s decision last week to reject the multi-billion dollar Keystone XL pipeline project is only the most “recent example of the administration’s anti-fossil fuels policy”.

“The president has made no secret of the goal of his anti-fossil fuels policy,” said Drevna.

“He wants to raise the cost of gasoline and diesel fuel for American consumers and businesses so that so-called ‘alternative’ energy sources are more competitive,” he said, adding: “Never mind that these so-called alternates are expensive, impractical and in some cases don’t even exist.”

In anticipation of the state of the union speech – which the White House had said in advance would include new Obama support for natural gas – Jack Gerard, president of the American Petroleum Institute (API), was sceptical.

Gerard said his industry welcomes greater emphasis from the president on domestic energy development, but he was critical of the Obama administration’s energy policies of the last three years.

“We hope the president will announce changes in policy to support growth in our domestic energy development by opening more offshore and onshore federal lands to production and by putting some restraints on duplicative and unnecessary regulations,” Gerard said.

He noted that the White House has cited increased US oil and natural gas production as evidence of positive energy policies

But he said that those recent domestic energy output gains are due to increased production on private and state-controlled territories while development on federal onshore and offshore lands has declined.

“The administration’s current polices have reduced offshore energy development and are slowing development on federal lands in the west,” he said.

“Under current policy, we will see a 35% drop in Gulf of Mexico offshore development by 2013, according to Energy Department statistics, and there has been a 44% decline in energy permitting on federal lands in the west,” he said, citing production and permitting in 2009-2010 compared with 2007-2008.

Gerard also noted that 85% of US offshore areas remain closed to energy development.

Like AFPM’s Drevna, Gerard cited the Obama decision to deny the permit for construction of the Keystone XL pipeline project that would bring Canadian crude oil to US refineries.

“We are going in the wrong direction,” he said.

“If the administration is serious about embracing domestic energy development, one thing the administration could do is to stop trying to inhibit fracking in natural gas development,” Gerard said.

Hydraulic fracturing, known as “fracking”, involves injecting large volumes of water under high pressure into shale rock formations to free-up otherwise unrecoverable natural gas resources. Environmentalists and others charge that chemical additives used in fracking contaminate drinking water supplies.

“Today there are eight federal departments or agencies in this administration that are reviewing fracking with the intent to regulate it,” he said. 

An API spokesman said the eight entities are the Environmental Protection Agency (EPA), Department of Energy (DOE), Department of the Interior (DOI), the Agriculture Department (USDA), Department of Defense (DOD), Department of Transportation (DOT), the Department of Health and Human Services (HHS) and the Securities and Exchange Commission (SEC).

“I don’t know how you can talk about improving production of domestic energy when you have eight agencies looking to restrict development,” Gerard said.

Despite that, Gerard said: “I think it is a positive indication that the president feels the need to address energy” in his state of the union address. 

“We hope that the president will make a course correction in his energy policy,” Gerard said.

The Society of Chemical Manufacturers and Affiliates (SOCMA) also welcomed Obama’s call for more energy development and support for manufacturing, although the specialty chemicals group noted that the state of the union address “sounded more like a campaign speech” than a realistic legislative agenda.

In addition, said SOCMA, the Obama administration has failed to deliver on earlier promises to spur US manufacturing growth.

On taxes, SOCMA noted that “Last year, Obama felt strongly about making the research and development tax credit permanent”.

“However, the tax credit has not been made permanent, nor has it been renewed, leaving many companies in limbo,” said the group, leaving the US ranked 17th globally in R&D tax credits, behind even China and Canada.

SOCMA also noted that last year Obama ordered federal agencies to review, cut and otherwise streamline regulations to reduce the burden on manufacturing. But “little to nothing has been done”, the group said.

“Meanwhile, the chemicals industry is staring down numerous regulations threatening its ability to compete,” SOCMA said, citing new federal emissions rules on industrial boilers, power generation and greenhouse gases, along with weakening protections for confidential business information.

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

By: Joe Kamalick
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