Former U.S. Rep. Bill Brewster (D-OK) said he believes the Republican-controlled Congress set to take office early next year will level much more scrutiny on government agencies' plans to regulate the oil and natural gas industry, but meaningful tax reform is still several years away.
Brewster added that it is unclear if Barack Obama will spend the last two years of his presidency building a legacy of working with the GOP, or forego getting things done and court environmentalists.
During a keynote presentation at the Natural Gas Roundtable in Washington, DC, on Tuesday, Brewster pointed out that one year ago the price of oil was $90-100/bbl, but there was fear that oil prices could climb due to instability in the Middle East. Meanwhile, natural gas prices were about $4 -- with the prospect of increasing to $5 by winter's end -- and there was "tremendous optimism" for passing a Keystone XL Pipeline bill.
Today, oil is in the mid-$70s and gas is still around $4, but "things haven't gotten better in the Middle East," he said. "Five years ago we were importing much more fuel than we are today. We were much more dependent on what happened in the Middle East."
What's changed is that producers have been targeting domestic oil and, consequently, bringing more associated gas to market. "The abundance of gas and the proliferation of the amount of gas, because of the shale wells, is going to keep [gas prices] low for quite some time," Brewster said. "But it gives the American people the greatest opportunity ever to really move more into gas for all kinds of manufacturing."
Brewster said some production figures -- like 1 million b/d in both the Bakken and Eagle Ford shales -- "were unheard of 10-15 years ago. I'm convinced that there are shale plays everywhere. There are so many that I'm convinced we are sitting on an energy supply that will last hundreds of years because technology will allow us to get it.
"The technology is what keeps everything going. It's not new discoveries -- it's new methods of recovery."
But he predicted that "the new day in production" will change the nation's political landscape.
"Everything changes through life, but today we've got so much domestic production that will allow things to change a lot on the politics front as well," Brewster said. "I believe that we will see next year, and in the coming years, some real changes in thought on utilization of our domestic resources and also on how we treat the Middle East.
"I think we're also going to see that [U.S. Environmental Protection Agency] EPA [regulations], and all government [regulations], get much closer scrutiny than they have the last several years. We certainly hope so, because some of the agencies have run roughshod over the energy industry -- and everything else for that matter. I think that the new Congress will be much more diligent in looking at what EPA and other agencies are bringing out."
The EPA has proposed new requirements for the oil and gas industry to monitor methane emissions, and for the power generation sector to reduce carbon emissions (see Daily GPI, Nov. 17; June 2). Meanwhile, the U.S. Fish and Wildlife Service has raised the industry's ire with the federal Endangered Species Act, the Interior Department's Bureau of Ocean Energy Management has been slow to open more offshore areas to drilling, and the Department of Energy still has restrictions on crude oil, condensate and liquefied natural gas (LNG) exports (see Daily GPI, Oct. 1; Aug. 14; Jan. 7).
Brewster said it's been 20-25 years since the nation last enacted a major tax reform bill, and the process took five years to complete.
"It's going to [take another five years] now," he said. "There will be a tremendous amount of work, hearings, everything you can imagine on tax reform this next session. But I really don't think you'll see one signed into law until after the next presidential election, and maybe even a couple years after.
"There's not a possibility of putting together a major tax reform [with the lame duck Congress]. My prediction is you're going to see the extenders done. There's disagreement in the House and the Senate on what to do -- the House wants to eliminate a bunch of the provisions and make the others permanent, [while] the Senate wants to extend them all for a two-year time frame.
"It's going to be a very interesting to see what happens the next few weeks on the tax extenders. They have to pass a CR [continuing resolution]; the government has to continue operating. The only things they truly have to do are the CR and the tax extenders. I think there will be a lot of talk about other stuff, and maybe a few other minor things happen, but I would be very surprised if you see much more than that. Next year you're going to see the tax reform issue eat up a lot of time."
Brewster also predicted that oil will be about $60/bbl "in the next few months, and that majors -- who exited the U.S. about 10 years ago and started returning about five years later -- "are going to be buying out a lot of the smaller companies and adding to their reserves. You're going to see them taking an opportunity to buy an awful lot of assets that are going to be out there."
During a question and answer session, Brewster compared Obama's current political situation to a similar one President Bill Clinton faced in 1994, after Republicans took control of Congress in midterm elections.
"Clinton decided he wanted his legacy to be positive accomplishments in government for the country," Brewster said. "Newt [Gingrich] and his crowd worked with Clinton to actually make a lot of positive things happen. We went through some awful good times then. The budget got balanced over a period of years. It was [through] working together.
"The question is going to be what President Obama decides he wants his [legacy] to be. If he wants to stay in the strictly environmental crowd arena and move further left with [Sen.] Elizabeth Warren and her group, it will be one legacy. If he chooses on the other hand to say 'OK, I'm going to go work with [Sen. Mitch] McConnell and [Rep. John] Boehner and see if we can get some middle ground stuff to work out,' he'll have quite a different legacy.
"It's going to be a decision that the White House is going to make on whether they want to work with the Republicans to make things happen. He's been a divider so far. I really thought that when he was first elected that there was a possibility that he would be a gatherer rather than a divider. I don't know which way it's going to go -- no one does until they make a decision."