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Producers: New Regs Could Be 'Disastrous' for Domestic Energy, Economy

Proposed federal environmental regulations would have "disastrous economic consequences" and increase U.S. dependence on foreign sources of oil, according to research backed by a coalition of U.S. oil and natural gas producers. One study noted that some proposed regulations -- especially related to shale gas development -- could have dramatic negative effects on the country.

Referred to as Project BRIEF -- Bringing Real Information on Energy Forward -- the research initiative is composed of studies on the history and progress of effective state regulation of energy development, the proper role of the federal government in regulating development, and the economic consequences associated with changes to existing regulatory frameworks. The group of oil and gas producers, which includes the Independent Petroleum Association of America (IPAA), is called the Energy In Depth Coalition.

The coalition said proposed environmental regulations circulating in Congress could force the closure of more than half of America's oil wells and a third of its gas wells, cost the federal government $4 billion in revenue, while state treasuries would lose $785 million. The regulations would also slash domestic oil production by 183,000 b/d and domestic gas production by 245 Bcf/year.

"The scope of the Project BRIEF research project is unprecedented, and its findings are stark," said Lee Fuller of IPAA, which represents the 5,000 smaller, independent producers that drill 90% of the nation's wells. "Implementing new federal regulations that threaten domestic energy production and increase costs -- without creating any additional environmental benefits -- is the wrong policy course for the country, and could cost thousands of hard-working Americans their jobs."

According to the coalition, 1.2 million Americans are directly employed by domestic oil and natural gas producers. In 2007 the industry invested $226 billion in domestic exploration and production, "driving countless state and local economies." The group also found that the oil and gas industry paid public and private landowners $30 billion in royalties.

Some of the producers' concerns are focused on President Obama's proposed cap-and-trade plan for controlling greenhouse gas emissions, which is expected to push up demand for natural gas over the next decade, especially by power generators. However, a large part of the demand isn't likely to be met by domestic gas due to the emissions allowance costs that will be imposed under the plan. Late last month, two U.S. producer groups said Obama's performance on oil and gas issues during his first 100 days in office earned a "D" grade (see NGI, May 4). The common complaint is that Obama said he supports oil and gas, but his actions don't support his statement. The producers are opposed to Obama's proposal to roll back more than $30 billion in tax credits for producers to pay for renewable and alternative energy sources (see NGI, March 2).

The coalition claims that saddling producers with "new, unnecessary and ineffective environmental regulations" could put them out of business, destroy jobs and increase U.S. dependence on foreign sources of energy. The group added that this is especially true if lawmakers move forward with plans to target hydraulic fracturing, a commonly used production technology that renders possible the efficient extraction of energy resources from shale rock.

"Energy is the lifeblood of our economy and the fuel that sustains and creates good jobs here at home," Fuller said. "The men and women who work for America's roughly 5,000 small and independent oil and natural gas producers are using 21st century technology to develop supplies safely, efficiently and effectively -- as their long record of achievement illustrates."

The coalition's website, www.energyindepth.org, features a virtual well operation and interactive features aimed at giving users an up-close view of American oil and natural gas production, as well as a copy of the report.

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