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Capitol Hill Views Obama Energy Plan with Skeptical Eye

Capitol Hill reaction to President Obama's blueprint for securing the nation's future energy supplies has run the gamut from supportive to skeptical about whether his targeted goal to reduce foreign imports can be met. Republicans said there is a wide disconnect between what Obama said Wednesday and his anti-drilling policies.

The energy blueprint, which was laid out in the president's speech at Georgetown University Wednesday, sets an aggressive goal for the country: that it will reduce its dependency on oil imports by one-third in a little more than a decade (see Daily GPI, March 31).

"The president's plan to reduce America's reliance on imported oil is ambitious, but achievable. It's going to take a lot of concerted effort by Congress and our committee, but the course of action the president set for the country...makes a lot of sense," said Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Committee.

Sen. Mary Landrieu (D-LA), a champion of the oil and gas industry, said she backed Obama's goal to reduce imports, but she added that it wouldn't happen unless the administration stepped up permitting in the Gulf of Mexico (GOM).

"The recent deepwater permits issued by the Interior Department are encouraging, but if the president is serious about reducing our dependence on foreign oil, then we need to rapidly accelerate the permitting process in the Gulf to increase production," she said. The president "can do something right now to advance his goals, and I hope he takes this opportunity to direct [Interior Secretary Ken Salazar] to approve pending drilling applications and [Energy Secretary Steven Chu] to approve pending DOE [Department of Energy] loan applications."

Rep. Doc Hastings (R-WA), chairman of the House Natural Resources Committee, introduced legislation earlier this week that also seeks to cut foreign oil imports by one-third by requiring the Obama administration to conduct lease sales in offshore areas that have abundant oil and gas resources (see Daily GPI, March 30a).

"While the president and I share the same goal, we have very different ways of getting there. The president wants to decrease imports by telling Americans to use less and to pay more. Republicans want to decrease imports by increasing U.S. production," Hastings said.

Energy analysts and experts weren't impressed by the president's speech. "History says presidents [who] make broad pronouncements about reducing oil imports via earthshaking energy policy changes are usually 'all hat and no cattle.' As with prior presidents' plans, we are skeptical about this one. Can this administration really embrace natural gas...because it means loving fracturing?" asked Tudor Pickering Holt & Co. Securities Inc. analysts.

"While we don't think the president has broken any new ground here from a policy perspective, he certainly is looking to show his concerns about rising energy prices," said Frank Maisano, energy specialist for Washington, DC, law firm Bracewell & Giuliani.

Obama's singling out of natural gas as a critical energy source was important, according to researchers at Barclays Capital. "When heard through a natural gas filter, President Obama's 'Blueprint for a Secure Energy Future' was notable. The status upgrade of natural gas to the center of the discussion is important. Gas should be well positioned if Congress decides to pursue energy legislation. If resurgent gasoline prices catalyze a public push for Congress to react, natural gas should have a front row seat at the debate."

Echoing the conclusions reached in an Interior report released Tuesday, Obama accused the oil and gas industry of sitting on tens of millions of acres of leases (see Daily GPI, March 30b). "Rather than pursue thoughtful, visionary solutions, the administration continues the stale blame game...chiding the very companies who have been victimized by the de facto drilling moratorium" in the GOM, said the House Energy and Commerce Committee, which is chaired by Rep. Fred Upton (R-MI).

"We are confronted with a permitting problem, not a leasing problem," as the Interior report suggests, the House panel said.

Obama Wednesday said his administration -- namely the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) -- was working to expedite permitting in the Gulf, but industry said the record did not reflect this. "The president failed to acknowledge the Gulf of Mexico permitting slowdown over which the BOEM has presided during the past year," said Jim Noe, executive director of the Shallow Water Energy Security Coalition.

"Data from the administration's own Energy Information Agency [EIA] reveals substantial underuse of the Gulf's true resource potential. According to the EIA, energy output is slated to decrease by 250,000 b/d per 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 at the end of two years' production of the Gulf will be approximately one-third of 2010 amounts," he said.

Testifying before the House Natural Resources Committee this week, BOEM Director Michael R. Bromwich said his agency was currently issuing six shallow-water permits monthly, close to an "historical average" of eight per month. "While it is true that roughly eight shallow-water permits were issued per month in [2009], this was a period of slow demand driven by low commodity prices and a severe economic recession. A more accurate 'historical average' would consider a broader time frame. Between 2000 and 2009, for example, 30 or more shallow-water permits were issued per month," Noe said.

"The president usually gives a great speech. The problem is that his actions often don't match his words," said Sen. David Vitter (R-LA). "If [he] is serious about domestic energy production," he said, asserting that Obama should support a bill that he and Rep. Rob Bishop (R-UT) introduced Thursday.

The legislation -- the Domestic Jobs, Domestic Energy and Deficit Reductions Act of 2011, or 3-D for short -- calls for opening closed areas of the Outer Continental Shelf to mineral leasing; opening the Arctic National Wildlife Refuge to oil and gas production; Interior to begin leasing of oil shale if a commercial interest is shown; preventing the Environmental Protection Agency from regulating carbon dioxide emissions under the Clean Air Act; streamlining the National Environmental Policy Act (NEPA) review process.

The NEPA streamlining could smooth the way for some of the 351 energy projects nationwide -- both conventional and alternative -- that have been stopped in their tracks due to a sluggish permitting process and environmental opponents, according to a recent study by the U.S. Chamber of Commerce. The chamber said this is costing the U.S. economy $1.1 trillion in gross domestic product over a seven-year period and 1.9 million jobs annually (see Daily GPI, March 11).

Another major piece of energy legislation, which has garnered bipartisan support, is expected to be introduced next Wednesday in the House. The measure -- the New Alternative Transportation to Give Americans Solutions Act (NAT GAS Act) -- calls for requiring 10% of new vehicles sold in the United States to be powered by natural gas by Dec. 31, 2018 and mandates that every retail automotive fueling station have at least one pump dispensing natural gas by Jan. 1, 2018 (see Daily GPI, March 31).

Rep. John Sullivan (R-OK), vice chairman of the House Energy and Power Subcommittee and a member of the House Natural Gas Caucus, is the lead sponsor of the legislation. Co-sponsors are Reps. Dan Boren (D-OK), John Larson (D-CT) and Kevin Brady (R-TX).

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