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President Touts Natural Gas Development, Pushes for End to Subsidies, Growth for Alternatives

President Obama, in the State of the Union (SOTU) speech Tuesday night before Congress, praised natural gas and oil development in the United States, as well as its importance in fueling energy independence and creating jobs, but said $4 billion in fossil fuel subsidies could be better deployed elsewhere.

The administration's "all-of-the-above energy strategy" is working and America today is "closer to energy independence than we've been in decades," he told the audience.

"One of the reasons why is natural gas...If extracted safely, it's the bridge fuel that can power our economy with less of the carbon pollution that causes climate change. Businesses plan to invest almost $100 billion in new factories that use natural gas. 

“I’ll cut red tape to help states get those factories built, and this Congress can help by putting people to work building fueling stations that shift more cars and trucks from foreign oil to American natural gas.”

The administration, he said, would “keep working with the industry to sustain production and job growth while strengthening protection of our air, our water, and our communities. And while we're at it, I’ll use my authority to protect more of our pristine federal lands for future generations."

The president appeared to walk both sides of the divide, praising fossil fuel development while pushing for an end to subsidies that, among other things, have led to new technologies that enabled the sustained growth.

Solar power was a big topic in the speech, and the president would like some of the oil and gas subsidies directed to alternatives. He urged Congress to adopt a "smarter tax policy that stops giving $4 billion a year to fossil fuel industries that don't need it, so that we can invest more in fuels of the future that do."

Still, the president said as gas and oil production has increased, "we've partnered with businesses, builders,and local communities to reduce the energy we consume. When we rescued our automakers, for example, we worked with them to set higher fuel efficiency standards for our cars. In the coming months, I’ll build on that success by setting new standards for our trucks, so we can keep driving down oil imports and what we pay at the pump."

Sustained applause from Democrats came when the president discussed taking more action to alleviate climate change, which he said is real and a growing threat.

"The debate is settled. Climate change is a fact. And when our children's children look us in the eye and ask if we did all we could to leave them a safer, more stable world, with new sources of energy, I want us to be able to say 'yes, we did.'"

With all of the administration actions together, Obama said his energy policy "is creating jobs and leading to a cleaner, safer planet. Over the past eight years, the United States has reduced our total carbon pollution more than any other nation on Earth. But we have to act with more urgency -- because a changing climate is already harming western communities struggling with drought, and coastal cities dealing with floods.

"That’s why I directed my administration to work with states, utilities, and others to set new standards on the amount of carbon pollution our power plants are allowed to dump into the air. The shift to a cleaner energy economy won’t happen overnight, and it will require tough choices along the way."

Following the speech, there was strong reaction from both sides.

America's Natural Gas Alliance (ANGA) CEO Marty Durbin said members welcomed the president's “continued support for the opportunities that natural gas is bringing our nation. It is clear...that the president recognizes the role natural gas is playing in meeting our nation's economic and environmental needs.

"As the president mentioned, there is great promise for natural gas in our transportation sector as trucks, trains and cargo ships transition to this clean and abundant fuel. The 1.4 million well-paying jobs that natural gas development will support in 2015 can help narrow America's income inequality. The abundance of natural gas and its geographical diversity is bringing manufacturers back to U.S. shores, improving the economic well-being of communities across the country and enhancing energy security by using more of this clean, affordable and domestic resource."

However, said Durbin, ANGA members "continue to disagree with the president on how this industry's tax provisions should be treated, but we stand ready to work with the administration, Congress and policymakers around the country to see that our nation capitalizes on the many environmental, economic and national security benefits offered by natural gas."

The president addressed income inequality and the need to create jobs that pay a living wage. American Petroleum Institute CEO Jack Gerard said if the administration wants to achieve that goal, “he can fight income inequality by seizing this once-in-a-lifetime energy moment by allowing more oil and natural gas jobs that pay seven times the minimum wage.

“The American energy renaissance gives us a unique opportunity to revitalize our economy and become a global energy superpower while helping Americans get back to work. The president has the opportunity to seize this moment by approving the Keystone XL pipeline, opening up new areas for responsible energy development and pulling back unnecessary and costly new regulations,” Gerard said.

“These pro-growth energy policies would create millions of stable, good paying jobs, which is the American people’s No. 1 priority. If the president is serious about combating income inequality, we must take full advantage of the opportunities in energy that are before us.”

Gerard said it was unfortunate that the president called for removing tax subsidies on the energy industry.

“Punishing energy companies by raising taxes is not sound energy policy and could lead to less energy, less government revenue, and fewer jobs. The oil and natural gas industry already contributes $85 million a day to the federal government -- a larger contributor of government revenue than any other industry in the United States.”

Marcellus Shale Coalition (MSC) President Dave Spigelmyer, whose members preside over the biggest gas developments in the onshore, said "the clear environmental benefits tied to safe shale development and the expanded use of natural gas cannot be denied."

The president  "also laid out his vision for America's role in the highly interconnected global economy and what we must do to remain competitive. Affordable supplies of oil and natural gas, driven by tightly regulated shale development, have catapulted America from a period of energy scarcity to a new and more prosperous era of energy abundance. And the results are clear: a plunging trade deficit, stronger geopolitical standing, cleaner air and significant consumer savings."

The MSC chief said the jobs created by shale production and the reduction in carbon emissions point to the importance of using domestic resources like gas.

"We appreciate the president's steadfast commitment to the safe development of American natural gas," Spigelmyer said. "It's a false choice to suggest that we can either produce natural gas and create jobs, or protect and enhance our environment. Pennsylvania continues to lead the way in achieving both of these shared goals."

Analysts with Clearview Energy Partners LLC, in their dig down into the speech, said energy and climate issues "took a back seat...In stark contrast to the green 'transformation agenda' embraced by the White House in 2009 and 2010…” Unlike the  “president’s pragmatic pivot to 'all of the above' energy policy in 2011, 2012 and 2013, this year's speech positioned fast-growing oil and gas production primarily as a fuel source for domestic end-use sectors..."

Clearview's team suggested that energy policy wasn't as strong in this year's address because "energy scarcity demands more political urgency than energy adequacy. Second, in recent years, President Obama hasn't been particularly popular in the most energy-intensive of the 12 (potentially) at-risk states, diminishing White House incentives to emphasize industrial themes."

The president "appeared to give more job-related plaudits to end-use sectors -- manufacturing, power generation and transportation -- than the oil and gas upstream itself. Likewise, energy exports went unmentioned in both the speech and in the accompanying fact sheet released by the White House," Clearview analysts said.

Tudor, Pickering, Holt & Co. analysts also gave a nod to the president for acknowledging how gas production is leading to energy independence, nothing that the speech included a "staple" of most SOTUs, such as "cutting red tape to help expedite building industrial factories that consume natural gas (think petchem) as well as building natural gas vehicle fueling sites." It's "hard to see how a Presidential decree will accelerate these projects...but a nod from the Prez can’t hurt.

"Sadly, there was no love for oil guys responsible for the remarkable renaissance in U.S. oil production...The good news is that there was no overt anti-fracturing rhetoric. Maybe the truth on this issue is sinking in...hydraulic fracturing [fracking] does not contaminate groundwater," no matter how hard the U.S. Environmental Protection Agency "tries to find a link."

World Resources Institute CEO Andrew Steer called 2014 "a pivotal year when it comes to climate change," and said the president had "presented a vision of a nation built upon innovation and economic achievement. Moving toward a low-carbon, clean energy economy can be part of this vision. This is not only possible, it is imperative. President Obama's legacy and the future prosperity of the country depend on it."

Many environmental groups expressed disappointment that the president had praised fossil fuel development while giving a shorter shrift to ways to combat climate change.

Sierra Club Executive Director Michael Brune noted that the administration has taken "significant steps forward by committing to hold dirty power plants accountable for their toxic carbon pollution and to protect our public lands. We're also encouraged to hear his plans to help repair and modernize America's infrastructure."

However, the country "can't drill or frack our way out of this problem. There is far more potential for good job creation in clean energy like solar and wind, and common sense solutions like energy efficiency.

"Make no mistake -- natural gas is a bridge to nowhere. If we are truly serious about fighting the climate crisis, we must look beyond an 'all of the above energy policy and replace dirty fuels with clean energy," said Brune. "We can't effectively act on climate and expand drilling and fracking for oil and gas at the same time...We must walk away from boondoggles like fracked gas. And we must seize on the opportunity and the obligation that the climate crisis has thrust upon us."

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