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Obama Touts Shale Gas; Taps Energy Secretary to Tackle Fracking Safety

In a major speech on national energy security Wednesday, President Obama promoted natural gas as a way forward for the United States and said he has directed Energy Secretary Steven Chu to work with other agencies, the natural gas industry, states and environmental experts to improve the safety of hydraulic fracturing (fracking).

The president defended his energy policy from the ongoing attacks of industry and Republicans on Capitol Hill, and he championed natural gas as a new source of energy. The threat of a cut in oil imports due to the political implosions of a number of Middle Eastern countries has added fuel to the verbal battle between the administration and the oil and gas industry over the de facto moratorium on Gulf of Mexico (GOM) drilling.

Speaking at Georgetown University in Washington, DC, Obama disputed claims that his administration was discouraging offshore oil and natural gas production by working at a snail's pace to issue new permitting, and closing off frontiers to oil and gas development. He also accused the industry of sitting on millions of acres of leases.

The key to the administration's blueprint for a secure energy future is reducing the nation's dependence on crude oil. The administration wants to cut the country's oil import dependency by one-third in a little more than a decade.

"In terms of [developing] new sources of energy, we have a few different options. The first is natural gas. Recent innovations have given us the opportunity to tap large reserves, perhaps a century's worth of reserves...in the shale under our feet. [But] we've got to make sure that we're extracting natural gas safely without polluting our water supply," Obama told the large audience, which included several Cabinet members and university students. At the federal level, he has tasked Chu with this responsibility.

Obama said "the potential for natural gas is enormous. And this is an area where there's actually been some broad bipartisan agreement" in Washington. He noted that last year more than 150 members of Congress from both sides of the aisle offered legislation to provide incentives for natural gas vehicles.

As the president spoke Wednesday the Environmental Protection Agency released a final rule easing the vehicle conversion process for alternative fuels, including compressed natural gas (CNG). Also, stocks of natural gas-weighted production companies jumped, mostly on the order of 1-3%, but with some pure plays such as Range Resources, Cabot Oil and Gas and Petrohawk going up 4-5% (see related story).

The mention of natural gas as a key plank in his energy policy was championed by two gas trade groups: America's Natural Gas Alliance (ANGA), which represents independent gas producers; and the American Gas Association (AGA), which represents gas utilities. "We were pleased that President Obama highlighted the 'enormous' potential natural gas offers for our transportation and power sectors," said ANGA Executive Vice President Tom Amontree.

"We at AGA applaud his commitment to reduce American consumption of foreign supplies of oil by increasing the role natural gas, renewable energy and emerging technologies can play," said AGA President Dave McCurdy.

Don Santa, CEO of the Interstate Natural Gas Association of America, applauded Obama for recognizing the important role natural gas will play in the nation's energy future as well as the resource's ability to decrease dependence on foreign energy sources. "In fact, when it comes to natural gas, the United States already has achieved near energy independence, with 98% of gas supplies coming from either the United States or Canada," he said. "Moving forward, it's about more than just promoting natural gas vehicles, although that is a worthy effort. It's also about converting more of our power generation to reliable, clean-burning natural gas to help reach the president's goals."

And to further "keep reducing that reliance on [oil] imports, my administration is encouraging offshore oil production and exploration as long as it's safe and responsible," the president said. "Lately we've been hearing folks say, 'Well, the Obama administration [has] put restrictions on how oil companies operate [in the] offshore.' Well, yes, because we spent all that time, energy and money trying to clean up a big mess. I don't know about you, but I don't have amnesia" when it comes to the blowout of the Macondo well and subsequent oil spill (see Daily GPI, April 22, 2010).

"Today we're working to expedite new drilling permits for companies that meet these higher [safety] standards," Obama said. So far he reported that his administration has issued 39 permits for drilling in the shallow waters in the GOM and seven new permits for drilling in the deepwater Gulf. The latest (seventh) deepwater permit was approved Wednesday for Shell Offshore to drill a new well.

The Macondo well blowout, which caused the Deepwater Horizon rig explosion and subsequent halt to drilling, occurred nearly a year ago. Only in the last month has the Interior Department sanctioned a restart of activity in the Gulf.

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