Following the presidential election, a big target is on the backs of oil and gas interests, according to a panel of industry experts.
On Tuesday energy executives from the Brookings Institution, the United States Energy Association (USEA) and ClearView Energy Partners LLC shared their thoughts post-election with Branko Terzic, executive director of the Deloitte Center for Energy Solutions, at the annual Deloitte Oil & Gas Conference in Houston.
“We’re in an interesting situation now,” said Brookings Institution’s Charles Ebinger, who directs the energy security initiative. “When shale gas became prominent, leadership came together and realized it was a great thing, that it would back out coal for power generation, and we saw gas as a bridge to an energy future.
“The mistake was that they did not anticipate the volumes of unconventional gas, unconventional oil made. Now it’s not a bridge; it is the future…and it’s beginning to alarm environmental leaders. They like gas, but they are increasingly alarmed that we are walking back into dependence on fossil fuels.
“There is sharp division on this issue, and I would not bet the ranch on where the major environmental groups will go” on drilling and hydraulic fracturing.
It is not known whether the Keystone XL pipeline, which would carry oil from Canada to the Gulf Coast, “will be a seminal event in the president’s administration,” said Ebinger. “Two weeks ago I would have told you that Keystone would be approved in the first quarter of 2013…But having talked to critical staffers, and who are themselves supporters of Keystone, I’m beginning to hear that the administration may not support Keystone.
“If Keystone is vetoed, it will not be good for other pipelines that need to be built and that we ultimately need to get all of the unconventional oil and gas to market. That worries me a great deal.”
Another “litmus test” facing the Obama administration is the huge turnover of top officials, including in the Departments of Energy (DOE) and Interior, as the administrator of the Environmental Protection Agency (EPA).
“Two or three choices have been talked about for DOE head, and one would alarm me a great deal as to how much the administration wants to be favorable to the oil and gas industry,” said Ebinger, who declined to name names.
“There also are a number of careerists at EPA who want to push forward on mercury rules and other pending rules on climate change. Again, a lot can be done harmfully. I’m not an alarmist, but there is a lot of what EPA could do that would not be good for this industry…”
Ebinger also warned the audience that there were “too many voices in Washington in too many trade associations. A couple are overtly antagonistic to the administration. Now that Obama has been re-elected, I seriously wonder if you have the best leadership in Washington.
“There are discordant voices of leaders similar to the oil import debate years ago that divided industry. It’s time to speak with one voice, one that speaks to your particular issues, in a constructive way. In an instructive way.”
USEA Executive Director Barry Worthington said President Obama had made it “very clear on some things in his campaign, and one of them was energy. I’ve never seen a campaign where we were hearing as much attention paid to energy this time around, both from Gov. Romney and the president. Both ascribed to an ‘all of the above energy policy…
“Starting off with a new administration, I personally take the president at his word that he’s for all of the above and I think that would include the fossil fuel industry, oil, gas and coal…The president claimed it did. But there’s also nuclear, and we’ll see if that bears out.
“The American people voted for a divided government…and they certainly sent a message with a reelected president…”
President Obama “got some political capital” from the election, but “whether he’s willing to spend it on renewable energy is very difficult to say,” said Worthington. “I do think that the whole notion of tax credits is very, very suspect. One element says take away tax credits for renewables, others say take them all away. It’s possible that it could happen.”
The panelists agreed that don’t see much support for the energy industry with Obama’s reelection.
“I think about human nature,” said Worthington. “The president at one point in time talked about punishing his enemies, and I’m not sure the energy business would fall into that category. If there is any restraint at EPA it will be in the courts and certainly not in the administration, not in Congress.”
Worthington said many of his colleagues have “bemoaned the lack of an energy policy in the United States. I don’t believe we don’t have a national energy policy because we can’t agree on the objectives…But I don’t see anything in the current political season that affects that. I think we will be as divided on national energy policies in 2013 as we ever have.”
“In the wake of the election, the partners spent a great deal of time discussing the implications of status quo that nobody wanted to see,” said ClearView’s Christine Tezak, with Republicans controlling the House and Democrats controlling the Senate and White House. “The fiscal cliff is very pressing, and from an energy perspective, it could be inter-related to the oil companies.”
Removing energy subsidies and tax breaks could be on the table “if some sort of revenues are needed,” she said. That might “bridge the gap of resolving the issue temporarily, particularly a deal to show good faith and broaden the base…”
President Obama has proposed eliminating $4 billion annually in tax breaks for oil and gas producers. Intangible drilling cost (IDC) tax breaks, which have been in place for almost 100 years, also may be on the table (see Daily GPI, Oct. 25).
“If some sort of revenues are needed, [removing tax breaks] bridges the gap of resolving the issue temporarily, particularly a deal to show good faith and broaden the base,” said Tezak. There’s a “lingering possibility” of international oil companies’ access to IDCs, and “everything in President Obama’s ‘green book’ that he’s had since he’s been in office” regarding increasing renewables.
“The only good news is, we’re all in the same boat…” Tezak added. Carbon taxes are a possibility, but more likely Congress could find bipartisan support for energy efficiency, she said. “Residential and industrial end users still are interested in booking energy savings, and we could see Congress move to back legislation” in the coming session.
The panel was asked whether the Obama administration appeared enthusiastic about expanding oil and gas industry opportunities to help boost the economy, and whether there were any policy moves that might single that.
The panelists were silent. Terzic spoke up. “If you can’t say anything nice, say nothing at all,” he said.
However, Ebinger said, “I genuinely believe that the president wants to be a transformative leader, not only in the United States but in the world community. Sadly, the perception is, even if natural gas is cleaner than coal, we’re still locked into fossil fuels and this is not the legacy he wants.”
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