The Obama administration is undermining domestic fossil-fuel production, say Republican Party officials.
They point to comments by EPA Regional Administrator Al Armendariz, who resigned Sunday as agency administrator for the south-central region, suggesting that the agency’s “general philosophy” is to “crucify” oil and gas companies as being symbolic of the administration’s attitude.
The Washington Free Beacon reported in a March 13, 2012 article that Obama Interior Department officials have intentionally “slow walked” drilling permits, reducing the number of annual permits by two-thirds from 157 before the 2010 drilling moratorium to 51 after. The GOP argues that small- to medium-sized businesses are the ones getting hurt, not “Big Oil” as Democrats like to argue.
As a result, half of all Gulf of Mexico businesses have laid-off workers and a further 39 percent have cut salaries and/or hours. A further 46 percent of affected businesses have moved their operations out of the gulf.
EPA regulations could result in a 11 percent drop in gas production and a 37 percent drop in domestic oil production.
The same attitude carries over to coal, where the Washington Post reported that looming EPA regulations would end the construction of conventional coal-fired power plants nationwide. Thirteen percent of all coal-fired power plants are likely going to shut down because of EPA regulations.
This has hit too close to home for a traditional Democratic constituency – coal miners.
By John Rossomando /// April 30, 2012
- Obama officials rip into GOP gasoline bills (mb50.wordpress.com)
- EPA Official: EPAs “philosophy” is to “crucify” and “make examples” of US energy producers (mb50.wordpress.com)
- EPA Official on How To Deal With Non-Compliant Companies: ‘Hit Them as Hard as You Can’ & ‘Make Examples Out of Them’ (nicedeb.wordpress.com)
- EPA Official Quits Over Remark (myfoxchicago.com)
- EPA Is Sorry for the Analogy But Not the Context of Crucifying the Oil & Gas Industries (independentsentinel.com)
NEW YORK (CNNMoney) — The oil industry recently laid out a set of proposals it believes will instantly lower gasoline prices.
The proposals call for more domestic oil production, fewer environmental regulations on refineries and fuel, and for not raising taxes on the industry. They’re basically what the Republican presidential candidates are calling for.
But analysts say those ideas will do little to lower gas prices in the short term. Here’s why:
More drilling: The industry has long held that this is key to lowering prices, and “unlocking America’s energy potential” is a theme all the Republican candidates are touting.
The industry has studies saying that if it was allowed to drill off both the East and West coasts, on all federal land that isn’t a national park and in Alaska’s national wildlife refuge it could produce another 10 million barrels of oil a day by 2030 — double the nation’s current oil output.
Eighteen years is a long time to wait for gas prices to come down. But the industry says that if Obama merely announced such a plan oil prices would drop overnight in anticipation of this new production.
“Markets are driven by expectations,” Jack Gerard, president of the American Petroleum Institute, said on a recent conference call.
Gerard noted that oil prices fell $16 in the two days after George W. Bush lifted a moratorium on drilling off the coasts in 2008, a moratorium that was effectively reinstated after BP’s (BP) Gulf of Mexico disaster.
But oil traders are skeptical.
“Just because a policy is announced doesn’t mean it can be easily or quickly attained, and the markets will discount that,” said Addison Armstrong, director of market research at the brokerage Tradition Energy.
Those against more drilling note that U.S. oil production has increased by about 15% since Obama took office, and prices have only gone up.
Obama himself likes to take credit for this production increase, although actual federal acreage available for drilling is down slightly from the Bush administration.
The extra production comes mostly from private land and is spurred by higher prices, new technology and the expanded use of hydraulic fracturing.
Known as fracking for short, the process is highly controversial as many fear it is contaminating the ground water. Yet Obama has allowed it to continue mostly unfettered — and has taken flack from his left flank as a result.
In the medium term it’s hard to say what impact increased production from the United Sates would have on oil prices.
Ten million barrels a day is a lot of oil, though critics say the industry would never be able to generate that much and note the potential high environmental costs of drilling everywhere.
Plus OPEC might simply cut that amount of production to keep prices high.
Either way, it’s unlikely more drilling now would lower gas prices anytime soon.
Fewer regulations: Cutting regulations is another mantra of the American Right, and more regulations are indeed looming for the oil and gas industry.
It’s thought that Obama’s Environmental Protection Agency will propose new standards designed to cut air pollution and global warming on both refineries and fuels.
The oil industry says the new fuel standards alone could add anywhere from six to nine cents to a gallon of gas.
Yet not implementing those regulations wouldn’t lower the price of gas now — analysts aren’t expecting them to be put in place until after the election.
Plus, it’s uncertain they will really cost that much.
“Historically, the cost impacts [of additional regulations] have been estimated to be higher than they really are,” said Joseph Stanislaw, founder of J.A. Stanislaw Group, an energy and investment advisory firm.
Less taxes: As any good lobby group would, API has used every chance it gets to rally against proposals from the Obama administration that would eliminate up to $4 billion a year in tax breaks for the oil industry.
“No economist in the world will tell you gas prices can be reduced by increasing taxes,” said API’s Gerard.
Eliminating the tax breaks has been opposed by nearly every Republican politician as well.
But while eliminating those tax breaks might be bad for oil company shareholders, it’s hard to see how they would have much of a bearing on raising or lowering gas prices.
What is driving prices: Fundamentally, what politicians on both sides of the isle are missing is the fact that gas prices are not being driven by domestic policies.
They are being driven by oil prices, which are in turn rising mostly on fears over a confrontation with Iran.
- API: Oil & Gas industry pays the government nearly $90 million dollars a day (mb50.wordpress.com)
- Reid plans March showdown on oil-industry tax breaks By Ben Geman (mariokenny.wordpress.com)
- Interest groups protest Obama’s support for Oklahoma-Texas pipeline (newsok.com)
In an interview on E&ETV yesterday, Cheniere CEO Charif Souki said that domestic natural gas prices could drop to $2 per million British thermal units as a result of improved drilling technologies, regardless of whether LNG exports are increased.
“The rationale is this is no longer an exploration play. We know where the resource is. This is now a technology play. Technology plays become better, not worse.
We are learning how to image better, so we know where we have to drill. Our drill bits are getting better, so we know how to manage them and get them to the right place faster and better with less intrusion.
John Berge was talking last week about being able to reduce the amount of water used in the fracking process by 80 percent over the next few years. So, this is going to become a better and better process,” he said.
“We’re very early in the learning curve and we’re going to be able to find this resource more easily, faster and cheaper over a long period of time.
Whatever we can do to export is not going to be sufficient to make any impact at all. Most of the studies talk about 20 cents, I would propose that 20 cents statistically is insignificant, because gas prices can go up or down 20 cents every week. So, over a 20 year period, if our impact by modeling is 20 cents, that’s fine,” he added.
Cheniere of USA is developing a project to add liquefaction and export capabilities to the existing infrastructure at the Sabine Pass LNG terminal.
The Liquefaction Project is being designed and permitted for up to four modular LNG trains, each with a nominal capacity of approximately 4.5 mtpa.
In November 2011, Sabine Liquefaction, a unit of Cheniere, entered into a lump sum turnkey contract for the engineering, procurement and construction of the first two trains of the project with Bechtel Oil, Gas and Chemicals.
Sabine Liquefaction has also entered into four long-term customer sale and purchase agreements for 16 mtpa of LNG volumes, which represents approximately 89 percent of the nominal LNG volumes.
- USA: Cheniere Urges FERC to Approve Sabine Pass Liquefaction Project (mb50.wordpress.com)
- Cheniere: Sabine 1,2 Train Construction Start in H1 2012 (USA) (mb50.wordpress.com)
- USA: Cheniere, KOGAS Ink Sabine Pass LNG Deal (mb50.wordpress.com)
- USA (Sabine Pass): BG Ups Sabine Pass LNG Volumes to 5.5 MTPA (mb50.wordpress.com)
- GAIL to buy 3.5 million tonnes of LNG from U.S. firm (mb50.wordpress.com)
- USA: Sabine Pass LNG Gets Cargo (mb50.wordpress.com)
- USA: Cheniere Plans Corpus Christi LNG Export Terminal (mb50.wordpress.com)