Blog Archives

Energy industry has lots of bureaucracy to deal with


Alex Mills
Posted September 11, 2011 at 12:19 a.m.

President Obama’s opinions about the petroleum industry aren’t very nice. He would like for it to vanish overnight to be replaced by wind, solar and other forms of “clean” energy.

The President, being the intelligent man that he is, knows that wishing won’t make it happen. He knows that his beloved “renewables” can’t compete in today’s economy even at $100 oil.

The President does have tremendous powers at his disposal, and that is the power of the federal bureaucracy. What he cannot impose on industry through the legislative process, he tries it through the bureaucratic process.

One of the first things Obama did as President was proposed to increase taxes on the U.S. oil and gas industry. He sent Secretary of Treasury Timothy Geithner to Congress to testify that percentage depletion and expensing of intangible drilling costs distorted crude oil and natural gas markets by creating and oversupply of energy.

With that kind of logic there is no wonder that the nation’s economy is in crisis.

Repealing tax provisions as outlined in President Obama’s budgets of 2010, 2011 and 2012 will discourage drilling and production, increase oil imports, put more pressure on increasing petroleum costs, and hinder job growth in the U.S.

Increasing taxes during a recession is ill advised, especially on one of the few industries that has experienced job growth. The number of Texans on oil and gas industry payrolls totaled an estimated 230,400, about 33,100 (16.8 percent) more than in July 2010, according to the Texas Workforce Commission. The number of upstream oil and gas workers in Texas peaked in October 2008 at an estimated 223,200, following a revision to reflect new industry employment data for 2009 and 2010.

Obama’s bureaucracy powers only begin with the Treasury Department. His Interior Department has slowed down to a crawl the approval of permits to drill on federal onshore and offshore leases. The stories of the feds dragging their feet in the Gulf of Mexico is well documented, but the same holds true for many permits onshore out west.

And, Obama’s Environmental Protection Agency (EPA) has tried to kill the oil and gas industry through a myriad new interpretations of old laws that would make it virtually impossible for the industry to get in compliance at almost any cost.

One of the most onerous new requirement comes from EPA’s proposed greenhouse gas (GHG) permitting program for utilities and refineries in Texas only. EPA’s unprecedented action comes after 18 years of successful regulation by the Texas Commission on Environmental Quality (TCEQ). Texas’ air permitting program has successfully reduced harmful emissions in the state at a higher rate than most other states. Emissions data cited by the Governor’s Office indicates that the Texas clean air program achieved a 22 percent reduction in ozone and a 46 percent reduction in nitrous oxide, which outpaces the 8 percent and 27 percent recorded nationally.

It is estimated that 167 plants will be affected. Will power plants and refineries close if they are unable to obtain a federal permit? If closed, how will oil and gas producers be able to get the products to a market? Will shortages of refined product and electricity occur? What impact will the shortages have on price, jobs and the economy? What changes will the regulations have on domestic production and oil and gas imports?

Additionally, EPA and the Department of Energy are conducting their own studies of hydraulic fracturing, which has been regulated by the states for more than 50 years.

The Commodities Futures Trading Commission, the Federal Energy Regulatory Commission and the Federal Trade Commission are all examining and regulating the trading of crude oil and natural gas on the commodities markets.

And, just recently the Securities and Exchange Commission announced that it will begin an investigation of oil and gas companies to make certain that potential investors are sufficiently notified of the possible liabilities associated with hydraulic fracturing.

That’s a lot of bureaucrats looking over your shoulder.

Despite all of the regulatory morass, the industry continues to push forward. Just imagine what could happen if the federal government became a friendly partner instead of an adversary.

Original Article

%d bloggers like this: