Monday, April 16, 2012

Obama Issues Executive Order to Consolidate Natural Gas Policy

On Friday, President Obama issued an executive order to form a working group of at least 13 federal entities chaired by the Director of the Domestic Policy Council to coordinate federal policy towards unconventional natural gas. The group is called the Interagency Working Group to Support Safe and Responsible Development of Unconventional Domestic Natural Gas Resources (WGSSRDUDNGR?).

This move will presumably prevent any one agency from hijacking shale gas policy and oversight. Stepping back a bit to try to look beyond politics and paranoia, I see it as a measured response to a very complicated issue. Shale gas is a once in a generation opportunity to alter the worldwide energy landscape, and it is something that needs to be handled carefully by all participants.

Lots of pundits and politicians claim President Obama is trying to kill natural gas. I think that's a total crock of sh*t. Obama is smart enough to know that shale gas is a huge boon to his administration and it creates a win-win proposition for his goals. The economic impact of shale gas can be seen in direct and indirect economic impacts from drilling as well as the growth in the industrial and manufacturing sectors from cheap gas. It creates jobs, it creates exports (an huge push by his administration), and it improves the environment.

The only negative from shale gas for Obama is the fact that cheap gas hurts more expensive alternative energy sources, which postpones a "green economy." But cheap, plentiful and less hazardous energy is the real fuel for our economy, and I guarantee you that the president knows this. The green economy ship sailed away several years ago. Obama has the chance to become the real Green President by leveraging natural gas to improve both the economy and the environment.

But as with most major policy issues, the president is caught having to balance different powerful political factions. With shale gas, we have the proverbial bull by the tail, but the speed at which development is moving and the proximity of the Marcellus Shale to the Northeast population base is causing great fear among environmentalists who are forced to act without sufficient supporting data. I've noted recently that environmental groups like the Sierra Club are veering away from supporting natural gas in any way.  I don't know if that is a calculated decision to please the base (a.k.a. raise funds) or if espousing compromise was too uncomfortable in this poisonous political atmosphere. But as with most things in America, there is not much remaining in the middle.

Another important consideration is how to balance control between the state and federal governments.  This is an issue that has dogged our nation since its founding and plays out in most important legislation dating back to the Constitution. I am of the belief that most of the specific drilling regulations are best handled by the states because each state is unique. Generally, I am terrified when the Louisiana Legislature is in session (as it is now) because of the free flow of stupidity that comes from Baton Rouge, but I still would rather see drilling regulations crafted by those who best know the geology and resources of the state.

That said, I also think the federal government has general responsibility to safeguard the air, water and land.  I hear the energy industry bellyaching about regulations making shale gas development cost prohibitive (but at these prices it is impossible to drill for gas and make any profit), but we have to balance the plaintive cries of industry with safeguarding the environment. I think it's doable.

But the feds do have authority over wide areas of federal land and can create and enforce specific regulations concerning drilling (look for the EPA to do this in coming weeks).  I think the EPA rules that come out for federal land - much of which is environmentally sensitive parkland and offshore waters - should not be viewed as a template for the resulting policies put forth by this working group. Given its membership, the working group should take a more balanced approach and consider the economic issues alongside the environmental concerns.

Bottom line:  I am glad to see this EO creating the interagency working group because I am optimistic that it will consider the many divergent opinions on the myriad of issues related to natural gas and create relatively balanced policies. In the end, I think that the working group's actions will please nobody, but isn't that the sign of successful governmental policy?


Anonymous said...

I thought this article was interesting

Robert Hutchinson said...

I don't buy that line of thinking.

I think the best thing for the natural gas industry would be to get shale gas out of the political arena. Unfortunately it is too late as various players have clawed onto it to illustrate their issues, many of which are not relevant to the subject.

Anonymous said...

There was an article written in the Journal of Petroleum Technology which is published by The Society of Petroleum Engineers. April 2012.... After reading the article I question why this is an issue... I want to keep the Federal Government out of Louisiana State Business

Anonymous said...

I am normally aligned with you on topics, but this is one I can't get there on. Even taking the Obama factor out of the equation, having this many federal agencies trying to agree on anything is going to be impossible. Additionally, getting them to agree on a hydrocarbon friendly policy will be an interesting debate. I attached the link above as the EPA, governed by Barbara Boxer's senate commitee, has already flagged where they stand on NG and fracing. There is also the recent Range Resource EPA debacle in the Barnett Shale that obviously overreached their authority.
I agree with many that it is the states right to regulate these issues and not the EPA.
Obama is now boasting that there is more oil production and rig activity in his term than any other administration in the last eight years. It is because of state approvals and goverance and has nothing to do with his administration and policies. Therefore, if what you said is true and it would be political suicide to stop the momentum of shale development, he should step aside and let states regulate as is happening now.
If he really was smart, he would enact a national energy policy around shale development whereby he would substantially reduce our trade deficits caused by paying out the nose for foreign crude. He would go down in history as the first president to actually do something prior administrations couldn't independence.

Robert Hutchinson said...

Don't get me wrong in thinking that I believe more government intervention is warranted. I think that the feds do have a voice but that the states should be the front line. What I appreciate is the balanced approach of involving many voices. We all know what would happen if the EPA takes control of shale gas oversight. With voices at the table representing the economy, national security, import/export, etc. you get a more balanced approach. You also get policy and action that comes from the top instead of from a deputy's desk.

But I think we would be foolish to believe that we will ever see a comprehensive national energy policy, especially in this political environment. We need to be content to go forward with a state of fraught tension. It's what we do in this country! And not just on the topic of energy. We aren't China, with its strict top-down command and control system. I sometimes marvel at China's decisiveness and its ability to get things done when it wants to, but that just won't work in the U.S., and I don't suspect it ever will. But that's also what makes this country great. It's an ugly process, but it's one we should expect.

In terms of federal involvement, my experience is scarred by growing up in southern Louisiana and witnessing the destruction of our wetlands partly because of haphazard construction of drilling canals in the swamps. This activity mostly occurred before there was a higher level of regulatory oversight, but to me it is a symbol of what can happen when industry acts unfettered by oversight. I am wary of capricious and overreaching regulation, but I believe there does need to be a balance between "free market" and the "greater good." I don't think this will every actually be achieved, but I think the right answer lies somewhere in-between.

Lastly, it will be quite an irony that so much domestic oil and gas production and development will occur under President Obama's administration when he came to office touting a green economy as the way forward. But a lot happened between the campaign in 2008 and the reality of 2008-9 between near economic collapse and the widespread adoption of new drilling technologies. I think the administration has pivoted towards a favorable attitude towards natural gas. Anonymous, I think your phrasing "political suicide" is quite apt to describe the president's situation. No matter what he may think about fossil fuels (none of us know for sure what that is), our nation boarded the shale gas/oil train and it has left the station. We aren't getting off any time soon.