Obama administration speaks with energy industry about gas drilling regulations

05 15, 2012 by Fuel Fix

A top White House adviser on Monday said the Obama administration made a concerted effort to reach out to the oil and gas industry while crafting regulations governing natural gas drilling and insisted the effort isn’t an election-year ploy.

After all, said White House energy and climate change adviser Heather Zichal, there still are tensions.

“The notion that we’ve rolled out the welcome mat and have this hunky dory relationship and we’re all holding hands and signing kumbaya is not exactly where we are today,” Zichal said after a presentation to an American Petroleum Institute forum.

Zichal’s comments come a month after President Barack Obama established an interagency task force to streamline the work of more than a dozen federal agencies studying or regulating the hydraulic fracturing, a technique used to harvest natural gas from dense rock. Some industry leaders — who generally prefer fracturing be regulated by states instead of the federal government — applauded the move as a step in the right direction.

Industry representatives also cheered the Interior Department’s decision to soften a disclosure requirement in a proposed rule governing hydraulic fracturing on federal lands, so that companies could tell regulators about chemicals after they are used at wells — not beforehand.

Zichal said there has been “a real, concerted effort to do outreach to the industry.”

“This industry is producing oil and gas which is incredibly important to our domestic energy portfolio,” she said. “But at the same time, this isn’t about election-year politics.”

“This is truly about the administration working on a number of regulations that directly impact the oil and gas industry,” Zichal said. “And we are going to be successful at completing and finalizing regulations that make sense — that provide certainty and predictability to the industry — if we have an ongoing dialogue. It’s nothing more than that.”

The dialogue between industry and the administration has irked some Republicans on Capitol Hill, who say oil and gas companies are being duped.

In an April 23 e-mail to energy industry lobbyists, a Republican staffer for the Senate Environment and Public Works Committee suggested the White House “staged the sequencing” of announcements about its natural gas task force and concealed its real intention to win the industry’s public backing but ultimately give environmental advocates greater power to influence regulations and research. According to the e-mail, first described in print by National Journal, the White House had pulled a “fast one.”

“Moving forward, we — your partners — would kindly ask for better coordination and communication from you to prevent the Obama administration from pulling similar stunts in the future,” the e-mail said.

When Obama was first sworn into office, top officials in his administration and leaders of the industry’s leading trade groups publicly traded barbs.

Zichal acknowledged the administration “could have been doing a lot more outreach in the beginning.”

API President Jack Gerard said when it comes to energy issues, “the administration’s views are clearly moving.”

Gerard said the industry and administration are talking to each other, but “it’s not nearly as cozy as some might like to suggest it is.”

“The reality is the dialogue is important to make sure the policy is right,” Gerard said. “They’re at least listening,” but that doesn’t mean they are heeding API’s advice.

“There are still some strong disagreements,” Gerard said.

Most notably, natural gas producers have come out against the Interior Department’s new standards for hydraulic fracturing on public lands. The proposed regulations are too proscriptive and translate to new federal mandates on top of existing state mandates, they argue.

API also has fiercely lobbied for approval of the Keystone XL pipeline that would carry Canadian oil sands crude from Alberta to Gulf Coast refineries. Obama rejected TransCanada Corp.’s application for a border-crossing permit for the pipeline earlier this year.

The clearest common ground is on natural gas extraction. Obama has used his presidential podium to tout the benefits of cheap, abundant natural gas, and on Monday, Zichal echoed those assertions.

“Low and relatively stable natural gas prices are making our country more competitive,” Zichal said. “The administration sees tremendous potential in natural gas.”
Policy on exporting natural gas is not as clear.

Federal regulators recently approved a permit for Houston-based Cheniere Energy to build a plant at its existing facility in southwest Louisiana for liquefying natural gas and exporting it.

But a handful of similar applications from other companies that want to export natural gas are on hold while the Energy Department broadly studies the issue.

Zichal said a major concern is ensuring that exporting the fossil fuel won’t send prices too high inside U.S. borders. Some manufacturers are relocating facilities to the U.S., to take advantage of lower prices for natural gas that they use as building blocks to make other products.

“Given the fast-paced changes we are seeing in the natural gas industry, . … they wanted to take a time out to work at the Department of Energy with their experts, including their economists and analysts at the Energy Information Administration to do an analysis about what price impacts we might see,” Zichal said. “Our goal here is to make sure we’re producing this but also protecting American consumers and make sure we’re sending the right signal to industry and to the manufacturing (sector).”

“As a general rule of thumb, we are certainly not opposed to LNG exports,” Zichal added.