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ENERGY

Industry Leaders Not Expecting Much From D.C.

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Oil and gas drilling following last year’s oil spill, pictured above, and spiking oil prices amid unrest abroad will dominate the 30th annual Cambridge Energy Research Associates, which begins on Tuesday.(SAUL LOEB/AFP/Getty Images)

HOUSTON — As Washington remains gridlocked over energy policy, thousands of executives who make the industry go round are meeting here this week to hash out a way forward with America’s energy plan.

The 30th annual Cambridge Energy Research Associates (CERA) conference gets under way Tuesday, with roughly 2,200 industry executives from 55 countries attending. Two dominant issues will be spiking oil prices amid Middle East unrest, and oil and gas drilling following last year’s BP’s Macondo well blowout and ensuing oil spill.

 

Many of Tuesday’s panel discussions focus on how drillers can get back into the Gulf of Mexico as quickly and safely as possible. BP’s CEO Robert Dudley will speak at a luncheon event.

“Macondo demonstrated that there was a greater need for industry collective responsibility because, yes, the consequences of the Macondo blowout fell most heavily on BP, but they clearly had a material impact on the whole sector,” said Michael McMahon, managing director of Pine Brook Partners, a New York-based oil and gas private equity firm.

As important as industry’s role is, government regulation is vital. Without government approval, companies can’t drill.

 

“Ensuring a cooperative relationship with the companies and the federal regulators who agree on best practices, and then to put the oversight in place to make sure companies are adhering to [it], that is very important,” McMahon said.

Discussion of that “cooperative relationship” might be one-sided. The Interior Department was not invited to the event. The department’s Bureau of Ocean Energy Management, Regulation and Enforcement director, Michael Bromwich, approved the first deep-water drilling permit for the Gulf of Mexico since the BP spill last week. It went to Noble Energy. Its CEO, Charles Davidson, will speak at the conference on Wednesday.

The administration will be represented by officials from the State and Energy departments, and the White House’s Council on Environmental Quality. None of those departments’ top officials will be here, illustrating the gulf between the private sector and Washington on energy issues.

Daniel Yergin, chairman of IHS CERA and chairman of the conference, said it’s imperative to resume drilling in the Gulf’s deep waters. The region produces 5 million barrels of oil daily. “If it was a country, it would be the fourth-largest producer of oil, if you think about it that way,” said Yergin, who authored the Pulitzer-Prize-winning The Prize: The Epic Quest for Oil, Money and Power. “It’s a major component of the pie.”

 

The renewable energy industry remains barely above water without a long-term federal policy. Because Washington isn’t likely to act on comprehensive energy and climate legislation anytime in at least the next two years, the conference this year will be less focused on Capitol Hill.

“There will definitely be a trend away from Washington,” said Don Furman, senior vice president of external affairs for Iberdrola Renewables. “But at the end of the day, the lack of a federal policy is still the biggest problem that we have.”

That puts companies like Iberdrola, the second-largest wind power operator in the United States, in a tough position. After record growth up to and throughout 2009, the wind industry has stalled because there is no stable federal energy policy ensuring it can stay cost-competitive with natural gas.

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Executives from major utilities face similar challenges.

“Underlying all of the policy issues, we need some degree of certainty that the rules aren’t going to change,” said David Mohler, senior vice president and chief technology officer for utility giant Duke Energy. “We need some kind of sustainable framework policy that people can plan into and build.”

Duke Energy announced this year it is merging with Progress Energy, and the combined company will be the biggest utility in the country. Duke currently produces 62 percent of its electricity from coal.

President Obama has proposed a federal standard of 80 percent clean energy by 2035. As long as Congress remains engrossed in a battle over Obama’s climate-change rules, a comprehensive energy bill seems unlikely. That’s limiting Duke’s involvement, which is notable given the company’s instrumental role in helping crafting a cap-and-trade bill —that ultimately stalled in the Senate—during the 111th Congress.

“Ever since Congress has changed hands [in January] we haven’t come out either way [on a clean energy standard] until they actually focus on it,” said Tom Williams, spokesman for Duke Energy. “And that’s very uncertain.”

This article appears in the March 8, 2011 edition of NJ Daily.

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