Why Obama Should Thank the Oil and Gas Industry

Major pieces of the president’s environmental program and foreign policy have been enabled by the fossil-fuel boom.

US President Barack Obama speaks about a Menurkey, a combination of a menorah and turkey honoring this year's shared dates of Thanksgiving and Hanukkah during a Hanukkah reception in the Grand Foyer of the White House December 5, 2013 in Washington, DC. Obama addressed the event behind held on the last day of Hanukkah . AFP PHOTO/Brendan SMIALOWSKI (Photo credit should read BRENDAN SMIALOWSKI/AFP/Getty Images)
National Journal
Amy Harder
Dec. 8, 2013, 7:20 a.m.

The oil and nat­ur­al-gas in­dustry prob­ably won’t ever get a thank-you card from Pres­id­ent Obama, but he has a few big reas­ons to be grate­ful for the fossil-fuel boom.

Amer­ica’s vast re­sources of oil and nat­ur­al gas have en­abled Obama to move for­ward on ag­gress­ive policies, in­clud­ing tough­er en­vir­on­ment­al rules and Ir­a­ni­an oil sanc­tions, which he would not have been able to do nearly as ef­fect­ively without them.

The In­ter­na­tion­al En­ergy Agency pre­dicts the U.S. will sur­pass Saudi Ar­a­bia as the world’s biggest oil-pro­du­cer in 2015; and, by the end of this year, the En­ergy In­form­a­tion Ad­min­is­tra­tion says we’ll sur­pass Rus­sia as the biggest nat­ur­al-gas pro­du­cer.

“I’ve joked be­fore that for the last 30 years, our na­tion­al en­ergy policy has been im­pli­citly pre­dic­ated on a low-cost, trustable sup­ply of nat­ur­al gas,” said Jason Gru­met, pres­id­ent of the Bi­par­tis­an Policy Cen­ter, who ad­vised Obama in his trans­ition to the pres­id­ency in 2008. “It is in­cred­ibly for­tu­nate that it showed up in time.”

As re­cently as 2007, the Fed­er­al En­ergy Reg­u­lat­ory Com­mis­sion warned we were run­ning out of nat­ur­al gas. Today, the United States is awash in the fuel, which is clean­er than oil and coal. Gas burns with al­most none of the tra­di­tion­al pol­lut­ants like sul­fur di­ox­ide, ni­tro­gen ox­ide, and mer­cury. It also pro­duces 50 per­cent few­er car­bon emis­sions than coal and 30 per­cent few­er than oil. That com­bin­a­tion — abund­ant sup­plies of a clean­er, cheap fossil fuel — has paved a path for Obama to move for­ward on ag­gress­ive en­vir­on­ment­al rules with com­par­at­ively lim­ited polit­ic­al push-back.

“Bet­ter to be lucky than good,” said Kev­in Book, man­aging dir­ect­or of Clear­View En­ergy Part­ners, a non­par­tis­an ana­lys­is firm. “The Obama ad­min­is­tra­tion was able to pull off the [mer­cury] stand­ard be­cause of Amer­ica’s nat­ur­al-gas pro­duc­tion.”

Book is re­fer­ring to the En­vir­on­ment­al Pro­tec­tion Agency’s stand­ards con­trolling mer­cury pol­lu­tion from coal-fired power plants that it rolled out in 2012. While EPA faced a lot of push-back from coal util­it­ies, the broad­er cri­ti­cism was re­l­at­ively muted be­cause many com­pan­ies were already shift­ing from coal to nat­ur­al gas.

“The pol­lu­tion that I’m look­ing at is tra­di­tion­al pol­lut­ants as well as car­bon,” EPA Ad­min­is­trat­or Gina Mc­Carthy said at an event last week hos­ted by the Cen­ter for Amer­ic­an Pro­gress, a lib­er­al think tank with close ties to the White House. “And nat­ur­al gas has been a game-changer with our abil­ity to really move for­ward with pol­lu­tion re­duc­tions that have been very hard to get our arms around for dec­ades.”

EPA is now mov­ing ahead with much more con­ten­tious rules con­trolling car­bon emis­sions from the na­tion’s power sec­tor as a way to com­bat glob­al warm­ing. Its draft rules for new plants could ef­fect­ively pro­hib­it coal plants from be­ing built un­less costly tech­no­logy is in­stalled. EPA’s rules for ex­ist­ing plants, which are ex­pec­ted in draft form next sum­mer, are also ex­pec­ted to heav­ily fa­vor nat­ur­al gas over coal.

“The fa­vor­able gas price has more than a little to do with EPA’s abil­ity to pretty much rule out new coal-fired power,” said Wil­li­am Re­illy, EPA ad­min­is­trat­or for Pres­id­ent George H.W. Bush, at an event at the Bi­par­tis­an Policy Cen­ter on Fri­day.

Gru­met agrees. “EPA is ob­lig­ated to think about the eco­nom­ic im­plic­a­tions of their reg­u­lat­ory out­comes,” said Gru­met, who has close ties to the agency. “The nat­ur­al-gas boom has fun­da­ment­ally changed the eco­nom­ics of the power sec­tor. So it would be frankly bizarre if the [car­bon] rules would come out the same way as they would have in a dif­fer­ent eco­nom­ic en­vir­on­ment.”

Wind and sol­ar power, which emit no air pol­lu­tion and have been a ma­jor fo­cus for Obama since he be­came pres­id­ent, may also be be­ne­fit­ing from the gas boom be­cause their in­her­ently in­ter­mit­tent power pro­duc­tion re­quires the backup en­ergy that gas provides.

“An­oth­er Obama en­ergy policy that be­nefited from North Amer­ic­an oil and gas may have been re­new­able power, which ex­pan­ded rap­idly with little or no con­sumer back­lash be­cause low nat­ur­al-gas prices keep power bills in check,” Book said.

Glob­ally, Amer­ica’s oil pro­duc­tion, which is at its highest since 1996, is em­power­ing Obama’s geo­pol­it­ic­al hand. EIA pre­dicts the U.S. will im­port just 28 per­cent of its oil next year, com­pared with al­most 60 per­cent in 2008.

“The reas­on we could put sanc­tions on Ir­an is be­cause the do­mest­ic U.S. pro­duc­tion was mak­ing up the dif­fer­ence in the oil we were sanc­tion­ing and tak­ing off the mar­ket from Ir­an,” said Rob­bie Dia­mond, founder and pres­id­ent of the Se­cur­ing Amer­ica’s En­ergy Fu­ture, a think tank ded­ic­ated to lessen­ing the coun­try’s de­pend­ence on oil (no mat­ter where it comes from). “If we did not have that do­mest­ic pro­duc­tion, the prices in the U.S. could have gone up.”

The ad­min­is­tra­tion isn’t so ex­pli­cit in its hand­ling of the is­sue, but it has im­plied as much. When the White House an­nounced the deal with Ir­an last month, Obama is­sued a pres­id­en­tial de­term­in­a­tion say­ing that there is enough oil sup­ply on the glob­al mar­ket in part thanks to “in­creased oil pro­duc­tion by cer­tain coun­tries” to jus­ti­fy keep­ing the oil sanc­tions in place.

To be sure, Amer­ica’s oil and nat­ur­al-gas boom presents sig­ni­fic­ant chal­lenges for Obama. Frack­ing, the tech­no­logy that’s made all this oil and gas ac­cess­ible, is con­tro­ver­sial for its en­vir­on­ment­al risks, and it has promp­ted a fierce grass­roots back­lash. Sci­ent­ists are also rais­ing con­cerns about how much meth­ane — a green­house gas 20 times more po­tent than car­bon di­ox­ide — is be­ing emit­ted throughout the nat­ur­al-gas pro­duc­tion and trans­mis­sion pro­cess. Ad­min­is­tra­tion of­fi­cials main­tain the cli­mate be­ne­fits are not erased by meth­ane con­cerns, but peer-re­viewed stud­ies are com­pel­ling a de­bate that this ad­min­is­tra­tion, and cer­tainly the next one, will even­tu­ally have to ad­dress head-on.

Broadly speak­ing, the dual cir­cum­stances of fossil-fuel abund­ance and the eco­nom­ic down­turn makes ad­dress­ing cli­mate change an even harder polit­ic­al sell than it already was. The scarcity prob­lem we had just six years ago presen­ted chal­lenges, of course, but so too does abund­ance.

“It’s a very real ques­tion,” Gru­met said when asked about the prob­lems en­ergy abund­ance cre­ates. “On bal­ance, I think the eco­nom­ic strength of this en­ergy break­through cre­ates more op­tions and space than di­min­ish­ing the com­pet­it­ive ad­vant­age of al­tern­at­ives. But in or­der to make sure we do have a di­ver­si­fied port­fo­lio, we’re go­ing to have to con­tin­ue to look at oth­er policy op­tions.”

Of course, non­re­new­able re­sources like fossil fuels don’t last forever. The same IEA re­port that pre­dicts we’ll be the biggest oil pro­du­cer by 2015 also pre­dicts that the North Dakota and Texas oil fields — which provide al­most 50 per­cent of the oil pro­duced in the U.S. — will be past their prime by 2020 and the Middle East will re­gain its dom­in­ance it had lost in the last few years.

The next few pres­id­ents may have to deal with the wan­ing side of this fossil-fuel boom. Mean­while, Obama is rid­ing the crest of it.

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