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.

What We're Following See More »
SUFFOLK POLL
New Survey Shows Clinton Up 9 in Pennsylvania
4 hours ago
THE LATEST

If a new poll is to be believed, Hillary Clinton has a big lead in the all-important swing state of Pennsylvania. A new Suffolk University survey shows her ahead of Donald Trump, 50%-41%. In a four-way race, she maintains her nine-point lead, 46%-37%. "Pennsylvania has voted Democratic in the past six presidential elections, going back to Bill Clinton’s first win in 1992. Yet it is a rust belt state that could be in play, as indicated by recent general-election polling showing a close race."

Source:
$500 MILLION PROJECT
Obama Library Heading to Jackson Park in Chicago
4 hours ago
THE DETAILS

"President Barack Obama has chosen Jackson Park, a lakefront park that once hosted the world’s fair on the city’s South Side, for his $500 million presidential library, according to a person familiar with the matter."

Source:
THREE NIGHTS RUNNING
Democrats Beat Republicans in Convention Ratings So Far
4 hours ago
THE DETAILS

Wednesday was the third night in a row that the Democratic convention enjoyed a ratings win over the Republican convention last week. Which might have prompted a fundraising email from Donald Trump exhorting supporters not to watch. "Unless you want to be lied to, belittled, and attacked for your beliefs, don't watch Hillary's DNC speech tonight," the email read. "Instead, help Donald Trump hold her accountable, call out her lies and fight back against her nasty attacks."

Source:
THE QUESTION
How Many VIPs Were the Secret Service Protecting in Philly Last Night?
6 hours ago
THE ANSWER

Seven, according to an official Secret Service tweet.

Source:
‘MOGUL,’ ‘DAREDEVIL’
Candidates’ Code Names Revealed
7 hours ago
WHY WE CARE

The Clintons will retain their Secret Service "code names from the last time they lived in the White House. Hillary Clinton is EVERGREEN and Bill ClintonEAGLE. Donald Trump is MOGUL, according to reports, and Melania Trump MUSE. The vice presidents get code names, too: Mike Pence is HOOSIER—a little on the nose—and his wife HUMMINGBIRD. Tim Kaine is DAREDEVIL, somewhat ambitiously. His wife's? To be determined."

Source:
×