Regardless of which party captures the crowning jewel of American politics in November, the energy industry’s challenges from the federal government will continue well beyond the Obama Administration’s tenure in the White House.
That’s from Dan Naatz, senior vice president of governmental relations and political affairs with the Independent Petroleum Association of America (IPAA), who shared his insights on energy issues during this election cycle at the 2016 NAPE Summit Business Conference.
of Governmental Relations
& Political Affairs, Independent Petroleum Association of America (IPAA)
The eventual lifting of the ban on crude oil exports was a pivotal moment for the industry, Naatz said, but the industry impact will take time.
“Nobody at our shop said that passing crude exports was going to solve the problem short term, but the ability of the United States to export crude, as a policy, is a good thing for everybody,” he said. Our customers want open markets – the ability to move their crude out. It’s a big change, and I don’t think people realize how much work went into it.”
Politicians believed that if they voted to lift the ban – and the price of gasoline went up as a consequence – they would be punished by voters.
“Politicians don’t want to be at a town hall meeting and answer, ‘Hey, you voted for crude oil exports and raised my gasoline prices 50 cents,’” he said.
IPAA and others provided officials with reports – from both sides of the aisle – that cast doubt on that theory.
And after the ban was lifted, both the price of crude and gasoline have continued to drop.
“It was really one of those things where when a door got slammed, a window opened, and that’s how you do it in Washington,” he said. “You have to find another way; you have to be nimble.”
Regulatory ‘Tsunami’ On Federal Lands
Producers will remain subject to the whims of a Bureau of Land Management (BLM) that operates under Obama-produced rules that make operating a challenge, especially on federal lands, he said.
“What’s happening on federal lands is instructive of what the administration’s position is toward oil and natural gas development, fossil fuel development, and the way they’re going about it [to] making it challenging for companies to operate,” he said.
The administration’s attempt to regulate hydraulic fracturing at the federal level is viewed as an impediment – one that is currently being hammered out in the courts.
“One of our arguments on hydraulic fracturing is that states are in a far better position to regulate hydraulic fracturing. States know their geology, their hydrology, they know how to do this better than the federal government,” Naatz said. “We put our stake in the ground on this one.”
Other rules that dictate endangered species from the bureau penalize the industry when the industry isn’t involved in a species’ decline, he said.
Endangered species “has nothing to do with federal lands. It really is a hammer,” he said. “It is a club that will stop anything from going forward. And if you’re not tuned into this, you need to be because it’s one way the environmental community is really attacking the oil and gas industry development.”
For example, he said, the declining population of the Monarch butterfly has nothing to do with the oil and gas industry, but whether it’s added to the endangered species list could hamper oil and gas efforts on federal land. The delicate insect is vulnerable to loss of habitat and food sources, he said – not the energy industry.
And offshore, a heavy regulatory push is taking aim at the industry, he said. After the Macondo incident, the industry stepped up to address offshore safety, but the federal government implemented its own new rules that made drilling offshore more expensive and difficult.
“It goes to this narrative that the White House has, which is to keep fossil fuels in the ground,” he said, adding there is a systemic effort by federal agencies to slow things down and make it as difficult as possible for companies to access and operate on federal lands.
The administration argues that with the energy renaissance, access to federal land isn’t needed, Naatz said. But that argument doesn’t recognize the future need to access those resources or that their production provides budget cash to state and federal governments for public services, such as schools.
“We have $18 trillion in national debt. I’m not saying oil and gas is going to fix $18 trillion debt – but we’re going to need those resources, and nobody’s talking about that,” he said. “And it’s going to be a huge deal as we move forward. We’ve got to be creative with how we solve those problems.”
What’s driving the administration to be so aggressive in pushing additional regulations on the industry? It’s President Obama’s desire to have solutions to climate change as part of his legacy, Naatz said.
“Don’t forget that the day he got elected, he said we’re going to ‘heal the planet.’ That hasn’t gone away,” he said. Democrats could only get health care reform through Congress, and so, the administration has pursued climate change through the regulatory process.
And consequently, companies must be prepared to ask tough questions of candidates, many of whom don’t like being put on the spot.
Platitudes such as, “Just watch. It’ll be fantastic,” won’t fix anything, he said. When the president began calling for a $10 per barrel tax on crude, House Speaker Paul Ryan, a Republican from Wisconsin, said it was dead on arrival. But that might not be the case with a Democrat in the position. And when companies believe strongly about proposals, they should comment as part of the Congressional record.
“Politics matter,” he said.