by Chase Beakley
On Jan. 12, President Obama gave his final State of the Union address, which he promised would included more ideas for America’s longterm future than policies for his final year in office. However, he did highlight a few efforts that he intends to devote his attention to in 2016 and as usual America’s energy industry was among them.
The problem with the State of the Union is that the breadth of the audience usually prevents the President from discussing the issues with nuance and those broad brush strokes can tempt any group to find doomsday proclamations hidden in the speech. For the most part on Tuesday, the President steered clear of the oil industry but here’s what he did say and what it might mean for the Permian Basin.
“We’ve got to accelerate the transition away from old, dirtier energy sources. Rather than subsidize the past, we should invest in the future, especially in communities that rely on fossil fuels.”
As we know President Obama has been promoting “clean” energy development and combatting climate change since he first took office and quotes like these have been typical rhetoric throughout his tenure. While such a statement might appear to suggest new restrictions on the oil and gas industry, when the President refers to “dirty” energy and fossil fuels he’s often referring to coal-powered electricity, not oil and natural gas. The President’s Clean Power Plan, drawn up after the recent international climate summit, focuses on making improvements to the U.S. power sector, which contributes 30 percent of the country’s emissions. It places major limitations on coal plant emissions and creates an incentive program for wind and solar electricity technologies. The only two mentions of oil and gas in the Clean Power Plan are rather innocuous goals to increase fuel efficiency among light duty vehicles, and a throw-away line about EPA attempts to cut greenhouse gas emissions from “oil and gas systems,” whatever that means.
“And meanwhile, we’ve cut our imports of foreign oil by nearly 60 percent and… gas under $2 a gallon ain’t bad either.”
This is standard political posturing that we’ve come to expect from any president. In his final State of the Union the President made every attempt to claim whatever victories were in any way attributable to him. Those of us in the industry know that cutting foreign oil importation is not a political accomplishment achieved by Washington, but an economic feat earned by the hard work of domestic producers in the private sector, but most SOTU viewers do not. It’s amazing that politicians always manage to take credit for victories they had no part in and deny defeats that they caused directly, but all in all this is a relatively harmless statement as well.
“… I’m going to push to change the way we manage our oil and coal resources so that they better reflect the costs they impose on taxpayers and our planet. And that way, we put money back into those communities and put tens of thousands of Americans to work building a 21st century transportation system.”
This was the only true head scratcher of the night and the one potential policy that could have real impact on the Permian Basin. Although it’s impossible to say for sure, the White House has been under increasing pressure to alter the way the Department of Interior leases public land to energy companies. The federal government owns very little oil and gas in Texas but it does have some holdings in Southeastern New Mexico and significant changes in leasing policy there could make waves in the Basin. From the quote it appears the goal of the legislation would be to tax energy companies operating on Federal lands and return a portion of the profit to the local community, but this legislation might attempt to address the Bureau of Land Management Hydraulic Fracturing Rules that have been stalled by litigation so far. While that would obviously be troubling, I highly doubt that a lame duck President in his final year would be either willing or able to force this issue. Leasing on public land will continue to be a problem to be resolved, but I expect it to be pushed back on the agenda deep into 2017 after a new president takes office.
All things considered, President Obama didn’t make many serious policy proposals regarding oil and gas. He touted our increasing energy independence with pride and even acknowledged that the need for deregulation in some areas. Interested parties in oil and gas should keep an eye on the development of federal leasing policy, but I expect any substantive changes to be stymied until the President leaves office.
Chase Beakley is a freelance contributor to Permian Basin Oil and Gas Magazine. He resides in Odessa, Texas.