Oil-and-gas lobby envisions improved relationship with the White House

The oil-and-gas industry expects to have a more fruitful relationship with President Obama this year as the White House attempts to turn the nation into an energy-exporting force.

The administration and industry spent much of Obama's first four years fighting about regulations, fossil-fuel drilling on federal lands and the Keystone XL pipeline.

But American Petroleum Institute CEO Jack Gerard said at the lobby shop’s annual energy outlook event Tuesday that he was “encouraged” by Obama’s recent comments on the oil-and-gas industry.

“I think over the past couple of months we’ve increased positive dialogue with the administration,” Gerard said in a news conference after the event.

Gerard attributed that shift to “game-changing” natural-gas development and the Obama administration’s more recent embrace of natural gas.

Gerard said he wants to work with the administration to harness the domestic energy boom to help the economy.

To do that, he said the administration and Congress must take an approach of “do no harm” — largely by opening access to drilling on federal lands, approving the Keystone XL pipeline and restraining regulations that might hamper energy exploration.

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He also said it is “unclear right now” whether Congress would attempt to change the corporate tax code, which Democrats would likely use as a platform to strip tax provisions awarded to the oil-and-gas industry.

Gerard contended those provisions are not subsidies, calling them cost-recovery mechanisms that are afforded to other industries.

Obama and Senate Democrats last year pressed to remove the industry’s ability to claim many of those deductions, though several legislative attempts affected only the “Big Five” oil firms.

Overall, Gerard said he was comforted by a “significant shift” in Obama’s remarks about the oil-and-gas industry, both on the campaign trail and since securing a second term.

During the campaign, Obama praised the domestic oil-and-gas boom for its economic and employment contributions. In debates with challenger Mitt Romney, he often noted that oil and gas production had risen under his watch.

Since winning reelection, Obama has said becoming an energy exporter is one of his top priorities. Much of that will come from sending natural gas and oil abroad, as a recent Energy Department-commissioned study showed increasing natural-gas exports would produce a net economic benefit.

Gerard said the nation could strengthen its export position by opening more interior and offshore federal lands to drilling. 

Industry and Republicans have charged that Obama has too tight a grip on those lands. They note fossil-fuel production on those lands dropped in 2011, though such development rose during Obama’s first years in office.

While Obama has appeared more receptive to the fossil-fuel industry in recent months, he also has vowed to tackle climate change.

Green groups are pointing to Hurricane Sandy and other natural disasters as a reason to avoid using fossil fuels. Obama also has said the disaster incited a call for action on climate change, though he has not detailed specific plans on the matter.

Environmental groups want Obama to nix the Keystone project, keep offshore and interior lands off limits to drilling and impose emissions caps on existing coal-fired power plants.

For its part, Gerard noted that the increased use of natural gas by electric utilities has helped drive U.S. carbon dioxide emissions to 1992 levels.

While some environmentalists have recognized natural gas's contribution to emissions reductions, others still want to move away from the carbon-based fuel source. Many green groups also have waged national and local battles against hydraulic fracturing, or "fracking," for natural gas.

The process injects a high-pressure mixture of water, sand and chemicals into tight rock formations to tap oil and natural gas.

The method has been credited with driving the nation’s energy boom, but environmentalists are concerned that it might contaminate drinking water and that it releases methane, a heat-trapping gas.

The industry, however, contends the practice is safe.

Gerard said Obama must avoid overreaching with rules on fracking to honor his promotion of the natural-gas industry on the campaign trail.

The administration is set to release rules for fracking on federal lands this year. Those rules would require management of so-called flowback water and would make drillers disclose chemicals used in fracking, though not before drilling occurs.

Gerard said industry is worried the regulations would duplicate existing state safeguards, saying adding the federal rules would amount to bad policy.

Gerard lauded natural gas and oil development on private and state land, calling it a model for the administration to follow.

With recently sworn-in Sen. Heidi Heitkamp (D-N.D.) in the audience, Gerard said the transformation that came with development on North Dakota's privately owned Bakken formation could be repeated at the federal level.  

“Don’t do anything that would discourage that investment and economic activity,” Gerard said.

Gerard also said the Keystone XL pipeline could provide an economic boost, and was optimistic the White House will still green-light the project.

He said the Keystone decision would provide another “early indication” on the energy path Obama would take in his second term.

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