In his much-hyped State of the Union address this past week, President Barack Obama gave a rhetorical bearhug to US energy development, even stealing a line from Republicans and pronouncing the need for an "all-out, all-of-the-above strategy" on increasing energy production.
Obama said shale extraction technology has the US producing more gas than ever and more oil than anytime in eight years, while creating jobs and lowering energy prices. Obama appeared to call for opening new areas offshore to oil and gas development, and to speed development of renewable power on federal lands
"My administration will take every possible action to safely develop this energy," Obama said Tuesday night.
But by the time the White House released the details of his plans in the days after the speech, analysts and industry officials said the proposals were largely a restatement of already-introduced policies, with only a handful of truly new ideas.
Houston-based Tudor, Pickering, Holt & Co., an energy investment bank, said in a note to its clients that the "only real takeaway" from Obama's embrace of natural gas is that it "necessarily takes some of the target off the back of hydraulic fracturing."
For natural gas, the phrase "every possible action" has been limited to Obama calling for a new tax incentive to boost use of natural gas as a transportation fuel for commercial trucks, and requesting more funding to build out natural gas fueling infrastructure. Obama proposed those initiatives Thursday in Las Vegas, speaking at a UPS facility that is converting its gasoline-powered trucks to a gas-powered fleet.
Senior administration officials said the proposed tax credit would be similar to one that expired at the end of last year, which provided 50% of the difference between a conventional and natural gas-fueled vehicle, up to a maximum of $20,000.
Kevin Book, a managing director of ClearView Energy Partners, a Washington-based consulting group, said reinstating the expired credit would not make a major difference in the development of natural gas vehicles, or NGVs.
It "wouldn't necessarily promote rapid uptake," Book wrote in a research note to ClearView's clients. "Augmenting the credit to...$40,000 or $64,000 however, could increase vehicle diffusion."
The story on Obama's oil comments were much the same. In the State of the Union speech, Obama said he was directing the Department of the Interior to "open more than 75% of our potential offshore oil and gas resources."
But as Platts reporter Gary Gentile reported, and senior administration officials later confirmed, the 75% figure referred to estimates in the administration's 2012-2017 OCS leasing plan, already proposed in November. "The point the President was making last night is he was directing the department to finalize that plan," an administration official said.
Obama's State of the Union pronouncement that he was "directing my administration to allow the development of clean energy on enough public land to power 3 million homes" was also a rehash of existing policies. That directive referred to Obama's goal of 10,000 MW of renewable energy projects on public lands by the end of 2012, not any action to open new areas to solar or wind development.
The natural gas industry was glad, however, that Obama's call to disclose chemicals used in hydraulic fracturing had also been long-expected, with work on those rules underway at the Interior Department for more than a year.
Clear View's Book has long predicted that states will rush to get ahead of what they perceive as any new regulation on shale extraction coming down from the federal government. Already this year, Colorado, Texas and Wyoming have added rules requiring fluid disclosures, and the industry has established its own online well-by-well database at www.FracFocus.org.
Speaking to reporters last week, a senior administration official said those rules will also require disclosure of shale-gas producers' water-management plans, among other steps.
The official stressed that currently, most regulations governing fracking fall under state ---not federal--jurisdiction. "The president specifically focused on the disclosure issues because that's an area where the federal government can show leadership here," the official said.
The Tudor Pickering analysts, for their part, were nonplussed by Obama's call for new rules covering drilling for shale gas or oil on federal leases. "Disclosure of chemicals and tweaks to the process aren't a big deal," they said. "Production growth from either commodity isn't happening without fracturing."
To subscribe or visit go to: http://www.platts.com