As prepared for delivery
Press briefing teleconference on oil supplies and gasoline prices
Erik Milito, API group director, upstream and industry operations
Tuesday, March 13, 2012
Good morning everyone. Thanks for calling in.
There’s much discussion today about what can be done to address rising gasoline prices. And the reality is that much can be done to impact prices in both the short term and the long term.
The first step, however – and what I’d like to focus on this afternoon – is to recognize the failures that have helped put us in our current predicament. Recognizing where we’ve gone wrong is key to making better decisions in the future.
Gasoline prices are higher today at least in part because government has neglected to pay sufficient attention to the importance of producing more of our own oil and natural gas. Adding supplies to markets is critical to keeping downward pressure on prices. And government policy has prevented and continues to prevent that.
The administration says its policies have supported more development and that oil production is rising, but most of today’s production increases relate to projects begun before it came into office as well as to what is happening on state and private lands. Moreover, from 2009 to 2011, the fact is that production from federal lands and federal waters combined declined significantly for both oil and natural gas.
The point is we could be doing much better, and we have only to look at administration policy decisions to confirm this.
Here’s the problem. The administration has been restricting where oil and natural gas development may occur, leasing less often, shortening lease terms, going slow on permit approvals, and increasing or threatening to increase industry’s development costs through higher taxes, higher royalty rates, higher minimum lease bids, and ineffective regulations and regulatory processes.
The administration’s latest offshore energy plan keeps more than 85 percent of our outer continental shelf off limits, and permitting in the Gulf is still behind where it was pre-Macondo, reducing offshore revenue by $5 billion.
The administration has decreased oil and gas leasing on federal lands in the West by 68 percent.
Ten administration agencies are now studying or considering new regulations on hydraulic fracturing, which could adversely affect the most exciting new energy opportunity of this century: shale oil and gas development. Nearly 70 percent of America’s future natural gas supplies will come from shale resources. The Administration should take actions that promote oil and natural gas from shale, not send signals to the contrary.
The administration has rejected the Keystone XL pipeline project, which would allow us to bring more Canadian crude oil to U.S. markets.
And the administration has proposed increasing taxes on oil and gas companies by $85 billion, which could have a chilling effect on industry’s investment decisions, with the potential to send future investment outside of the country, taking jobs, revenue, and energy security with it. We’ve seen the oil and gas industry stand tall in the face of the recession by maintaining strong employment, and tax policies should not interfere with continued job creation by our industry.
Overall, the administration is neglecting the importance of supply and has sent clear signals to markets that America is not interested in taking the reins of its energy destiny when it comes to oil and natural gas.
We have prepared a short white paper that provides specifics on this, which we’ll email to you immediately after the call. And we’ll be happy to answer any questions you might have about it later today.
Without a change of course on policy, we will not produce the oil and natural gas we could be producing – oil and gas we know we’ll need given the administration’s projections that they will supply nearly 60 percent of our total energy for decades to come.
We will not be adding as much oil and gas supply to markets or doing as much as we can to reduce imports from less stable parts of the world.
And the erosion of potential new jobs that could be created and revenue that could be delivered to our government with more development will continue, hurting consumers and damaging our energy and economic security.
The administration is being criticized for high gasoline prices. In the face of public outrage, it claims it has an all-of-the-above strategy, and that there is no silver bullet for reducing prices. But it has simply not done all it could have done, and can do, to bring supplies to market. A change of course is needed to get our country back on track to producing the affordable and reliable energy that Americans will need in the years ahead.
An all-of-the-above approach includes making available more of America’s oil and gas resources, streamlining the permitting process for all sources of energy, implementing reasonable regulations, and promoting a tax structure that is fair across all business sectors. This is the type of approach that would send positive signals and that would encourage investment in U.S. oil and gas projects. We have seen the opposite from the Administration, despite the fact that such a policy would serve to enhance our energy security.
Thank you. I’d be happy to take your questions.