Leadership Needed to Improve the Energy Regulatory Landscape

Mark Green
Posted September 25, 2012

In its blueprint for American-made energy – a plan based on safe and responsible oil and natural gas development – API calls for common-sense energy regulation. What a sharp contrast with the regulatory landscape fostered by the administration, which simply has not made good on promises to promote regulatory predictability and reduce uncertainty. Upstream Group Director Erik Milito and Howard Feldman, director of regulatory and scientific affairs, made the case in a conference call with reporters.

Milito listed ways administration policies, as well as regulations it is considering, have hindered energy development and job creation:

• A status quo five-year plan for offshore oil and natural gas drilling that leaves 85 percent of our offshore acreage off limits to exploration and development.
• A decision to redo its commercial oil shale regulations.
• A plan for the National Petroleum Reserve-Alaska that keeps about half of the reserve closed to exploration and development.
• Unnecessary hydraulic fracturing regulation that could erect a major hurdle to shale oil and natural gas development on public lands.
• Delayed action on seismic activity off the Atlantic coast
• Failure to approve the full Keystone XL pipeline project.

Milito:

“We have seen numerous examples of regulatory decisions that simply move in the wrong direction and that contribute to uncertainty and inefficiency. …  Our industry could do much more of these good things if allowed to produce at home more of the energy our nation will need spared from the burden of unnecessary, costly regulations.  Unfortunately – judging from its policies – the current administration doesn’t see regulations as a problem and has little or no interest in expanding development.”

Milito said there has been a “flight” of investment capital from federal lands under the administration’s control to private and state lands, where projects can get under way faster and where a return on investment can be realized sooner. The average wait for a drilling permit on federal lands currently is 200 days – compared to about 20 days on state lands, he said. An effective all-of-the-above energy approach should include predictable leasing and permitting rules and regulatory certainty. Milito:

“We (industry) are not opposed to regulation. We support sensible, cost-effective regulation that provides actual environmental benefit.”

Feldman said industry faces a regulatory “tsunami” in other areas. Refineries have invested about $125 billion in making their operations safer, cleaner and more efficient. Air quality has been improved while creating and preserving jobs. Yet the EPA has plans for new rules that could make production more difficult and costly – without demonstrable environmental benefit – including a Tier 3 gasoline rule lowering sulfur content in fuel, greenhouse gas rules for refineries and new fine particle air pollution standards. Feldman:

“Now is not the time to impose still more requirements unless the need is indisputable.  Yet that is exactly what the administration seems bent on doing.  A slew of new rules, applicable only to U.S. refineries but not their competitors overseas, may put some U.S. refiners out of business, diminish U.S. fuel manufacturing capacity, and increase our reliance on imported fuels.”

The issue isn’t whether industry has an important role to play in protecting the environment. Feldman:

“Addressing our environmental challenges is not discretionary.  We get that.  But with so great a burden already being shouldered, America’s refineries don’t need excessively costly regulations that do not account for progress already made, regulations without a sound science-based justification, or regulations for the sake of regulations...The President said we should see streamlining in the regulatory area. We’re not seeing that.”

The U.S. has the energy wealth to make its future more secure while creating jobs, producing additional revenues for government and helping more Americans prosper. But it will take bold energy leadership, a holistic approach that increases access to American reserves and manages development in a common-sense manner. So far, the administration hasn’t provided that kind of leadership. Milito:

“The United States is in a position to be a leader around the world in energy development...We need to see real leadership on oil and natural gas.”