Oil, gas producers’ interests diverge over climate debate
Sens. John Kerry, D-Mass., and Barbara Boxer, D-Calif., unveiled two weeks ago the U.S. Senate’s version of a climate bill that aims to reduce greenhouse-gas emissions, create new energy jobs and includes incentives for more natural gas production and implementation.
Immediately and unsurprisingly, it earned both praise and criticism from environmental groups and industry groups, respectively. There was some dissent in the ranks, however, about how several energy-industry trade groups interpreted the bill after its presentation.
The American Petroleum Institute and the Texas Alliance of Energy Producers issued statements declaring their disapproval of the bill, specifically when it comes to the cap-and-trade dilemma. On the contrary, America’s Natural Gas Alliance released a glowing statement of praise, celebrating its involvement in the drafting process, but stopped short of an outright endorsement.
“The bill has a long way to go, obviously, and what you saw for natural gas in the bill are placeholders,” said ANGA Chairman David Trice. “What we’re encouraged about as an organization … is the fact that this bill has recognized that natural gas has a lot of abundance and I think Sen. Boxer made positive comments about natural gas when she introduced the bill.”
The diverging points of view about the bill indicate that the once united oil and gas industry sometimes splits, particularly when it comes to environmental causes. Natural gas is a cleaner-burning fuel and thus has some supporters in the environmental ranks.
The Texas Alliance of Energy Producers doesn’t make its member list public, however, according to a directory, most Barnett Shale-affiliated companies are members, including Chesapeake Energy Corp., Devon Energy Corp., EOG Resources Inc., EnCana Corp., Range Resources Corp. and XTO Energy Inc. Those six member companies also are founding members of America’s Natural Gas Alliance.
Furthermore, Devon Energy and EnCana also are members of all three organizations. Clearly, divisions or contradictions exist. So which is it – for or against? It depends on who you ask.
What they think about the bill
“The oil and gas industry remains united and steadfast in its opposition to any climate change or climate bill approach that resembles the Waxman-Markey bill in the House,” said Robert Dodge, a spokesman with the API. “To the extent that the Kerry-Boxer bill heads in that direction we will oppose that as well.”
The API is “still hopeful that the Senate will get it right and craft a bill that recognizes the importance that transportation fuels play in our economy,” Dodge said, “and the impact a climate change bill could have on both consumers and businesses that use fuels.”
Texas Alliance of Energy Producers President Alex Mills said the cap-and-trade system will wreak havoc on an already bruised energy industry: increased energy price volatility, more foreign oil imports, higher food prices and big business gaining another upper hand over small business.
“The whole thing is just a bunch of federal garbage,” Mills said. “It creates more big government. There are over 100 new requirements in this bill governed by bureaucracy on the energy industry.”
Mills said the global warming-climate change debate is far from over. It’s not set in stone that humans are the cause of climate change. But – for the sake of argument, he said – curbing greenhouse-gas emissions should be a “real, market-based initiative” rather than the government mandating what companies should do.
“Kerry-Boxer and Waxman-Markey want to increase fossil fuel prices so that wind and solar are more cost-competitive,” he said.
Meanwhile, Trice said ANGA, founded in March, was too late to the party to have a hand in Waxman-Markey – “That bill, in our view, does nothing for natural gas,” he said. – but the group is encouraged by the early look of Kerry-Boxer.
“But translating that into actual legislative proposals that make it, the devil is always in the details,” Trice said.
A changing landscape
Edinburg, Texas, attorney Philip Vasquez acted as deputy assistant secretary for the Department of Energy in Washington, D.C., during the Clinton administration, overseeing the department’s oil and gas office. In the past, gas and oil were associated with one another, he said, but a growing shale gas industry has managed to earn its own notoriety.
“With this recent new technology, as demonstrated in the Barnett Shale, there is an entire gas industry into itself and that’s where the paths diverge between the traditional oil producers and the, more or less, newly created gas industry,” said Vasquez, adding, “I think it’s a recent phenomenon because of the huge gas discoveries in Arkansas, the mid-continent states, Ohio, Pennsylvania – and these guys are solely gas producers.”
Presently, companies can afford to be gas-focused, as opposed to both oil and gas. For example, more than 90 percent of Chesapeake Energy’s total production is natural gas.
“[The splitting trend] started a few years ago,” he added, “and I think it will continue as they find more natural gas and comparatively less petroleum.”
A growing industry – with money behind it – affords increased clout. Natural gas shale plays have been found in more than half of the United States, and as such the gas industry’s roster of political friends grows, too.
“Natural gas is, of course, a very clean energy resource whereas oil is not,” Vasquez said. “[Natural gas] is more environmentally friendly and you have to choose your sides. The oil guys that are heavily tied to petroleum are on one side of the fence and the gas guys are on the other side of the fence.”
What they think about divisions
Two API officials said the organization’s oil and gas constituents remain on the same page regarding the bill, and that some natural gas companies have expressed “unrest” about the bill’s unknowns.
“We’re pretty tight with our natural gas-producing companies,” said Lou Hayden, a policy analyst. “They sit on our board that directs our policy, so the depth of their involvement with API is great.”
Mills said he would caution companies against getting on board with the bill just yet, because of the possible influence the coal industry and its political allies can have.
“They’re natural gas producers, publicly held companies, and they’re fine companies but when companies start throwing the baby out with the bath water – and I’m talking about our crude oil-industry brothers – bad things can happen,” he said. “I’d urge them to rethink their position, to look at this as a matter of public policy. What’s right for America, rather than what’s right for a specific company?”
He added that he “can’t see the rational argument of jumping on to the Kerry-Boxer bandwagon at this point in time.”
ANGA is clear about its sole concern for North American gas producers.
“If we can – and it’s a large if – produce a bill that recognizes the benefit and abundance of natural gas then I think both the organization and members will largely support it,” Trice said.
“In our view, there’s enough natural gas now,” he added. “Given its qualities, it should be the foundation for both energy policy and climate change policy.”
Democrats have shown the most support for natural gas producers so far. Although many Republicans appear hesitant to support any climate change bill, Trice said he’s hopeful there can be bipartisan support for a natural gas-friendly bill.
Chesapeake Energy is a member of the TAEP and ANGA. Tom Price, senior vice president of corporate development and government relations, said there are many issues on which the oil-heavy companies and gas-heavy companies agree.
“However, as one gets into some of these bills that deal with issues that are more focused on light-carbon fuels rather than heavy-carbon fuels it really begins to bifurcate some of the membership of these groups,” Price said. He added, “We think Texas, Oklahoma, Louisiana, Arkansas and the states that are primarily natural gas producers will come out very favorable to a legislation that differentiates among the low-carbon fuels.”
Cautioning against knee-jerk reaction, Price said “the wise step is to continue to be constructive,” make suggestions and “to propose there are alternatives that can be integrated that can make the bill not only better for the environment but better for the economy and certainly better for those states who employ hundreds of thousands of people in the business of natural gas production.”
A member of all three groups, Devon Energy deferred its stance to the trade organizations, a spokeswoman said.
