It’s safe to say the oil and gas industry is less than thrilled by President Barack Obama’s election to a second term on Nov. 6.
While industry leaders and analysts put different spins on results — some were glum, others confident they could work with Obama — it is clear most of the industry backed Republican Mitt Romney and his party.
Some leaders congratulated Obama while others predicted trouble on the horizon.
Julia Bell, a spokeswoman for the Independent Petroleum Association of America, said the election represents an important moment for the oil and natural gas industry.
“We face incredible regulatory hurdles from the administration but the great news is that, so far, producers have been able to overcome them to grow oil and natural gas production to record levels in this country,” she said. “The fact is the economy will not be able to get back on track with a crippled energy industry. If the president wants job creation, he is going to have to rely on America’s oil and natural gas industry.”
She added that tax issues will likely resurface in Congress, “so we just need to keep educating legislators and the American people how critical the deductions of intangible drilling costs and percentage depletion are to sustained production levels.”
Crowe Horwath LLP, one of the largest public accounting and consulting firms in the US, noted Nov. 7 that the current Internal Revenue Service code contains targeted deductions for taxpayers in specific industries.
Obama’s proposed changes would eliminate many targeted provisions available to fossil fuel industries – oil, gas, and coal – while renewable energy incentives might be extended or increased, the firm said.
Reuters reported that energy companies will likely see more regulation in Obama’s second term, with less access to federal lands and water even as the administration promotes energy independence. Tighter rules are expected for oil and gas drilling, and it’s possible there could be stronger emissions rules for chemical producers.
While Obama said he would cut oil imports by half by 2020, he also said he would roll back subsidies for oil companies and reduce the nation’s reliance on oil by mandating production of more fuel-efficient vehicles.
“You are going to have less access to federal lands and tougher government agencies,” Dan Pickering, chief investment officer at TPH Asset Management, Houston, told Reuters.
Jack Gerard, CEO and president of the American Petroleum Institute, congratulated President Obama on his re-election, saying he looks forward to continuing API’s work with the administration to expand domestic oil and natural gas as major pathways for job creation and economic growth.
Gerard said he hoped to help the president “fulfill his campaign promise to increase domestic oil and natural gas production that will create American jobs and strengthen our economy.” He noted both candidates supported more development of oil and natural gas resources. “Energy is a big winner in this election,” Gerard said.
Gerard also encouraged the president to approve the Keystone Pipeline and put thousands of Americans to work. “By following through on his own executive order to eliminate overly burdensome regulations, he can rein in EPA’s plans to impose regulatory burdens that could cost businesses hundreds of billions of dollars and chill economic growth,” he said.
He urged the president to acknowledge states were already effective in oil and natural gas regulation and avoid the temptation to impose unnecessary and redundant regulations on hydraulic fracturing.
“The domestic energy-from-shale boom is just beginning,” Gerard said. “We have an unprecedented opportunity to work together to create millions of new jobs, generate hundreds of billions of dollars for our government, and strengthen our energy and national security. With the right public policies, this could be a game changer for America.”
Still, the antipathy between oil and gas and Obama wasn’t a secret. Obama’s campaign site on energy policy was framed by the question, “Why is Big Oil attacking President Obama?”
Obama says he supports tapping the country’s 100-year supply of natural gas and expanding domestic oil production by offering millions of acres of land for development. But he attacked Romney’s energy plan, saying it was “written by Big Oil for Big Oil” and that it wouldn’t move forward energy security.
Obama offered further contrast by saying Romney would “continue giving government handouts to oil and gas companies – $4 billion a year.”
As for natural gas, Obama said Romney wouldn’t make the US more secure and would open “sensitive lands and coasts to drilling” without proper safety and environmental safeguards in place.
The industry let money do its talking.
Since the 1990 election cycle, 75% of oil and gas contributions have gone to Republicans, according to opensecrets.org, a website operated by the Center for Responsive Politics.
Obama received $884,000 from the oil and gas industry during the 2008 campaign, more than any other lawmaker except Republican presidential candidate Sen. John McCain, R-AZ, the website said.
This year, Romney received nearly $4.8 million through oil and gas contributions. Obama, with about $705,000, wasn’t even second. That position was held by Texas Gov. Rick Perry, who received $967,000.
Overall, in 2012, oil and gas contributors gave Democrats $4.2 million. A full 90% of contributions went to Republicans – $39.4 million.
In Texas, where shale oil and gas is flourishing and the state leads the nation in oil and gas production, Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association, said moving forward responsibly, but without hampering the industry, is vital.
He noted the oil and gas industry provides employment opportunities to more than 345,000 Texans, along with millions of others in states across the country.
The industry also pays billions of dollars in taxes, including nearly $9.25 billion in taxes and royalties in Texas during fiscal year 2011. Economic growth is tied to the industry, as is tax revenues at a time when they are needed most.
Longanecker pointed to the success of the Eagle Ford shale, which has produced oil, gas, and liquid condensate at record levels in recent years, far exceeding original expectations and significantly contributing to a rapidly evolving business climate in the region.
An average of 297,000 b/d of oil was produced in the Eagle Ford between January and August, compared to only 11,900 b/d in 2010.
“With the election now behind us, all of our newly elected officials, state regulators, the general public, and the oil and gas industry must now work together to formulate policy that supports domestic energy development and provides sustained economic growth while also protecting the environment, so as to ensure a bright future for the state of Texas and the US,” Longanecker said.
Contact the author, Darren Barbee, at firstname.lastname@example.org.
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