Brazil's Economic Woes Make It Reluctant Successor to Chavez

SAO PAULO - The death of Hugo Chavez makes room for Brazil to take a stronger leadership role in Latin America, but the opportunity comes at a difficult time for Brazilian President Dilma Rousseff, who is struggling to restart her country's stalled economy.

Despite being Latin America's largest economy and most-populous country, Brazil in recent years had been overshadowed politically by Venezuela's flamboyant former president, who built strong alliances with the continent's left-wing leaders and challenged the involvement of the U.S. in the region.

"Chavez occupied a huge ideological space," said Rubens Barbosa, who served as Brazil's ambassador to the U.K. and later to the U.S. and currently heads consulting firm Rubens Barbosa & Associados. "What Chavez did was divide the region, leaving Brazil in the middle."

While Mr. Chavez spurned the U.S. and sought to build close ties with its adversaries, such as Cuba and Iran, Brazil took a more pragmatic stance, seeking to expand trade with developed economies as well as emerging markets, and forge friendly relationships with the U.S. and Europe as well as Asia, Africa and the Middle East.

While Venezuela antagonized some of its neighbors, on occasion cutting off trade with Colombia, Brazil tried to act as a mediator for the continent's political conflicts. But Brazil often found itself isolated, being the only Portuguese-speaking country on the continent and, with a population highly concentrated along the Atlantic coast, far from its Latin American neighbors.

While Mr. Chavez's ample financial aid to ideological allies in Bolivia and Ecuador won him popular support, Brazil's more-businesslike dealings with neighbors often led to accusations of economic imperialism.

Analysts say the death of Mr. Chavez creates a temporary power vacuum, but it is one that Ms. Rousseff will be reluctant to fill.

"Dilma [Rousseff] lacks a motive to occupy the space left by Hugo Chavez in Latin America," said Celso Roma, a political scientist associated with the National Science and Technology Institute, a Brazilian think tank. Ms. Rousseff "is worrying herself with building an economy that's attractive to overseas investors and fomenting policies based on international cooperation," he said.

Brazil reported just 0.9% growth in its gross domestic product in 2012 despite a slew of tax cuts and record-low interest rates. With presidential elections coming up next year, Ms. Rousseff is likely to focus on ways to stoke domestic growth, rather that strengthening the country's regional role.

"Brazil is organizing important events like the Confederations Cup, the World Cup, the Olympics and the possibility of hosting the 2020 [World] Expo," said Cristiano Noronha, a political analyst at consulting firm Arko Advice. "These are events that force the country to look inward."

Some, however, say Brazil won't be able to avoid taking a larger role in the region.

"Chavez always sought to wrest regional leadership from Brazil," said David Fleischer, a political science professor at the Federal University of Brasilia. "With his death, Brazil will delicately and pragmatically take that leadership back. Argentina could be a potential threat to Brazil's leadership in the region, but more in words than in practice. Argentina could try to assume Venezuela's role in the region as a country that likes to make a lot of noise."

Analysts say little will likely change economically for Brazil, with Venezuela maintaining its trade deficit with its southern neighbor. Venezuela has hired Brazilian construction firms for infrastructure projects, and that demand is likely to continue, even if Venezuela's opposition party comes into power.

"In itself, Chavez's death doesn't bring about economic or social change in Brazil," said Mr. Noronha.

However, the death of Mr. Chavez could ease a logjam in one of the biggest economic projects between Brazil and Venezuela: the troubled Abreu e Lima refinery joint venture in northeastern Brazil.

Brazil's state-run energy giant Petrobras has waited years for Venezuelan counterpart Petroleos de Venezuela SA, or PdVSA, to come up with loan guarantees for its 40% stake in the refinery, and has watched as PdVSA repeatedly missed deadlines to get its financing in order. Mr. Chavez's death may be an opportune time for Brazil to pull the plug on PdVSA's participation, reducing project costs by eliminating needs for expensive equipment to process the heavy Venezuelan crude that PdVSA was expected to bring to the refinery.

Luciana Magalhaes and Rogerio Jelmayer in Sao Paulo and Jeff Fick in Rio de Janeiro contributed to this article.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

New Albany Shale Could Create Jobs, Economic Growth in Illinois

The New Albany shale play could add jobs and economic growth to the southern Illinois economy – but only if environmental protestors don't succeed in banning hydraulic fracturing statewide.

A minimum of approximately 1,000 jobs would be created or supported each year through exploration of the play, which is in its infancy. However, more than 47,000 jobs per year, or more than $9.5 billion of economic impact, could be created or supported if the study's highest scenario is realized, according to the study conducted by Dr. David G. Loomis, professor of economics at Illinois State University.

Loomis conducted the study for the Illinois Chamber of Commerce Foundation in response to environmental groups' push for a moratorium on hydraulic fracturing as the Illinois General Assembly seeks to create regulations governing fracking.

The foundation decided it wanted to put some numbers down for the industry's economic impact if the play becomes productive, Tom Wolf, executive director for the foundation's energy council, told Rigzone.

The foundation shied away from a study focused on oil because of uncertainty surrounding the amount of oil in the New Albany shale play.

Some companies are looking at the play for its oil potential, Wolfe noted anecdotally. The state has produced oil from conventional resources since 1905.

While the play might not turn out to be productive, particularly with current natural gas prices, crafting a regulatory model on hydraulic fracturing will create a roadmap for the industry so oil and gas companies know where to go.

Wolfe said the foundation is fine with regulating hydraulic fracturing, but wants to see it done in a way that does not stifle economy activity.

"Illinois is in no position to turn its back on the play's potential and the jobs and tax revenues it would generate," Wolf commented.

New tax revenue sources are needed as the state continues to grapple with financial challenges, including underfunded state worker pension funds.

A report by the Illinois State Financial Task Force, "Just the Facts: A Primer on Illinois Pensions", noted that Illinois' five state pension plans are not sustainable, with an aggregate unfunded pension liability of $83 billion in fiscal year (FY) 2011. The growth of the unfunded pension liability of the plans from $20 billion in FY 1996 to $83 billion is partly due to the "Great Recession", but also inadequate state funding, lower than expected returns on pension fund assets and changes in actuarial assumptions played a role.
To address underfunding, state contributions to the pension plans have grown dramatically from FY 2008 to FY 2013.

The task force was formed in 2006 by the Civic Committee of The Commercial Club of Chicago in an effort to reform the state's pension, retiree health care programs and last spring proposed substantial cuts in other areas of Illinois' budget.

In FY 2008, pension contributions used six percent of general funds revenue; in FY 2013, they will consume 15 percent, even after the recent tax increase.

"The growth in general funds pension contributions from 2008 to 2013 represents $3.5 billion that could have gone to other critical state programs," according to the report.

The $3.5 billion is larger than the entire general funds appropriation to the Department of Human Services in Illinois Gov. Pat Quinn's proposed FY 2013 budget, and more than half of the general funds appropriation to the state Board of Education.

"Those extra resources could have ameliorated the deep Medicaid cuts currently under consideration, or funded increases in General State Aid to Illinois' public schools, or paid the bills owed to financially-strapped social service agencies," according to the task force report.

Job creation has also been a priority for the state after it suffered consecutive monthly declines in employment in 2008 and 2009. Illinois added over 167,000 private sector jobs since January 2010, when job growth returned.

The state's unemployment rate declined from 9.7 percent in December 2011 to 8.7 percent in December 2012, but the December 2012 percentage was still higher than the U.S. national unemployment rate of 7.8 percent, according to a Jan. 17 press statement from the Illinois Department of Employment Security (IDES).

The bill that would regulate hydraulic fracturing is under negotiations. Senate Bill 3280, which would include a requirement for companies to disclose the chemicals they use in hydraulic fracturing fluids, has been the subject of intense and serious negotiations among legislators, oil and gas industry representatives and their allies and environmental groups, Wolf commented.

Wolf said he hopes to have a bill in place at the end of the assembly's five-month session in May that will hit a sweet spot – one in which the environment is protected and provides the industry the certainty it needs to be successful.

The New Albany play is estimated to hold shale gas resources off 11 trillion cubic feet (Tcf), and is the fourth largest play of the U.S. Northeast region, according to a 2011 estimate by the U.S. Energy Information Administration (EIA).

The New Albany shale play formation covers 60,000 square miles across Illinois, Indiana and Kentucky and lies at a depth ranging from 600 feet to 5,000 feet. The play may hold oil resources as well, but it is too early to give an estimate of its size or economic impact, said Loomis.

Approximately 155,000 oil, gas and injection wells have been drilled in Illinois since exploration first began in 1853, according to the Illinois Department of Natural Resources website. The state's oil production peaked between 1955 and 1963 with average yearly production of 80 million barrels. Currently, Illinois' yearly production is approximately 10 to 12 million barrels per year.

Most oil production occurs in the southern portion of the state in the Illinois Basin, a geological structure that also covers western Kentucky and western Indiana, according to the Illinois Department of Natural Resources. The majority of wells in the state are stripper wells with a daily production of 1.5 barrels per day.

In the study, Loomis examined the total impact on direct, indirect and induced impact on employment under three different scenarios:

Loomis noted that the high scenario is similar to historical employment impacts of shale gas in Arkansas, Pennsylvania, Louisiana and Texas' Eagle Ford play. He points out that several national studies of the economic impact of shale gas, including the October 2012 report by IHS Global Insight, which reported the total number of direct jobs generated by shale gas activity stood at 187,360 in 2012 and would rise to 436,773 jobs by 2035.

"In summary, the number of jobs coming from shale gas plays is large and is expected to get much larger in the coming years," said Loomis. "Many earlier studies have updated their estimates which proved to be too low in the early years."

Besides oil and gas drilling, the sectors with the largest employment impacts in the low, medium and high scenarios in order of impact are:

Food servicesPrivate hospitalsReal estate establishmentsWholesale trade businessesHealth practitionersArchitects and engineers

The local labor impacts under the three local content assumptions, which include wages and benefits, is estimated to range from $53.8 million to $484.6 million.

No exploratory drilling had taken place in the New Albany play in Illinois as of third quarter 2012.

"Much more will be known about the potential for future drilling after the first test sites are completed and analyzed," according to the report.

Breitling Oil & Gas CEO Chris Faulkner told Rigzone that the company has accumulated 10,000 acres in the New Albany shale play, where the company will start shooting seismic soon, with plans to drill later this year or in 2014. Faulkner said that the New Albany play offers a mix of oil and associated natural gas, similar to the Bakken shale play.

In southern Illinois, Faulkner is seeing local residents battling over whether to allow hydraulic fracturing of shale. Opponents of shale fracking include NIMBYs (Not In My Back Yard) as well as farmers who may not need the money. But their neighbors whose farms are not doing as well may want shale exploration and production on their land.

The New Albany Shale play in Illinois, along with the Marcellus shale play in New York and the Monterey play in California, are the three areas in the United States with huge oil and gas production potential, Breitling commented.

But these same three areas also share another characteristic: the existence of a tremendous amount of anti-fracking activity. The move by many states to update their oil and gas regulations to account for new technology as well as how to manage fluid disposal and water treatment presents an Achilles heel for environmentalists.

"It's black or white with environmentalists. They don't want fracking, whether there's regulations or not," commented Faulkner, who said he found the opposition troubling due to the huge economic opportunity for jobs and state and federal tax revenues associated with these plays.

"The trouble with environmentalists is they are against every form of energy – wind power because it kills birds, solar because of they don't want the chemicals used in manufacturing photovoltaic components, nuclear because of a possible meltdown, and coal because it is dirty."

Faulkner believes New York will set some standards for hydraulic fracturing regulations that only Illinois and California will adopt. While a moratorium on hydraulic fracturing might be implemented around New York's watershed and other regulations be put in place, he doesn't see the state banning the practice altogether.

He also doesn't see the U.S. federal government overstepping the states' authority in regulating fracking on private or state owned lands, even though federal guidelines are being crafted by the U.S. Environmental Protection Agency.

Concerns over hydraulic fracturing that have sprung up in other parts of the country –including heavy traffic on roads and concerns over fracking's impact on local water supplies – also have cropped up in Illinois. Southern Illinoisans Against Fracturing Our Environment (SAFE) launched a website earlier this year with the intent of banning hydraulic fracturing in southern Illinois.

The Carbondale, Illinois-based group in a Jan. 15 letter to Illinois county officials asked how local government units in the state would decide to address hydraulic fracturing as oil and gas companies lease mineral rights across Southern Illinois to explore the New Albany Shale. SAFE urged county officials to sign a letter supporting a moratorium on high-volume horizontal hydraulic fracturing in the state "until it can be shown that this practice will be done without harming the health, future economic viability, environment, or quality of life of residents of Illinois."

"Currently, in Springfield, politicians are working without public oversight on a bill to 'regulate' fracking in Illinois," SAFE commented in the letter. "Regulation has proven meaningless in other states in regard to providing public and environmental safety."

SAFE noted that governments cannot regulate the amount of water used in fracking and its impact on drinking water supplies.

"Secondly, the state does not have the money, the manpower, nor a system in place to monitor, regulate and enforce an industry that is so dangerous and complicated."

Another group, Food & Water Watch, has been seeking to impose moratoriums on high-volume horizontal hydraulic fracturing in U.S. states, including Illinois. The national group participated in local campaigns in Anna and Carbondale to bank hydraulic fracturing.

The national group has also been targeting 2016 presidential hopefuls Gov. Mario Cuomo of New York, New Jersey Governor Chris Christie, Governor Martin O'Malley of Maryland, and Colorado Gov. John Hickenlooper in their efforts to ban fracking, saying any moves by the four governors to support hydraulic fracturing "will come back to haunt them in 2016".

The Sierra Club and Natural Resources Defense Council are also among groups seeking to ban hydraulic fracturing in Illinois and around the country.

Late last year, Alto Pass became the first Illinois municipality to specifically ban hydraulic fracturing within city limits. The town of Carlyle, Illinois, in January 2012 banned all drilling or operations of oil and gas wells within its city limits, including hydraulic fracturing. Other Illinois cities and counties have also passed or called for bans on hydraulic fracturing.

While environmentalists have successfully pushed counties that have not traditionally had oil and gas development to pass moratorium, they want to go a step further and see a statewide moratorium passed.

"In fact, they even say they want a ban in their mission. So you know they're not pushing a moratorium to 'allow more time to study,'" said Taylor Smith, policy analyst with The Heartland Institute, in an email to Rigzone.

"I think the controversy over hydraulic fracturing, and the fact that it can now be done horizontally and at high-volume does play a role in the opposition," said Smith.

"But I think a bigger reason is the overall expansion that will happen if regulations are finalized and signed into law, thus lifting the de facto moratorium in place, since no company will invest or drill if they don't know what the rules will be. The move would allow oil and gas development to take place in both areas that haven't traditionally had development, and areas that have had it, but now possibly to a greater degree," Smith commented.

Between 30,000 and 50,000 wells have been hydraulically fractured in Illinois since the 1950s, the Interstate Oil & Gas Compact Commission (IOGCC) reported on its website. None of these wells caused any harm to groundwater, IOGCC added.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Crude Tops $97/Bbl as Economic Data Boost Demand Hopes

NEW YORK--U.S. crude futures rose 1.2% Tuesday, pushing above $97 a barrel for the first time in more than four months as investors wager that signs of an improving economy will translate into higher fuel demand.

Oil has rallied 9.7% since early December, gaining momentum in recent days on a stream of data that pointed to improving economic conditions in the U.S., the world's largest oil consumer.

On Tuesday, Standard & Poor's Case-Shiller home-price index showed a 5.5% increase from last year. Last week, applications for unemployment benefits fell to a five-year low. Stock markets, used by oil traders to gauge economic sentiment, have also rallied to start the year. The Standard & Poor's 500 is up 5.7% in 2013.

Vikas Dwivedi, global oil and gas economist at Macquarie, forecast oil demand will rise by 875,000 barrels a day in 2013. But a speedier recovery of the global economy, due in part to the U.S., will mean a sharper rise in fuel use, he said.

"If in 2013 the various big economies of the world hit their stride, we could be well over a million barrels a day of demand growth. Then you have a pretty interesting market," Mr. Dwivedi said.

Light, sweet crude for March delivery settled $1.13 higher at $97.57 a barrel on the New York Mercantile Exchange, the highest since Sept. 14. Brent crude on the ICE futures exchange settled up 88 cents, or 0.8%, at $114.22 a barrel.

After a pipeline issue in the U.S. crimped oil's gains last week, analysts and traders said the focus has shifted back to the global economy. The outlook looks rosier--compared to last year when Europe's debt crisis and concerns about tax hikes and spending cuts in the U.S. made investors wary of betting big on economic growth.

"We're over the fiscal cliff and that kind of stuff, so the market is starting to go up on this economic optimism," said Phil Flynn, an analyst at Price Futures Group in Chicago.

Investors have piled into bullish bets over the past two months, according to data from the Commodity Futures Trading Commission. Money managers' net-long position in oil futures and options is at the highest level since March.

Of course, some traders believe the market has rallied too quickly amid a still-tepid recovery, particularly as U.S. prices move back toward the key $100 a barrel level.

"We might see $100, but I don't think we'll hold above $100 in the short term," said Mark Waggoner, head of Excel Futures. "Demand just isn't there. There has got to be a stopping point."

Meanwhile, in the U.S. new pipelines are helping to bring oil stuck in the middle of the country to refineries on the coast, which is beginning to relieve a supply glut that has depressed U.S. crude prices compared to Europe's Brent crude.

The premium for Brent crude futures fell under $17 Tuesday.

Investors will be looking ahead to weekly data on U.S. oil and fuel stockpiles from the U.S. Energy Information Administration, due Wednesday at 10:30 a.m. EST, for further signs of oil demand.

Oil stockpiles are expected to rise by 2.7 million barrels, according to a Dow Jones Newswires survey of analysts. Gasoline stockpiles are seen rising by 200,000 barrels, while stocks of distillate, which include heating oil and diesel, are seen falling by 900,000 barrels.

The American Petroleum Institute, an industry group, is due to report its own stockpiles data at 4:30 p.m. EST Tuesday.

Front-month February reformulated gasoline blendstock, or RBOB, settled 3.86 cents higher at $2.9734 a gallon. February heating oil settled 4.76 cents higher at $3.1092 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Crude Tops $97/Bbl as Economic Data Boost Demand Hopes

NEW YORK--U.S. crude futures rose 1.2% Tuesday, pushing above $97 a barrel for the first time in more than four months as investors wager that signs of an improving economy will translate into higher fuel demand.

Oil has rallied 9.7% since early December, gaining momentum in recent days on a stream of data that pointed to improving economic conditions in the U.S., the world's largest oil consumer.

On Tuesday, Standard & Poor's Case-Shiller home-price index showed a 5.5% increase from last year. Last week, applications for unemployment benefits fell to a five-year low. Stock markets, used by oil traders to gauge economic sentiment, have also rallied to start the year. The Standard & Poor's 500 is up 5.7% in 2013.

Vikas Dwivedi, global oil and gas economist at Macquarie, forecast oil demand will rise by 875,000 barrels a day in 2013. But a speedier recovery of the global economy, due in part to the U.S., will mean a sharper rise in fuel use, he said.

"If in 2013 the various big economies of the world hit their stride, we could be well over a million barrels a day of demand growth. Then you have a pretty interesting market," Mr. Dwivedi said.

Light, sweet crude for March delivery settled $1.13 higher at $97.57 a barrel on the New York Mercantile Exchange, the highest since Sept. 14. Brent crude on the ICE futures exchange settled up 88 cents, or 0.8%, at $114.22 a barrel.

After a pipeline issue in the U.S. crimped oil's gains last week, analysts and traders said the focus has shifted back to the global economy. The outlook looks rosier--compared to last year when Europe's debt crisis and concerns about tax hikes and spending cuts in the U.S. made investors wary of betting big on economic growth.

"We're over the fiscal cliff and that kind of stuff, so the market is starting to go up on this economic optimism," said Phil Flynn, an analyst at Price Futures Group in Chicago.

Investors have piled into bullish bets over the past two months, according to data from the Commodity Futures Trading Commission. Money managers' net-long position in oil futures and options is at the highest level since March.

Of course, some traders believe the market has rallied too quickly amid a still-tepid recovery, particularly as U.S. prices move back toward the key $100 a barrel level.

"We might see $100, but I don't think we'll hold above $100 in the short term," said Mark Waggoner, head of Excel Futures. "Demand just isn't there. There has got to be a stopping point."

Meanwhile, in the U.S. new pipelines are helping to bring oil stuck in the middle of the country to refineries on the coast, which is beginning to relieve a supply glut that has depressed U.S. crude prices compared to Europe's Brent crude.

The premium for Brent crude futures fell under $17 Tuesday.

Investors will be looking ahead to weekly data on U.S. oil and fuel stockpiles from the U.S. Energy Information Administration, due Wednesday at 10:30 a.m. EST, for further signs of oil demand.

Oil stockpiles are expected to rise by 2.7 million barrels, according to a Dow Jones Newswires survey of analysts. Gasoline stockpiles are seen rising by 200,000 barrels, while stocks of distillate, which include heating oil and diesel, are seen falling by 900,000 barrels.

The American Petroleum Institute, an industry group, is due to report its own stockpiles data at 4:30 p.m. EST Tuesday.

Front-month February reformulated gasoline blendstock, or RBOB, settled 3.86 cents higher at $2.9734 a gallon. February heating oil settled 4.76 cents higher at $3.1092 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Oil Futures Rise as Economic Outlook Improves

NEW YORK--Improving economic data from the world's two largest oil consumers and a drop in oil supplies at a key storage hub sent U.S. crude-oil futures higher Thursday.

Traders rallied behind oil after a drop in U.S. jobless claims, coupled with improving Chinese manufacturing activity, suggested that demand for oil and fuel products could be headed higher. New applications for unemployment benefits in the U.S. fell to 330,000 last week, the lowest since January 2008.

"The unemployment claims number really helped," said Peter Donovan, a broker at Vantage Trading in New York. And after a sharp price decline Wednesday, he said, "we were probably due for a little bit of a bounce back."

Light, sweet crude for March delivery settled 72 cents, or 0.8%, higher at $95.95 a barrel on the New York Mercantile Exchange.

The gains helped reverse a $1.01 drop Wednesday due to a cut in the capacity of the Seaway pipeline, which runs to Houston from a supply hub in Oklahoma. The reduced capacity raised concerns that oil supplies will build up in the middle of the U.S., far from refineries along the Gulf Coast. On Thursday, pipeline operators said the capacity cut was due to a major refinery that lowered demand due to maintenance and wasn't the result of problems with the pipeline.

"The market reaction was that the Seaway problem is going to be short lived," said Andy Lipow, president of Lipow Oil Associates.

Brent crude on the ICE futures exchange rose 48 cents to $113.28 a barrel.

The gains Thursday kept oil futures above $95 a barrel for the fifth-straight session. U.S. oil prices have gained 12% since mid-December on an improving economic outlook as well as hopes that expanded pipelines will relieve the U.S. supply bottleneck.

Oil futures were also boosted Thursday by a report from the U.S. Energy Information Administration that showed crude stockpiles at the Cushing, Okla., pipeline hub fell by 500,000 barrels last week after seven-straight weeks of gains.

Total stockpiles at the supply depot rose above 50 million barrels for the first time ever earlier this year.

Surging production from new shale-oil fields in North Dakota, Texas and other states has overwhelmed existing transportation infrastructure, keeping U.S. oil prices depressed compared to prices overseas as pipeline operators try to link up supplies with refineries along the coasts. Storage declines in Cushing, if they continue, would signal that the glut is easing.

Front-month February reformulated gasoline blendstock, or RBOB, settled 2.91 cents higher at $2.8629 a gallon. February heating oil settled 0.83 cent higher at $3.0864 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Our Energy and Economic Crossroads

During a recent conference call with reporters API Chief Economist John Felmy said the country is at a “crossroads of energy and economic policy.” That’s quite a crossroads. Chad Moutray, chief economist at the National Association of Manufacturers, pointed out that manufacturing has added 462,000 net new jobs since 2010, and that continued growth hinges on energy and regulatory policy. So, where do we stand?

The administration’s energy policy is a muddle, as IPAA President and CEO Barry Russell argues in this Roll Call piece:

“Obama calls to expedite infrastructure projects, but in the wake of rejecting the Keystone XL pipeline. Obama claims increased oil and natural gas production on his watch, but then follows up with accusations that oil companies are profiting at the expense of the American people. Obama repeatedly calls for an ‘all of the above’ energy strategy, but then singles out the oil and natural gas industry for new regulations and targeted tax attacks.”

OK. Not so great. How about regulatory policy?

Last week’s new EPA rule on emissions from oil and natural gas development had positive elements – for example, delaying industry compliance with some costly and labor-intensive requirements until 2015. Still, overall, the administration’s regulatory approach hasn’t been encouraging, chiefly seen in policies that limit access to federal areas onshore and offshore.

Fuel Fix reports that deepwater drilling in the Gulf of Mexico is getting busier, but take a look at the actual numbers:

“The government awarded 163 deep-water drilling permits for the Gulf in 2009. The number dropped to 74 in 2010, but has climbed since then to 79 in 2011 and 44 through March of this year.”

And:

“[Analyst Robert] Kessler also noted that the time required for approval of exploration and development plans is still 150 days on average, compared to 54 days before the moratorium, another indicator of the added expense and challenge since the spill.”

Felmy cautioned that added regulatory layers “can slow development” of America’s vast energy resources. “Look at the totality of all EPA rules,” he said. “It really is an onslaught.” Moutray said the economic recovery is tenuous, and that the manufacturing sector is looking for broad energy options and sensible, stable policy from government:

“Energy is critical. We need affordable sources of energy to remain competitive globally. … We need an all-of-the-above approach that doesn’t pick winners and losers, that stresses the ‘all’ and not just favored projects. … We must have as many tools as possible for energy.”

Energy is the linchpin for economic growth – especially in the manufacturing sector. Developing energy from shale in Pennsylvania, North Dakota and Texas has produced jobs and a rising economic tide capable of lifting state and regional economies. Ohio and other states are poised to benefit as well.

The question is whether Washington will allow that kind of activity to go forward, or will it sap the momentum with red-tape delays and new layers of restrictive regulation, possibly duplicating effective state regulatory efforts? Will the administration continue to threaten higher taxes on an industry that pays its fair share already and is ready to do much more on energy and jobs? Will it get serious about domestic oil production, onshore and offshore, and end its obstruction of the Keystone XL pipeline?

As Felmy noted, these are components of an energy strategy that could see the United States reach energy self-sufficiency through North American resources in just 12 years.

Good questions for consideration at the crossroads.

View the original article here