Barack Obama’s quiet war on oil

By Elana Schor

The oil and gas industry is in the crosshairs of the administration’s eco-agenda, even if Shell gets its Arctic drilling permit.

President Barack Obama’s enemies have long accused him of waging a “war on coal.” But a very different war on oil and gas is coming next.
The newest phase of Obama’s environmental agenda has the oil and natural gas industry in its crosshairs, with plans to curb greenhouse gas pollution from rigs and refineries, tighten oversight of drilling on public lands and impose a strict ozone limit that industry lobbyists slam as “the most expensive regulation ever.”

The administration still might hand some modest victories to the industry along the way — as early as Friday, for example, the Interior Department may give Shell Oil a final green light for expanded drilling off Alaska’s Arctic coast. And unlike the massive climate rule that the EPA issued for power plants last week, the administration’s actions on oil and gas will be quieter, more piecemeal and harder to track.
Still, the oil industry’s top lobbying group says it’s facing a “regulatory avalanche or a tidal wave” — one that some of Obama’s critics have been bracing for.
The administration has “ridden this horse as far as it wants to ride it,” GOP energy lobbyist and strategist Mike McKenna said in an interview, tying the oil and gas crackdown to Obama’s efforts to make wind and solar power more competitive. He said Obama and his team “have always been very clear-eyed about their strategy: they want to make affordable, dependable, traditional fuels like oil, gas and coal more expensive. … This is just the natural rush at the finish line.”
But greens say it’s past time for Obama to start reining in oil and gas as the next step in the climate legacy that he’s made such a priority for his second term. For these activists, the EPA’s power plant rules represented only a down payment.
“We’ve seen the administration willing to take on King Coal,” Jamie Henn, co-founder of the climate activist group 350.org, said in a recent interview. “They’ve got to go after bigger bad guys, like Big Oil and the Koch brothers.”
Environmentalists say the upcoming actions still won’t hit drillers and refiners as hard as EPA is hitting coal-burning power plants.
For example, the administration promised this year to slash oil- and gas-related emissions of methane — an especially potent greenhouse gas — by as much as 40 percent from 2005 levels by 2025. But that level of reduction is “not hard, nor is it particular costly” to achieve, Environmental Defense Fund Vice President Mark Brownstein said.
Unlike the tectonic realignment away from coal underway in the power sector, thanks in part to the EPA’s rules, “nothing would be required of the oil and gas industry that would cause it to have to fundamentally rethink how it does business,” he added.
Republicans in Congress may yet succeed in stopping or slowing down some of the multiple regulations that oil and gas hate the most during final negotiations on funding the government beyond next month. But GOP leaders have little to no appetite for risking a government shutdown to bury the regulations. And the refinery and ozone regulations are both tied to court-ordered deadlines this fall, making it harder for lawmakers to stop the train.
The limits on toxic air emissions from refineries that EPA proposed last year could cost more than $20 billion to implement, according to industry estimates, though the American Petroleum Institute said on Thursday that it hopes to see the final version significantly scaled back. EPA’s projected price tag was much smaller, at $239 million in total costs for the new emissions standards.
The National Association of Manufacturers has offered an even more gargantuan cost estimate for the ozone rule that EPA proposed in November, warning it could wipe out $3.4 trillion in economic output and 2.9 million jobs by 2040. The agency disagrees, saying the costs would amount to no more than $16.6 billion a decade from now, compared with as much as $42.1 billion in benefits such as reductions in deaths and illnesses.
The updated ozone rule “will be based on the law and an exhaustive, open and transparent review of a large body of science, along with advice from an independent panel of leading air quality and health experts,” EPA spokeswoman Laura Allen said Thursday. The rule, required to become final by Oct. 1, would set the standard at between 65 and 70 parts per billion, down from a George W. Bush-era standard of 75 parts per billion.
Allen said the agency’s regulations on methane pollution from oil and gas drilling, set for release before the summer’s end, will make room for both current industry practices and “emerging innovations” and will be aimed at cutting emissions while “oil and gas production and operations continue to grow.”
The political battle is complicated by the fact that the oil and gas rules are moving through EPA and the Interior Department with far less public fanfare than the Obama-touted plan to push down power plant pollution. And the president continues to praise the economic power of the domestic oil and gas boom while risking greens’ ire with moves to open up parts of the nation’s coasts to offshore drilling.
But fossil fuels’ friends in Washington are growing less patient with mere rhetorical support from the administration, especially as industry suffers from crude oil prices that have plummeted by more than half in the past year.
For Obama, Shell’s Alaskan drilling permit is “a completely free thing to be in favor of,” lamented the GOP lobbyist McKenna, because the company may yet abandon the project.
Although the oil and gas curbs set to unspool during the last months of the Obama era affect a far more diverse industry than power plants, the industry looks at their impact alongside the historic carbon dioxide standards that EPA unveiled last week and sees a president moving far left on the environment — abandoning the “all-of-the-above” energy brand he embraced during his reelection run.
“All of this is coming down on us very hard right now,” said Howard Feldman, API’s senior director of regulatory affairs. He quipped to reporters Thursday that API uses various dire metaphors to describe the impending oil and gas rules, “depending on our mood.”
API is running what Feldman described as a “significant” television ad campaign in seven states this month that urges the administration to leave the Bush-era ozone standard intact. It has also made a separate Washington ad purchase on the issue.
“Anybody who thought getting rid of coal was going to be the end of concern about climate regulations’ impact on the fossil fuel sector” now sees “that’s a questionable assumption,” said Salo Zelermyer, a top Energy Department official under George W. Bush who now advises industry clients at Bracewell & Giuliani.
In addition to EPA’s methane regulations, which are expected to affect existing emissions sources narrowly if at all, Interior’s Bureau of Land Management is preparing to open a White House budget office review as soon as this month on rules for drillers’ releases of the greenhouse gas on public lands. A separate BLM fracking regulation unveiled in March is stuck in legal limbo thanks to a challenge by two regional oil and gas groups but could go forward next month.
Beyond further legal challenges, critics of Obama’s oil and gas agenda have few options to stop it, even as the president prepares an Alaskan visit this month to plug the EPA power plant rules and his advisers look ahead to a global climate pact during United Nations talks in Paris later this year. But the industry continues to exhort the administration in hopes of winning concessions.
“At one point we went to [the White House Office of Management and Budget] three weeks in a row,” Feldman of API said. “I know my way around the conference rooms.”