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Debates Should Touch on Energy's Role in Job Creation, Economic Growth

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Debates Should Touch on Energy's Role in Job Creation, Economic Growth

American Petroleum Institute (API) President and CEO Jack Gerard said he would like to see Republican presidential candidate Mitt Romney and President Obama discuss how energy could play a role in job creation and economic growth in the upcoming presidential debates.

The question of how to spur job creation and economic growth in the U.S. economy is one that both Romney and President Barack Obama will have to answer in the upcoming presidential debates.

At the Republican National Convention, Romney mainly assailed President Obama for his assault on the oil, gas and coal and the number of manufacturing jobs that would be sent to China. However, Romney's number one point is using energy as a stimulus for job creation and economic growth, and would pursue an agenda to encourage oil and gas production on federal lands, Gerard said in an interview with former CNN host Frank Sesno.

President Obama at the Democratic National Convention discussed how the United States is less dependent on foreign energy imports and has doubled its use of renewable energy, but did not mention the Keystone Pipeline project and opening up more federal lands for drilling.

"It's a good news bad news situation," said Gerard. "We are producing more energy but the bad news is that demand has come down because the economy has retracted. When we need to ensure that the supply is there in the future when the economy is at full strength and energy demand rises."

Gerard said he believes that the president is sincere in his efforts to talk about jobs, but wonders why he's not looking at energy as a job creation source. In a previous State of the Union address, Obama had referred to the oil and gas industry as a yesterday industry. In more recent times, he's discussed the benefits of natural gas.

"We're just trying to get [the federal government's] actions and words to match," said Gerard. "The vision discussed is good of more renewables and better energy efficiency, but we shouldn't overlook the fact that oil and gas supply 52 percent of the energy we consume and shouldn't rely on the actions of governors or economic contraction" when forming a national energy policy.

Given the lead time to bring oil and gas production online and the anticipated growth in U.S. population, Gerard said he would like to see Obama open up more federal lands for federal drilling, noting that strong bipartisan support exists for opening up areas offshore Virginia for exploration.

Robust regulation of oil and gas activity is needed. However, Gerard also sees no need for the federal government to add a layer to existing state regulations for hydraulic fracturing, noting that federal regulations would add a layer that would conflict and confuse what the states have already addressed.

"We're supportive of an appropriate regulatory regime," Gerard said, but the industry doesn't want to see Congress going off half-cocked on a regulatory initiative that will delay economic recovery.

"There's no reason it should take four to seven years to get a drilling permit."

Gerard pointed out that the states are best suited to regulate hydraulic fracturing, given their first-hand knowledge of the topography and geography in their state. Over the past 65 years, 1.2 million wells were drilled using hydraulic fracturing technology with no case of groundwater contamination occurring.

To address recent concerns over whether fracking is safe, states such as Colorado, Montana, Ohio and Pennsylvania have moved quickly to implement robust environmental protection, Gerard said.

A regulatory taxation policy that treats all industries the same, rather than policies that penalize the oil and gas industry, should also be pursued, Gerard said.

"We don't hear conversations about the taxes for Apple being raised or for that industry. If we're allowed to cover costs, other industries should be allowed to cover costs."

Obama's decision not to approve the Keystone Pipeline came as a surprise to Gerard, noting that Secretary of State Hillary Clinton had publicly said she thought the pipeline would be approved and that Canadian Prime Minister Stephen Harper said it was a "no brainer" decision to approve the pipeline.

"It should have been a quick decision that made energy, economic and job sense," said Gerard. "I'm surprised he would risk re-election by not approving it."

Gerard believes that API has been successful in its Vote4Energy plan to elevate discussions among U.S. voters surrounding energy, and is seeing movement in opinion in terms of voters on Capital Hill, including strong bipartisan support for the Keystone Pipeline.

"Congress is a lagging indicator [of public opinion]," Gerard said. "They're going to react to what [the public] believes."

"We are an energy-rich nation with more resources than most major producers," said Gerard. "It's all about the right public policy."

Gerard noted that the United States needs to take a long–term approach to energy, adding that it took the United States a century to wean itself from wood as a primary energy source.

"The mistake we're making is that the current discourse is limited. You can't switch to new forms of energy in five or six years, it needs to be in multiple decades."

The interview was followed by a roundtable discussion by energy industry officials and analysts of what role energy should play in the presidential debates.

While both candidates have said they want an "all of the above" energy policy, there are serious differences in their positions, said Kyle Ksakower, vice president of regulatory and economic policy at API, who would like to see the candidates address in the debates how they would incentivize private investment.

Dr. Michael Mandel, chief economic strategist of the Progressive Policy Institute, would like to see practical and political realism in U.S. energy policy. This policy would acknowledge that fossil fuels will be part of a balanced U.S. energy portfolio for some time, the economic impact of the energy industry in terms of jobs and that global warming is an issue that should be addressed through technology and a cap or tax.

The panelists agreed that the United States needs a national energy policy that promotes a true "all of the above" approach that transcends politics with current and forward-looking regulation. Over the past 40 years, the nation has operated on the premise of rising demand and resource scarcity, but flat to declining demand and an enormous resource base thanks to the shale boom have changed that picture.

While U.S. tax policies should not penalize the oil and gas industry, subsidies to help nascent energy industries should be implemented in a broad way so that as many different technologies are picked up as possible. Investment in technology research and development for a broad spectrum of energy resources should also be encouraged to meet future U.S. energy demand moving forward.

"We shouldn't be going after four or five companies on subsidies, but it is hard to do a transformation when existing infrastructure has so much of a market advantage," said Frank Verrasto, senior vice president and director of the Energy and National Security Program at the Center for Strategic and International Studies.

Though it comes from a massively smaller base, the solar industry created 100,000 jobs during the severe U.S. economic downturn, said Kevin Smith, CEO of SolarReserve, noting that the tax credits and subsidies in place for the renewable industry are short term.

The United States also needs to establish a manufacturing policy to address how much shale gas should be exported as liquefied natural gas and how much should be kept at home as fuel for the U.S. manufacturing and petrochemical industries, Mandel said.

While low gas prices have prompted many producers to switch to drilling for mainly oil and liquids, gas prices will rise again as demand increases for gas in manufacturing.

"We're not going to see a huge spike, it will create enough of a market," said Isakower.



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

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