‘Energy Policy’ Process is Under Way

American Association of Petroleum Geologists (AAPG)

The plane was buffeted by gusty winds as it banked to line up with the runway, but with a steady hand the pilot guided our craft to a safe landing at Midland International Airport. It was my first trip to the heart of the Permian Basin.

The purpose of my visit was to speak at a Division of Professional Affairs (DPA) town hall meeting, providing an overview of GEO-DC activities and addressing specific policy issues that affect AAPG and DPA members.

Nearly 80 people gathered for drinks and hors d’oeuvres at the Midland Petroleum Club, hosted by DPA past-president Mike Party. DPA president-elect Paul Britt led off the evening with an overview of the division and its role within the Association and the profession. I followed with my talk on “The Shifting Sands of U.S. Energy Policy.”

I began with the history of GEO-DC and what AAPG is trying to accomplish in Washington, D.C.

I stressed that AAPG is a scientific and professional association, not a trade association. GEO-DC does not represent the petroleum industry. There are plenty of trade groups, such as the American Petroleum Institute and Independent Petroleum Association of America, to fill that role.

Instead, AAPG represents the science and profession of energy geology, with primary emphasis on petroleum. Our members include scientists and professionals working in industry, government and academia.

As a result, our principal mission at GEO-DC is to bring our members’ collective scientific expertise and professional experience into the policy-making process to (we hope) result in better public policy.

The second part of the talk focused on the policy actions under way and proposed by the Obama administration and the 111th Congress, beginning with public land access.

Secretary of Interior Ken Salazar currently is undertaking a comprehensive assessment of the outer continental shelf (OCS) – with an extended public comment period until Sept. 21 – asking the Minerals Management Service and U.S. Geological Survey for an assessment of OCS energy sources, and holding a series of regional meetings in coastal areas to solicit stakeholder input.

Shortly after arriving at Interior, Salazar rolled back the oil shale research, development and deployment leases that the Bush administration had awarded in its “eleventh hour.” He opened a comment period on a new round of oil shale R&D leases, seeking stakeholder input.

The president’s budget for fiscal year 2010 proposed the repeal of the ultra-deepwater and unconventional research and development program, which, combined with the persistently inadequate funding of the Department of Energy’s oil and natural gas research programs, will result in insufficient investment in oil and natural gas R&D to meet future demand.

The FY2010 budget also included provisions seeking to impose a fee on non-producing acreage – a “use it or lose it” fee. It also proposed changes to the tax code, designed to raise $31.5 billion over 10 years. The changes include:

  • Excise tax on Gulf of Mexico oil and gas production.
  • Repeal enhanced oil recovery credit.
  • Repeal marginal well tax credit.
  • Repeal expensing of tangible drilling costs.
  • Repeal deduction for tertiary injectants.
  • Repeal passive loss exception for working interests in oil and gas properties.
  • Repeal manufacturing tax deduction for oil and gas companies.
  • Increase geological and geophysical amortization period for independent producers to seven years.
  • Repeal percentage depletion for oil and natural gas.

Commenting in written testimony presented to the House Energy and Water Appropriations Subcommittee on the policies proposed in the president’s budget, AAPG President Scott Tinker wrote:

“… Compounded by a weak economy and limited access to capital, these proposed policies on top of an already heavily taxed industry would have a chilling effect on oil and natural gas drilling, production and energy investment in this country, cost many jobs and directly undermine U.S. energy security.

“The U.S. tried this experiment from 1980-88 with the windfall profits tax which, compounded with the drop in price of oil in the ’80s, had a disastrous effect on drilling, industry employment and U.S. energy production for nearly two decades to follow.

“We face a very similar price situation now,” he continued, “and cannot afford to repeat an experiment that has already been tried and failed.”

It is important to remember that the provisions in Obama’s budget are just proposals. Congress holds the federal purse strings and decides from whom tax dollars are collected and how they are spent.

This process is just beginning.

GEO-DC will continue informing policy with science, and educating law- makers on the consequences of their actions.

Based on the Association’s statements we will support tax and public land use policies that encourage exploration and production – that is good public policy. We also will continue to support robust energy R&D, especially in oil and natural gas.

But in a representative democracy, there are limits to what our office can accomplish. In fact, one of our primary responsibilities is to develop ways for you as members and individual constituents to get involved. You are the key to communicating the message to Congress.

When considering next steps, I suggested to the Midland audience that the situation demands their personal engagement and action. We all should contact our elected officials by phone, e-mail or a personal visit to their local offices.

It is essential that we encourage colleagues and friends to also get engaged, particularly if they live in a state that does not have a large oil and natural gas community. The DPA has posted some helpful resources on its Web page on other ways to get engaged on this issue.

Alexis de Tocqueville reportedly said, “[i]n a democracy, the people get the government they deserve.” It is not time to panic. It is also not time for complacency. Get involved and work hard to ensure that your legislator understand the consequences of their actions.

As we look forward, the stakes are high but the task is clear. Now let’s get to work.

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