Several developments suggest that the Obama administration will embrace development of domestic oil and gas resources. That would be a cheery turnabout for oilfield companies like Nabors Industries
It's a beginning
The big breakthrough is that oil and gas producers have for the first time enlisted labor unions to further their cause. It's a shrewd move for the industry, given the current emphasis within the administration toward creating new jobs.
A group called the Oil & Natural Gas Industry Labor-Management Committee took out a full-page ad in The New York Times last week, touting a "labor-industry initiative to support policies that develop America's oil and natural gas resources -- and preserve and create high-quality jobs." They describe a partnership formed to increase the number of Americans -- now at 1.8 million -- working in the oil and gas industry.
According to the group, developing federal oil and gas reserves could create more than 160,000 jobs, especially in refinery and pipeline construction. Among others, unions that compose the Building and Construction Trades Department of the AFL-CIO, as well as the International Union of Operating Engineers, have joined the 15-union coalition, whose trustees include ExxonMobil
Pressure from labor might push the nation's energy policy in what seems to many an obvious direction -- namely, trying to exploit our domestic oil and gas supplies as part of a multifaceted program aimed at reducing our dependence on imported oil.
A worthy target
With our balance-of-payments deficit almost as alarming as our budget shortfall, the $400-billion-plus spent last year on imported oil is a worthy target for future reduction. While the White House is ever enthusiastic about the potential of "green energy" -- and indeed has marked more than $60 billion in the American Recovery and Reinvestment Act for "clean energy investments" -- there has been nary a whisper about drilling for oil and gas.
That could change, and not just because of union pressure. Recent data on gas reserves argues strongly for pushing natural gas development in particular. A newly released study from the Potential Gas Committee raised its estimates of natural gas reserves in the U.S. by 39% over its previous estimate from just two years ago. The current level of reserves represents a 100-year supply of the fuel, not taking into account any future consumption increases.
The jump reflects improvements in recovery rates from traditional sources, as well as important breakthroughs in developing shale-gas plays like the Barnett, Marcellus, and Haynesville fields. Companies like Chesapeake Energy
Meanwhile, the Department of Energy's latest data showed says that proved natural gas reserves (as opposed to potential) increased 13% in 2007, thanks in large part to resources available through advanced technology like horizontal drilling, which can significantly raise the output from existing wells. For instance, in Texas, not exactly a newfound territory, proved reserves went up 17%. In each year since 1998, natural gas reserves have increased, while proved reserves of crude oil have remained mostly flat.
The natural solution
This abundance has led T. Boone Pickens to identify natural gas as the obvious fuel to help reduce oil imports during the next decade while we work to develop alternative renewables like wind power. The challenge is to substitute natural gas for oil where possible, and in transportation in particular. The Pickens Plan calls for using natural gas to drive fleet vehicles such as buses and taxis, which return regularly to a central location where they can be refueled. Pickens supports a current House bill that would offer incentives for fleet owners switching over to natural gas.
The second important fact about natural gas is that it is relatively clean. With the administration's emphasis on green energy, cleaner fuels will clearly have an advantage in building a larger role in energy policy going forward.
Public will
Will concerns about climate change short-circuit oilfield drilling? Voters are fickle; polls suggest that their affection for oilfield drilling -- and for the environment -- waxes and wanes with the economy. Americans understand that there is a trade-off between the environment and industrial activity; when jobs are scarce, they tend to worry more about putting bread on the table than about the amount of CO2 released into the atmosphere. Faced with last year's sharp hike in gasoline prices, polls showed that anywhere between 60% and 75% of respondents thought offshore drilling was a fine idea.
Given the current shortage of jobs, many Americans would doubtless welcome the resurgence of an industry that tends to pay more than twice the national average, according to the American Petroleum Institute (API).
What will unions do for energy?
Will the newfound coalition of labor and industry fight for oilfield spending? An early test will be its response to the American Clean Energy Security Act, which is about to emerge on the floor of the House. API chief Jack Gerard sent a letter to Congress citing the Heritage Foundation's conclusion that the bill would hike gasoline prices, lower employment and is "fundamentally flawed."
Tom Owens, director of communications for the Building Trades Union of the AFL-CIO, says that they are watching the legislation closely, but have not yet formed a response. Their interest, he told me, is creating "good-paying American jobs." He adds, "A lot of people think we can turn on a dime and move to renewables without any economic impact," he says. "But we have to strike a balance which includes renewables as well as a traditional energy portfolio and also nuclear."
Sounds like maybe oil and gas producers have found a friend at last.
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