Five years ago this month, we had just bounced off an all-time high crude price near $150 per barrel, and we were concerned about the long-term availability of black gold. Today, however, the combination of hydraulic fracturing and deepwater operations have boosted U.S. oil production to unexpected levels, and our energy problems are all behind us.
Or are they? Many seers believe we'll top Saudi Arabia in oil and gas output by 2020. But it's a clear statement of fact, rather than political posturing, that regulatory speed bumps looming in Washington, D.C., could throw our newfound growth in oil and gas production into a tailspin.
For instance, there's the potential new approach of the Environmental Protection Agency. Clearly, we all want to protect our planet, but there was something daunting about a statement made by new EPA chief Gina McCarthy. It appears from McCarthy's remarks at the University of Colorado recently that the Obama administration is prepared to go it alone, circumventing Congress in imposing federal rules in response to climate change.
It's noteworthy that not just Republicans stand to be turned aside. You may recall that In 2009, with Democrats controlling both houses of Congress, a cap-and-trade system to rein in greenhouse gas emissions received a thumbs up in the House, only to be scuttled by the Senate.
It's unrealistic to assume that the petroleum sector will escape eventual direct-from-the-administration legal promulgations. However, it's also a virtual given that the coal companies, from Peabody Energy (NYSE:BTU) on down, will immediately be in the crosshairs of the looming administrative fiats.
That'll clearly add insult to injury. Shares of Peabody, the biggest U.S.-based coal producer, have already toppled by a third during 2013.
Beyond that, power producers such as Dynegy and Duke Energy are uundoubtedly preparing for a gush of capital spending. These and other companies could find it necessary to open their coffers wide to replace coal-fired plants with those that utilize cleaner-burning natural gas.
Then there's the Keystone XL pipeline. As proposed by TransCanada (NYSE:TRP), the line would run from the oil sands-producing region of Alberta to refineries on the Gulf Coast of Texas. Permission to construct Keystone -- or not -- will come directly from the president.
The likely direction of his decision has swung wildly during the past year. Lately, however, a couple of President Obama's speeches have included comments about the probable job-producing capabilities of the line.
In late July he said that Keystone would create only 50 permanent jobs. "That's not a jobs plan," he said. His prediction varies wildly from a State Department assessment in March that targeted the line's potential at 42,100 jobs, along with about 4,000 construction gigs per year for a couple of years.
The Department of State has been reviewing the Keystone proposal for years now, a must since the pipeline would involve two countries. For starters, in March 2008, State issued a permit authorizing the construction and operation of facilities along the U.S. border with Canada. In July 2010, however, the EPA, maintained that the State Department's original study and report had been "unduly narrow," and effectively demanded another analysis.
A new State Department study is now in the works. In fact, in March of this year the department released a preliminary environmental assessment stating that the 1,700-mile line would have a minimal potential effect on climate change.
That conclusion, albeit a preliminary one, has unleashed a major controversy. Opponents of the line maintain that experts working on the study for Environmental Resources Management, a consulting firm, have an inherent conflict of interest.
Their primary contention is that the firm's second in command, Andrew Bielakowski, has previously served as a consultant to TransCanada. Beyond that, they maintain that he has also done work for ExxonMobil (NYSE:XOM) and ConocoPhillips (NYSE:COP), two among many producers that stand to benefit from a Keystone imprimatur.
Beyond the administration's potential go-it-alone approach to energy regulation, along with lessening confidence in some quarters that Keystone will receive a presidential imprimatur, there's also the issue of a pending EPA study of fracking's effects on the environment. Those results are due out in 2014, and negative findings could be deleterious for the technology, which has had a salient role in dramatically catapulting U.S. oil and gas output.
While the mood surrounding the U.S. oil and gas world is far more sanguine than it was a few short years ago, I urge Fools to closely monitor the regulatory issues discussed above. Their ultimate outcomes stand to have profound effects on the U.S. conventional energy scene.
Fool contributor David Smith and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.