Stepping into a new advocacy arena

Independent producers may be descending on Washington in what has become an annual rite of spring. But the American Petroleum Institute also is doing its part in the industry’s fight against the Obama administration’s proposed oil tax increases with television commercials during The Daily Show on Comedy Central.

The messages are brief and simple. They feature everyday people saying new taxes of any kind don’t make sense during a recession. Each one lasts about 15 seconds. API is clearly identified as the sponsor.

Advocacy commercials aren’t new during breaks in The Daily Show and The Colbert Report, the back-to-back half-hour programs which broadly satirize current events. It’s refreshing, however, that API hasn’t surrendered this audience to the Clean Energy Lobby which periodically buys time to argue its positions and, occasionally, bash fossil fuels.

Maybe this reflects API President Jack N. Gerard’s statements that the group plans to participate more aggressively in the national energy and environmental policy debate. Its current campaign is a nice step beyond the four-color advertisements in major newspapers and magazines on behalf of “the people of the oil and gas industry” which have been running for years.

It’s also a pretty good bet that API is just getting started in this new direction, and that its messages will show up in other surprising places the next few months.

Three governors and energy taxes

Most US governors have submitted proposed budgets to their states’ legislatures for 2010. Three announced moves involving energy production taxes in early February. Each took a different approach.

Alaska Gov. Sean Parnell (R) announced on Feb. 9 that he would transmit to his state’s legislature four proposed changes in the oil production tax designed to increase investment, employment, and, ultimately, production.

He said he would ask lawmakers to add a 30% credit for all drilling and well-work expenses; eliminate what he said was a double standard against new producers by allowing the state to pay for capital credits they earn regardless of their future spending levels; allow all producers to enjoy the entire benefit of their capital costs in the year they are earned instead of spreading the credit over two years; and allow for a waiver of interest charges on late payments due to the retroactive application of new regulations.

Pennsylvania Gov. Edward G. Rendell (D) said on the same day that he would resubmit his request for an oil and gas severance tax, tying it to a levy on cigars and smokeless tobacco products. “Once again, it’s simply not fair that Big Tobacco and Big Oil and Gas are exempt from the obligations the rest of us have to bear,” he declared in his Feb. 9 budget address. “The revenues raised by these initiatives are overwhelmingly supported by our fellow citizens, and would provide a half a billion dollars for the Stimulus Transition Reserve Fund.”

Then there was Wyoming Gov. Dave Freudenthal (D), who proposed a wind energy tax in his Feb. 8 state of the address. “It has drawn some controversy, and I will tell you the following: If you look at the wind energy industry, it is the most heavily subsidized industry in this country from the federal point of view,” he said. “It is also an industry that enjoys the sort of energy de jour in terms of people saying, ‘You know, it is important.’ That is not my particular quarrel.”

Freudenthal emphasized that he’s not trying to slow wind energy development down in the Cowboy State. “Wind is a good idea for Wyoming. We have 40% of the best wind resources in America in Wyoming. It can be a remarkable industry for us. It can help keep people in agriculture. It can help people get jobs and it can bring some manufacturing to the state,” he maintained.

“Having said all of that, the industry is not entitled to a free ride. In my lifetime, this is the first opportunity this state has had to diversify its tax base,” Freudenthal continued. He said that Wyoming lawmakers could expect to hear arguments that the wind energy industry needs to be encouraged, and that lobbyists would argue that a tax would stunt its growth. “We have been through this with oil and gas. We have been through this with coal,” he observed. He asked legislators to remember county and local governments which are struggling to continue providing services without raising their own taxes.

“Think about what it is you are being asked to do. You are being asked to diversify the state's tax base. You are being asked to be reasonable with regard to the impacts to local government, and you are being asked to make a decision that says nobody in this state gets a free ride,” Freudenthal said. “I want wind energy. I believe it is good for the state. However, it must be on terms fair to the state and the citizens of the state.”

Economic recovery, jobs, and health care are the three biggest issues as the National Governors Association’s 2010 winter meeting approaches. But as states’ chief executives meet in Washington Feb. 20-22, others beyond these three will be thinking hard about energy industries’ capacity to generate revenue.

EPA invites citizens to keep ‘Eyes on Drilling’

The US Environmental Protection Agency has created a toll-free tip-line for citizens to report non-emergency suspicious activity related to oil and gas development. Called “Eyes on Drilling,” the number for the tip-line, which EPA’s Philadelphia regional office announced on Jan. 27, is (877) 919-4EPA. Tips may be provided anonymously, it added.

The agency, which also is accepting tips by e-mail at eyesondrilling@epa.gov, said it will accept information from people who observe what appears to be disposal or wastes or other illegal activity. “While EPA doesn’t grant permits for oil and gas drilling operations, there are EPA regulations which may apply to the storage of petroleum products and drilling fluids. The agency is also very concerned about the proper disposal of waste products, and protecting air and water resources,” it continued.

The notice said that EPA wants to better understand what people are experiencing and observing as a result of oil and gas drilling activities. The information collected may also be useful in investigating industry practices, it indicated. The tips should include the location, time, and date of such activity, as well as materials, equipment, and vehicles involved, and any observable environmental impacts.

EPA’s regional office in Philadelphia clearly issued the notice because of growing interest in the Marcellus Shale natural gas formation. Production of gas from it will require hydraulic fracturing, which it said results in 20-30% of the fluid used flowing back to the surface with produced brines which contained dissolved materials from the formation, it said in the notice.

“Operators are urged to recycle their flowback water for reuse in the fraccing process, but some of the flowback is taken offsite for disposal,” it continued. “Chemicals used in the process are often stored on-site. Spills can occur when utilizing these chemicals or when transporting or storing wastewater, which can result in the contamination of surface water or ground water, which is used for many purposes including drinking water.”

The service adds another government element to an already complicated situation as Pennsylvanians, New Yorkers, and West Virginians try to grapple with potentially heavy gas production in areas which have no experience with it. It won’t be surprising if opponents use it to cause trouble. But it also will be there in case actual landowners and nearby residents see genuine problems.