Thursday, January 26, 2012

Obama’s speech evades key fracking question

President Obama prepares for State of the Union address
Photo: White House release
President Obama’s State of the Union pledge to aggressively pursue new sources of domestic energy while improving conservation is politically safe in an election year. How can you vote against clean, domestically produced energy as an economic driver?  His endorsement of shale gas extraction as a subset of this ventures into riskier political territory, but is not a huge gamble at this stage. He has already endorsed shale gas in an energy plan unveiled last summer, called Blueprint for a Secure Energy Future. This plan recognizes shale gas development as part of the administration's energy strategy, including a component to support global efforts to displace oil with natural gas. At the time of his State of the Union address, Obama was also due to give the carbon industry a rhetorical nod after taking away the Keystone pipeline project, which remains a sore spot among his critics.

Probing beyond the rhetoric, Obama’s call for "safe drilling" can mean a lot of things on a technical level that were not included in his speech, which gave little insight into a fundamental question on which the future of shale gas development hinges: Will the industry be regulated under the Safe Drinking Water Act under Obama's watch? And if so, is shale gas extraction economically sustainable with the low prices and market glut?

There are strong capital forces at work, which I explore in Under the Surface. Not all of these forces encourage a rush to embrace natural gas as America’s fuel of choice. Along them are Charles Koch and his brother, David, who control Koch Industries, a $100 billion privately held conglomerate with major holdings in cattle, timber, and oil; and Dow Chemical Company, which uses natural gas as both a fuel and feedstock in manufacturing 3,300 different products, from paints to personal care items. Both Koch and Dow Chemical lobbied against a bill, supported by Obama and natural gas booster T-Boone Pickens. HR 1380, commonly known as The Pickens Plan, would subsidize natural gas vehicles. In their opposition, both Koch Industries and Dow argued that government-subsidized initiatives would drive up prices and encroach on their cheap supply of natural gas.

There are other factors at work that belie the rhetorical simplicity of natural gas production outlined in the president’s speech. The EPA has recently shown a willingness to insert itself in the hydraulic fracturing controversy, as it takes over an investigation from the Pennsylvania state DEP looking at groundwater contamination in Dimock. The Dimock probe will be factored into a larger study on the safety of hydraulic fracturing due to be released by the EPA later this year, possibly in the throes of the presidential campaign. The economy, the fracking debate, the EPA study, the political atmosphere, and capital pressures on domestic energy supply and demand – each are variables that could swing one way or another in months to come, with a combined effect that defies prediction.

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