From the April 2012 issue of Research Magazine • Subscribe!

Industry Crossroads

America’s independent producers continue to lead the industry and the nation towards meaningful energy security and a manufacturing renaissance.

The American oil and natural gas industry finds itself once again at a dramatic political crossroads in 2012. Not entirely surprising in an election year for a historically targeted industry, it is nonetheless alarming to see the wide divergence from the reality of what American oil and gas production provides and offers for the nation’s future, and what its opponents would have it reduced to for the sake of politics.

Thanks to a complete transformation of the nation’s energy supply and potential, made possible by the homegrown entrepreneurship and ingenuity of independent producers, the United States is poised to make revolutionary strides with new jobs, more revenues for state and local governments and the invaluable national security that comes with it. This is the path leading to the bright horizon of revived rust belt towns and a largely self-reliant energy future.

The emergence of horizontal drilling and hydraulic fracturing, led by America’s independent producers, has unlocked vast riches of shale oil and natural gas. As a result, the United States’ oil imports are down from 60% in 2005 to 47% today. Many experts project that the United States will be the world’s top petroleum producer in under a decade.

The other road points to closed U.S. factories, high energy prices, and increased political dependence on the Middle East. Well-organized, well-funded environmentalist movements, intent on inventing a carbon-free future, seek to shut down all development of U.S. petroleum, liquids and natural gas. Their tactics? Paint the entire industry as homogenous and greedy — the industry is “Big Oil” stealing funding from the education of our children and the healthcare of the elderly. Paint the industry as destructive — the industry’s mysterious “fracking” contaminates water, kills animals, and causes earthquakes. These are unfounded, purposeful claims but are also serious threats as the federal government now has more than ten separated agencies seeking to regulate American oil and natural gas exploration and production.

Preventing an onslaught of prohibitive federal regulations has become a growing priority for the Independent Petroleum Association of America over the past few years, as well as a growing challenge. Fortunately, our efforts to date have been largely successful, but with much more work to be done, IPAA continues to fight for independent producers and ensure that the tremendous potential of America’s oil and natural gas reserves are realized and made available a to the American people.

With regulatory issues, such as the manufactured debate over hydraulic fracturing leading concerns over the federal government’s involvement and potential to slow or stop American oil and natural gas production, the crawling pace of federal permitting continues to hinder American oil and natural gas production on a nearly prohibitive level. The federal government’s slow process of re-opening the Gulf for exploration and production, more than a year after the Deepwater Horizon accident demonstrates that the administration can restrict American oil and natural gas production.

And to date, the Environmental Protection Agency (EPA) has had the most aggressive federal hand on America’s independent producers, threatening to over-regulate the industry on a number of fronts, with one in particular leading the way.

Hydraulic fracturing, the technology which, combined with horizontal drilling has enabled the amazing shale revolution in America, has become the environmentalist’s bull’s-eye to take down the industry — and they are using the EPA to make it happen. The EPA is still conducting a closed door study to determine the effects of hydraulic fracturing on groundwater. Though IPAA has welcomed thorough investigation into the process, knowing our industry’s long history of safety, the EPA has recently, in the case of some early data from Pavillion, Wyoming, seemed aggressive to find fault that hydraulic fracturing contamination. It is an alarming posture, especially in light of EPA chief Lisa Jackson’s acknowledgment that there has not been one proven case of hydraulic fracturing contaminating drinking water.

EPA is also vigorously being called to regulate hydraulic fracturing under the Safe Drinking Water Act (SDWA). This disregards that the states are already safely and successfully regulating hydraulic fracturing. The immediate problem of imposing this specific federal regulation is that hydraulic fracturing is outside of the scope of the SDWA.

The SDWA was never intended to apply to well-completion fluids when it was passed in 1974. In the 1990s, environmental groups brought their case to court to change the scope of the legislation to regulate the industry. The 2005 amendment, coined by environmentalists as the “Halliburton loophole” is not a loophole at all, but a clarification of the legislation, which brought the scope back to the legislation’s purpose.

Undermining the point of redundancy of new federal initiatives has been the opposition’s disregard of state-based programs such as FracFocus, an online chemical registry website where production companies list their hydraulic fracturing fluids, and STRONGER, the State Review of Oil and Natural Gas Environmental Regulations. IPAA actively promotes both programs, which demonstrate the success of the state regulatory regimes already in place.

But the EPA has pressed on, as have the activist interests, like “GasLand” director Josh Fox, that have become obstructive in the process of finding productive answers to the public’s questions on hydraulic fracturing. For the industry’s part, there remains an open and transparent source of information through the IPAA-managed coalition, Energy In Depth (EID).

Dispelling confusion about hydraulic fracturing early in the public debate through its comprehensive online information platform and media resource outlet (www.energyindepth.org), EID outreach and capability continues to grow every day and has served as the industry’s focal point for getting the truth about hydraulic fracturing and answering the public’s questions about industry practices.

These threats demonstrate the importance of electing policymakers who understand how much the oil and natural gas industry has to offer. The IPAA Wildcatter Fund is the largest oil and natural gas industry association Political Action Committee in the nation. Its success has been demonstrated throughout many election cycles. In 2010 alone, the Wildcatters Fund contributed to over 113 races nationwide. Out of these races, 86% of our candidates won.

Not only does IPAA get these leaders elected, but once these legislators are in office, IPAA holds them accountable by publicizing their voting record on industry issues. The oil and natural gas industry has the ability to help take our nation down the path of prosperity and energy security. The importance of success in the upcoming elections of 2012 cannot be emphasized enough.

Despite the dangers that the industry faces in 2012, IPAA is confident that the future of the American oil and natural gas industry is bright. We must take back the debate from radical environmentalists, who champion their cause by demonizing the industry and drumming up unfounded fear in the public. Their activities threaten the livelihood of millions of American workers who depend on the oil and natural gas industry for well-paying jobs.

Independent producers support 4 million jobs in America — that’s 3% of all U.S. jobs. IPAA is committed to fighting against overregulation and irresponsible legislation which limits the oil and natural gas industry’s ability to lead our nation to economic recovery and a more stable energy future.

IPAA’s efforts and success would not be possible without the continued support of its members, who are truly the backbone of the association’s work in Washington. Not only is IPAA fortunate to have a membership that is effective through their collective advocacy involvement, but also one that is a constant example of its own cause; America’s independent producers continue to make the best case for the industry every day in the field, as they lead in industry and the nation towards meaningful energy security and our manufacturing renaissance.

The nation is at a serious crossroads, one defined by choices to be made on the economy, energy and national security. Fortunately, there is a path available that provides the key to all three — and the American oil and natural gas industry is prepared to lead the way. At IPAA, we are proud to represent the men and women who have made that path possible and defend their right and ability to continue that work.

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