Oil and Gas:

IPAA's Naatz responds to Interior's move on Utah oil shale lease sales

Does the Interior Department's move to cancel oil shale lease sales in Utah preview how other access expansion decisions may be handled by the Obama administration? During today's OnPoint, Dan Naatz, vice president of federal resources and political affairs at the Independent Petroleum Association of America, reacts to Interior's latest decision and explains how independent petroleum producers will be affected if drilling access is not expanded. Naatz also explains how IPAA's member companies are positioning themselves in the cap-and-trade debate.

Transcript

Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. With us today is Dan Naatz, vice president of federal resources and political affairs at the Independent Petroleum Association of America. Dan, thanks for coming on the show.

Dan Naatz: It's a pleasure being here, Monica.

Monica Trauzzi: Dan, the exploration of new energy resources has been at the top of the headlines in the last month, particularly with Interior Secretary Salazar canceling the planned Utah oil shale lease sale that was approved by the Bush administration. He's holding a 90-day comment period before deciding whether to allow for other new releases. What's your take on all this?

Dan Naatz: Well, my concern overall I think is as the administration has come in, Secretary Salazar, who's a Westerner, has taken a number of actions, in Utah with the oil shale leases, also canceling leases in the southern part of Utah that have really caused us some concern as the administration's talking about increasing American energy production. And certainly production that independent producers are interested in getting access to those areas. Suddenly there's been a shift of stopping all these, delaying these, and it causes us concern because it's really key that access be maintained for all energy sources certainly, but certainly those areas, oil and natural gas that are American production.

Monica Trauzzi: Do you see this Utah decision sort of foreshadowing how the administration might handle other leases in the future?

Dan Naatz: We certainly hope not. Now, again, I know that secretary has said that these were done in the dark of night at the end of the Bush administration. But if you look at the situation there was full regulatory process going forward. So we want to certainly work with the secretary, work with the new administration. We've been reaching out to Democrats, Republicans, and certainly the Obama administration to talk about the importance of access. So we hope it doesn't go to the next step where this is the standard that the administration sets going forward.

Monica Trauzzi: But why shouldn't the administration be sort of taking some time to look at things a little closer, analyze these lease sales, analyze where the exploration is happening? I mean isn't this a sensible solution where they're finding out the information they need and then they're going to come back to it in 90 days in this case?

Dan Naatz: Any time an administration changes I think you can expect that there's going to be some attempts to look at what happened in the past, look through this. Our concern has been that this was done a under full regulatory process with the previous administration and nobody is talking about shortchanging the public involvement process, speeding things through. On all of these activities this was done fully. And we fully anticipate that a new administration is going to want to take a look at some of these things, but our concern has been that coming out of the box the first number of requests have been to delay activity either onshore or, I'm sure we'll talk about offshore down the road, holding off on moving forward and making some really key positions on energy as we move forward.

Monica Trauzzi: And specifically on the expansion of access to drilling, they've delayed that by 180 days. Are you anticipating another delay after the September 23 deadline.

Dan Naatz: Well, we hope not. And, again, we are going to be talking to the administration. We've been talking. We're trying to reach out to the secretary on this delay of the five-year plan comment period, delaying it another six months. Again, we fully understand the process is important. There needs to be full public involvement. It's important to note, again, as the Secretary characterized what happened on the five year plan as kind of something that happened in the dark of night. Nothing could be further from the truth. This first round had over 150,000 comments, public comments, both for and against. This process, this five-year plan process is a multi-tiered process that's going to take a number of years to put forward. So we are concerned that in the name of additional comments, that actions are being taken that are going to significantly delay the ability of the public and producers to access these resources.

Monica Trauzzi: What, more specifically, is the impact on your member companies? How are they impacted by these delays? These are smaller producers. These are not the big guys. So how are their day-to-day operations impacted?

Dan Naatz: Certainly for our independent producers, which, again, it varies company to company, but we average 25 people. These are small companies. The offshore usually a little larger. But in all of this, not having the ability to access the federal lands in the Intermountain West, not having the ability to access these offshore resources makes it very difficult for them to put budgets together, to put plans together. You know, our independent producers traditionally roll in even more than what their - profits that they're getting, roll it back in. A lot of times they're borrowing money. And so when delays happen six-month may not sound like much, but it's a significant impact if you're trying to put business plans together and deal with all these issues that are going on in the economy.

Monica Trauzzi: In his first speech before a joint session of Congress the president focused on energy as one of the main solutions to our current economic crisis and he talked a lot about the development and expansion of clean energy resources. He did not discuss the expansion of drilling however. What's your take on the overall tone of the speech and also, more specifically, on the fact that that was not mentioned?

Dan Naatz: Sure. First of all, I will tell you that we are thrilled that the president raised energy issues honestly. This has been a debate that in the country has been ignored for far too long, be it oil and natural gas, be it alternative resources, be it conservation. So we're happy that that came out and I think it had been reflected in the elections. As information we are seeing, energy was something that was, you know, on top of their list, so that's good. The country needs to have a discussion about energy issues. We obviously are concerned that the focus was solely on important energy resources, alternatives, but you can't get there without addressing the issue of oil and natural gas, production, and how you're going to move forward. So we certainly want to continue having that dialogue. Again, we're pleased that the president is looking at it and we want to make sure that they're looking at all energy resources, kind of the all-of-the-above moniker gets used a lot, but it really is true. As you're looking at the energy picture, the energy puzzle, you have to have all the pieces moving forward and you can't pick and choose as you're trying to address these very important issues.

Monica Trauzzi: Also mentioned in this speech was a cap on carbon emissions and both the House and Senate have established very aggressive timelines for getting legislation through both chambers this year. It seems like this is coming. It seems like a cap and trade, you know, we could see it in the next year or two signed.

Dan Naatz: Sure.

Monica Trauzzi: How are your members positioning themselves for the cap-and-trade debate and ultimately once we have one in place?

Dan Naatz: First of all, I will tell you from an association we have not taken an official position for this reason, we have 5000 members and there are companies that are in different spots. But I will tell you the industry in total has looked at this and our number one concern is that we take actions that aren't going to impact jobs, aren't going to impact the economy, that we look at this and that they have a vigorous debate about what's been talked about when you talk about a cap and trade. It's easy to talk about a cap and trade, these are central arguments that are going to impact my children and their children as we move forward on this. And so it's really key that we look at this in a broad look and have a vigorous debate and talk about it. I'll also tell you one of the things that we've been talking about when we talk about Capitol Hill and the Congress and we're actually having members come in next week to be involved, and this is that natural gas is really going to be a key part of any efforts to get to a climate change answer. And in order to have those natural gas resources we've got to have access. We have to have the ability to put business plans together. So we think natural gas certainly is a key tool in addressing any future actions on climate change.

Monica Trauzzi: I want to switch gears and focus sort of on some of the more technical items that your member companies are dealing with. And IPAA is concerned about efforts to give EPA the authority to regulate hydraulic fracturing, which would be used to produce gas from shale and also enhanced oil recovery. Why shouldn't EPA be regulating this? What is the reason for the concern there?

Dan Naatz: Sure, the concern is that these states for long have had the ability to regulate these activities and we believe that's the way it should be. You don't want an overarching, federal mandate that would mandate that would impact the ability to allow companies to go forward. We believe the federal government should have some systems in place, but then allow the states, who are far more knowledgeable about what happens in their areas, especially when you're talking about ground water and when you're talking about all those issues. And I will tell you, really, it's really key that when you're talking about hydraulic fracturing, how this has really made a paradigm shift in natural gas production in the United States. Last year American production went up 9 percent with natural gas and so it's really key that we continue to move forward and allow hydraulic fracturing to move forward. There are certainly questions that need to be answered. We need to move forward with that and look at ways so that we don't make it more difficult to produce American energy and hydraulic fracturing is one of the keys to that.

Monica Trauzzi: OK, we'll end it right there on that note.

Dan Naatz: All right.

Monica Trauzzi: Thank you for coming on the show.

Dan Naatz: Thank you.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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