Mixed Messages

Last month, I attended the annual IHS CERAWeek conference in Houston. This meeting brings together some of the biggest and most influential names and companies in the global energy industry. From the outside, viewing the star-studded speaker list (which included dozens of CEOs from around the world, plus two sitting U.S. governors and two former governors), one could easily be seduced into thinking that this was a confab of some of the most powerful people in the country. That’s certainly an impression held by some, if one is to judge by the group of Occupy Houston protestors who twice disrupted the conference to protest oil and gas subsidies. But what I came home from Houston with was the sense of an industry gripped by a pervasive sense of helplessness.

Thomas F. Farrell II, the president and CEO of Dominion, put it very succinctly in his keynote address: "Americans love electricity, and, as always, love is blind."

The energy industry, first and foremost, is handicapped by a public that has no real understanding of how electricity is generated and gets to its outlets and by a federal government (in all its elements) that seems largely uninterested in changing this fact unless there are political points to be scored in the process.

The overwhelming majority of electricity in the U.S. is generated from domestically produced resources—coal, gas, nuclear, and renewables—yet the debate over our energy future is often contorted by arguments about how supporting one option or another will "reduce our dependence on foreign oil." The power generation industry is as heavily regulated as banking and health care, if not more so, yet Americans still wonder why their utility bills don’t rise and fall with the petroleum commodities market.

Leadership Is Lacking

The one thing nearly all sectors agree on is that the U.S. is in dire need of a comprehensive energy policy. But a policy presumes some consensus on the major issues, and forming a policy consensus is difficult at best when there is little agreement on basic facts and no consistent leadership to change this.

That brings us to President Obama’s recent cheerleading on natural gas.

Many in the industry, including GAS POWER, welcomed the president’s comments in his State of the Union address on hydraulic fracturing and moving toward greater use of natural gas. Here’s what he said, in full:

We have a supply of natural gas that can last America nearly 100 years. And my administration will take every possible action to safely develop this energy. Experts believe this will support more than 600,000 jobs by the end of the decade. And I’m requiring all companies that drill for gas on public lands to disclose the chemicals they use. Because America will develop this resource without putting the health and safety of our citizens at risk.

The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy. And by the way, it was public research dollars, over the course of 30 years, that helped develop the technologies to extract all this natural gas out of shale rock—reminding us that government support is critical in helping businesses get new energy ideas off the ground.

Although some of the factual statements here are open to debate (such as how fracking technology was developed), "every possible action" doesn’t leave a lot of wiggle room.

But since these words were delivered on Jan. 24, the emphasis has seemed to be far more on "safely" than "develop." Even as the states—including those with Republican governors, like Ohio—have moved aggressively to rein in irresponsible fracking operations and require disclosure of fracking chemicals, the Environmental Protection Agency and Bureau of Land Management are readying a dizzying array of new regulations of their own.

Oil and gas development on private land has traditionally been under state jurisdiction, and it’s not at all clear that the states can’t do the job. Indeed, they’ve moved much faster in response to this issue than the federal government, which has only recently begun looking into it. (For more on the impending wave of regulations, see the article by Mark Fitzsimmons and Rachel Tennis in this issue.)

The Industry Is Not Anti-Regulation

The industry is clearly in favor of some regulation of fracking—almost every mention of shale gas at CERAWeek was accompanied by professions of support for some oversight—but I doubt anyone wants to deal with multiple, overlapping rules at both state and federal levels.

Of course, the federal government is in control of gas development on federal lands, but there too one hears complaints of too many regulations and roadblocks in the way of responsible development. Who you listen to has a large effect on how you view this issue, but it’s clear that a majority of the growth in gas production over the past few years has come from private land. Though the president issued an executive order forming a working group to advance the production of unconventional gas resources on April 13, the long list of members (thirteen federal agencies plus "other agencies or offices as the Chair may invite to participate") does not augur well for quick results.

Shale gas offers great promise for this country’s energy future, but we need to get it out of the ground first. As heady as it may be for a president to champion one’s industry in major speeches, words need to be followed by action. So far, we’re still waiting.

—Thomas W. Overton, JD is POWER’s gas technology editor. Follow Tom on Twitter.