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In Colorado, the system worked. So, naturally, the fractivists aren't happy.

When Colorado Gov. John Hickenlooper created an oil and gas task force to resolve simmering issues between the industry and local communities, it demonstrated the sometimes-necessary give-and-take that can be critical to policy-making. But now that the panel has made its recommendations, it looks like the activists and their allies are in no mood to give – and keep wanting to take.

Last year, in an 11th-hour bid to keep potentially harmful anti-drilling initiatives off the November  ballot, Hickenlooper forged a compromise: The measures, which would have effectively banned hydraulic fracturing, would be pulled and the task force would instead work toward finding common-ground, common-sense rules and forward them to the governor.

Thirty-six proposals were considered; nine made the cut. One of them provided that local governments be brought into the facility-siting process early and, in the event differences could not be bridged, that the community and the driller would go into mediation.

It was a pragmatic, realistic way to deal with concerns that too often have been defined by the extremes. So, of course, environmentalists hated it.

Their problem was that none of the recommendations sent to the governor gave municipalities the right to regulate oil and gas development. That’s what they wanted. They didn't get it. And they almost immediately started criticizing the task force’s efforts – even going so far as to say that the initiatives Hickenlooper so artfully managed to keep off the ballot might surface again.

One of the more telling (and predictable) responses came from U.S. Rep. Jared Polis, who was the money behind the anti-fracking measures: “Unfortunately, the oil and gas industry proved they weren’t interested in a compromise or solving the problem.”

Seriously?

Here you have an approach that everyone agreed to; a task force whose membership represented every side of the debate; a six-month process that invited citizens from across Colorado to have their voices heard in meetings throughout the state; and real-world rules that give localities a greater role in decisions related to oil and gas development.

In other words, the strategy accomplished exactly what it was designed to accomplish. But instead of giving Hickenlooper and the panel its due, environmentalists fell back on their “blame-the-industry” rhetoric and vows to ban fracking.

Maybe the task force’s efforts were doomed from the start, given the activists’ traditional refusal to bend and their habit of embracing a line-in-the-sand strategy. I don’t know. But I do know this:

Colorado found a pragmatic way to handle a problem that, if left unsolved, could have had significant implications for the state’s economy and its people. Just because the outcome didn't completely go their way on every issue does not give environmentalists the right to cry foul, to point fingers, or to assail something they agreed to and were part of.

This is truly a case where the system worked. The fractivists need to deal with it.

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In the wake of a new White House report, one question


Last week, the Obama administration released the White House “Economic Report of the President,” a 414-page document that details a “breakthrough year” in 2014. I want to point to some of its highlights, and then ask a single legitimate – if pointed – question.


From the report:

  • “Expanded production of oil, natural gas, and renewables has raised employment in these industries during a period of labor market slack. Technological innovation and greater production help reduce energy prices, to the benefit of energy-consuming businesses and households. These developments have contributed broadly to employment and GDP growth, and will continue to do so.”
  • “Lower net oil imports reduce the macroeconomic vulnerability of the United States to foreign oil supply disruptions.”
  • “The U.S. energy revolution has contributed to economic growth, both in terms of net economic output as measured by GDP and overall employment. It has also contributed to a declining trade deficit as the Nation has recovered from the Great Recession.”
  • “Growth in oil and gas production has directly and indirectly created jobs over the past several years…(T)otal employment in the oil and natural gas industries…increased by 133,000 jobs between 2010 and 2013, and continued to grow through 2014.”
  • “New oil and gas (producing) regions have seen employment growth in schools, retail, health care, and other sectors.”
  • “The increase in domestic oil production, combined with reduced demand for oil, has also led to a sharp drop in net petroleum imports and, as a result, a decline in the Nation’s trade deficit.”
  • “The energy revolution has benefited not only domestic energy sectors, but also the energy-consuming businesses and households that enjoy lower energy price.”
  • “Households pay lower gas bills and can either spend or save the difference. Commercial and industrial businesses…also benefit from lower gas prices, which raise business profits.”


Even though these conclusions speak for themselves, let me summarize.


The domestic energy revolution has created jobs, supported communities, cut oil imports, reduced the trade deficit, enhanced local government services, saved families and businesses money on their monthly power bills, and improved our energy security.


So here’s my question:


Given all of that, why is the White House targeting the industry with punitive tax proposals (killing the so-called tax breaks for oil and gas companies) and burdensome regulations (for example, methane reductions on a sector that is already cutting them voluntarily) whose practical effect is to drive up costs and slow, cripple, or even stop the U.S. boom?


It strikes me as a triumph of presidential politics over sound economic and energy policy. And it makes no sense at all. None.


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Gov. Kasich's declaration of war against drillers in Ohio


Kevin Colosimo, the managing partner in Burleson’s Pittsburgh office, had a really strong opinion-page article in the Cleveland Plain-Dealer last week laying out the arguments against Ohio Gov. John Kasich’s proposed severance tax on drillers.


He wrote in detail about how the plunge in oil prices has already affected the state, and that the tax is “an especially wrong move at the worst possible time” given OPEC’s war on U.S. shale production. After citing the oil and gas industry’s positive contributions to the Ohio economy, he concluded:


“Rather than cut state spending – which rose more than 20 percent during his first term, according to Opportunity Ohio – (Kasich) has instead decided to place a ‘success tax’ on oil and gas companies that will have the collateral effect of costing Ohio citizens jobs, opportunities, and higher incomes.”


Kevin is absolutely right. But one of things I have found most interesting is how Kasich has responded to criticism and questions about his decision.


According to Crain’s Cleveland Business, the governor was asked during remarks in Columbus if, with depressed prices, this was the right time to raise taxes. He replied: “It’s never the right time, is it? They've had three or four years…of free.”


He also suggested one way for drillers to avoid paying the tax: “If you don’t drill, then you don’t pay. It’s only when you sell that you would pay.” (Of course, if you don’t drill, you don’t create jobs, make investments, or generate local government revenues, either.)


And perhaps most concerning of all, he suggested that private ownership of drilling rights is somehow bad and that the State has rights, too. Kasich said of drillers, “You make us a poorer state. Every time you take valuable things out of the ground, you make us poorer.”


His logic on that one escapes me.


As Kevin pointed out, the oil and gas industry has supported 200,000 jobs in Ohio. Production in the Utica Shale has been the primary driver of a 53 percent drop in unemployment statewide. Nine counties that make up the Utica Shale’s core have seen $22.5 billion in investment because of shale energy development.


That doesn’t exactly sound like an industry that is making the state “poorer.”


I find it odd that Kasich – a conservative with, some say, his eyes on the White House – would single out an industry that has been responsible in no small part for Ohio’s economic achievements. As Kevin stated, the move to increase the severance tax on drillers – accompanied by the governor’s “fighting words” in defense of his plans – amounts to nothing less than a declaration of war against oil and gas companies.


If that’s how Kasich treats an industry that has been such a friend to Ohio, I’m hard-pressed to imagine what he’d do to the state’s real economic enemies.

 

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Report suggests fears over fracking-quake link in Irving are exaggerated


A few weeks ago, I wrote that while drilling critics have been laying the cause of small earthquakes around Irving at the door of hydraulic fracturing, researchers, scientists, and seismologists have not been so quick to assess blame. Last week, we got the first bit of evidence to suggest that activists’ fears may (not surprisingly) be greatly exaggerated.


A team from Southern Methodist University has been studying the recent spate of tremblors in North Texas, and has determined that there is a narrow, “shallow” two-mile fault line that runs from Irving to West Dallas. That, they say, is where the tremors are occurring, and it will probably be the focus of their continuing investigation.


According to an interim report released last week, the quakes occurred in “the shallow crystalline basement (granites) below the sedimentary rocks (sandstones, shales, limestones, etc.) that comprise the Fort Worth Basin,” at depths of between 4.5 and 7 kilometers – or three to five miles underground.


But while most news reports acknowledge the shallow depth, here’s a fact that has for the most part been inexplicably omitted from the coverage:


“Production and disposal activities in this region are generally confined to the sedimentary units overlying the basement rocks.”


Translated, that means the quakes, though comparatively shallow, are still starting a lot deeper than drilling and wastewater injection activities.


What’s more, those trying to link the quakes to fracking have pointed the finger of guilt at a pair of wells in the area that were shut down years ago. But a U.K. geologist who has studied the connection told the Dallas Morning News most of the tremors he’s seen that might be associated with fracturing took place no more than a few hours after drillers commenced the process.


When asked if he could think of any way the long-closed wells could have caused the quakes, he replied: “It’s not totally impossible, but I find it hard to believe.”


Also, in examining the “possible mechanisms” of the quakes, Brian Stump, an SMU seismologist, said, “These are not injectors, where fluids are being disposed of.”


It’s important to say that the research is continuing. But this report, though preliminary, has done something both rare and important: It has brought some much-needed, objective science into the debate. For that reason alone, it deserves attention.


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In the debate over Keystone and carbon emissions, truth is the first casualty


I’ve tried to steer clear of any commentary about the Keystone XL Pipeline, mostly because the issue has long ceased to be about energy security, infrastructure, or responsible policy and is now purely about politics.


But with the Senate passing a bill last week forcing its approval – and the White House promising a veto – I wanted to look at one argument that pipeline critics have seized upon and to show how truth can become the first casualty in the environmental debate.


We’ve all heard the claim: Building Keystone would result in “dramatic” increases in carbon pollution that will worsen climate change and bring the planet to the brink of environmental catastrophe.


Sounds pretty scary. The problem, though, is that it just isn’t true.


In 2012, total U.S. greenhouse gas emissions reached 6.5 billion metric tons. The Environmental Protection Agency has estimated that the tar-sands crude moving through the pipeline would result in an additional 18.7 million metric tons of carbon dioxide annually compared to conventional oil, which is less carbon heavy.


That amounts to less than one percent of U.S. greenhouse gas emissions, and what The New York Times in April called “an infinitesimal slice of the global total” of 32.6 billion metric tons.


Now take a look at what else EPA says:


Agriculture, including flatulence and belching from cattle, produced 526 million tons of greenhouse gases in 2012; industrial processes such as iron and steel production, 334 million tons; and land use and forestry, 37.8 million.


Yet no one is urging the Obama administration to outlaw cows, steel mills, or tree-planting. Of course, that’s because none of those things generate the passion (and, cynics might say, the fundraising) that Keystone does, despite the fact that it has just a small fraction of the climate impact by comparison.


Personally, I think a case can be made for Keystone and that it should be built. But that case is based on facts. And this debate isn’t even remotely acquainted with the facts.


I don’t agree with The Times on much of anything, but the paper got it right in reporting that “when it comes to the pipeline’s true impact on global warming…Keystone’s political symbolism vastly outweighs its policy substance.” It’s just too bad that shouts from the pipeline’s critics keep drowning out the voice of reason.


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