At Metro Center, the connection between jobs and the energy industry

The American Petroleum Institute has a new ad campaign up and running, “I’m one,” complete with signage in the Metro Center station in the Washington Metro.

That’s Frederica C. smiling at us in the sign above, appreciative of her job as a marketing manager supported by the oil and gas industry.

You can see all 25 API Metro ads by scrolling down here.

It’s a timely campaign, given the expected comments about energy and jobs President Obama will make in his State of the Union address Tuesday.

American Petroleum Institute, “API response to commission report: ‘We’ve made progress to improve safety’“:

API Upstream Director Erik Milito said the group is still in the process of reviewing the commission’s report but is pleased the commission is recommending increased funding for the federal agency responsible for inspecting and monitoring offshore activity. However, he said API is deeply concerned that the commission’s report casts doubt on an entire industry based on its study of a single incident.

“This does a great disservice to the thousands of men and women who work in the industry and have the highest personal and professional commitment to safety,” Milito said.

Dan Kish, Senior Vice President at the Institute for Energy Research, “IER: BP Spill Commission Was Flawed From the Start“:

This commission has had problems from the beginning – it has seemed to prioritize creating political cover for the Obama Administration over working towards becoming a fact-finding body. That’s because it’s full of politicians, activists and opponents of offshore drilling. The public needs to know that the Macondo spill was an isolated incident that tragically differed from the oil and gas industry’s history in the Gulf: 60 successful years that generated 50,000 successful wells.

Washington Examiner editorial, “Oil spill antidote: More federal bureaucracy“:

It wasn’t hard to predict the sort of recommendations to expect from the seven-member National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling when President Obama appointed Natural Resources Defense Council President Frances Beinecke, Union of Concerned Scientists board member Fran Ulmer and five other Democratic donors to the panel. All seven oppose offshore oil and gas activity and are environmental movement stalwarts. … (continue reading…)

The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling today released its final report making numerous recommendations, including an increase in the current $75 million cap on liability for offshore drilling accidents. The oil spill dommission did not recommend a specific figure for the higher cap, leaving that decision up to Congress.

Manufacturers believe that a substantial or unlimited cap increase is not the solution. Before taking any action, Congress should take a close look at the impact of any cap increase on the industry. Any substantial increase to the liability limit will inevitably lead to higher insurance rates, making operations in the U.S. waters potentially so expensive as to drive producers out of the Gulf overseas. Smaller independent operators, in particular, would suffer competitively. (See this American Petroleum Institute paper, “Impacts of Increased Liability Limits on OCS Operations.”) The result would be to continue an unofficial moratorium on offshore drilling.

Last session, there were discussions of an unlimited liability, while several Senators introduced legislation to raise the cap 13-fold, to $10 billion. Despite intense pressure to act, Congress ultimately passed very little legislation last year in response to the Deepwater Horizon spill, largely out of concern about further damaging the Gulf region’s economy. Those concerns remain valid.

As the Manufacturers have stated before, any delay in off-shore drilling will have a significant economic impact on manufacturers and other industries throughout the Gulf Coast and the nation.  The nation cannot afford increased job loss, especially during a time when the unemployment rate is as high as 9.4 percent.  Additionally, any further delay will have considerable impact on the domestic oil supply where it will drive up the cost of energy and create uncertainty in oil supply because companies will have to go abroad for drilling.

The American Petroleum Institute today hosted a panel discussion with three economists, Dave Crowe of the National Association of Home Builders (NAHB), John Felmy of API and David Huether of the National Association of Manufacturers (NAM).

API’s Jane Van Ryan has a report at the EnergyTomorrow blog, “Economists: Higher Taxes Could Harm Economic Recover.” Excerpt:

David Huether of NAM predicted that the “economy will be stuck in low gear for the second half of this year,” citing low consumer confidence and uncertainty over government policies. Although U.S. exports are up and 145,000 jobs were created largely in the first four months of 2010, economic growth is “lackluster.” Huether also cautioned that since manufacturers compete globally, “The last thing the government should do is add costs, raise taxes.”

API’s John Felmy also warned about government actions. “Policies are being proposed that drain money from the industry,” he said, referring to the administration’s plan to increase taxes on the oil and natural gas industry by $80 billion. John also said the failure to pass tax cut extensions could have a negative impact on small oil producers whose wells produce 2 barrels a day or less and provide jobs for about 125,000 workers. He said higher taxes, as well as the de facto offshore moratorium, could adversely impact domestic oil and natural gas supplies, energy security and job creation.

The Small Business Administration’s Office of Advocacy report we cited below , “The Impact of Regulatory Costs on Small Firms,” did not take into account the Bush Administration’s 2008 ozone regulations (reducing the ambient air quality standard to 75 parts per billion), nor the Obama Administration’s proposed regulations, which could lower the standard to 60 ppb.

It’s safe to say those regulations will be expensive. Bet small business gets hit the hardest.

From The Oil and Gas Journal, “Proposed ozone standard would devastate US economy, API warns“:

WASHINGTON, DC, Sept. 21 — A US Environmental Protection Agency proposal to reduce the national primary ozone standard to 60 ppb from 75 ppb would devastate the US economy by forcing most of the country to meet stringent standards which now are imposed of its most heavily populated areas, the American Petroleum Institute warned.

“We all know that EPA cannot consider economics in considering standards,” Howard Feldman, API’s director of regulatory and scientific affairs, said in a Sept. 21 teleconference with reporters. “But it cannot ignore them. There’s a real cost and real significance to this.”

The story builds on the NAM-API co-sponsored report, “Economic Implications of EPA’s Proposed Ozone Standard (ER-707. The analysis by Donald A. Norman, Ph.D., Manufacturers Alliance/MAPI economist, concluded:

• GDP would be reduced by $676.8 billion in 2020 (in 2010 dollars), an amount that represents 3.6 percent of projected 2020 GDP in the baseline case (2.5 percent annual GDP growth);
• Total U.S. job losses attributable to a 60 ppb ozone standard are estimated to rise to 7.3 million by 2020, a figure equal to 4.3 percent of the projected 2020 labor force;
• Together, annual attainment costs and reduced GDP in 2020 would total $1.7 trillion.

API’s Feldman raises another an angle we hadn’t considered: Unreasonably stringent ozone rules represent yet another move again U.S. energy security, including the tremendous promise shown by natural gas development of such areas as the Marcellus Shale: “Clearly, natural gas drilling is increasing across the country, and we expect that to continue…As more of it moves into areas such as Pennsylvania which would not meet these new standards, it would require extra costs and controls. The states also would have to offset these emissions.”

Earlier posts: (continue reading…)

Responding to today’s report the national unemployment rate had risen to 9.6 percent in August, President Obama made a statement at the White House expressing concern about joblessness. He then continued:

But I want all Americans to remind themselves there are better days ahead. Even after this economic crisis, our markets remain the most dynamic in the world. Our workers are still the most productive. We remain the global leader in innovation, in discovery, in entrepreneurship.

That’s right, and the President’s reminder is useful as context and reassurance.

Still, the statement must clank painfully against the ears of all the people who are out of work or who face the loss of their jobs because of Administration policies on energy, specifically the moratorium on deepwater drilling, and the proposals in Congress to raise taxes on the oil and gas industry. On Wednesday, about 5,500 people, including a heavy representation of energy workers, workers, turned out for “Rally for Jobs” events in held in Houston, Port Arthur and Corpus Christi to protest those policies.

As Jack Gerard, President of the American Petroleum Institute, observed, “Today energy citizens in Texas sent a clear signal to Congress that lawmakers should focus their efforts on reviving our economy and creating more jobs. U.S. unemployment is high and Americans are increasingly concerned about the slow pace of economic recovery.” That message certainly resonates even more today with the latest unemployment report.

API has put together a video report on the Wednesday’s rallies at the EnergyTommorow blog, “Energy Workers Fight for Their Jobs.” More events are scheduled next week in Canton, Ohio, Farmington, N.M., and Joliet, Ill.

The drilling moratorium’s toll on jobs continues to add up. The 33 drilling platforms support between 800 to 1,400 workers each – offshore and on.  This means that as many as 46,200 jobs could be idled by the moratorium in the short term. If a moratorium carries forward, API estimates the loss of jobs could reach 120,000 by 2014. And of course, the economic activity that normally flows through local communities is stifled. (For more figures, see this report from the Louisiana Mid-Continent Oil and Gas Association.)

With the moratorium, it’s as if the Administration is saying: “Jobs. JOBS! Just not those jobs.”

But wasn’t there another rig fire on Thursday? Doesn’t that prove the need for a moratorium?

Only if the standard is the impossible to meet “no risk, ever.” As Charlotte Randolph, president of the Lafourche, La., Parish and an outspoken critic of the moratorium, told The Associated Press, the outcome of Thursday’s platform fire proved that the oil and gas industry practices effective safety procedures: “The people were safely recovered. The oil did not spill. It’s everything the Deepwater Horizon was not.”

Right before breaking for its six-week August recess, the House of Representatives voted to pass a bill that, if it became law, would raise the cost of energy and drive out energy producers from the Gulf of Mexico and other offshore sites.

From all that we hear, the Senate will have a difficult time moving on any “energy” bill this week, especially with any language to eliminate the liability cap on accidents from offshore activities. Unlimited liability would disadvantage smaller domestic energy producers.

The House-passed bill is H.R. 3534, the Consolidated Land, Energy, and Aquatic Resources Act. It passed by a vote of 209-193, with 30 members not voting, nine Democrats and 21 Republicans. Those 30 members could have defeated the bill, but plane reservations had been made.

The bill did include a good amendment sponsored by Rep. Charlie Melancon (D-LA) to lift the Obama Administration’s moratorium on deepwater drilling for rigs that meet safety requirements.

The National Association of Manufacturers issued a statement, “Manufacturers: House Energy Bill Is Setback for America.”

The American Petroleum Institute issued a critical statement from API President Jack Gerard after the vote, “API says House-passed spill bill anti-jobs, anti-consumer, anti-energy.” Excerpt:

The House bill passed today will kill jobs, threaten our fragile economic recovery and place our energy security at risk. This is an anti-jobs, anti-consumer and anti-energy bill. Instead of addressing the risks of offshore development by improving safety and establishing a robust system for covering the costs of possible future accidents, this bill effectively bans development and sends thousands of workers in offshore communities to the unemployment lines.

Senate Majority Leader Harry Reid (D-NV) introduced the long-awaited “energy bill” on Tuesday, legislation that has no cap-and-trade, no utility-only CO2 limits, nor any renewable energy portfolio standards. All to the better…

The legislation is being called “Clean Energy Jobs and Oil Company Accountability Act.” (Reid statement, bill summary, text.)

The Wall Street Journal’s coverage of the bill is straightforward, “Energy Bill Would End Oil Claims Cap“:

WASHINGTON—A draft energy bill unveiled Tuesday would eliminate the cap on damage claims oil companies must pay for spills, and offer new federal subsidies for natural gas and electric vehicles. But the proposal by Senate Democrats faces an uphill fight….

Mr. Reid’s draft bill would lift the current $75 million cap on economic damages paid to residents and small businesses by oil companies after oil spills. It would also provide various subsidies to encourage the production and purchase of natural-gas and electric vehicles. A new program would encourage homeowners to make energy efficiency upgrades.

The measure’s estimated $15 billion cost would be financed by raising the per-barrel surcharge that oil companies contribute to the federal Oil Spill Liability Trust Fund.

Jack Gerard, president and CEO of the American Petroleum Institute, reacted to the bill with a critical statement, “Senate Energy Bill Threatens Jobs, Economic Growth“:

[The] liability provision sticks out as a jobs killer. Requiring an unattainable level of insurance coverage for domestic energy producers on the Outer Continental Shelf will force the vast majority of American companies out of U.S. waters, according to insurers. 

This would cut domestic production, kill American jobs, slow economic growth and cost billions in federal oil and natural gas revenues.

The Journal also refers to the concerns that the bill’s goal of switching transportation to natural gas, coming at the same time that environmental groups and some politicians are calling for increased regulation of hydrofracturing, could produce a price spike as demand outstrips supply. This release last week from the energy consumers explains the objections, “Coalition of Consumers Urges Senate Not to Legislate Natural Gas Demand in Energy/Climate Bill.” (continue reading…)

President Obama visited Youngstown, Ohio, in mid-May to promote the Administration’s economic policies, pointing to the stimulus bill’s success in encouraging investment and job creation. To illustrate his argument, he appeared at V&M Star, a manufacturing of steel tubular goods, embarking on a $650 million expansion.

In the President’s remarks, he hailed the new railroad spur that encouraged the company’s expansion.

So as a result of this investment, V&M Star’s parent company decided to invest $650 million of its own money — its own money — (applause) — to build a new one-million-square-foot mill right here in Youngstown, the largest industrial plant built in the valley since GM built its plant over in Lordstown in the 1960s.  Think about that — biggest investment since the 1960s — 50 years.  (Applause.)  So right here, in the heart of the old steel corridor, where some never thought we’d see an investment like this again, they’re placing a bet on American manufacturing and on this community.

And that bet is going to pay off for 400 construction jobs once they break ground this summer; 350 new manufacturing jobs once the mill comes online, which doubles the current workforce.

Infrastructure investment is critical to the manufacturing sector, of course. It was one of the key elements of a Milken Institute study, “Jobs for America: Investments and Policies for Economic Growth and Competitiveness,” sponsored by the National Association of Manufacturers.

But there better be an economic reason to justify the infrastructure, some underlying demand that inspires the investment. Unfortunately, President Obama made only one passing reference to the basic reason for V&M Star’s expansion — natural gas, that is, shale gas, that is, the Marcellus Shale, made accessible by hydrofracturing technology.

Groundbreaking ceremonies were held at V&M Star the end of June, and the local newspaper, The Vindicator, reported on the event. From “V&M Star’s $650m expansion gets rolling“:

Philippe Crouzet, chairman of the Vallourec Management Board, praised the private- and public-sector cooperation that made V&M’s expansion possible. [Vallourec is the French parent company.]

“Every aspect of our endeavor is coming together remarkably well,” Crouzet said. “There was an unprecedented collaboration between elected leaders, government professionals and the business community.”

The expansion will allow V&M Star to respond to the growing demands of its natural-gas customers in the Marcellus Shale, Crouzet said. The shale, a natural-gas formation the size of Greece located under Pennsylvania, New York, West Virginia and Ohio, could contain as much as 489 trillion cubic feet of recoverable gas.

“We are building the future in a market that has great opportunities,” Crouzet said. “V&M is well-positioned to serve as a bridge between this demand and supply.”

In case there was any doubt about the connection between economic activity, jobs and the Marcellus Shale, the American Petroleum Institute has released a new study that documents the value of natural gas. From the news release, “New Study Finds Natural Gas in Marcellus Shale Region Worth 280,000 Jobs, $6 Billion in Government Revenue“: (continue reading…)

From the Department of Interior, “Secretary Salazar Issues New Suspensions to Guide Safe Pause on Deepwater Drilling“:

WASHINGTON, D.C. – Secretary of the Interior Ken Salazar today directed the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) to issue new suspensions of deepwater drilling on the Outer Continental Shelf (OCS), saying a pause is needed to ensure that oil and gas companies first implement adequate safety measures to reduce the risks associated with deepwater drilling operations and are prepared for blowouts and oil spills.

Shallow water drilling activities that use different technologies do not present the same type or level of risks as deepwater drilling operations and can continue to move forward if operators are in compliance with all safety and environmental requirements, including new safety and environmental requirements implemented through recent Notices to Lessees. Production activities in federal waters of the Gulf are not affected by the deepwater drilling suspensions.

“More than eighty days into the BP oil spill, a pause on deepwater drilling is essential and appropriate to protect communities, coasts, and wildlife from the risks that deepwater drilling currently pose,” said Secretary Salazar. “I am basing my decision on evidence that grows every day of the industry’s inability in the deepwater to contain a catastrophic blowout, respond to an oil spill, and to operate safely.”

American Petroleum Institute’s President and CEO Jack Gerard issued a statement criticizing the latest moratorium. Excerpt:

It is unnecessary and shortsighted to shut down a major part of the nation’s energy lifeline while working to enhance offshore safety. The new moratorium threatens enormous harm to the nation and to the Gulf region. It places the jobs of tens of thousands of workers in serious and immediate jeopardy and promises a substantial reduction in domestic energy production. No certain and expeditious path forward has been established for a resumption of drilling.

The 33 now idle deepwater drilling rigs in the Gulf have passed thorough government inspections and are ready to be put back to work. The industry has been working extremely hard on all fronts to enhance safety – and will continue to do so. And the government has already imposed significant, additional safety requirements that are supported by the industry. A resumption of drilling would proceed only under the most intense and vigilant oversight.