Last updated: December 26, 2012 5:32 pm

Oil lobby seeks to work with Obama

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Shale gas boom©Bloomberg

Unlike Europe, US is enjoying a shale gas and oil boom as at this plant in Pennsylvania

One of President Barack Obama’s fiercest critics, the head of the US’s powerful oil and gas industry lobby, has signalled the potential for better collaboration during Mr Obama’s second term, thanks in no small part to the unexpected fossil fuel boom that has put the country on track to become the world’s largest energy producer.

After four years of combat between the American Petroleum Institute and the White House, Jack Gerard, the lead representative of 500 oil and natural gas companies, said he is hopeful that the president will keep his re-election campaign commitment to promote the industries as crucial to economic growth and energy independence.

An important first measure of the president’s commitment over the next six months will be whether he approves the construction of a controversial pipeline to bring oil from Canada to the US that was previously blocked, he said.

“If the president approves the Keystone XL Pipeline that will be a very positive indicator that he’s going to fulfil the promises he made to the public,” said Mr Gerard, a staunch supporter of Mitt Romney who was tipped as a potential chief of staff in a Republican White House.

“A second real test will be to look at the way the regulatory activities unfold and how much development we see coming from federal lands,” he added, attributing most of the recent boom to governors in states like North Dakota, Colorado, Pennsylvania and Ohio allowing development on private and state lands. He is lobbying for public land to be opened up for drilling.

Relations between the oil industry and the White House deteriorated when Mr Obama took office with a vow to promote alternative energy sources like wind and solar power, and diminish US reliance on fossil fuels.

His administration backed efforts to introduce a cap-and-trade system for carbon emissions, then used regulation through the Environmental Protection Agency to crack down on coal plants and other emitters.

It imposed a broad moratorium on drilling in the wake of the BP oil spill and blocked the construction of the Keystone XL Pipeline, angering the industry and many Republicans. An environmental impact report on whether the pipeline will be allowed to go ahead is due soon.

But during the second half of his first term, Mr Obama began to show a more favourable stance towards fossil fuels, in light of the unexpected shale gas and oil boom and the petering out of stimulus-era funds for alternative energy development.

The International Energy Agency’s latest World Energy Outlook projects that the US, already the global leader in natural gas, will become the world’s biggest oil producer by 2020 and will finally achieve energy independence a decade later.

Analysts see good omens for a second-term energy policy that has a place for fossil fuels, saying that the Obama administration cannot block the source of so much economic growth, no matter how unpalatable it might find the hydraulic fracturing or “fracking” that comes with shale gas development.

“I don’t think they are going to kill the goose that laid the golden egg,” says Frank Verrastro, director of the energy programme at the Center for Strategic and International Studies, predicting that the Obama administration will over-regulate shale.

But environmentalists are urging the president to continue pivoting towards renewables and away from fossil fuels.

“The shale gas boom does not need federal taxpayer help,” said David Doniger, director of the climate and clean air programme at the Natural Resources Defence Council, urging an end to century-old tax credits for oil and gas companies.

“The wind industry is at a point in its development where it is rapidly bringing down its costs so we should hasten that and help get them to scale so they can stand on their own,” he said.

In response to Mr Gerard’s challenge, the White House said that the president had already made clear that expanding safe and responsible production of oil and gas is a priority.

“Domestic production has increased each year the president has been in office, with oil production currently higher than any time in nearly a decade and natural gas production at an all-time high,” said Clark Stevens, a spokesman. “At the same time, we continue to offer tens of millions of acres to industry for production.”

Mr Obama said in his state of the union address last year that “my administration will take every possible action to safely develop” the US’s natural gas supply, which experts say could last almost 100 years.

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