Climate Bill Divides Oil and Gas Industry

Posted by Kristy Kershaw on October 13, 2009 at 3:41 pm

ANGA and API are on opposite sides of the climate bill. (image: rangeresources.com and puspatri.edu)

A division is cropping up between oil and gas producers over the Kerry-Boxer climate bill currently in the Senate, John-Laurent Tronche of the Fort Worth Business Press reported Monday. Trade groups representing both industries have divergent thoughts on the proposed bill.

The American Petroleum Institute and the Texas Alliance of Energy Producers were quick to issue statements condemning the bill, specifically on the subject of cap and trade. According to Alex Mills, president of the Texas Alliance of Energy Producers, the cap and trade system will “wreak havoc” on a struggling energy industry. He anticipates energy price volatility, more dependence on foreign oil imports, higher food prices, and bigger government. Mills believes that the curbing of greenhouse gas emissions should be a “real, market-based initiative” rather than a government mandate.

On the other side of the debate is America’s Natural Gas Alliance, which released a very positive statement. While not endorsing the bill outright, ANGA Chairman David Trice said the organization is encouraged by the early look of the bill, specifically that “Sen. Boxer made positive comments about natural gas when she introduced the bill.”

The oil and natural gas industries have typically been united on such issues, but splits have arisen in recent years, especially in the environmental arena. As some environmentalists turn to natural gas as a cleaner-burning alternative to oil, some elements of the natural gas industry see an opportunity in aligning themselves with environmentalists, even if it means standing in opposition to oil.

Natural gas is also a growing industry in the United States. While there are fears about the future availability of oil, there have been huge gas discoveries recently in Arkansas, Ohio, Pennsylvania, and other mid-continent states. According to Chairman Trice, “In our view, there’s enough natural gas right now. Given its qualities, it should be the foundation for both energy policy and climate change policy.”

ANGA’s optimism on the Kerry-Boxer bill includes hopes that a bill will emerge that recognizes the abundance, and benefits, of natural gas. In the meantime, the API, according to spokesman Robert Dodge, is “still hopeful that the Senate will get it right and craft a bill that recognizes the importance that transportation fuels play in our economy and the impact a climate change bill could have on both consumers and businesses that use fuels.”

For heating oil consumers, cap and trade may mean an initial economic hit, as companies pass costs on to the customer. However, if natural gas gained market share from oil it could reduce overall oil demand, which would mean lower oil prices—including lower home heating oil prices—in the years to come.