Energy alliance official: Keystone approval likely soon

A former Clinton administration official who now works with the Consumer Energy Alliance predicted Tuesday the Obama administration will approve TransCanada’s Keystone XL pipeline soon, just one of the economic benefits that representatives of the alliance said the oil and gas industry can offer a still recovering national economy.

“I think there’s no doubt the Keystone pipeline will be approved in fairly short order and generate economic growth,” John Northington, counsel to the alliance, said.

But Northington and former Bush campaign official Michael Whatley, executive vice president of the alliance, agreed looming talks about tax reform threaten to hurt independent drilling companies if the tax credit for intangible drilling costs is cut or eliminated.

“If you take away those intangible drilling costs (for) independent producers, 25 percent of their drilling budget is going to come off the table,” Whatley said.

A short-term gain in government revenue would result in a long-term cut in employment and production taxes, he said.

The two men spoke on a conference call with reporters to discuss energy policy and its potential impact on economic policy. Both were bullish on what the industry has to offer the economy but said energy policy is unlikely to play a major role in short-term discussions about reducing the deficit.

Northington, who served as senior adviser to the director of the Bureau of Land Management, said the Keystone pipeline would eventually move not just Canadian oil sands but also Bakken crude oil “to where its needed.”

He also suggested that changes affecting the industry are more likely to come through regulation than legislation.

And while the International Energy Agency reported Monday that the United States is projected to surpass Saudi Arabia as the world’s top oil producer by 2020, Northington said removing tax breaks for domestic drilling could change that.

Lowering the corporate tax rate wouldn’t be an even exchange, he said.

“Lowering the corporate tax rate doesn’t do much for (independent drillers),” he said. “You have both Republicans and Democrats thinking that would be a good thing, and overall it would be. But in this case, it could have a devastating impact on production.”

Whatley, who served as an attorney and senior policy advisor for the Bush-Cheney 2000 campaign, said losing the tax break would hit independents far harder than the major oil companies.

“Employment and everything else are going to get significantly weaker,” he said.

If President Obama and Congress don’t reach agreement on plans to deal with the deficit, planned cuts affecting national defense and other federal programs would go into effect automatically — a situation widely characterized as the “fiscal cliff.” That could impact permits for exploration and drilling, Whatley said.