Obama’s climate plan spares oil and gas from big changes

Units at Total's Port Arthur refinery (Photo: Total)

Units at Total’s Port Arthur refinery (Photo: Total)

The oil and gas industry largely escaped attention as President Barack Obama unveiled his broad plan to combat climate change on Tuesday.

While the president took aim at a suite of tax incentives cherished by oil and gas companies, he left refineries out of the cornerstone of his plan to throttle industrial greenhouse gas emissions. Instead, he focused that initiative squarely on new and existing power plants, despite a 2010 legal settlement obligating the EPA to address refinery emissions too.

Obama’s timeline for curbing emissions from power plants — with a final rule expected no sooner than June 2015, followed by potentially two years of work by states to implement the mandates — also signals he’s unlikely to usher in similar rules for refineries during his White House tenure. It will be enough of a haul to get the power plant rules in place before he is slated to leave office in January 2017.

During a speech outlining his climate change plan at Georgetown University, Obama repeatedly leveled praise on natural gas, casting it as a “cleaner-burning” alternative to coal that could help the U.S. transition to greener energy sources, despite some environmentalists’ skepticism.

“Sometimes there are disputes about natural gas,” Obama acknowledged, “but let me say this: We should strengthen our position as the top natural gas producer because, in the medium term, at least, it not only can provide safe cheap power, but it can also help reduce our carbon emissions.”

Obama’s blueprint for tackling climate change includes paring methane emissions tied to natural gas, both at the wellhead and when the fossil fuel is transmitted. Although methane does not remain in the atmosphere as long as other greenhouse gases, it is 21 times more potent than carbon dioxide when it comes to warming the atmosphere.

“We’ll keep working with the industry to make drilling safer and cleaner, to make sure that we’re not seeing methane emissions and to put people to work modernizing our natural gas infrastructure so that we can power more homes and businesses with cleaner energy,” Obama said.

Obama is directing executive agencies to develop a comprehensive strategy for tackling methane emissions. A 21-page document outlining the president’s climate plan noted that “efforts to build and upgrade gas pipelines could “reduce emissions and enhance economic productivity.”

That could include work to build more natural gas pipelines near surging oil production in the Bakken Formation in North Dakota and Montana, where the dearth of such infrastructure has encouraged drillers to burn off the fossil fuel when it accompanies extracted crude.

Don Santa, president of the Interstate Natural Gas Association of America, said the industry “recognizes methane as a potent greenhouse gas, and we support efforts to gain greater knowledge on methane emissions.” But, he stressed, “it is important to use sound science to detect data gaps and identify technologies, best practices and incentive-based opportunities to reduce emissions.”

Oil industry advocates blistered at Obama’s decision to single out the industry’s tax breaks in a high-profile climate speech.

American Petroleum Institute President Jack Gerard said that “by recycling his plans to raise taxes on U.S. oil and natural gas companies, President Obama … would jeopardize his own climate goals” by making some domestic energy projects uneconomic.

Congress has repeatedly rejected Obama’s previous requests to spike the industry’s tax breaks, and there’s no sign of that changing anytime soon.

Although Obama’s plan did not aggressively target the oil and gas sector, some industry leaders still weren’t breathing easy.

Stephen Brown, vice president of federal government affairs for San Antonio-based Tesoro, said the oil and gas industry should derive a warning from the Obama administration’s approach to coal-fired power generation.

“What this administration does to the coal industry is what they intend to try and do with refining — distort markets by forcing artificial price signals and fostering reliance on technologies that are nascent at best,” Brown said. “Further, the legal precedents that the White House will try and set with these new rules promises good times ahead only for Clean Air Act litigators.”