In Romney plan, oil drilling unfettered by politics

By Joshua Schneyer and Timothy Gardner
Aug 24 (Reuters) - In unveiling his energy policy on
Thursday, Republican presidential candidate Mitt Romney tapped
into the oil industry's giddy optimism about shale drilling to
paint a rosy picture of U.S. economic renaissance fueled by
hydrocarbons.
A 21-page energy policy white paper distributed by the
Romney campaign is also notable for what it doesn't address: The
document contains no mention of climate change, few proposals to
curb U.S. fossil fuel demand, and sparse paragraphs on the
merits of renewable energy.
The promise of a drilling frenzy takes center stage. After
decades of failed plans to wean the world's top economy off
foreign oil, huge new domestic oil and gas resources can now be
easily tapped by high-tech drilling, the plan says.
By opening more territory for drilling and expediting
permits, private companies will be enabled to bring an oil and
gas bonanza to market at record pace, the plan says. One key to
the plan is handing states the power to permit for drilling on
acreage owned by the Federal government, which controls nearly
30 percent of U.S. lands.
That move could expedite permits since several states --
including North Dakota, Ohio and Colorado -- have shown they are
many times faster to issue drilling permits than the Federal
government, Romney's plan says.
Such a major regulatory overhaul would require legislative
approval, however, and could face resistance in a divided
Congress. Meanwhile, the prolific drilling method known as
hydraulic fracturing, or fracking, faces staunch resistance in
some quarters, over fears it could contaminate water supplies.
New York State has maintained a fracking moratorium since 2008.
Democratic Rep. Henry Waxman, in a statement, called
Romney's plan an "oil-above-all" policy, contrasting it to the
Obama administration's stated "all-of-the-above" policy that
promotes a broad mix of renewable energy sources and less
hydrocarbons usage, in addition to more oil and gas drilling.
"The Romney plan takes us in the wrong direction by
increasing our dependence on oil, ignoring the reality of
climate change, and attacking commonsense environmental
protections and successful clean energy programs," Waxman said
in a statement.
But Romney's plan is sure to appeal to many voters wary of
U.S. dependence on foreign oil and gasoline prices near an
all-time high this year. Increasing drilling could turn the
United States into an energy super power by 2020, creating 3
million jobs and adding $500 billion to U.S. gross domestic
product, while slashing reliance on "unstable" foreign
oil-producing nations, the plan says.
The plan promises to open territory from Alaska to the
Virginia coastline up for more drilling.
"It's clever because it's an effort to catch the shale
drilling wave, and embrace the excitement and optimism sweeping
through the U.S. oil industry," said Sarah Emerson of energy
consultancy ESAI.
"It's not a 'we'll try anything' approach. It says 'we've
got this new resource, let's develop it and it will have a huge
impact on GDP and jobs."
In betting heavily on a fossil-fueled U.S. energy future,
the plan also carries economic and environmental risks.
"There is now really a path toward U.S. energy independence
and it's welcome that politicians are thinking about this," said
Ed Morse, head of commodity research at Citi in New York, whose
recent research on the potential of U.S. shale drilling is cited
in Romney's plan.
"This is enviable for a country that has been the world's
only super power and could sustain its power through a
(shale-fuelled) reindustrialization."
The plan is still vulnerable to global energy prices, Morse
said. Expanding U.S. oil development hinges on relatively high
global oil prices, and if OPEC producers like Saudi Arabia or
Iraq were to boost oil production and cause prices to fall to
$70 a barrel -- around 27 percent below current rates -- many
North American projects could lose their economic appeal.
The United States would also have to nearly double its oil
production to becoming a net exporter, raising the risk of new
accidents following the 4.9 million barrel Gulf of Mexico spill
in 2010.
"There's some good stuff in this plan," said Michael Levi, a
fellow at the Council on Foreign Relations in New York. "But
it's a plan for oil production, not a comprehensive energy
strategy."

NOD TO INDUSTRY
Romney, whose chief energy advisor is Oklahoma oil
billionaire Harold Hamm, the CEO of shale driller Continental
Resources, borrows heavily in his white paper from research
notes by oil and gas industry experts.
He slams the Obama administration for allegedly dragging
its feet on new drilling. Permitting has languished - allegedly
by 37 percent - a key pipeline hasn't been approved, and rich
offshore prospects remain off limits to drillers, the plan says.
In many ways, however, a proliferation of new drilling --
mostly for fracking projects -- has already transformed the U.S.
energy industry, putting domestic natural gas output on track
for a second annual record, and helping to lift U.S. oil
production to a nine-year high in 2011 from shale-rich states
like North Dakota and Texas.
The United States remains the top net oil importer, although
U.S. reliance on foreign fuel has waned after gasoline demand
fell by more than 6 percent since peaking in 2007, in part due
to more renewable fuels and higher fuel efficiency standards.
According to Romney's plan, oil companies currently wait an
average 307 days for drilling permits from the Federal
government. In North Dakota, permits to drill on state-owned
lands take just 10 days.
"The economic consequences of not getting permits for years
is brutal," said Mark Mills, an energy expert and fellow at the
Manhattan Institute, who authored a paper cited in the Romney
plan. "The limitation to drilling is access to land, and that
can be solved with the stroke of a pen."
Romney also pledged to forge a U.S. energy alliance with
neighboring oil exporting nations Canada and Mexico, and to
approve the Keystone XL pipeline, a project to carry Canadian
oil sands crude to the U.S. Gulf Coast that has drawn concern
from environmentalists.