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Energy And Chemical Sectors Favor Romney

Presidential candidates offer different paths on energy and regulatory policies

by Glenn Hess
October 22, 2012 | A version of this story appeared in Volume 90, Issue 43

Credit: Shawn Thew/EPA/Newscom
Obama (right) and Romney clashed over energy and other domestic policy issues during the presidential debate in Denver on Oct. 3.
A photo of President Barack Obama, Republican presidential candidate Mitt Romney, and moderator Jim Lehrer during the first 2012 Presidential Debate at the University of Denver.
Credit: Shawn Thew/EPA/Newscom
Obama (right) and Romney clashed over energy and other domestic policy issues during the presidential debate in Denver on Oct. 3.

Energy is central to the country’s economic revival and has become a focus of the 2012 presidential campaign. In his bid for reelection, President Barack Obama has often emphasized the need for continued investment in clean sources of energy, such as renewable fuels and wind and solar power.

But his Republican challenger, Mitt Romney, asserts that the U.S. can become energy independent by 2020 largely by greatly expanding domestic production of traditional fossil fuels.

The two candidates are also at odds on regulatory policy. The Obama Administration has put in place numerous new rules to curb pollution. But Romney has charged that overzealous environmental regulations are strangling the economic recovery.

So it’s no surprise that companies that produce oil and natural gas and manufacture petroleum-based fuels and chemicals are strongly backing the former Massachusetts governor in the race for the White House. Chemical manufacturers are also leaning toward Romney.

The oil and gas industry ranks among Romney’s staunchest financial supporters, contributing about $3.5 million to his campaign, according to the Center for Responsive Politics (CRP), a nonpartisan organization that tracks money in politics. Overall, Romney received more than $6 million from the energy and natural resources sector as of the end of August, compared with the $1.6 million the sector gave to Obama.

“The President has called for an ‘all of the above’ strategy on energy policy. But his actions are falling far short of that pledge,” says Charles T. Drevna, president of American Fuel & Petrochemical Manufacturers, a trade association whose members include oil-refining and petrochemical giants such as ExxonMobil, Chevron, and Shell.

Obama has heavily pushed a green energy agenda. His Administration has poured billions of federal dollars into wind, solar, and advanced car battery projects aimed at reducing U.S. dependence on foreign oil.

The President has also said he recognizes the need for greater fossil-fuel production during the decades it will take to build a clean energy economy. The White House says domestic oil and gas output has increased every year since Obama took office in 2009.

“While that is a factual statement,” Drevna says, “it belies the fact that the lion’s share of that increase has come from state and private lands where the federal government has no jurisdiction.”

Drevna points to data from the U.S. Energy Information Administration that show total fossil-fuel production on federal lands has dropped 7% since 2009. From 2010 to 2011, oil production on federal lands dipped nearly 14% and gas production was down 11%.

Much of the decline occurred in the Gulf of Mexico, where Obama imposed a drilling moratorium after the massive BP oil spill in 2010. In addition, permitting was initially slow after the suspension ended as companies adjusted to new safety standards.

Drevna says the Administration’s “anti-fossil-fuel crusade” includes the President’s refusal earlier this year to approve construction of the Keystone XL pipeline, which would deliver crude oil from the vast Canadian oil sands to refineries in Texas. “The pipeline will immediately create 20,000 high-paying, long-term jobs,” the industry official says.

Obama said his decision to delay construction was based on the need to conduct “a full assessment of the pipeline’s impact, especially on the health and safety of the American people, as well as on our environment.”

Romney’s energy plan, in contrast, calls for construction of the 1,700-mile pipeline and a sharp increase in production of oil and gas on federal lands and off the East Coast. The blueprint would open new areas for development, starting with Virginia, North Carolina, and South Carolina. This would reverse Obama’s decision to suspend development off the coast of Virginia after the 2010 BP spill.

In another departure from current policy, the Republican plan would let states manage energy development on federal lands within their borders. Romney has argued that allowing state governments to issue permits for exploration on federal lands would speed up the process.

The Obama campaign has been critical of Romney’s energy strategy, saying it would “keep giving billions of dollars in tax subsidies to the big oil and gas companies and recklessly open new areas for drilling.”

But Drevna says the Republican challenger “understands that we have to use the abundant and affordable fossil fuels we’ve been blessed with. We’re an energy-rich nation.” The U.S., he contends, “has the ability to be energy self-sufficient in the next 10 to 12 years. President Obama and his Administration have turned a blind eye to that. I believe that is the major difference between the two candidates.”

Under Romney’s plan, funding for renewable energy projects would be left to the private sector. During the first presidential debate, in Denver on Oct. 3, Romney lambasted Obama for investing taxpayer dollars in “losers” such as Solyndra, the bankrupt solar-cell manufacturer. “This is not the policy you want to have if you want to make America energy-secure,” Romney said.

Obama defended the spending as crucial to the country’s long-term energy independence and economic health. “I believe that we’ve got to look at the energy sources of the future, like wind and solar and biofuels, and make those investments.”

Environmental groups say the exchange is an example of the “clear choice” between the two candidates. “President Obama wants to invest in energy efficiency and renewable power while protecting our health. Gov. Romney would bet our future on fossil fuels of the past,” says Frances Beinecke, president of the Natural Resources Defense Council.

Much like big oil and its petrochemical subsidiaries, the chemical manufacturing industry has also put the bulk of its financial support behind the Republican candidate. Through August, Romney received $454,191 in campaign contributions from chemical company executives and political action committees, whereas donations to Obama totaled $172,036, according to CRP data.

For the chemical industry, Obama’s regulatory policies have been a mixed bag, says William E. Allmond IV, vice president of government relations at the Society of Chemical Manufacturers & Affiliates, a trade group for specialty and batch chemical makers.

In January 2011, Allmond notes, Obama ordered executive branch agencies to conduct a retrospective review and to identify onerous and ineffective regulations for modification or repeal. But at the same time, he says, the Administration has been steadily increasing the number of regulations on manufacturing.

“On the one hand, the Obama Administration recognizes the issue of burdensome regulations, while on the other, they are working to impose a high amount of major new rules,” Allmond says. “The number of regulations finalized this year alone, especially from the Environmental Protection Agency, has been pretty staggering.”

Allmond is referring to the fact that about 1,300 new federal rules have been issued so far this year, with 15% of those coming from EPA.

He also notes that a recent study by NERA Economic Consulting found that an average of 72 major federal regulations per year have been issued since Obama took office in 2009, compared to an average of 45 per year during the George W. Bush Administration. Major rules are those estimated by the government to impose compliance costs of $100 million or more annually.

“For the chemical industry, the news gets worse,”Allmond says. “This study warns that chemical manufacturing output could fall 9 to 10% each year over the next decade due to the cost of regulation. The path that we are on could really be devastating, particularly for small and midsized chemical companies.”

Romney has indicated in policy statements that he would make every effort to safeguard the environment. But Allmond believes the GOP candidate would take a pragmatic, cost-conscious approach to regulatory policy that weighs the financial impact to business before issuing new rules. He also says Romney appears to be less ideological than many in the Republican Party.

“If you look at Gov. Romney’s position on climate change, he’s much more moderate than the right-wing position of the Republican Party platform,” he remarks. “For example, the governor has said that he does believe human activity is a contributing factor to climate change and that it is important for the U.S. to reduce its emissions of greenhouse gases. So there is an acknowledgment that more needs to be done. For a Republican, that’s a pretty moderate position.”

Obama and Romney have made little mention of climate change on the campaign trail but have addressed it in responses to questions from C&EN (C&EN, Oct. 8, page 32). There and elsewhere, Romney promises to scrap proposed EPA rules that are designed to curb greenhouse gas emissions from power plants arguing because such rules would harm the economy.


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