Under Pressure from High Gas Prices, Obama Looks to Streamline Domestic Oil Production

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Franz Aberham

Whenever President Obama isn’t talking about cracking down on subsidies for Big Oil, he’s usually hyping all the work his own Administration has done to support domestic oil production. He has a point—U.S. oil production has gone up under Obama. Unlike his predecessor, Obama doesn’t look much like an oil man, but he’s hardly gone out of his way to punish the industry—this is the President, after all, who was willing to open up offshore drilling in parts of the Atlantic in exchange for support of comprehensive climate and energy legislation. Obama had to be forced by his environmentalist base to block the Keystone XL oil sands pipeline. He’s not anti-oil—whatever the American Petroleum Institute (API) tells you.

But with gas nearing $4 a gallon, the President is going to take every opportunity to remind the American people that his Administration is, in fact, eager to facilitate the production of Made in the U.S.A. crude. So yesterday Interior Secretary Ken Salazar announced plans to speed up the review process for oil and gas companies seeking to drill on U.S. lands. The agency will implement a new automated tracking system that the Administration says can reduce the review period for drilling permits by two-thirds, and expedite the sale and processing of federal oil and gas leases. The idea is to get oil companies swifter access to public oil resources—including in and around the Bakken Formation in North Dakota, where a mini oil boom is already underway. “By upgrading and improving our oil and gas drilling permit processing systems and technologies we believe we can improve efficiencies while ensuring thorough reviews for safety and compliance,” Salazar said yesterday. “This is another step forward in the Obama Administration’s efforts to reduce the nation’s dependence on imported oil, spur local economies and create jobs.”

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The API, which represents the oil and gas industry, sounded an optimistic note after Salazar’s announcement:

We support any system that will ensure efficiency and a clear, consistent application process. Most important, the administration needs to significantly reduce the unnecessary multi-year timeframe for environmental reviews and open areas that remain off limits for responsible energy development.

There’s little to criticize about the procedural changes, which are a long time coming. Oil companies will now be able to submit their permit applications electronically—until now, permits had to be done paper, and the back and forth took an average of nearly 300 days per permit to complete. (Yes, Interior is apparently now just entering the computer age.) But even if the drilling permit process accelerates, there’s no guarantee that oil production will follow. Oil production on public lands is already at the highest level since 2003, and there are already more drilling rigs in operation in the U.S. than the rest of the world combined. Oil companies area already sitting on thousands of unused permits, in part because much of the new drilling is being done on private land as that’s where the oil is. (Natural gas production on public land is at its lowest level since 2008, but again, that’s largely because shale gas deposits in states like Pennsylvania have been found chiefly on private land.) It seems doubtful that even if the federal government were to suddenly open significantly more public land to drilling that oil companies would necessarily be able to take advantage, at least in the short term.

Nor would increased drilling instantly translate to lower gas prices. An AP investigation from last month found that there has been relatively little correlation between domestic oil production and lower gas prices, for reasons I’ve explained more than once. More domestic oil production is good for the oil industry and for those who work in it, and it helps chip away at the massively high U.S. trade deficit, much of which is due to costly foreign oil imports. But for the average American who just wants to fill up the family car without emptying his wallet, policy changes like the one once announced by Salazar yesterday won’t make much of a difference. Obama, though, knows that re-election will be that much tougher if he’s perceived by Americans as anti-domestic oil—at least as long as gas prices are hanging around record highs. Which is why yesterday won’t be the last time the White House looks to help out the oil industry.

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