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October 2012 Cover Story

A Crossroad For U.S. Oil & Gas

The 2012 presidential election has been called a “crossroad for America,” offering a clear choice between divergent philosophies of government.

The talking points and public media have focused on jobs and the economy–and with good reason. The nation’s economy remains mired in the slowest recovery since the Great Depression, and the unemployment rate remains stubbornly above 8 percent, despite the largest federal economic stimulus in U.S. history.

A September poll released by the National Association of Manufacturers and the National Federation of Independent Business says 67 percent of small business owners believe there is too much uncertainty in the market to expand, grow or hire new workers, while 55 percent say they would not start a new business in today’s environment.

A major component of that business environment–and a key input into every industrial activity–is energy. A critical component of America’s energy supply is the independent oil and gas sector, which according to the Independent Petroleum Association of America, drills 95 percent of the nation’s wells, and produces 68 percent of its crude oil and 82 percent of its natural gas.

The 2012 presidential election is as pivotal for independent oil and gas producers as it is for the country at large. The growing likelihood of comprehensive federal income tax reform puts historical tax deductions critical to independent producers’ capital recovery on the table, while public concerns about the technologies that have opened vast supplies of unconventional resources to development raise challenges to the industry’s continued “license to operate.”

A plethora of other issues critical to independents, ranging from accessing federal acreage to regulatory proposals that could have far-reaching effects on energy markets, could be directly impacted by the election’s outcome.

With the U.S. House of Representatives widely expected to remain in Republican hands, and neither party expected to gain firm control of the Senate, legislative gridlock is likely to continue, potentially making White House energy inclinations all the more important.

The American Oil & Gas Reporter went to the two major party candidates to obtain exclusive answers to a series of questions of particular interest to independent oil and gas producers, ranging from taxes and hydraulic fracturing regulations to endangered species and access.

In Election 2012, President Barack Obama and former Massachusetts Governor Mitt Romney outline their fundamental philosophies regarding domestic oil and gas exploration and production, and reveal the principles on which they propose to shape U.S. energy policy.

An adequate supply of energy is a must for an industrial society, and every U.S. citizen expects affordable and adequate supplies. Data from pollster Rasmussen Reports indicates 54 percent of U.S. voters rank energy policy as a more pressing issue than Social Security, the war on terrorism or the war in Afghanistan. What are the elements of a national energy policy you would present to the American public and Congress as president of the United States?

Obama: A strong and sound energy policy is one of the key pillars needed to create an economy built to last. That is why I have taken concrete steps to make us more energy independent by bolstering domestic production and investing in new technologies so we can out-innovate and out-build our competitors around the world.

By taking advantage of our natural resources such as oil and natural gas at home while investing in clean energy and efficiency, we can continue to send a strong signal that the United States is open for business. We will see businesses move back to the United States to take advantage of our affordable natural gas, and take control of our energy future.

Romney: A crucial component of my “plan for a stronger middle class” is to dramatically increase domestic energy production, and to partner closely with Canada and Mexico to achieve North American energy independence by 2020.

A successful national energy strategy will profoundly influence the well-being of the nation. An expansion of affordable, reliable supplies of domestically produced energy can bolster the competitiveness of virtually every industry within the country, creating millions of jobs from coast to coast.

I have put forward a six-part plan for achieving these goals:

  • I will empower the states to control all forms of energy development onshore, including on federal lands within their borders.
  • I will open offshore areas to energy development.
  • I will pursue a North American energy partnership so that America can benefit from the resources of its neighbors.
  • I will ensure an accurate assessment of the nation’s energy resources by updating decades-old surveys that do not reflect modern technological capabilities.
  • I will restore transparency and fairness to federal permitting and regulation.
  • I will facilitate private-sector-led development of new energy technologies.

The world needs energy, and the United States is in a position to produce it more cleanly and safely than any other nation. Getting our energy policy right is critical to the success of our nation.

We have the natural resources to succeed, and more importantly, we have scientific and engineering talent that is unsurpassed the world over. What we have lacked is a clear recognition that tying up our resources and shackling our enterprises are costing us dearly in every important arena. The bad news is that self-defeating policies have left us less secure as a country and have weakened our economy. The good news is that we can change, and I intend to lead the way.

A full white paper describing my plan for North American energy independence is available at www.mittromney.com.

Every form of energy has its own advantages and shortcomings. What is your opinion on the role of crude oil and natural gas in America’s energy future? How do you view other traditional forms of energy such as coal and nuclear power, as well as alternatives such as wind, solar and ethanol in the future energy mix? What role (if any) do you believe government should play in promoting particular energy sources?

Obama: Since taking office, I have supported an all-out, all-of-the-above strategy that develops every available source of American energy, including oil, natural gas, wind, solar, biofuels, clean coal, nuclear and beyond. Last year, natural gas production was higher than any year in our history. Crude oil production has increased by an average of more than 1 million barrels a day, and we now are at our highest level of production in 14 years.

I have proposed a goal to lower our oil imports by one-third by 2025 in order to increase our energy independence. To do this, we need to harness our domestic energy, which is why my administration is opening more than 75 percent of undiscovered oil and gas resources for development in the Gulf of Mexico and the Arctic.

We have worked to speed the leasing and permitting process, and to improve safety measures to prevent future spills. And I am supporting the safe, responsible development of America’s nearly 100-year supply of natural gas, which has the potential to support more than 600,000 jobs by the end of the decade.

Cheap natural gas is helping to bring manufacturing jobs back to the country, and it has an important role to play in our energy future. But we can’t depend on increased drilling alone to reduce our reliance on foreign oil, which is why I also am encouraging investment in the clean energy economy by setting a goal of generating 80 percent of our electricity from clean energy sources such as wind, solar, natural gas, nuclear and clean coal by 2035.

We have made historic investments in clean energy technologies, and it is paying off. Electricity generated from wind, solar and geothermal is on track to double by the end of 2012.

My administration also has made historic investments in clean coal and is investing in the future of that domestic resource. An economy built to last must create the jobs of the future in high-tech industries such as clean energy as well as traditional fossil fuel production.

Romney: I believe all of our energy resources–from crude oil, natural gas and coal to wind, solar and other forms of renewable energy–should continue to be sources of long-term, competitive advantage for our nation.

However, government must get out of the business of picking winners and losers. Instead of distorting the playing field, the government should ensure that it remains level. Private sector job creators must be allowed to compete on a level playing field and produce the most abundant energy at the most affordable prices.

My policies to open access for oil, gas and coal development also can open access for constructing wind, solar and hydropower facilities. Strengthening and streamlining regulations and permitting processes will benefit development of both traditional and alternative energy sources, and encourage the use of a diverse range of fuels, including natural gas in transportation.

Instead of defining success as providing enough subsidies for an uncompetitive technology to survive in the market, success should be defined as eliminating any barriers that might prevent the best technologies from succeeding on their own.

I also believe that the federal government should play an appropriate role in facilitating innovation in the energy industry. This includes focusing government investment on research across the full spectrum of energy-related technologies and revitalizing nuclear power by equipping the Nuclear Regulatory Commission to approve new designs and to license approved reactor designs on approved sites within two years.

For more than 40 years, U.S. energy policy has been guided by the belief that the United States was running out of oil and gas, and faced a future of increasing dependence on foreign imports. The “shale revolution” has changed that. Today, some estimates place recoverable North American natural gas resources at more than 4,000 trillion cubic feet and recoverable oil resources at nearly 2 trillion barrels. Instead of import dependency and high price volatility, energy independence and moderate prices appear to be an attainable goal in the near future. How should this new supply reality affect federal energy policy? How can the United States best take advantage of our continent’s abundant unconventional oil and gas resources?

Obama: Our dependence on foreign oil–much of it bought from unstable and hostile countries–has long placed our economy and national security at risk. For years, we have sent billions of dollars overseas to import millions of barrels of oil a day. That dependence has hit consumers hard, tying us to unstable gasoline prices that strain budgets for millions of American families.

But now we are at a turning point. Our reliance on foreign oil is at a 20-year low, and policies that we put in place today can put us on a path toward energy independence.

Our vast domestic resources of natural gas offer the opportunity to help create a new energy economy that is powered right here at home. That is why I am supporting policies that will unlock American ingenuity to help find more ways to use natural gas in the transportation sector, and am providing incentives to grow a clean transportation fleet that runs on this abundant domestic energy source.

For example, if we switched 3.5 million trucks to run on natural gas, we could cut our oil imports by more than 1 million barrels a day by 2035. That is more than half the amount we imported from the Persian Gulf in 2011.

I also am pursuing a clean energy standard that would encourage the use of natural gas for making electricity, bringing down prices for households by up to $600 a year by 2020, compared with when I took office.

Romney: Every assessment of America’s energy resources indicates tremendous potential. Yet, many of these assessments are outdated, based on decades-old technology, and are lacking in the data that only become available once development begins.

President Obama has used this lack of information, coupled with confusion over the difference between “proved” reserves and recoverable resources, to argue incorrectly that America’s resources are scarce.

We are the world’s most energy-rich nation, and for too long we have been living like an energy-poor country. Despite the president’s best efforts to stop it, we are witnessing a private sector-driven energy revolution in this country, and with the right policies in place, we are on track to achieve North American energy independence by 2020.

Until recently, this might have been an unthinkable concept. But as is so often the case in this country, hard work can yield astonishing results. This is evidenced in the extraordinary growth in energy production that we have seen on state and private lands across the nation. This success has been driven by the determination and commitment of an industry willing to invest massive amounts of private capital and time into technological innovation.

Importantly, this significant and continued investment has occurred mostly on state and private lands, within carefully crafted frameworks that actually have encouraged, rather than encumbered, that growth. In spite of attempts by the Obama administration to federalize the regulation of energy production and weaken or diminish the states’ role, a good share of the credit for our nation’s energy success goes directly to the states, which have crafted highly individualized and efficient permitting and regulatory programs.

My policies would seek to replicate and expand this success on lands across the nation, by ensuring that all states are afforded those rights. I believe it is time for federal bureaucrats to stand down. We should allow states to control energy development within their own borders, including on all federal lands not specifically designated off limits. States should establish processes for leasing and permitting, get sign-off from Washington, and then have the freedom to proceed.

Extracting hydrocarbons from the tight sands and shales that are the source of America’s new oil and gas bounty depends on modern horizontal drilling and advanced stimulation technologies. Yet many in the public are fearful of hydraulic fracturing and call for severe restrictions, if not an outright ban. Industry counters that it is a procedure companies have been employing safely for 60 years, and points out there are no documented cases of groundwater being contaminated directly by fracturing. What is your general opinion of hydraulic fracturing and other key technologies employed to develop oil and gas resources?

Obama: I am committed to ensuring continued safe and responsible shale gas development. Under this administration, natural gas production has reached an all-time high. I believe we can ensure that hydraulic fracturing is done in a way that protects human health and the environment, without impacting industry’s ability to power America.

That is why I have developed safeguards to protect against water contamination and air pollution that also provide industry certainty and allow for continual increases in production. And that is why we created an interagency working group to coordinate and streamline federal regulations to promote responsible development of unconventional domestic natural gas resources. This working group won praise across the industry.

Domestic natural gas and oil development are important parts of our all-of-the-above energy strategy, and I am committed to continuing its production in a safe and responsible way.

Romney: Natural gas is a clean-burning fossil fuel, and recent assessments indicate we have a 100-year supply beneath our lands. To produce this resource, we must use stimulation techniques, including hydraulic fracturing, which, incidentally, has been carefully and effectively regulated by the states for more than half a century. While fracturing requires regulation, just like any other energy-extraction practice, I believe each state is far better equipped to appropriately tailor programs to address its individual needs.

A number of states have, or are in the process of, revising regulations in the areas of casing and well construction standards. Many of them are including requirements that companies disclose the chemical components of frac fluids, while the FracFocus.org website provides a national registry where companies may voluntarily post frac fluid constituents. Do you believe the states are responding adequately to the public’s desire for environmental safeguards? What role would you advocate that the federal government undertake in regulating hydraulic fracturing? What is your philosophy, in general, regarding the appropriate roles for state and federal governments in regulating the oil and gas industry?

Obama: It is vital that we take full advantage of our natural gas resources, while giving American families and communities confidence that natural and cultural resources, air and water quality, and public health and safety will not be compromised, and also providing industry the certainty it needs for a healthy business environment.

While states are the primary regulators of onshore oil and gas activities, the federal government has an important role to play in natural gas development by overseeing oil and gas activities on public and Indian trust lands, and by setting sensible, cost-effective public health and environmental standards to augment state safeguards.

I have taken action to streamline oversight of natural gas drilling and to streamline permitting and leasing, automating the system to expedite the process for industry. And we continue to ensure that hydraulic fracturing is done in a safe and responsible manner.

Romney: Rather than pursue a one-size-fits-all federal regulatory approach to energy development as the president has done, I would empower the states to develop, adopt and enforce regulations and review processes based on the unique geology, ecology and concerns of each state and its citizens. From oil and gas to wind and solar, local regulators are best positioned to understand and address the distinctly local factors that are specific to their needs.

This policy is particularly necessary in the western United States, where the federal government owns the majority of our lands, and thus, the vast energy resources beneath them, are under lock and key. At least 62 percent of known oil resources on federal lands are off limits.

The states want to develop their resources for the benefit of their citizens and the nation, and it is time to give them that opportunity.

States have diverse energy assets and expertise, and should be encouraged to share best practices and experiences with one another. This will improve the quality and efficiency of their programs, and provide a forum to share lessons learned and constructive feedback.

My plan also encourages the formation of a State Energy Development Council, where states could work together along with existing organizations, such as STRONGER (State Review of Oil and Natural Gas Environmental Regulations) Inc. and the Interstate Oil & Gas Compact Commission, to share their expertise and best management practices.

The oil and gas industry faces new regulatory requirements in the areas of federal greenhouse gas reporting, new source performance standards, and national emissions standards for hazardous air pollutants for hydraulically fractured wells and related equipment and activity, among others. Can you comment on your beliefs regarding the appropriate level of regulation for the oil and gas industry in these and other areas, such as treating exploration and production wastes as hazardous materials under Subtitle C of the Resource Conservation and Recovery Act? How would you balance the nation’s need to produce crude oil and natural gas with protecting air and water quality? What level of cost/benefit analysis is appropriate for regulations affecting oil and gas production?

Obama: I am committed to continuing to increase our domestic supply of oil and natural gas, and I am confident this can be achieved safely and responsibly.

I always have been committed to looking at existing rules, and streamlining, fixing and eliminating those that aren’t working. Last year, I issued an executive order calling for a governmentwide review of regulations to reduce costs, eliminate unnecessary burdens, and get rid of unnecessary paperwork requirements that waste time and money.

In response, dozens of government agencies produced final plans, including more than 500 proposals for reducing regulatory burdens. These changes already are improving conditions for consumers and businesses. Over the next five years, more than $10 billion in savings are anticipated from just a small fraction of the initiatives now under way.

However, the fact that some regulations should be streamlined or modified does not change the fact that regulations are on the books to protect the health, safety and welfare of the American public. We don’t have to sacrifice Americans’ health and safety to drive growth, job creation and innovation–and our record shows that.

Romney: Government oversight is critical to any safe and responsible development of natural resources. But statutes and regulations that were designed to protect public health and the environment instead have been seized on by environmentalists as tools to stop development altogether.

President Obama’s administration, which is similarly opposed to developing the nation’s resources, has embraced this approach, going so far as to implement regulations designed to “bankrupt” the coal industry. It actually is being held in contempt of federal court for illegally imposing a moratorium on drilling in the Gulf of Mexico.

Over-regulation, permitting delays, endless reviews, and senseless litigation interfere with all forms of energy production: oil and gas, nuclear- and coal-power generation, and the construction of wind farms and solar plants.

Modernizing America’s complex environmental statutes, regulations, and permitting processes is crucial to ensuring that the nation can develop its resources safely and efficiently. Laws should promote a rational approach to regulation that takes cost into account. Regulations should be crafted carefully to support rather than impede development. Repetitive reviews and strategic lawsuits should not be allowed to endlessly delay progress or force the government into imposing rules behind closed doors that it would not approve in public.

Energy development, economic growth, and environmental protection can go hand-in-hand if the government focuses on transparency and fairness, instead of seeking to pick winners and repay political favors.

One area of federal regulation that is not subject to economic limitations is the Endangered Species Act. The U.S. Fish and Wildlife Service, in a May 2011 settlement agreement with WildEarth Guardians, committed to making listing decisions on 251 species by September 2016. To what degree do you believe economic impact should be considered when making critical habitat designations under the ESA? Do you think the ESA is in need of broad reform? If so, what changes would you propose?

Obama: The Endangered Species Act was put in place to protect America’s heritage and wildlife diversity, but we can do that while balancing the concerns of citizens and industries.

We have a great example of industry working to protect wildlife in New Mexico and West Texas. There, the oil and gas industry has been proactive in conserving the habitat of an endangered species, the dunes sagebrush lizard. Industry collaborated with federal government agencies and local stakeholders, and they all worked hand-in-hand to develop a plan to manage the land and resources in the area. The plan will allow continued oil and gas drilling, while also protecting habitat for this species and preventing it from being listed under the Endangered Species Act.

This type of collaboration demonstrates the potential for public/private partnerships, and shows how my administration would like to approach these issues–with all partners at the table.

Romney: I support wildlife protection and biodiversity, and believe that science and data are vital to protecting any species. Unfortunately, the Endangered Species Act has not yielded significant conservation benefits and has been consistently abused by activist environmental groups, intent on blocking energy development.

We need to more effectively promote on-the-ground conservation efforts, reduce frivolous litigation, and ensure that decisions are based on sound science, rather than politics. It is also important that we balance all this with the need to alleviate economic burdens and promote jobs. The Endangered Species Act is failing to achieve its primary purpose, and after almost 30 years, it should be modernized and updated to better focus the law on true species recovery.

The U.S. oil and gas industry as a whole contributes 9.2 million jobs and $1 trillion in yearly gross domestic product. The Independent Petroleum Association of America estimates that independent producing companies drill 95 percent of the nation’s oil and gas wells, and directly support 2.1 million jobs onshore and another 200,000 in the Gulf of Mexico. For independents, especially smaller companies, cash flow determines how many wells they can drill, how long marginal properties can be kept on production, and how many workers they can employ. Recognizing that federal income tax policy has a direct impact on cash flow, how do you view industry tax deductions such as intangible drilling costs and percentage depletion?

Obama: I have put forward a comprehensive framework for corporate tax reform that would reduce corporate rates to 28 percent without adding a dime to the deficit, by closing corporate tax loopholes. And I signed into law, $200 billion in tax relief and incentives for America’s businesses to encourage them to make new investments and create new jobs. This relief includes allowing businesses–both large and small–to immediately write off 100 percent of the costs of new investment in equipment in the United States in 2011. I also am calling on Congress to extend 100 percent expensing through 2012.

While we are making changes to our tax code to grow our economy, it also means taking another look at subsidies and loopholes that no longer make sense. I propose discontinuing the annual $4 billion in tax preferences that oil and gas companies receive.

According to the Congressional Research Service, oil and gas companies pay a tax rate that is about 21 percent less than what a factory pays. This lower tax rate is subsidized by other taxpayers, and has been since they started receiving subsidies at the beginning of the last century, when they were emerging markets. Now, they are being paid at a time when oil companies are making near-record profits.

My administration is focused on making sure there are plentiful resources available for production, but I do not believe taxpayer dollars should continue to subsidize an industry that is as well-established as oil and gas.

Romney: All American manufacturers qualify for various tax provisions within today’s hopelessly complicated tax code. There are a number of tax provisions that are specific to the oil and gas industry, but in almost every case, these are simply versions of deductions that are widely available.

Fundamental tax reform should look for ways to simplify the whole tax code into an efficient system that supports the growth of all companies. Engaging in the unfair practice of imposing higher tax burdens on specific industries, at the expense of others, is not a tax model that should be encouraged.

There has been much discussion from both sides of the political aisle about eliminating many traditional tax deductions in return for lowering corporate income tax rates. What is your attitude toward broad-based federal income tax reform, and how would you go about it? Keeping in mind that exploration, drilling and production are capital-intensive endeavors that must compete for capital with other forms of investment, how would you ensure broad tax reform does not disadvantage oil and gas investment?

Obama: There is no question we need to reform our corporate tax code. Corporate tax breaks and loopholes vary dramatically across industries. In 2007-08, U.S. corporations paid an average tax rate of 26 percent, but utility companies paid an average rate of 14 percent, while construction firms paid an average rate of 31 percent. The result is a tax system that creates an uneven playing field for corporations and their shareholders.

That is why I have proposed a framework for comprehensive corporate tax reform that would eliminate dozens of tax loopholes that we don’t need, and reinvest these savings to lower the corporate tax rate to 28 percent.

Romney: Corporate tax reform should be centered on making American businesses competitive by leveling the playing field with foreign countries. With the highest corporate tax rate in the world, American companies are at a disadvantage and do not have the freedom to efficiently allocate their capital.

I support comprehensive tax reform that lowers the corporate rate from 35 percent to 25 percent, broadens the base, achieves revenue neutrality, and adopts a territorial system of international taxation.

According to the U.S. Energy Information Administration, total U.S. crude oil and condensate production rose 14.6 percent from 2007 through 2011 while marketed natural gas production increased 19.7 percent. But while total domestic production has increased dramatically, EIA reports that oil production from federal and Indian lands rose only 2.7 percent during that same period, while natural gas production on federal and Indian lands declined 16.6 percent. What degree of access for oil and gas leasing do you believe is appropriate for federal lands in areas such as the Rocky Mountains, Alaska and the U.S. Outer Continental Shelf? Should there be further evaluation of the resource potential of federal lands?

Obama: I have offered, and continue to offer, millions of acres of public land and federal waters for oil and gas exploration and production. Thirty-eight million acres of public lands are under lease for oil and gas development, which is more than the industry is even using.

Last year, my administration approved more than 4,200 permits to drill on federal and Indian lands, and expects to process even more this year and next.

I have opened millions of acres in the Gulf of Mexico and the Outer Continental Shelf for oil and gas exploration and production. Over the next five years, I am opening more than 75 percent of offshore undiscovered oil and gas resources for development in the Gulf of Mexico and the Arctic.

Additionally, my administration is taking the first steps to assess the oil, gas and renewable energy resource potential in the Mid- and South Atlantic, including off the coast of Virginia. This assessment will help inform future decisions about whether leasing for oil and gas would be appropriate in these areas. We are doing the same for parts of the Arctic.

My administration is constantly evaluating our resource potential on public lands and in public waters, and will continue to do so over the next four years.

Romney: I believe we must release the chokehold the federal government has placed on our onshore resources, and allow states to take the lead in managing energy development. I will empower states to control energy development within their own borders, including on all federal lands not specifically designated off limits.

The Outer Continental Shelf is a vital national resource held in trust by the federal government for the American people, yet since day one, the Obama administration has systematically attempted to block its development. Decisions made today about access to energy resources affect investment and production for decades into the future.

Providing greater access and streamlining permitting not only will increase production in areas where resources have been identified already, but also will speed the identification and development of new resources.

I also believe the American people and their elected representatives must have a true understanding of the nation’s resource endowment in order to make informed decisions about the future of American energy policy.

Private sector exploration already yields valuable data when it occurs offshore. But in areas where no exploration is allowed to occur, conducting detailed surveys becomes all the more important. There is no excuse for placing any area so far off limits that its potential cannot even be determined.

And when exploration occurs onshore, that information should be shared to help develop the fullest possible picture of America’s energy potential.

Significant regulatory changes were initiated in response to the 2010 rig explosion in the Gulf of Mexico, including a complete restructuring of the federal agencies responsible for implementing and enforcing regulations. The Gulf of Mexico is an integral component of U.S. oil and gas supply, accounting for 8 percent of the nation’s natural gas production and 11 percent of its crude oil production. How do you view the state of regulations in the Gulf? Are all the necessary safeguards now in place to reduce health, safety and environmental risks to acceptable levels, particularly in deep water? Would you propose any specific measures to ensure the Gulf remains a viable oil and gas investment region, given the high costs associated with deepwater operations?

Obama: Since the Deepwater Horizon tragedy, my administration has launched comprehensive reforms to offshore oil and gas oversight. These new safety measures include heightened drilling safety standards to reduce the chances of another tragedy like the one we saw in the Gulf. The measures focus on containment and response capabilities in the event of an oil spill.

New workplace safety rules, including some recommended by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, also have been implemented, and an enhanced proposal is expected to be finalized before the end of this year.

These reforms are helping to ensure that the United States can expand development of its offshore energy resources safely and responsibly. Since we put new safety standards in place in the wake of the Gulf oil spill, we have approved more than 750 drilling permits in the Gulf of Mexico. In fact, we now are permitting at levels seen before the spill, all while meeting these important new standards.

Romney: Following the tragic Gulf of Mexico rig explosion and oil spill in 2010, it became evident there was a need to reorganize and restructure the federal government’s offshore energy agencies. Reforms also were needed to increase accountability, improve efficiency, promote safety, and ensure the highest ethical standards of employees.

The oil and gas industry had a responsibility to restore the confidence of the American people in deepwater drilling operations, and it has accomplished this through comprehensive improvements to well containment and intervention capability, and improved drilling standards. The industry also responded by forming a Center for Offshore Safety to promulgate best practices, and led in developing improved spill containment systems. The combination of these efforts has resulted in a multilayer system that has reduced the risk associated with offshore energy development dramatically.

Unfortunately, despite the important steps that have been taken, the Obama administration has still slowed the rate of offshore permitting by more than 60 percent, and slowed the rate of offshore leasing by two-thirds, which has resulted in an offshore production declining by 14 percent last year. Lease revenues have fallen from $9.5 billion in 2008 to only $37 million last year.

Government oversight is critical to the safe and responsible development of our natural resources, but I would ensure that state-of-the-art processes and safeguards for offshore drilling were implemented in a manner designed to support rather than block exploration and production. We need an environmentally responsible, robust offshore energy development plan that truly supports increased American energy and American jobs. Unfortunately, the president’s plan falls short of the mark.

Oil and gas companies frequently complain that drilling on federal lands is hampered by slow processing of applications for permits to drill, lengthy and repetitive environmental impact assessments, and lawsuits challenging any agency decision that favors oil and gas development. What reforms–if any–would you propose to expedite Bureau of Land Management and/or Bureau of Ocean Energy Management permitting procedures? Do you support “loser pays” laws to reduce frivolous lawsuits that hold up energy production on federal lands?

Obama: Making sure we can efficiently and expeditiously produce oil from our domestic resources is part of my all-of-the-above energy strategy. Since I took office, oil production is at a 14-year high, and my administration has taken concrete steps to streamline the permitting process.

Since I took office, the number of oil well drilling rigs in the United States has more than quadrupled. My administration has approved more than 8,000 permits to drill onshore, and I continue to provide vast opportunity to drill on public lands and waters.

In fact, the industry holds more acres for leasing than it is using. At the end of last year, more than 55 percent of our public lands that had been leased to the industry were sitting idle, and more than 70 percent of our offshore leased acres were idle. Furthermore, there were 7,000 approved permits last year that the industry is not developing.

I am committed to making sure industry has available resources for producing domestic oil, and also making sure American taxpayers are getting their fair share from our public lands.

Romney: In the midst of America’s energy surge, oil and gas production on federal lands somehow plummeted last year. This was no accident. President Obama has intentionally sought to shut down oil and gas production in pursuit of his own alternative energy agenda. Federal land open for exploration has declined 20 percent on his watch, and the rate of permitting is down 37 percent. It now takes a shocking 307 days to receive the permits to drill a new well.

Compare that record with what states have achieved on lands under their supervision. States have crafted highly efficient and effective permitting and regulatory programs that address their own specific needs. The state of North Dakota can permit a project in 10 days. Ohio does it in 14 days, and Colorado in 27.

Nor do these processes pose any greater environmental risks. To the contrary, from oil and gas and coal to wind and solar and biofuels, states are far better able to develop, adopt and enforce regulations based on their unique geology, ecology and other local concerns.

Offshore, the Obama administration has canceled more leases than it has held, and has slowed the rate of permitting by more than 60 percent. As a result, offshore oil production declined 14 percent last year and production in the Gulf of Mexico this year will be 25 percent below what had been expected before the Obama adminstration’s policies took effect.

Beyond the Gulf of Mexico, President Obama has stifled efforts at exploration entirely. Off the Atlantic Coast, for instance, billions of barrels of oil await development, and a bipartisan consensus in Virginia supports doing just that. Unfortunately, the president chose to block access to those resources and cancel leases that had been planned in the area.

My plan would establish a new five-year offshore leasing plan that aggressively opens new areas for development, beginning with those off the coast of Virginia and the Carolinas. Second, I would require the secretary of interior to set minimum production targets for each five-year lease plan, and to provide annual reports to Congress on the progress of reaching those goals. If a shortfall is expected to occur, I would require the secretary explain why, as well as implement policies to remove impediments.

I also would require that state-of-the-art processes and safeguards for offshore drilling be implemented in a manner designed to support rather than block exploration and production.

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