Why Obama's Latest Energy Policy Makes Sense
Last April, I put forth my perspective on President Obama's ambitious energy plan, which called for a one-third reduction in oil imports by 2025. I tried to put together the supply-side issues on the domestic front and see whether that plan was carved in stone. Now, in his latest State of the Union address last week, the President emphasized regulations for the safe development of those resources. This means that all companies drilling for gas on public land are required to disclose the chemicals used for fracking.
Influential lobbies in the petroleum industry have interpreted the latest Presidential address as conflicting with the earlier plan and being equivalent to putting brakes on the development of the oil and gas industry. Hearing of more regulations, the first (and probably the easiest) conclusion is that the idea of making America energy-independent was just another round of lip-service from the President. On the face of it, this looks like a logical interpretation. The billion-dollar question, however, is: Are the two plans really in conflict with each other?
Moment of truth ...
Fracking has been extremely successful, and there's little doubt that it'll play a decisive role in reducing dependence on foreign oil. However, the chemicals used in fracking have been a contentious issue for quite some time. Last September, Houston-based Cabot Oil & Gas (NYS: COG) found itself in hot water when residents of a Pennsylvania village accused the driller for polluting their aquifers. In other words, shale gas and shale oil production have reached a crossroads where a crucial decision must be made by regulators and legislators.
As more-advanced technology is put into use, questions about the various consequences will always crop up, which I believe is perfectly normal. Fears that a leakage of the chemicals used could contaminate aquifers and other groundwater resources continue to linger. But are those fears overblown? We need to know. However, what we need to understand is this: By not addressing these fears, the general perception of the process outside of the exploration and production industry will only tend to take a turn for the worse.
... but a great opportunity as well
The new disclosure norms are a great opportunity to dispel notions that are probably untrue. Keep in mind, there's still a long way to go in terms of developing properties with proved reserves. Which is why disarming critics is essential at this point. Oil companies only stand to gain the trust of the general public by ensuring proper disclosure of the chemicals used for fracking.
It isn't that difficult
In fact, it isn't all that difficult, as Range Resources (NYS: RRC) has shown. Last September, fellow Fool Aimee Duffy noted how Range has been the first mover on this front. The company -- one of the major players in the Marcellus shale play -- has already been disclosing the chemicals used in fracking water. It also recycles the water used in fracking.
It doesn't end there. Companies operating in North Dakota's Bakken - home to the most promising shale discovery in the country - are voluntarily disclosing fracking details. XTO Energy of Exxon Mobil (NYS: XOM) , Chesapeake Energy (NYS: CHK) and ConocoPhillips (NYS: COP) have started the practice last November. "We believe this is an excellent step forward," said XTO-Exxon spokesman Jeff Neu. "Our intention is to provide the public ... objective information on hydraulic fracturing." In short, it doesn't hurt to be a little more transparent -- unless companies really have something to hide.
So, if there's truly an issue with the chemicals used in fracking, we need to understand the true cost of oil independence. After all, this involves people's properties and drinking water -- it is not just another environmental issue. The industry can't afford another moratorium on drilling.
Conflict? What conflict?
As I see it, the two plans seem to be in tandem with each other. This is not the first time that skepticism has been around, and it won't be the last. But this is undoubtedly a fantastic opportunity for the powers that be to prove that truth is backed up by hard facts. What do you think? Sound off below.
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At the time this article was published Fool contributor Isac Simon does not own shares in any of the companies mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of Chesapeake Energy and Range Resources. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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