Obama claims credit for cheap natural gas

Neil Munro - The Daily Caller
January 26, 2012

President Barack Obama has been taking the credit for the worldwide boon of cheap natural-gas, declining to give credit to the entrepreneurial energy industry.

“The marketplace needed a nudge here,” Obama said at a Jan. 17 meeting of his jobs and competitiveness council. “Folks are acting as if that [boon] just sprung out of thin air and is one more example of the dynamism of the marketplace,” he complained to the executives.

Obama “wants to take credit for anything that happens in the private sector because he wants the public to look favorably on government,” responded Dan Kish, a senior vice president for policy at the Institute for Energy Research. His gas-fracking claim “is sort of like Al Gore [claiming credit for] inventing the Internet,” he said.

Obama’s controversial statement came only a few days before his State of the Union speech, where he said government participation in the successful gas-fracking industry justifies a central role for government in other energy sectors.

Fracking technology was successfully used in 1999 by a Texas entrepreneur, George Mitchell, to extract gas from shale rock. His success has forced a worldwide drop in natural gas prices, from an average of roughly $8 per unit in the mid-2000s to a current price below $3.

That drop in price has saved people and companies worldwide many billions of dollars that are now being used for other purchases or new investments. The cheap energy is also boosting the U.S. manufacturing sector following the 2008 economic crash.

Mitchell’s breakthrough is also doing more to reduce the atmospheric release of carbon dioxide than the controversial international treaties that are championed by progressive environmental groups.

Mitchell’s entrepreneurship was aided by some federal technology and advice, but he — not the government — spent years and millions of his own dollars pushing his own partners, as well as federal researchers, to develop the gas-fracking technology. (RELATED: Full coverage of Barack Obama)

Mitchell tested his technology in 1999, and sold his gas-fracking business to a bigger energy company in 2001 for $3.5 billion. At the time, Obama was a state senator in Illinois.

Nonetheless, Obama said that progressive government “nudged” — not helped or funded — industry towards the gas-fracking breakthrough.

Obama pitched a similar — but softer — credit-grabbing message in his Jan. 24 State of the Union speech.

Cheap natural gas will support more than 600,000 jobs by 2020, he declared, adding, “by the way, it was public research dollars, over the course of 30 years, that helped develop the technologies to extract all this natural gas out of shale rock, reminding us that government support is critical in helping businesses get new energy ideas off the ground.”

Other progressives are also trying to take the credit from entrepreneurs. John Podesta, head of the Center for American Progress, declared in a Jan. 24 Wall Street Journal article that “under President Obama’s leadership, we appear to be at the beginning of a domestic gas and oil boom.”

Obama’s grab for credit is ambitious, and is backed by the Breakthrough Institute, a progressive advocacy group. “The federal government developed and demonstrated every significant technology that led to the shale gas revolution: Hydraulic fracking, horizontal drilling, 3D mapping and imaging,” Ted Nordhaus, a founder of the institute, told The Daily Caller.

“Without those contributions, there is no shale gas revolution, except in the counter-factual fantasies of libertarian ideologues,” he added.

Industry officials deride the progressives’ grab for credit.

“The industry’s success … [is] the result of the fortitude and perseverance of private sector companies and their shareholders, not the benevolence of  the federal government,” said one official who did not want to be identified for fear of retaliation by Obama’s deputies. “Both in rhetoric and regulation, this administration has largely thrown roadblocks in front of the one engine that is propelling a more favorable economic outlook.”

“I don’t know of any large-scale technical developments that have been from government,” said Alan Boras, a vice-president for media relations at Encana Corp., a gas-fracking company.

Government researchers developed some basic technology that was used by industry in the fracking business, but that doesn’t allow government to claim credit for the gas boom, he said. The U.S. government also funded early development of the Internet, he added, but “did the government develop the technology for the iPad? No, it didn’t.”

“We did at all, [without] a cent” from government, said James Hill, an executive at Gastrac, another fracking company. Gastrac is a Canadian company that was formed by veterans from energy giant Halliburton, and it has developed a newer form of fracking technology that use only small quantities of corrosive chemicals to extract natural gas from rock.

In Canada, Hill said, “the government got out of the business of helping companies long ago.”

The attempted credit grab “is part of the never-ending search for more power… [which] is the driving force of progressivism,” said Kish. Power is valuable, he said, because progressives “can convert that power into everyone having to come to the government to do anything.”

Progressives constantly cast doubt on private-sector successes because they need to boost government power, Kish continued. The progressives’ attitude, he said, is “if [something] is successful, government had to have something to do with it, and if people are successful on their own, they must have done wrong or gotten something by underhanded means.”

Mitchell’s massive success still leaves many opportunities for progressives to play a role in the gas industry

“The economics are such that we don’t have to incentivize industry to extract it, but we do have to make sure the technologies are there to do it safely, where there may be some underinvestment on the private side,” Obama said on Jan. 17. On Jan. 24, he announced plans to regulate companies’ use of chemicals.

The industry, however, already invests heavily in safety, partly because natural gas is explosive and can kill workers and destroy equipment, but also because lawsuits and safety violations can eat up profit.

Obama is also using his claim for credit to win a larger role for progressives in the nation’s other energy sectors.

Obama’s 2009 stimulus included about $40 billion in funds for the green-tech industry. Much of that money went to basic research, but much went to companies or consumers to temporarily subsidize the sale of solar power, high-tech batteries, battery-powered autos and other products.

The sector’s infamous poster child is now-bankrupt Solyndra, a California-based solar cell manufacturer. The firm went bankrupt in 2011 after receiving $535 million in federal loan guarantees following extensive contacts between Obama’s deputies and company advocates.

The resulting scandal has significantly damaged public support for Obama’s green-tech policies.

Now, Obama appears to be using his claim about progressives’ role in the gas-fracking industry to bolster a larger role for progressives in the green-tech sector.

“The question is whether we apply that insight to things like solar and wind and other renewable energies as well… That’s where the controversy comes in,” he said on Jan. 17.

“Our experience with natural gas shows us that the payoffs on these public investments don’t always come right away,” he said in his State of the Union speech. “Some technologies don’t pan out; some companies fail. But I will not walk away from the promise of clean energy. … I will not cede the wind or solar or battery industry to China or Germany,” he declared.

Obama’s multi-billion dollar support for green-tech production and sales goes far beyond the government labs’ traditional sharing of taxpayer-funded research and technology with eager entrepreneurs.

Even Nordhaus — who argues that the government played a significant role in the gas-fracking sector — criticized some of Obama’s expensive subsidies, and argued that federal funds should be focused on novel technologies, not on products.

“We think the potential for present generation renewables … has been overhyped,” he told TheDC. “We think that has resulted in policies that too often subsidize output from mature technologies that aren’t going to be cost-competitive… rather than subsidizing innovation.”

Amid the controversies, Obama is working to buy allies in the energy industry.

“I think having a business voice on behalf of those [renewable] investments is useful, because I think, if it is just coming from us, it can oftentimes look like we’re picking winners and losers, or that we have an overriding environmental agenda as opposed to an economic development agenda,” Obama told the business leaders on Jan. 17. “My view has always been that these things are compatible, not contradictory.”

Obama’s attempt to entice companies to accept progressive leadership is regularly slammed by GOP leaders.

“You’ve got to stop the spread of crony capitalism,” former Massachusetts Gov. Mitt Romney declared at the Jan. 20 South Carolina debate. Obama “takes $500 million and sticks it into Solyndra. He stacks the labor stooges on the [National Labor Relations Board] so they can say ‘no’ to Boeing and take care of their friends in the labor movement… He turns down the Keystone [XL] pipeline, which would bring energy and jobs to America.” he said.

Obama’s audience at the Jan. 17 meeting included at least three business leaders who rely on government support for green tech.

One was the council’s chairman, Jeff Immelt, CEO of General Electric (GE), which is trying to win a large role in the green-energy market.

GE lobbied for Obama’s very ambitious “cap and trade” bill, but the bill was defeated by GOP opposition. However, the GOP failed to stop a 2008 federal mandate that bars the sale of cheap incandescent bulbs. The mandate requires consumers to buy high-profit, low-power bulbs, which are made by GE and other companies.

“I’m still scratching my head on that whole light bulb [controversy]… I thought it was a pretty good idea, and Jeff did too, because he’s making them,” Obama said at the meeting.

Another attendee was Lewis Hay, the CEO of NextEra Energy, Inc., which is the largest renewable energy generator in North America. Hay urged Obama to continue federal spending on renewable-energy programs, despite the political controversy over Solyndra and other government-subsidized green-tech products.

“I’m shocked there is a little controversy in this area — its a little disappointing,” Obama responded, prompting more laughter from the CEOs and investors.

If progressives “thought they could take credit for a sunny day,” Kish said, “they would try.”

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