Governors drill deep on energy in annual addresses

Source: Amanda Peterka • E&E • Posted: Monday, January 30, 2012

When President Obama focused heavily on energy issues in his State of the Union address earlier this week, he echoed themes many governors have been pushing forward in their annual “state of the state” speeches this month.

Governors from resource-rich states like Alaska, Virginia, West Virginia and Colorado all have devoted substantial sections of their annual addresses to traditional energy this month. The governors — both Democrats and Republicans — have called for increases in traditional and renewable energy development, and many have taken jabs at the federal government for stifling development.

Alaska Gov. Sean Parnell, a Republican, made one of the strongest pitches for energy development, calling for increased investment, lower taxes and streamlined permitting for the state’s oil industry. He slammed Washington, D.C., and U.S. EPA for holding up development.

“Years of misinformation and lobbying have convinced some bureaucrats that Alaska is just one big national park, with no room for economic growth,” Parnell said during his address. “It’s time to stop putting extreme special interests above our people’s interests. Where the federal government would lock us out, we will open the doors of opportunity for Alaskans.

In the speech, Parnell called for “meaningful tax reform” to increase the flow of oil in the Trans Alaska Pipeline System from 600,000 barrels a day to 1 million barrels. Last legislative session, he championed an attempt to cut taxes on oil companies, a move critics say could deprive the state of up to $2 billion in revenue a year.

This year, he said oil companies have pledged to invest at least $5 billion in new investments should the state Legislature pass tax reform legislation.

The state oil and gas industry applauded Parnell’s focus on reforming the tax system, saying it was imperative that an overhaul happen as soon as possible to help increase investment in the state.

“We do feel that the governor is trying to work with industry to find a fiscal structure that works for everyone,” said Kara Moriarty, executive director of the Alaska Oil and Gas Association. “Because when we work together, we win together. Alaska very much depends on the oil and gas industry. We pay almost 90 percent of their bills. So when we’re successful, the state’s successful.”

Parnell also called on the CEOs of three major natural gas leaseholders to come together to build a gas pipeline through the state to drive exports to Asia. And by the third quarter of this year, he wants the leaseholders — Exxon Mobil Corp., BP PLC and ConocoPhillips Co. — to decide on a work schedule for the pipeline.

“The path ahead is better defined and benchmarks for progress are in place,” Parnell said. “While a lot more work remains, Alaska is closer to the day when our gas can move from the ground to Alaskans and markets beyond.”

The companies must first agree to resolve a dispute over Point Thomson, an oil- and natural gas-rich field that Exxon Mobil and other companies have been slow to develop. The state government is eager for the project to start, and Parnell said he would fight “for Alaska’s interests” at a Feb. 8 hearing in Anchorage if a settlement cannot be reached.


Also fighting for his state’s interests is Virginia’s Republican Gov. Bob McDonnell, who used his state of the state address to criticize the Obama administration for not including Virginia in its 2012-2017 plans for offshore drilling.

“We must continue to demand that the federal government stop the overreach and overregulation of our important job-creating coal and natural gas industries,” the governor said.

McDonnell’s goal is to make Virginia “the energy capital of the East Coast” by pursuing an “all of the above; red, white and blue” approach to energy, the governor said during his address.

McDonnell has repeated those phrases in multiple speeches. But Lia Guthrie, executive director of the Virginia League of Conservation Voters, called them unrealistic talking points.

“Even if [offshore drilling] were allowed today, it would take years for that to actually net any oil or gas, and so we don’t think that’s a realistic solution,” Guthrie said. “It’s certainly not something he could achieve during his term as governor.”

McDonnell’s words came a week after he rolled out an ambitious seven-part plan on energy that called for an expansion of natural gas infrastructure, stricter mine safety and a streamlined process for approving major transmission line projects.

McDonnell also called for increased investment in renewable energy research, energy efficiency programs and thermal energy incentives. Rounding off the plan is a proposal to convert state-owned vehicles to run on alternative fuels.

Critics of McDonnell’s proposals say they won’t generate more energy from truly renewable sources. And they say a budget proposal to invest $500,000 in a “wind energy area” off the coast of Virginia is not enough to stimulate investment in wind power.

But each of the proposals has strong backing from at least one state delegate or senator.

“Through the targeted development of all of our energy sources, Virginia will become a leader in East Coast energy production and can be home to thousands of new energy industry jobs,” said state Sen. John Watkins (R), who is introducing the energy efficiency measure.

West Virginia

Gov. Earl Ray Tomblin of neighboring West Virginia also took a shot at the Obama administration during his state of the state address.

The Democrat vowed to “fight this administration’s war on coal,” criticizing EPA for engaging in “backdoor policymaking that threatens the very livelihood of so many of our fellow citizens” (Greenwire, Jan. 12).

In response, the West Virginia Coal Association said the governor “scored” with his speech and was “unequivocal” in his support for the industry.

Tomblin also devoted much of his speech to natural gas development in the state’s section of the prolific Marcellus Shale play, touting the potential jobs the industry would bring to the state. He cited an estimate by the American Chemistry Council that the ethane manufacturing industry could bring 12,000 jobs to the state and pledged to submit legislation that would provide incentives to help achieve that goal.

“I will do everything in my power to make sure that West Virginia is positioned to take full advantage of this opportunity,” he said.

The state oil and gas industry said it was encouraged by the speech and by actions since. This week, the state Legislature approved a measure that would grant a 25-year tax break for a Marcellus Shale-connected chemical plant, a bill he is expected to sign.

“We’ve been a backbone industry and we’ll continue to be a backbone industry,” said Corky DeMarco, executive director of the West Virginia Oil and Gas Association. “It’s encouraging for him to stand up there and really be exuberant about what our potentials are in the long term and the near term as well.”

Tomblin has also entered into an agreement with seven other states to increase production of natural gas-powered cars. The state will consider converting some of its fleet to natural gas, he said


In resource-rich Colorado, Gov. John Hickenlooper (D) took credit for beginning the multi-state natural gas vehicle initiative in his state of the state address, touting his Energy Office and the abundant reserves of gas in the Niobrara Shale formation.

And Hickenlooper did not shy away from the topic of hydraulic fracturing — a controversial drilling process that pumps water, sand and chemicals into the ground to break up gas trapped in shale rock

“This is a drilling procedure that has opened the door to a whole new era of energy development that can lead to more jobs, cleaner air and energy security for our country and the world,” Hickenlooper said.

Hickenlooper praised his state’s fracking disclosure rule, calling it the “country’s strongest and fairest rule disclosing the ingredients in the fracking process.” The rule went into effect at the start of the year and has garnered support from both environmental and industry groups (Greenwire, Dec. 14, 2011).

The governor also addressed the proliferation of local fracking bans across the country, a trend industry groups and drilling companies have said creates a patchwork of regulations that are difficult to negotiate. Colorado will work with its counties and municipalities to create regulations, Hickenlooper said, but “the state can’t have 64 or more different sets of rules.”

But some governors of states with large oil and gas resources avoided the controversial topic. New York’s Democratic Gov. Andrew Cuomo was one. He avoided the subject of hydraulic fracturing and drilling entirely in his state of the state address (Greenwire, Jan. 5).

Will any of the governors’ ideas see action?

Despite much back-patting on energy in this year’s state of the state addresses, governors still have to face their state legislatures and tough budget constraints when it comes to implementing the proposals. And it remains unclear how the governors’ energy plans will fare as states face tough fiscal realities, another theme the governors focused heavily on in their speeches.

In Alaska, for example, Parnell’s oil tax reform proposal passed the House last year but stalled in the Senate. The state Legislature’s 2012 session began this week and already Democrats are doubting whether the tax will spur oil companies to invest in the state. Lawmakers are asking for a clear commitment on investment and evidence that the tax has actually slowed production in Alaska before passing any reforms.

As for the gas pipeline, it is uncertain whether the state can reach an agreement with the three leaseholders. Gas was discovered four decades ago in Alaska, and a pipeline has yet to be built.

“There are some in Alaska who wish natural gas resources could have been developed 20, 30 years ago, and it hasn’t been for lack of trying,” said Moriarty of the state oil and gas association.

Several governors have not given their annual speeches yet. Most of those are scheduled for early next month. Among them: Maryland’s Democratic Gov. Martin O’Malley, who will likely address an ambitious proposal to stimulate offshore wind energy.

O’Malley announced legislation this week to spur development of an offshore wind farm, which is one of a series of agenda items for the year. The bill, which failed last year in the state General Assembly, would create a renewable credit system for offshore wind energy.