Obama Backs Fracking to Create 600,000 Jobs, Vows Safe Drilling for Gas

                By                    Jim Snyder and Katarzyna Klimasinska                 -
U.S. President Barack Obama

U.S. President Barack Obama

Joshua Roberts/Bloomberg

U.S. President Barack Obama, front center, delivers the State of the Union address to a joint session of Congress with U.S. Vice President Joseph “Joe” Biden, back left, and House Speaker John Boehner at the Capitol in Washington.

U.S. President Barack Obama, front center, delivers the State of the Union address to a joint session of Congress with U.S. Vice President Joseph “Joe” Biden, back left, and House Speaker John Boehner at the Capitol in Washington. Photographer: Joshua Roberts/Bloomberg

President Barack Obama pushed drilling for natural gas in shale rock and called for an “all-out” U.S. effort to develop cleaner energy sources that will help boost the economy.

Hydraulic fracturing, which injects a mix of water, sand and chemicals underground to free gas trapped in rock, could create more than 600,000 jobs by the end of the decade, Obama said tonight in his last State of the Union address before the election. The process, called fracking, is among a list of energy policies Obama said would fuel economic growth.

“We have a supply of natural gas that can last America nearly 100 years, and my administration will take every possible action to safely develop this energy,” Obama said.

Obama reiterated support for conservation and cleaner sources of power, which have been themes of his administration. He announced incentives to make industries more energy efficient, and again called on Congress to require that a larger percentage of the nation’s power come from low-pollution sources by 2035.

“This country needs an all-out, all-of-the-above strategy that develops every available source of American energy – a strategy that’s cleaner, cheaper, and full of new jobs,” Obama said, prompting a standing ovation from lawmakers.

He directed his administration to open up more than 75 percent of potential offshore oil and gas resources for production.

Eight-Year High

“Right now, American oil production is the highest that it’s been in eight years,” Obama said. “Not only that – last year, we relied less on foreign oil than in any of the past 16 years.”

U.S. natural-gas production averaged 1.89 trillion cubic feet a month through October, 13 percent higher than the average during President George W. Bush’s two terms, according to Energy Department data.

Crude oil production is 2 percent higher, the department said.

In stressing oil and gas production, Obama risks upsetting environmental groups that are a key Democratic constituency. Groups like the Sierra Club fear natural-gas fracking poses risks to water supplies. Obama said the drive for new drilling would be accompanied by regulations to ensure safe drilling practices. Those would include a requirement that companies operating on public lands disclose the chemicals used in the fracking fluid.

Jobs, Taxes

Obama’s energy themes were part of a speech that emphasized the role of manufacturing in creating jobs and he pressed Congress to adopt what he said was a fairer tax code by ensuring millionaires and billionaires pay at least 30 percent in income taxes.

Before the address, Republicans sought to contrast Obama’s pledge to use energy policy to create jobs with his denial of a permit to TransCanada Corp. (TRP) for the $7 billion Keystone XL pipeline to connect Canada’s oil sands to refineries on the U.S. Gulf coast.

House Speaker John Boehner, an Ohio Republican, invited Jay Churchill, manager of ConocoPhillips (COP)’ Wood River refinery in Roxana, Illinois, and Ray Brooks, refining division manager atMarathon (MRO) Petroleum Corp. in Robinson, Illinois, as his guests to sit in the House visitors’ gallery.

Canada Pipeline

He said in a statement that the companies would benefit from building the pipeline.

TransCanada has said its proposed pipeline would create 20,000 jobs and carry 700,000 barrels of crude per day.

The State Department in a report to Congress said the project would create from 5,000 to 6,000 jobs for the two years it would take to complete, citing TransCanada’s own labor expenses submitted as part of its application.

Environmental groups oppose the project because producing crude from the oil sands releases more greenhouse gases. Transporting it over the more than 1,600 miles of steel pipe also raises risks of a spill, critics say.

Indiana Governor Mitch Daniels, who was to deliver the Republican rebuttal to Obama, called Keystone a “perfectly safe pipeline that would employ tens of thousands” and said in an advance copy of his address that Obama has sought to stifle energy production in the U.S., according to excerpts released by Republicans.

Decision Deadline

Obama said last week a 60-day decline imposed by Congress didn’t give him sufficient time to weigh the risks of an alternative pipeline route that would go around the environmentally sensitive Sand Hills region in Nebraska.

As he backed more domestic oil and gas production, Obama also pledged support for renewable sources of power.

Among First Lady Michelle Obama’s guests was an employee of Energetx Composites in Holland, Michigan, a company that benefits from a wind production tax credit set to expire at the end of the year. Obama said Congress should pass clean energy tax credits.

The expiration of the credit puts manufacturing jobs in“peril,” Denise Bode, chief executive officer of the American Wind Energy Association, said in a statement before the speech.

The Washington-based trade group has more than 2,500 members, including General Electric Co. (GE) and Vestas Wind Systems A/S (VWS).

An energy efficiency initiative outlined by Obama could cut $100 billion from the nation’s energy bills. Obama also pledged that the Defense Department would make the largest renewable energy purchases in history.

Congressional Resistance

Obama’s energy goals have met resistance in Congress. His proposal to cap carbon dioxide emissions to reduce the risks ofclimate change died in the Senate in 2010.

Congress has yet to act on a clean-energy standard, which Obama pitched a year ago as a replacement to his climate bill, to require more energy from low-pollution sources.

Senator Jeff Bingaman, a New Mexico Democrat and chairman of the Energy and Natural Resources Committee, plans to introduce legislation promoting a clean energy standard this year. It will likely face opposition in the Republican-led House, which generally opposes federal mandates on states.

Obama also repeated his call from last year to repeal tax credits for the oil and gas industry. That effort also failed to win broad support in Congress, after producers said the measures would push more production and jobs outside the U.S.

‘A Contradiction’

“Advocating greater energy production but penalizing those who provide that energy is not a sound energy policy, but a contradiction,” Jack Gerard, chief executive officer of theAmerican Petroleum Institute, said in a statement.

While the administration has been criticized by the Washington-based petroleum group for not developing fossil fuel resources, oil and gas production have been on the rise since Obama took office.

The president’s promotion of natural gas follows an announcement by Chesapeake Energy Corp. (CHK), the second-biggest natural gas producer in the U.S., that it would cut back on drilling to try to stop a price slide in prices.

Obama imposed a temporary moratorium on deepwater drilling in the Gulf of Mexico after BP Plc’s Macondo well exploded in April 2010, killing 11 workers and sending 4.9 million barrels of crude into the Gulf of Mexico.

Gerard told reporters before the speech that production has increased even under Obama’s policies, which the group has said discourages energy development.

To contact the reporters on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net; Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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