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A Project of The Annenberg Public Policy Center

Bogus Oil Claims by Crossroads GPS

Crossroads GPS is accusing the Obama administration of “bad energy policies” causing “prices we can’t afford.” But the Republican-leaning group makes some false and exaggerated claims.

  • It says the president “limited development of American oil shale.” Actually, production of petroleum from shale formations is booming. What the administration slowed down were plans for experimental development of ways to produce oil by heating kerogen-rich rocks, something that is years away from becoming commercially feasible.
  • The ad claims Obama lobbied to “kill” the Keystone XL pipeline. Not true. So far he has delayed a decision on some of it — while endorsing construction of a portion that will carry more low-cost oil to Gulf Coast refineries.
  • The ad correctly notes that there was a 17 percent decline in oil production in the Gulf of Mexico last year. But not all of that is because of the administration’s temporary drilling moratorium there.

The ad started running March 21. Crossroads said it is spending $650,000 to run the 30-second spot on national cable TV and in TV markets in Ohio, New Mexico and Nevada, where the president was pitching his energy policies this week.

The ad correctly notes that the price of gasoline has risen from a little over $1.80 a gallon during the week Obama took office in January 2009, to over $3.70 a gallon more recently. In fact, the average price of regular gasoline hit $3.867 during the week of March 19 — even higher than the figure shown on screen in the ad — according to the U.S. Energy Information Administration.

But is the difference in the price then and now due to Obama’s policies, as the ad claims? The ad offers some false and misleading evidence.

Oil Shale

The narrator’s claim that the administration “limited development of American oil shale” is badly misleading. No significant restrictions have been placed on the currently booming production of petroleum from shale formations such as the Bakken in North Dakota and Montana, or Eagle Ford in Texas.

Environmental regulations haven’t restrained production. It’s true that the EPA is studying the possible effects on drinking water of the hydraulic fracturing methods that drillers have used to extract oil and gas from such shale formations. But the results of the report are not due until 2014.

What the ad refers to is another type of “shale oil” entirely — rocks that give up petroleum or gas when heated to 650 to 700 degrees Fahrenheit — or more. There are rich deposits of these oil shales in Colorado, Utah and Wyoming. But the Energy Information Administration’s experts say “2023 probably is the earliest initial date for first commercial production.”

The ad shows a snippet from a 2009 news story saying “oil shale leases will be scrapped.” To start, that’s a partial quote that gives a false impression. No leases were scrapped. What the full quote makes clear is that a last-minute plan by the Bush administration to grant leases was scrapped.

Reuters, Feb. 25, 2009: A Bush administration plan for more research, development and demonstration oil shale leases will be scrapped because the proposal is flawed and royalties to the government are too low, Interior Secretary Ken Salazar said on Wednesday.

The ad also failed to note that these were merely “development and demonstration” leases, and that what Salazar was canceling was a decision announced in the final week of the Bush administration to make up to 2 million acres of public land available for leasing.

Currently, according to a Feb. 3 news release, the Obama administration is studying the effect on the environment of its “preferred alternative” of offering under 462,000 acres for such oil-shale leasing.

Keystone Pipeline

The narrator claims — falsely — that Obama lobbied to “kill” the Keystone XL pipeline project. In fact, he has merely delayed a decision on the controversial northern leg of the project, and lobbied against a GOP move to force quick approval.

The ad cites a Boston Globe story from March 9, which actually says the president called Democratic senators to oppose “a Republican bid to speed approval” of the project, which then failed. Furthermore, it is doubtful that the “fast-track” plan proposed by Senate Republicans could have really hastened construction, because the company that wants to build the pipeline– TransCanada Corporation — has yet to choose a new route through Nebraska to avoid the environmentally sensitive Sandhills area. The company says it is still working with Nebraska officials but expects to submit a new application to the White House this year. It expects to get approval in the first quarter of 2013, and place the pipeline in service in 2015.

Meanwhile, there’s nothing to prevent more Canadian oil from coming into the U.S. right now, should Canada be able and willing to send it. Existing cross-border pipelines already have much more capacity than they are using. Those pipelines have the capacity to bring in more than 1 million barrels per day of additional Canadian oil, according to a study produced for the U.S. State Department by EnSys Energy & Systems Inc. of Lexington, Mass., in December 2010. And the study predicts that surplus capacity will persist at least until the year 2020, even if the Keystone is never built (see table 3-4).

Meanwhile, Obama has embraced the southern portion of the project. It will begin in Cushing, Okla., and help eliminate a bottleneck that has prevented a glut of lower-cost oil from reaching U.S. Gulf Coast refineries, which have been clamoring for it. On March 21, Obama even said he would order federal agencies to make faster permitting and review decisions, a mostly symbolic gesture, since a TransCanada Corporation official had said earlier that he expects to get the needed permits and to begin construction as soon as this June anyway. The company says it expects the Cushing-to-the-Gulf pipeline to start carrying oil in “mid to late 2013.”

Gulf Production Restricted?

On another point, the ad makes a claim with some validity, but still exaggerates. The narrator says, “President Obama’s administration restricted oil production in the Gulf,” while on screen the viewer can see a snippet of an article saying “in the Gulf of Mexico … it declined 17 percent.”

It’s true the publication Greenwire reported on Feb. 27 that oil production from federal lands and offshore waters declined in 2011. It added: “The reduction in oil production was most significant in the Gulf of Mexico, where it declined nearly 17 percent.” But the same story went on to say, “There could be many causes” besides the administration’s drilling pause.

Experts attribute some of the decline in production to the halt in deepwater drilling that the administration imposed for several months in 2010, after the explosion and fire that sunk the Deepwater Horizon drilling rig in April of that year, triggering the worst oil spill in U.S. history. Although the moratorium was lifted after less than six months, the temporary halt caused oil companies to send some of their expensive drilling rigs to other parts of the world, and so the effects are still being felt. According to Rigzone, a trade publication, there were still slightly fewer drilling rigs under contract in U.S. waters in the Gulf in December 2011 than there were prior to the BP disaster.

As we noted a year ago, the EIA had been predicting a decline in Gulf of Mexico oil production even before the BP disaster. That’s because production from newly drilled wells wasn’t expected to offset the drying up of production from thousands of old wells. So some of that 17 percent decline was due to happen no matter what Obama did.

The Big Picture

So overall, are Obama’s policies to blame for today’s high gasoline prices? That’s no more true today than it was in 2008, when Democrats blamed President George W. Bush for prices that briefly topped $4 a gallon, before they plunged during the 2008-2009 recession. The fact is that oil prices are set on world markets. And this time around, the reason prices are soaring is “mainly geopolitical,” according to noted authority Daniel Yergin, chairman of IHS Cambridge Energy Research Associates and author of several books on world oil markets. He wrote in a March 15 op-ed in the Wall Street Journal:

Yergin, March 15: At least half a million barrels a day are currently out of the market because of disruptions in South Sudan and Yemen and civil war in Syria. [And] the market is operating on expectations that supplies will become even tighter as new U.S. and European sanctions against Iran take effect and the risk of military conflict increases. Put simply, the oil market is reading the front page.

Yergin added: “Given these circumstances, there’s not much Washington can do in the short term to reduce prices at the pump.”

— Brooks Jackson