Will the Energy Sector Improve in Obama's Second Term?
Erin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
What can we expect from the energy sector during a second Obama administration?
The president has promised to-
- Boost American energy production
- Develop clean energy technologies
- Control our own energy
Is it possible for him to succeed? The energy sector believes it is and that it will benefit the economy overall.
Both political parties and the Obama administration are committed to addressing the nation’s rising gasoline prices and boosting American energy production. The country can protect the economy by actively producing its own energy resources- including natural gas, coal and nuclear, along with alternative sources such as wind, solar, hydropower and geothermal.
One step towards boosting American energy production would be to further TransCanada (NYSE: TRP) Keystone XL Pipeline. After the last deference, it was indicated that the pipeline would be reconsidered in early 2013, and some industry watchers expect it to be the president’s first major action after re-election. And even though the oil and energy industry leaders have accused Obama of playing liberal politics with the environment, some feel that with the pressure of re-election behind him, he may abandon his environmental friends and finally approve the Keystone XL Pipeline.
In order to boost energy production and develop new technologies regulations will have to be pulled back. For instance, there are at least ten federal agencies considering regulations on hydraulic fracturing (fracking). The overabundance of regulations discourages energy production and growth.
The oil and natural gas industry wants to work with the administration to increase domestic oil and gas production, more jobs and economic growth. The sector’s hopes for the next four years:
• Approval of the full Keystone XL Pipeline, employing thousands of Americans.
• Reduce regulations on shale energy resources, which would benefit corporations such as Denbury Resources (NYSE: DNR), the second largest producer of carbon dioxide flooded oil.
• Reduce the burdensome regulations and streamline the federal permit process for onshore and offshore energy development.
• Open up more offshore drilling.
Expanding access to America’s oil and natural gas resources can create 1.4 million jobs by 2030, according to EnergyTomorrow.org.
Oil shale royalty rates are established by the Bureau of Land Management (BLM). A royalty rate is the percentage of profits business must pay for using public resources. Energy businesses favor lower royalty rates because oil shale extraction is costly and therefore a lower royalty rate promotes the oil shale industry. To establish a royalty rate, interested parties must go through an extensive federal regulation process.
Denbury Resources Inc. is an independent oil and natural gas company with 461.9 million barrels of oil and natural gas reserves, of which 77% was oil. With oil and gas prices still recovering from their big drops back in April, several companies are looking to sell off different parcels in exchange for cash. In September, ExxonMobil (NYSE: XOM) agreed to buy Denbury's assets in the Bakken Shale for $1.6 billion in cash and interests in two oilfields.
More than 85% of the U.S. outer continental shelf is currently closed to energy exploration. Allowing more offshore drilling would help companies such as Transocean (NYSE: RIG), the world's largest offshore oil and gas drilling company, would benefit from more drilling opportunities, resulting in higher production, which would lower costs down the line to consumers.
According to a recent survey, most Americans want action against climate change, and support clean energy, but they are hesitant to support policies that force them to make lifestyle changes, particularly ones that increase expenses. Clean energy options are available that do not cost more than current opportunities through public investments in innovation. For almost 30 years the federal government invested in the research and development of breakthrough drilling techniques and partnered with industry to demonstrate new technologies.
The topic of nuclear energy invokes a wide range of responses from the dangers of a meltdown to sustainable energy sources. For roughly the past five years thorium has slowly gained attention as a form of nuclear energy. Advocates of thorium are pushing for a new type of U.S. nuclear plant with thorium fueled reactors that would produce less waste, and is more difficult to turn into a nuclear weapon. Several other rare earth mineral production companies are involved in thorium production.
Cameco Corp (NYSE: CCJ) is active around the world in several different types of mining and mineral production, including thorium. Cameco is world's largest uranium producer. The company operates through diversified business segments- Uranium, Fuel Services and Electricity. It generates 1,000 MW of clean electricity through a partnership in North America's largest nuclear generating station located in Ontario, Canada. The company would benefit from progress in energy alternatives such as thorium, but also in clean electricity production.
If the president is interested in supporting the economy through energy, the opportunities are boundless, and could have tremendous positive impacts on energy portfolios.
ErinAnnie has no positions in the stocks mentioned above. The Motley Fool owns shares of Denbury Resources and Transocean. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.