State of the Union Address: Dominating the World Energy Markets and Losing to Congress

January 30, 2015

The State of the Union Address, the speech delivered by the US President at a joint session of the US Congress, is the most highly anticipated public announcement of the year for many industries, including energy. But the state of the union per se is only part of the speech; the address also puts forward strategic directions that crystalize into various legislations, policies, programs, and initiatives throughout the year and afterward. The latter portion is perceived as being the most valuable, mainly because it provides an indication of future government funding. The last five years could be called anything but boring for those who paid close attention to the sections of the President’s addresses related to energy: at first the direction was chosen, then it was altered, then the originally chosen direction was re-stated, and so on. The 2015 speech, however, brought an even bigger surprise.


But let’s begin with some context. The 2009 speech cleared the way for clean energy technologies and suggested that the United States would double the nation’s supply of renewable energy in the next three years. A year later, a new comprehensive energy and climate bill was promised to US citizens. In 2011, the address confirmed the chosen direction by voicing the President’s pledge to have 80% of the nation’s electricity coming from clean resources by 2035, while also promising to bring 1 million electric vehicles to the road by 2015. The 2012 speech altered this direction – the new “all of the above” strategy invited fossil fuels back into the circle with the honorable mentioning of hydraulic fracturing technology designed to enhance the recovery of shale deposits. In the 2013 speech, the President proposed the creation of an Energy Security Trust dedicated to shifting cars and trucks off petroleum, the development of new alternative energy hubs, and the promise of executive action if Congress failed to develop a market-based solution to climate change. The 2014 speech re-emphasized what was said the year before: a déjà vu discussion of an “all of the above” energy strategy that supported the development of all domestic energy sources, including natural gas and crude oil. The natural gas was called “the bridge fuel that can power our economy” and the United States was identified as a global leader in solar power generation.


I choose to refrain from commenting on the implementation success of all those pledges and promises. So by the day of the 2015 address, I had built up more hopes and aspirations that the time had come for a breakthrough program. My hopes were so high for this speech that I was compelled to turn on the TV while on my vacation in Hawaii, on my birthday. What a “wonderful” birthday present that speech was – a vague reference to the US energy policy framed with a lei of slogans. The US President elevated the nation to the position of the world leader in many different areas, including the energy industry: “And today, America is number one in oil and gas. America is number one in wind power. Every three weeks, we bring online as much solar power as we did in all of 2008.” Impressive. The US President seemed to have conquered the world energy markets, but admittedly could not persuade Congress to develop the climate change legislation promised in 2013: “…over the past six years, we’ve done more than ever before to combat climate change, from the way we produce energy, to the way we use it. …[T]hat’s why I will not let this Congress endanger the health of our children by turning back the clock on our efforts.”


While I find it very curious that the US Congress has proved to be more powerful than the rest of the world in preventing the President from achieving his goals and objectives, I am more interested in the nation’s world-domination stance itself. And I wonder how the following facts fit into it:
• The Excelerate Energy’s LNG terminal in Lavaca Bay, Texas, the first floating export facility in the United States, was put on hold in December 2014 due to uncertainty in its economic success.
• According to the EIA petroleum report, the US crude oil imports have been declining since 2013.
• ConocoPhillips, Shell, Hess, Occidental Petroleum, and Marathon Oil reduced their capital expenditures for 2015 due to deferrals of the US drilling and exploration plans, the decline in shale wells return, and dropping oil prices.

Reader's Discussion

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    Charlie Auvermann

    MS Gorstenko seems to express a slight level of frustration with American energy politics in her excellent article this month. That frustration is quite understandable as most people involved with some aspect of the industry have a level of frustration with U.S. Energy Policy – or the lack there of.
    I entered the oil industry during the “first oil crisis” in 1974. Then President Nixon gave a State of the Union Address in 1973 that made no mention of the word “energy” only referencing “natural resources” in an environmental context. His address in 1974 was noted as being the first State of the Union address in 186 years that mentioned the word “energy.” There in were several statements about energy regulations and an under current of the thought of a national energy policy.
    Since that time I worked in the oil industry including some time in the government relations arena in D.C. – under 8 U.S. Presidents including Nixon. Over that time there has been discussions, attempts and arguments about a U.S. Comprehensive Energy Policy but to date there is no such policy. Nixon, Ford, Carter, Reagan, G.H.W. Bush, Clinton, G.W. Bush and Obama have given speeches, suggested and even had legislation dropped but still we have no comprehensive energy policy. That works out to 5 Republican and 3 Democratic administrations over 41 years that have produced nothing. Perhaps the task is too complicated both politically and operationally for any hope of such a policy. Some years ago I too was frustrated by the entire policy scene and resigned myself to the opinion it would not happen in my lifetime. Today I believe that perhaps we are better off without a national energy policy. Comprehensive healthcare, environmental and welfare policies have emerged in some form or another and each has been overly bureaucratic, incredibly expensive and in my opinion rather ineffective in their long-term results. Would a comprehensive energy policy fall to the same fate?
    I continue to be deeply involved in politics at a state and to some degree national level. One can expect nothing more than tiny incremental changes to any overall situation through the political system we know, respect and at the same time admonish. Every political issue results in a 7 step political process which is by its very design stuck into a permanent “do loop.” The 2015 “single party” Congress has not produced anything of any substance, on any real issue as of yet this year; whether that issue faces a presidential veto or not. As a business person I will not pick sides in any of these fights but there is nothing substantial coming out of Washington D.C. on any topic no matter whose speeches one listens to. The next president no matter which party and what legislative combination they will be joined with, will no doubt make little progress toward a comprehensive national energy policy. It is best perhaps to celebrate the incremental improvements no matter how small and disjointed they may seem.
    An interesting study to consider might be looking at all of the State of the Union speeches since 1974, versus the political party status at the time and compare that to the price of energy, and the momentum on energy policy. I suspect it would generate an interesting scatter chart and little more.
    Certainly I share in the author’s frustrations with the current situation – welcome to the reality of U.S. politics.

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