Energy plays key role in Obama's State of the Union

@CNNMoney January 24, 2012: 10:27 PM ET

NEW YORK (CNNMoney) -- For the third year in a row energy played a central role in President Obama's State of the Union address, with the president leaning hard this year on the twin themes of increased domestic oil and gas production and the need to invest more in renewable sources.

"Right now, American oil production is the highest that it's been in eight years," said Obama. "Not only that -- last year, we relied less on foreign oil than in any of the past sixteen years."

Obama has indeed presided over a boom in domestic energy production since taking office.

From 2008 to 2011 U.S. crude oil production has jumped 14%, going from 5.1 million barrels per day at the start of 2008 to nearly 5.8 million barrels per day currently, according to the U.S. Energy Information Administration.

Natural gas production is up by about 10% over the same period.

Much of this increase is due to new drilling technology and the expanded use of hydraulic fracturing. Known as fracking for short, the controversial process injects water, sand and chemicals deep into the ground to crack rock and release oil or gas, but has some concerned over its effects on the ground water.

The Obama administration has so far done little to restrict the process despite calls from many in the environmental community. But the Environmental Protection Agency is looking into the matter, and may ultimately take some of the regulatory authority away from the states, which currently oversee the practice.

The Obama administration has also approved some new drilling leases in Arctic waters off Alaska, and opened up some new areas in the Gulf of Mexico.

But after the BP spill in 2010, the administration canceled plans both it and the Bush administration had to open up areas off the East Coast and western Florida for drilling.

Obama said during his speech that he is directing his administration to open up 75% of the country's potential offshore oil and gas resources.

He also stood behind increased development of natural gas, but said he will require the full disclosure to all the chemicals energy companies use in the fracking process when done on public land.

"America will develop this resource without putting the health and safety of our citizens at risk," he said.

Obama repeated his call that some $4 billion in oil industry tax breaks be eliminated.

Obama has called for the elimination of those tax breaks in all his previous budgets, but the measure has yet to pass Congress.

The oil and gas industry was generally supportive of Obama's plans to open up more areas for drilling, although was skeptical that would actually happen.

Ohio set to see oil boom thanks to fracking

"The truth is, that the administration has sometimes paid lip service to more domestic energy development, including more oil and natural gas development," American Petroleum Institute head Jack Gerard said before the speech. "We hope today is different and that after tonight he will follow through."

The industry staunchly opposes the elimination of any tax breaks, arguing they are available to many industries and their suspension would result in drillers, and the jobs they support, moving overseas.

"Advocating greater energy production but penalizing those who provide that energy is not a sound energy policy, but a contradiction," said Gerard in a statement after the speech.

On the renewable energy front, the president called for greater investment in technologies like wind and solar.

Analysts say the grants Obama provided the industry in the stimulus package were essential for allowing the sector to grow during the economic downturn.

Since 2008 the amount of electricity generated from solar has roughly tripled while wind production has risen nearly that much, although both still account for a relatively small portion of the nation's overall electricity mix.

But the stimulus grants that proved so effective during the downturn, which essentially gave wind and solar projects a 30% cash advance, expired at the end of last year.

The solar industry wants those grants extended.

"The U.S. risks losing this momentum if smart policies, like the [grant] program, are not extended by Congress, said Rhone Resch, head of the Solar Energy Industries Association.

Keystone oil sands pipeline rejected, for now

If they are not extended, the solar and wind industries would rely on tax credits that are worth a similar amount but have to be claimed at the end of the year. Those credits are expiring at the end of 2012 for wind and 2016 for solar.

In a cost-conscious environment, representatives from the wind industry said making sure the tax credits are renewed is their first priority.

Obama seconded that notion.

"Pass clean energy tax credits and create these jobs," he said.

The federal government spent just under $15 billion supporting renewable energy programs of all types in 2010, according to EIA. Most of that went to wind and ethanol.

On broader environmental issues, environmentalists gave the president credit for fighting off attempts to weaken the EPA, raising fuel efficiency standards, enacting new mercury pollution laws and blocking the Keystone oil sands pipeline, which was slated to carry a dirtier form of crude from Canada to the U.S. Gulf Coast.

But they called on the president to enact stricter fracking rules, a law requiring utilities to buy a certain percent of their power from renewable energy, and to pass some type of greenhouse gas law, which Obama unsuccessfully tried to do in 2009.

Obama said "the differences in this chamber may be too deep right now to pass a comprehensive plan to fight climate change," but did call for a law requiring utilities to buy more renewable energy.

He also directed his administration to provide public land to build enough renewable energy projects to power three million homes.

"It's double-down on a clean energy industry that's never been more promising," he said.  To top of page

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