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The new DC boom: Lobbying

January 14th, 2009
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Times are tough all over. Job losses. Business bankruptcies. Mortgage foreclosures. Gloom abounds.

Well, not quite everywhere. There is an oasis of economic good cheer in the US:  A place that has been largely immune to the wrenching economic dislocation that the rest of the US is enduring. A city that not only is showing relatively robust economic health compared with other US locales but may already be in the first throes of a genuine boom.
Guess yet where this Shangri-La of the American economy is located?
Try Washington, DC. And it’s just getting started.

In a fascinating Associated Press (January 12, 2009) article by Brian Westley, information both empirical and anecdotal shows that the nation’s capital is benefiting from growth in businesses and jobs linked to a “mad rush” to influence where money from President-elect Barack Obama’s massive economic stimulus package (at last count, $800-850 billion and counting) should go.

According to the AP article, one analyst predicts job growth for the DC area in 2009 of 20,000 jobs after gaining 31,000 jobs for the 12-month period ended in November 2008.
Washington is tied for the lowest unemployment rate in metropolitan areas of more than 1 million with Oklahoma City. (Any bets on that tie being broken soon as the oil and gas industry continues its swoon?)

Looks like there will be booming business for anyone connecting with lobbying, consulting, economic analysis, hospitality (gotta keep those politicos entertained) and related business support services.

At same time, Obama has backpedaled a bit on his campaign promises, saying that some of them can’t be fulfilled soon because fixing the economy takes priority over everything else.  Yet he has also reaffirmed his commitment to alternative energy as part of the economic recovery plan, claiming that alternative energy development will provide 5 million new jobs. Also, in a Jan. 9 speech, Obama said that he intends to see the production of alternative energy in the US double over the next 3 years.

That sounds impressive until you consider that nonhydro renewable energy sources such as solar and wind power each have logged double-digit annual growth for more than a decade now and collectively have achieved a whopping 5% market share in the US. So we’re looking at annual increases of, say, 25-30%, in solar and wind energy production rocketing to about 33%. Think we can boos their market share to, say, 5.5% by 2011?

Just like “organic” and “natural” when it comes to food, “alternative” can have a broad range of meaning, akin to the old saw “Beauty is in the eye of the beholder.” There is similar ambiguity in the term “unconventional” gas. What is an “alternative” if not the  “unconventional?”

Until the collapse in natural gas prices starting last summer, the hottest E&P play in North America was unconventional gas, in particular shale gas. Some shale plays have potential for tens of trillions of cubic feet of recoverable gas each. But these are generally higher-cost plays, and most of the continuing collapse in the US rig count is attributable to the operators in these frenzied plays laying down rigs when US gas prices plummeted to about $6/MMBTU—even as low as $3/MMBTU in parts of the Midcontinent.

Tight sands gas, coalbed methane, and ultradeep gas are also contributors to what EIA expects will be 50% of the nation’s gas supply in 2030. Apart from current price issues, there are lands access and environmental barrier to unconventional gas development.

These unconventional gas plays probably would not exist without decades of research funded by the US Department of Energy and the Gas Technology Institute aimed at unlocking these massive resources. DOE oil and gas R&D funding—primarily aimed at helping US small independents—has been shrinking steadily for years to its current pittance.

More importantly, industry’s campaign to unlock this massive unconventional gas resource benefited from federal tax credits in the 1980s and 1990s. Studies have shown that these tax credits and R&D funds for unconventional gas have been paid a return many times over: Unconventional gas now supplies more than 44% of the nation’s gas.

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