Oil and Gas Companies: What this EPA Official Doesn't Understand

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Government bureaucrats really need to stop talking when there's a camera present; otherwise, they might just get caught telling the truth about their agenda when the tape resurfaces.

Enter Dr. Alfredo Armendariz, the U.S. Environmental Protection Agency (EPA) regional administrator for Region 6, a region that oversees environmental regulations for energy companies in Louisiana, Arkansas, New Mexico, Texas, and Oklahoma.

Turns out, Armendariz doesn't like oil and gas shale production, and he's quite the history buff.

Joel Gehrke in Washington explains:

"Al Armendariz, a regional administrator for the Environmental Protection Agency, explained in 2010 that he understands the EPA policy to be to "crucify" a few oil and gas companies to get the rest of the industry to comply with the laws.

"I was in a meeting once and I gave an analogy to my staff about my philosophy of enforcement," Armendariz said during a meeting in 2010. "It's kind of like how the Romans used to conquer little villages in the Mediterranean: they'd go into little Turkish towns somewhere, they'd find the first five guys they'd run into, and they'd crucify them and then, you know, that town was really easy to manage over the next few years."

Armendariz said that by finding companies that are "not compliant with the law and you make examples of them," the EPA could maximize its enforcement capability with limited resources. He added that "fines can get very high very quickly, and that's what these companies respond to."

Breathe.

Let's forget the reference to killing dissidents for a second. That's a whole different therapy session.

There are a few important points that need to be addressed about this sort of rhetoric.

The "Evil" Oil and Gas Companies

First, these comments embody the very problem with bureaucratic behavior today. As a person who was appointed to be a watchdog, it's very evident that Armendariz has a specific agenda, one that clouds his judgment and ability to be impartial on matters of energy and environmental policy.

I encountered this regularly in graduate school at Johns Hopkins while studying energy and environmental policy. It was very difficult to break through to some academic minds who were overly adamant about the horror of evil energy corporations.

In their minds, energy firms needed to be stopped at all costs, despite the impact of regulations on end consumers and jobs. Everyone wanted clean air, so many top environmentalists supported natural gas production as a clean fuel.

Now they're against it. And Armendariz is certainly in that camp.

In fact, it's already been widely reported by Forbes that Armendariz took up his crusade against oil companies by pushing for meaningless lawsuits against Range Resources (NYSE: RRC). After forcing Range to lawyer up and defend itself, the EPA would eventually come to realize that Armendariz's claims were bogus, and unnecessarily tying up the court system.

These accusations came from the man who oversees environmental legal policy on a very critical section of the United States, as Louisiana is an important hub of our national refining network. When you hear EPA officials using this sort of rhetoric, and explaining that brute legal force is the proper way to get companies to fall in line, you quickly realize something: The market is being distorted by agendas and not fully functioning on fundamentals the way that it should.

But here's the real problem.

What's Important to Realize about Energy

Evidently certain people don't understand that cheap, affordable energy sources have been the catalysts of growth in this nation for 200 years.

We used wood, we used gasoline, and now we're going to use natural gas. It fuels our transportation systems and our supply chains.

What's even worse is that the importance of the oil and gas industry to the economy is more far reaching than anyone actually knows. The oil and energy industry represents nine million jobs in this country and roughly 7.5% to 8% of GDP.

And oil and gas company performance is far more critical to the average investor than people realize. According to a 2011 study by Sonecon, 31.2% of all stock in oil companies is held by public and private pension funds. More than 21% is held by individual, retail investors. Another 20% is held in mutual funds, and 18% in IRAs.

For all the talk about greedy CEOs, less than 3% of all oil company stock is owned by corporate executives.

Yes, we're adamant about clean air, clean water, and improved soil. But in the world of government regulation there must be logical, rational people acting as watch dogs. Zealots need not apply since consequences are never part of their research.

What better way to start capital flight than to bludgeon the backbone of the economy into the ground.

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