Houston (Platts)--9Mar2012/205 pm EST/1905 GMT

The holdup on the Keystone XL pipeline project, which was denied a permit by the Obama administration in January to ship oil from Alberta to the US Gulf Coast, is a case where industry does things the right way and policymaking falls short, ExxonMobil CEO Rex Tillerson said Friday.

Tillerson, delivering the keynote address on the last day of the annual IHS CERA CERAWeek conference in Houston, also said the "transformational" development of shale gas, which has "safely and responsibly" unlocked new energy sources, is an example of how industry has worked with state and local legislators to alleviate concerns on water and hydraulic fracturing. As a result, industry has produced vast amounts of oil and natural gas from that growing resource, he said.

On the other hand, the outcome on Keystone XL, proposed by TransCanada and several years in the making, was a reminder "that even when industry does things the right way, policymakers must do their part," he said.

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He noted that the US State Department's Inspector General recently found a three-year process for evaluating the pipeline's route was "not improperly influenced by industry and was in fact a neutral and uncompromised evaluation."

Instead, the decision to halt progress on the line was "the result of political calculations in Washington," he said.

"In the end, it was also a disservice to public employees who are charged with overseeing this process and who met their obligations," he said. "We must continue to engage elected officials of the public to communicate the consequences of failing to move forward with such strategic opportunities."

A third recent lesson in how industry has worked with government to comply with its concerns is the Macondo oil spill in April 2010. There, US regulators tightened safety requirements for drillers and operators, and oil companies proactively joined together to create spill containment systems, including the ExxonMobil-led Marine Well Containment Company. The two major containment systems -- the other was developed by oil services company Helix Energy Solutions Group -- resulted from a new spill response requirement of US regulators prior to approving the resumption of drilling in the deepwater Gulf of Mexico.

Tillerson said to meet global energy demand, industry needs to be able to plan over 10-, 20- and even 30-year time horizons. "Political considerations based on two- and four-year electoral cycles are significant hindrances to long-term planning and investment," he said.

"This type of dysfunctional regulation is holding back American economic recovery, growth and global competitiveness," Tillerson added.

--Starr Spencer, starr_spencer@platts.com

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