TPT January 2013

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Global Marketplace
70 January 2013
Energy
Whither the American energy
industry in the second term of a
pragmatist president committed
to renewable power?
“Some of the sharpest disagreements between President
Obama and Mitt Romney during the campaign were over
energy policy, and the president’s re-election could be viewed
as a defeat for the coal industry and a win for renewable
energy, with a murkier outlook for oil and gas drillers.”
Writing in the New York Times shortly after election day in
the US, Clifford Krauss took note of the major energy-related
initiatives of Mr Obama’s first term, all intended to reduce the
country’s dependence on carbon-intensive fossil fuels and
mitigate their impact on global climate: tighter air pollution
regulations on power plants; tens of billions of dollars in
loans and other federal support for renewable power; and the
negotiation of higher fuel economy standards with the auto
industry.
Mr Krauss then considered what a reinvigorated Obama
administration might mean for the US energy sector. Here,
briefed down, are his most pertinent projections (“For Oil
and Gas Companies, an Expectation of Higher Taxes,” 8
November):
› Against expectations, President Obama carried both
Virginia and Ohio, the two coal-producing swing states.
Analysts say that a second Obama administration is likely to
continue restrictions on mountaintop mining and press forward
with regulations that effectively block new coal-fired generation
plants that do not include carbon capture and sequestration.
› The future is less clear for oil and gas companies. President
Obama has repeatedly criticised the roughly $4bn worth
of tax credits and deductions that oil and gas producers
receive annually. The pressure on the government to reduce
the national budget deficit, coupled with the industry’s political
support for Mr Obama’s opponent, suggests that at least some
of the tax breaks could disappear.
But, Mr Krauss pointed out, during the campaign Mr Obama
“praised the oil and gas drilling frenzy in shale fields across
the country over the last four years.” The president also
offered no suggestion that he would increase regulation
of hydraulic fracturing, “fracking,” the drilling technique
embraced by the oil and gas industry but which some people
believe contaminates water supplies. And he reiterated his
commitment to seeking greater independence from foreign
oil, supporting more offshore drilling in Alaska and the Gulf of
Mexico.
› Mr Krauss, who is chief of the Times’s Canada bureau,
wrote that President Obama’s re-election introduces
some uncertainty as to ultimate approval of the extension of
the Keystone XL pipeline from Canada to the US Gulf Coast.
Environmentalists oppose the pipeline on grounds that refining
and burning oil from Canada’s oil sands contributes to faster
climate change.
Mr Obama had delayed approval of the pipeline, but many
industry observers predict that he will go along with the
project during his second term since the pipeline builder,
TransCanada, has modified its route to avoid a sensitive
aquifer in Nebraska.
› Obama administration officials have pledged to continue
promoting solar, wind, and other renewable power
sources, but it is as yet unclear what form that support might
take. An early test will be the debate over the production tax
credit for the wind industry, which expired with 2012. The
industry says the tax credit is vital to the expansion of the wind
industry in the US.
Other portents of the energy future
The biggest change in Washington for energy policy may
come with the retirement of Senator Jeff Bingaman of New
Mexico, a Democrat friendly to oil interests, and his probable
replacement with Ron Wyden, a liberal Democrat from
Oregon, as chairman of the Senate Energy and Natural
Resources Committee.
Wrote Mr Krauss, “Senator Wyden has been more critical
than Senator Bingaman of fossil fuels and nuclear power, and
he is considered a stronger backer of renewable fuels, in part
because Oregon relies on wind and hydroelectric power for
its electricity.”
A couple of state ballot measures with important implications
for energy policy were also put to the vote on 6 November:
› In Michigan, voters defeated a proposed amendment to
the state constitution that would have required Michigan to
get 25 per cent of its power from renewable sources by 2025.
The Sierra Club and other environmental groups had made
the proposition a high priority, arguing that it would help stem
climate change and promote alternative energy businesses
and employment in the state.
But the measure drew strong opposition from business
groups and the governor, who argued that a commitment to
the goal at the state level was impractical since Michigan gets
only a tiny fraction of its power from renewables.
President Obama favours greater use of renewable energy