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Vol. 231 No.12 |
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| PRAMOD KULKARNI, EDITOR |
Change in the right direction
Change is a favorite political campaign theme. In 1992, Bill Clinton won with “For people, for a change.” This year, UK Tory leader David Cameron helped his party win the general elections with a plaintive call for fiscal conservatism: “The year for change: We can’t go on like this.” Barack Obama handily won the 2008 presidential election and solidified the Democratic Party’s hold on both houses of the US Congress with his campaign for “Change we can believe in.”
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President Barack Obama’s campaign of change will have to undergo a mid-course correction to a more reasoned approach on energy policies.
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Change is a favorite political campaign theme. In 1992, Bill Clinton won with “For people, for a change.” This year, UK Tory leader David Cameron helped his party win the general elections with a plaintive call for fiscal conservatism: “The year for change: We can’t go on like this.” Barack Obama handily won the 2008 presidential election and solidified the Democratic Party’s hold on both houses of the US Congress with his campaign for “Change we can believe in.”
Through Energy Secretary Paul Chu and Interior Secretary Ken Salazar, the change that we were subjected to was a hard left turn in the direction of renewable fuels and legislative as well as executive efforts to deincentivize oil and natural gas drilling and production. Plans to open up the East Coast and Alaska for leasing folded quickly in the aftermath of the Gulf oil spill. The administration acted with extraordinary zeal in imposing a six-month deepwater moratorium, followed by what is now offshore permitting at a snail’s pace, if not a de facto moratorium.
The political mood in the US shifted quickly, and in the 2010 midterm elections, Republicans won a sizeable majority in the House of Representatives and reduced the Democrats to a nominal majority in the Senate.
Cap on cap and trade. In the press conference immediately after the midterm elections, President Obama distanced himself from the cap-and-trade program he had previously boosted as the best tool to limit global warming. “Cap and trade was just one way of skinning the cat,” Obama triangulated. “It was a means, not an end. I’m going to be looking for other means to address this problem.” As a consequence, the Carbon Financial Instrument contracts on the Chicago exchange have fallen to about 15 cents per ton from about $2 last year. In Europe, carbon contracts are worth $18.50 per ton.
Review of moratorium decision. Rep. Doc Hastings, R-Washington, who is expected to become the chairman of the House Natural Resources Committee, is planning to have the committee review the process used by the White House to levy the deepwater drilling ban. On Nov. 9, the Department of the Interior (DOI) inspector general issued a report concluding that senior DOl officials, in an effort to help justify their decision to impose the moratorium, misrepresented that the moratorium decision was reviewed and supported by a group of scientists and industry experts.
Several senators are vying for the chairmanship of the House Energy and Commerce Committee. Both of the leading candidates, Rep. Joe Barton of Texas and Rep. Fred Upton of Michigan, announced plans to make EPA Administrator Lisa Jackson testify about regulatory plans for greenhouse gases and hydrofracing that could adversely affect the oil and gas industry.
Speeding up Gulf permitting. Hastings also wants to question DOI officials about the slow permitting pace in the Gulf of Mexico. Permitting impediments may also be reduced as a result of the actions of Louisiana’s US Sen. Mary Landrieu. She had held up the nomination of Jack Lew as Obama’s budget director since Sept. 23 in order to force the DOI into action. Landrieu released her hold on Nov. 18 after three meetings with Secretary Salazar to improve “regulatory clarity and certainty.”
Political shift in Pennsylvania. In Pennsylvania, outgoing Gov. Ed Rendell had placed a moratorium on shale drilling in state forests on Oct. 26 after his efforts to enact a severance tax on shale gas were thwarted by Republican members of the state Senate. Republicans seized five US House seats from Democrats and won the governorship as well. Governor-elect Tom Corbett campaigned against the severance tax and is expected to lift the moratorium. Pennsylvania’s new House delegation will also press the EPA to back down from attempts to force the disclosure of proprietary frac fluid components.
Compromise on energy solutions. Republican legislators will put up a tough challenge to the administration’s plans to end tax incentives for fossil fuels. There is bipartisan support to increase the liability for oil spills, but there will have to be a compromise on how high to raise the ceiling.
Both Salazar and Chu have been champions for solar and wind energy. The DOE has used $36 billion of stimulus money to jump-start solar and wind projects despite the fact that EIA levelized costs per megawatt-hour are $149.30 for onshore wind power, $191.10 for offshore wind power, $396.10 for photovoltaic solar power and $256.60 for thermal solar power compared to $57 for geothermal and $54 for natural gas. Clearly, stimulus money needs to be spent on making clean energy sources economically feasible rather than to build plants that are white elephants.
Backdoor attempts. President Obama will have to be in a conciliatory mood to improve his chances of winning a second term to the White House. While Obama takes the high road, some in the executive branch may attempt to regulate what they were unable to legislate. Hopefully, there will be watchdogs with a big bark and bite in the new batch of senators and representatives. 
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