Harsher energy regulations coming in Obama's second term

11 07, 2012 by Reuters

  1. * Tighter rules expected for oil, gas drilling
  2. * Solar, wind likely will get renewed focus
  3. * Chemical producers fear stronger emissions rules

Energy companies likely will see more regulation in President Barack Obama's second term, with less access to federal lands and water even as the administration promotes energy independence.

With a pledge to cut oil imports by half by 2020, Obama during the campaign advocated what he called an "all of the above" approach to developing a range of domestic energy sources. He said, however, that he would roll back subsidies for oil companies and reduce the nation's reliance on oil by mandating production of more fuel-efficient vehicles.

"You are going to have less access to federal lands and tougher government agencies," said Dan Pickering, chief investment officer at TPH Asset Management in Houston.

Obama's energy strategy over the last four years has shifted away from focusing on climate change after a bill establishing a cap-and-trade system to curb carbon emissions died in the Senate in 2010 after a bitter partisan fight. The president's green policies also suffered a major setback when solar power company Solyndra collapsed last year after receiving a $535 million loan guarantee, unleashing a political firestorm.

Obama's team of energy advisers include Energy Secretary Steven Chu, a Nobel prize- w inning scientist who specializes in alternative and renewable energy technologies but who regularly talks up the government's role in developing hydraulic fracturing technology. His top White House energy adviser is Heather Zichal, who has been an advocate for creating green jobs and tackling climate change by reducing dependence on oil.

Obama has pledged more support for development of renewable energy technologies like solar and wind, but he will need the support of Congress to extend or renew tax breaks that have underpinned the growth of those industries.

"Obama can love solar as much as he wants, but I don't know that a whole lot more is going to happen in terms of new, constructive policy," said Morningstar energy analyst Stephen Simko.

Perhaps most importantly, however, renewable energy faces major obstacles unrelated to policy, such as stiff competition from low-priced natural gas, a lack of infrastructure to connect large projects to the grid, and a global glut of solar panels that is putting their manufacturers out of business.

Here are more details on how companies in various energy sectors will fare under President Obama's second term:


Obama is expected to tighten rules and regulations governing energy exploration, actions that may add billions in costs for oil and gas companies.

ClearView Energy Partners analysts, in Washington, expect the president to "continue prosecuting energy policy through regulation and administrative action, with only the courts as a check on that agenda," according to a note sent to clients last week.

Tougher restrictions are expected for companies drilling on federal lands as well as more rules governing water management and methane emissions. Any new rules related to hydraulic fracturing may drive up costs for active drillers including Chesapeake Energy Corp and Exxon Mobil Corp.

Still, throughout the campaign and during the debates, Obama has touted the benefits of increasing production of cleaner burning natural gas, winning him praise from America's Natural Gas Alliance, an industry lobby group.

Obama has also pledged to eliminate more than $46 billion in subsidies for fossil fuel companies, a plan the industry has vigorously protested.

While the Obama Administration has put approval of TransCanada's Keystone XL pipeline on hold, eventual approval is expected, an action that will increase the flow of cheaper crude oil from Canada to refineries on the Gulf Coast at Port Arthur, Texas.

Companies with refineries in Port Arthur or in nearby Beaumont include Valero Energy Corp, Shell, France's Total and Exxon Mobil Corp.


Obama is deemed by opponents to have waged a "war on coal" over the past four years, particularly through stricter Environmental Protection Agency regulation.

Hal Quinn, president of the National Mining Association, criticized Obama for not living up to a 2008 promise to develop clean coal technology. "Current administration policies virtually preclude the construction of new, cleaner coal-based plants that are the necessary platform for the technology the president advocated," Quinn said. "These same policies have skewed the market against coal."

The U.S. Chamber of Commerce pointed to estimates of up to 33 gigawatts of coal-fired electricity generation due to be retired - about 3 percent of total U.S. power capacity. While tougher regulation has played a part, cheap natural gas as an alternative power source is also driving that change.


Obama is likely to implement several long-delayed, controversial emissions regulations for industrial boilers that are commonly used by chemical producers.

The centerpiece provision, known as Boiler MACT (Maximum Achievable Control Technology), had been first proposed in 2004 but was effectively shot down by courts before being revived by the Environmental Protection Agency in 2011.

It has been winding its way through courts again, and the EPA is due to issue new rules by December.

Obama's victory could embolden EPA Administrator Lisa Jackson to further tighten Boiler MACT regulations next month on limits for dioxin, mercury and carbon monoxide emissions. It is not clear if Jackson will stay at the agency in Obama's second term.

"While we don't agree with some of the provisions (of Boiler MACT), we think that it will be pushed through more readily than if Romney had won," said Lawrence Sloan, president of the Society of Chemical Manufacturers and Affiliates, an industry trade group.