A green man in the White House for a second term?

There were substantial changes in the discourse between President Obama’s first and second presidential campaigns, particularly regarding energy. If, four years ago, he seemed glib about the oil and gas sector and more than enthusiastic about the Climate Change Bill, the tables were turned on the road to his second term.

The US economy was a frequent topic of heated debate during the presidential campaign, as Obama and Mitt Romney pitted their recovery plans against each other in the hope of convincing the nation. And as expected, much was said about the energy sector. Both candidates were careful to emphasise the differences between their policies during the second debate of the campaign at the Massachusetts Institute of Technology.

The President is unlikely to back down on his renewable energy pledges

Obama was keen to embrace his ‘all-of-the-above’ energy strategy, which – at least on paper – includes developing more oil and gas drilling as well as funding research in energy innovation. Though the President has been clear in his enthusiasm for renewable energy in the past, in his second presidential campaign he was keen to show his support for fossil fuels.

President and CEO of the American Petroleum Institute Jacques Gerrard said: “If you listen to what the President said during the election, he is actually a big proponent of oil and natural gas. He has indicated in his all-of-the-above strategy that oil and natural gas should play an important role.

“But if the President is serious about what he promised the American people and what he was elected on, then oil and natural gas will have to be a big part of that energy plan. We are in sync together on the role of oil and natural gas. The question before us is: will the President live up to his commitment?”

Obama has been clear on his aim to continue to develop domestic oil and gas, though the policies announced during his most recent campaign were a drastic change from the policies he pursued during his first campaign four years ago. Gerrard said: “The President has really moved 180 degrees on the issue of oil and natural gas in the past year, or year and a half.

“Two years ago, in his State of the Union address he called us [the oil and gas industry] yesterday’s energy, assuming we had no role. But we provide over 62 percent of the energy consumed in the United States and his own economists will tell you that we will continue to provide over 50 percent of the energy 50 years from now.”

A shift to shale
One of the major factors behind this change of heart has been the remarkable shale oil and gas boom America has been experiencing over the past few years. Vast reserves of both oil and natural gas have been surprising geologists, hidden under sheets of shale rock. New developments in technology are finally allowing the safe and efficient extraction of these recently discovered resources.

According to the IEA, the US’s formidable shale discoveries will help the country overtake Saudi Arabia as the world’s largest producer of oil by 2020. According to the agency, the global energy map “is being redrawn by the resurgence in oil and gas production in the United States”. Experts have suggested that President Obama’s recent U-turn on oil and gas strategy might have something to do with the abundant new discoveries.

Miners have accused Obama of turning his back on the industry

The President has vowed to cut oil imports in half by 2020, which inevitably means developing more offshore and possibly more federal lands for oil and gas exploration. For Rob Barnett, senior utilities analyst for Bloomberg Industries, this is still a contentious issue.

Barnett said: “There is a constant debate between those that want additional energy exploration on federal lands and groups that want to see that type of land be preserved. »
“The amount of land that is available for prospecting is actually a little lower under President Obama but production is actually up. So production does not equal necessarily the amount of land: it is up predominantly because of technology, not because of increased leasing and things like that. I don’t expect too much of a change on that front under a second Obama administration.”

Fracking success
As much of the newly discovered reserves are buried under shale rock, the US looks set to continue investing in fracking: the controversial technique of using chemical-infused water to drill through the shale and reach the oil and gas underneath. In the last two years, the technique has become widespread, but is still scarcely regulated. Obama’s second term is likely to bring further regulation, particularly pertaining to the use of water in the fracking process.

Barnett said: “There are potential regulations for water that we could expect at some point, most of that is handled at State level right now. The Environmental Protection Agency is looking into whether there are issues with water, but we don’t expect a report on that until 2014 and then regulation would come from that. We are years away from water issues, which are the most pertinent to fracking.”

Though the President expressed newfound support for the oil and gas industry during the campaign, he has also suggested he might be looking to eliminate some of the subsidies currently designated to the fossil fuel companies. As it stands, the federal government grants around $46bn annually in subsidies to the oil and gas industry.

Virginia Lazenby, President of the Independent Petroleum Association of America (IPAA), said the industry was vigorously opposed to the President’s plans to collect more tax from the industry. She said: “IPAA hopes President Obama will stop his call to eliminate the crucial tax provision of intangible drilling costs and percentage depletion, which are not subsidies at all, but allow independent producers to reinvest 150 percent of their cash flow into new energy products.”

First term promises, first term failures
During his first term in office, the President pushed for stricter regulation pertaining to the emission of greenhouse gases and sought to invest billions of federal dollars in green energy companies. Neither policy was particularly successful: the greenhouse gas emissions bill was killed by the Senate and the President was criticised after Solyndra, a solar panel manufacturer that had received federal investment, went bankrupt.

While the President has insisted investments in research and green energy will continue, it is unlikely any more climate change legislation will make it through the Republican-controlled Senate. Nevertheless, he is unlikely to back down on his renewable energy pledges. Barnett said: “On the other hand, energy policy is also driven by questions about the environment so right now we are looking at four years of a very active Environmental Protection Agency putting forward new regulations and things like that.”

There are currently some tax breaks and other incentives in place to help stimulate the renewable energy sector, and the President has promised even more assistance for solar and wind technology. However, Congress is under Republican control and is likely to kill further environmental protection bills. Obama will need some form of congressional support to extend tax breaks for the renewable energy sector.

One of the President’s main challenges may come sooner rather than later as the current tax credits for wind energy production expired at the end of 2012. An extension will have to go through Congress. According to one of the President’s aides, clean energy programmes and efficiency initiatives will remain a major goal during the second term.

Obama’s deputy energy and climate change adviser Heather Zichal said: “If you take a step back and look at what this administration’s done to invest in clean energy and double down on energy efficiency initiatives, we’ve made it clear that we are going to look strategically at how we use our existing authorities. We will continue to focus on that in the next administration, and obviously the big issue will remain engagement with Congress.”

Taking responsibility
Though Obama has been adamant in reiterating his commitment to fighting climate change and curbing natural gas emissions, he has not yet been specific in outlining any policy. He said: “I am a firm believer that climate change is real, that it is impacted by human behaviour and carbon emissions. And as a consequence, I think we’ve got an obligation to future generations to do something about it.”

Since Obama took office in 2008, the US has doubled its renewable energy output and it is likely the President will continue to push for these sources to play an increasingly large role in the US’s future energy independence plan.

Executive Director of the SUN DAY Campaign Kenneth Bossong says Obama’s first term policies are directly responsible for the dramatic growth in energy generation from renewable sources. He said: “non-hydro renewable sources provided 5.76 percent of net electrical generation for the first half of 2012. This represents an increase of 10.97 percent compared to the same period in 2011.”

During the second presidential debate, Obama said: “We’ve got to control our own energy, you know – not only oil and natural gas, which we’ve been investing in – but also, we’ve got to make sure we’re building the energy sources of the future. Not just thinking about next year, but 10 years from now, 20 years from now. That’s why we’ve invested in solar and wind and biofuels, energy-efficient cars.”

But what about coal?
The clear absentee from President Obama’s all-of-the-above energy strategy so far is coal. At the beginning of his administration, the President promised to invest in research into developing a clean coal technology. Nothing has materialised and miners have accused Obama of turning his back on the industry.

The US has one of the world’s largest coal reserves and proponents say the country should work with what it has. However, up to 33 giga-watts of coal-fired power generation is in line for retirement. This is due in part to the emergence of natural gas, which is not only cheaper but burns cleaner than coal.

Bill Bisset, President of the Kentucky Coal Association, has said the industry is in decline “not simply because of the low natural gases but also the impact of a federal government that has increased costs of mining at every turn”. But he added: “We are hopeful that the President’s pro-coal comments from the campaign reflect a new direction in his administration.”

Building the infrastructure
President Obama’s second term in office is also likely to hail greater investment in the energy infrastructure sector. Since he has been in office, the Department of Energy
has developed the Smart Grid Investment Grant programme. It has invested $3.4bn in grid-enhancing projects and initiatives, which optimise energy consumption and help make households and industries more energy efficient.

While high-tech cities have benefited most from this technology, an additional $36.25m is being invested exclusively in bringing smart grid projects to rural areas. This can help make agriculture distribution more efficient.

Another significant investment comes in the shape of the Keystone Pipeline. The President has put the project on hold for the time being, but industry analysts expect to see it granted approval. The pipeline will allow a greater flow of crude oil from Canada to refineries in Texas and could significantly reduce the US’s reliance on oil from the Gulf region. Obama was initially reluctant to concede on the build, but seems once more to have shifted gear during the campaign.

Gerrard said: “The Keystone Pipeline will be the first real test. Even with changes in the election, there is still a majority of support both in the Senate and the House for the Keystone Excel Pipeline. The President implicitly indicated that he would approve that second leg from Canada down after the election. We are waiting to see if he follows through: that will be the first test of if his words really meant something during the election.”