This past year saw President Obama’s aggressive pronouncement of his climate agenda, more of the same for the Keystone XL pipeline, and some of the starkest evidence that America’s oil and natural-gas boom is turning on its head almost every bit of conventional wisdom about the global energy landscape. So what’s in store for 2014?
EPA rules controlling greenhouse-gas emissions
The big day for Environmental Protection Agency Administrator Gina McCarthy should come sometime in June, when her agency is scheduled to unveil historic standards controlling carbon emissions from the nation’s fleet of power plants, which includes nearly 600 coal-fired plants poised to be hit the hardest, because coal emits more carbon than oil or natural gas. Apart from the actual rulemaking process, you should expect three other notable (albeit unsurprising) developments next year on this front: 1) An unprecedented coalition of industry groups opposed to the rules; 2) Republican lawmakers continuing to hammer away, with limited success, to undermine the rules; and 3) the Supreme Court’s review of one part of EPA’s suite of climate rules that deals rather narrowly with permitting, which will be argued in February and likely decided in June.
Keystone XL pipeline — and also broader infrastructure issues
Will a final decision finally come on the controversial project this year? President Obama is unlikely to make a final decision on the pipeline, caught up in regulatory and political limbo for more than five years, until at least the spring. Steps to watch for before that include the final environmental impact statement, which is expected in the early part of 2014. Don’t count out another delay pushing the decision after the 2014 midterm elections, though. As we’ve learned, almost anything is possible with this project. Lurking behind the high-profile fight over Keystone is a wonkier one about energy infrastructure of all kinds: pipelines, rails, and waterways that all, to varying degrees, move energy products around. Under the tagline “architecture of abundance,” the House Energy and Commerce Committee is expected to focus on this issue a lot in 2014.
Fossil-fuel exports of all stripes
Coal exports have been trending into record-high territory for the past few years, the Obama administration is decidedly bullish on exporting natural gas, and exports of refined petroleum products continue to be among the leaders across the board. These three trends will keep raging into 2014, and now brace yourself for the third rail of energy-export politics: exports of crude oil. The U.S. has banned most exports of crude since the 1973 oil embargo. Politicians of both parties are mindful of the effect — whether real or merely perceived — that exporting crude oil could have on prices at the pump. This debate will crisscross Congress, where you can expect a lot of talk but not a lot of action; the Commerce Department, where the exports are regulated; and the World Trade Organization, where the oil industry may claim the ban is violating world trade laws. It’s unlikely the oil industry will succeed in lifting this ban anytime soon, if ever, but expect a lot of debate about it nonetheless.
Congress laid the foundation for this strange-bedfellow debate in 2013, and next year could bring more substantive action, depending on whether gasoline prices go up and how that affects ethanol prices. The RFS, which requires increasingly large amounts of biofuels — mostly corn-based ethanol — to be blended into gasoline each year, will come to the forefront again when EPA finalizes 2014 biofuels levels by June. After House Energy and Commerce Committee Chairman Fred Upton, R-Mich., and ranking member Henry Waxman, D-Calif., spent the better part of 2013 writing white papers, holding hearings, and trying to find the elusive middle ground on this polarizing policy, their next move is unclear. They have promised legislation, but the timing on that is uncertain.
After missteps in its efforts to drill in the Arctic Ocean off Alaska’s coast in the summer of 2012, Shell is going to try again this summer, but the effort will prompt even more scrutiny from the Obama administration and criticism from environmental groups that don’t want the drilling at all. On top of that, the Interior Department is moving forward on lease sales in the same area and writing regulations for oil and gas development specifically in the Arctic. A broader question overlaying this particulate debate is how much economic incentive companies have to drill in the Arctic, which has notoriously bad weather and is open for drilling for only a few months of the year, when oil production is booming onshore in the lower 48 states.
Fracking, including methane and water concerns
Environmental groups will keep the pressure on the Obama administration to more aggressively regulate methane, a greenhouse gas 20 times more potent than carbon dioxide that is the primary component of natural gas. Peer-reviewed studies have raised concerns about how much methane is leaking throughout the production and transmission of natural gas, casting doubt on whether it really is better for global warming than coal, which burns 50 percent more carbon than natural gas. Right now, EPA rules indirectly, but not directly, regulate methane. Meanwhile, EPA is also scheduled to release for public comment by year’s end a long-awaited study on fracking’s impact on drinking-water supplies.
Ozone rule (maybe)
Remember Labor Day 2011 when President Obama punted on a tougher smog (ground-level ozone) standard, publicly rebuking then-EPA Administrator Lisa Jackson and bowing to pressure from a broad coalition of business groups? At that time, Obama said he was delaying a review of the standard until 2013. This year has come and gone, and environmentalists are now worried because the ozone rule doesn’t appear on the administration’s short-term regulatory agenda, and the action date posted on the White House’s Office of Management and Budget website is simply “to be determined.” Several groups, including the American Lung Association, have filed suit to force EPA to act. Industry lobbyists say they expect action in December. But this EPA rule — once the most controversial of them all — is largely taking a backseat to the controversy swirling around EPA’s plans to regulate carbon emissions.
Energy tax incentives (but not reform)
Congress was already unlikely to pursue comprehensive tax reform in a genuine fashion before the 2014 midterm elections. But with the recent news that Obama is tapping current Senate Finance Committee Chairman Max Baucus, D-Mont., to be ambassador to China, the prospects have grown even dimmer. Baucus, who had already announced his retirement, had floated a draft proposal to reform energy tax provisions just hours before the news broke about his appointment. That means that current Energy and Natural Resources Chairman Ron Wyden, D-Ore., is likely to become chairman of the powerful Finance Committee — his dream job — sometime in this Congress. Where tax reform fails, temporary tax incentives win. While a host of expiring tax credits, including the production tax credit for wind, are likely to expire by year’s end, Wyden supports extending them, so he may pursue that early next year in a retroactive manner. To be sure, even the prospect of comprehensive tax reform somewhere on the congressional horizon makes energy companies of all stripes — but especially oil and natural-gas companies — nervous about what lawmakers could do with the tax provisions they’ve been enjoying for decades.
While this is a utility company and not an issue, a pair of projects that Southern is pursuing could have ripple effects throughout the energy industry. On the nuclear-power front, the company is building a pair of new reactors at a plant in Georgia. Southern is awaiting final sign-off from the Obama administration for an $8.3 billion loan guarantee to help build the reactors. The loan guarantee was conditionally announced in February 2010, but it’s been significantly delayed since then. These two reactors are poised to be the first built in the United States in some 30 years, so the way this whole process goes could affect Americans’ appetite for more nuclear power, which accounts for about 20 percent of our electricity right now and is carbon-free. Meanwhile, on the coal front, EPA is holding up as a model for “clean coal” technology, another Southern project in Mississippi, even though company officials have said EPA should not use its project (which is over budget and delayed) as an example that can be replicated throughout the country. Regardless, how successful — or not — Southern is at proving out this project could either pave the way for, or slow, investments in carbon, capture, and sequestration technology in the United States.
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