What Energy, Environment Issues to Watch in 2014

WASHINGTON, DC - MARCH 21: Committee Chairman Sen. Ron Wyden (D-OR) listens as members speak during a markup meeting of the Senate Energy and Natural Resources Committee March 21, 2013 in Washington, DC. The committee met to vote on the nomination of Sarah Jewell for the position of Secretary of the Interior.
National Journal
Amy Harder
Dec. 27, 2013, 1 a.m.

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.

Re­new­able-fuel stand­ard

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.

Arc­tic drilling

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.

South­ern Co.

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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