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Stricter energy regulations expected

By Wire Reports
Wednesday, Nov. 7, 2012, 7:16 p.m.
 

Energy companies likely will get more regulation during President 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 advocated during the campaign for 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 battle.

Even so, Obama may consider introducing a tax on carbon emissions to help cut the budget deficit, according to HSBC Holdings Plc.

A tax starting at $20 a metric ton of carbon dioxide equivalent and rising at about 6 percent a year could raise $154 billion by 2021, Nick Robins, an analyst at the bank in London, said in a research note, citing Congressional Research Service estimates. “Applied to the Congressional Budget Office's 2012 baseline, this would halve the fiscal deficit by 2022,” Robins said.

A continued Republican majority in the House means Obama's scope for action will be limited, Robins said.

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 includes Energy Secretary Steven Chu, a Nobel prize-winning 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.

Reuters and Bloomberg News contribute to this report.

 

 
 


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