Obama Environmental Picks Seen Focusing On Oil Boom

From Bloomberg

By Jim Snyder & Mark Drajem

Four years ago, President Barack Obama said his energy and environmental advisers would work to develop a “new hybrid economy” based on wind, solar, and other renewable energy sources.

Lisa Jackson has announced her exit as head of the Environmental Protection Agency, and Energy Secretary Steven Chu, who faced congressional criticism over green-energy programs, could follow. Obama may end up assembling a second- term team for a different task: how to manage the boom in U.S. production of oil and natural gas.

“When the Obama team came in the first go around, there was great hope that the president would be transformative and really try to shift the energy policy much more heavily towards renewables,” Charles Ebinger, an energy policy expert at the Brookings Institution in Washington, said in an interview.

Instead, the growth of hydraulic fracturing to drill for oil and gas in shale rock formations is offering a “unique opportunity to revitalize the American economy and reinvigorate American manufacturing,” Ebinger said.

Oil production is at its highest level in 15 years, and natural gas development is at record levels. That pushed prices down to a decade low last year, enticing chemical companies that rely on natural gas to build new factories in the U.S.

‘Paradigm Shift’

“The whole paradigm has shifted over the last four years,” Stephen Brown, a lobbyist for Tesoro Corp. (TSO), which is based in San Antonio, Texas, said in an interview. The administration needs to “figure out how not to get in the way of this,” he said.

Ebinger said Obama should pick an Energy secretary, who can explain the benefits offered by natural gas development to a skeptical public.

“He needs a couple of people at the top who can go out and sell the message that we really are at a situation now where we can reduce our oil import dependency if we move to develop these unconventional resources,” he said. “I think he needs a salesman or a saleswoman.”

On the other side are environmentalists who want the U.S. to adopt stricter regulations to protect water resources and limit air pollution from “fracking.”

The Interior Department is developing the first rules for the drilling practice on federal lands to address some of those concerns as it also promotes oil and gas development as a source of economic growth.

Fracking Study

The EPA, meanwhile, plans to release its multi-year analysis of the potential risks of fracking in 2014. Margot Anderson, the executive director of the Energy Project at the Bipartisan Policy Center, a Washington-based group that says it promotes legislative consensus, said that study will probably determine the level of regulatory restrictions on fracking the administration pursues next term.

The oil industry hopes Obama chooses candidates who “are well versed in how an agency operates and what the agency is capable of doing,” Tesoro’s Brown said.

“Hydraulic fracturing regulation done poorly would put the brakes on development going on here in this country,” he said.

The emphasis for Obama’s new energy and environmental team appears to be on seasoned insiders who understand the politics of rulemaking and how to negotiate with diverse constituencies.

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