America's energy outlook this year will be, more than ever before, tied to how the federal government approaches the issue of climate change — and how much leverage the new Congress will have to help or hinder those efforts.
Many of President Obama's supporters expect real action. Although it's unlikely that a federal carbon tax or a revived "cap-and-trade" pollution-control system could be implemented — House Republicans will have none of it — the administration and its environmentalist allies still have cards to play. Congress will have some say in what happens to American fossil-fuel production, subsidies for wind and solar power and other key energy matters, but most of the important decisions will be made in the White House.
Chief among those is whether to approve the Keystone XL pipeline, a massive Canada-to-Texas project that backers say could transform North American energy markets but one that many environmentalists see as a major concession in the larger fight to reduce carbon emissions.
That is a fight that many expect Mr. Obama to embrace in his second term.
"We're confident that he's going to tackle it. He's had a very good start," said Josh Saks, legislative director for the National Wildlife Federation's advocacy center, citing the administration's drive to improve auto fuel standards and other steps taken in the name of fighting climate change in his first term.
"The carbon [issue] is the big enchilada for us right now. We're going to make sure that the president pays attention to this," Mr. Saks said.
Although the Keystone project may be the highest-profile energy fight this year, the administration is poised to ratchet up its regulatory agenda in other areas, though it first must fill a key vacancy on its policy team.
A new EPA head
Mr. Obama has not nominated a permanent replacement for Environmental Protection Agency Administrator Lisa P. Jackson, who recently announced that she would be stepping down after the president's State of the Union address this month.
She has led what many on the left consider a successful four-year term, but also has encountered several major embarrassments, including an ongoing investigation in her use of secret email accounts.
Whoever takes over the agency, one thing is certain: The EPA will move ahead this year with a litany of rules, including a tightening of the ozone standard, that critics contend will hold back the energy and power generation sectors of the economy and ultimately may cost tens of thousands of jobs.
The EPA last month released the final version of its controversial boiler "maximum achievable control technology" standard, better known as the Boiler MACT rule. It will greatly limit emissions from industrial boilers, heaters and similar sources.
"I don't think you're going to see a slowdown of regulations. Right now, the EPA is geared up to get them out the door," said Ken von Schaumburg, a D.C. lawyer who served as deputy general counsel at the EPA during the George W. Bush administration. "The agenda is set. It's just a matter of how stringent the rules are going to be when they come out."
Another item at the top of the EPA hit list is greenhouse- gas emissions, viewed as a main contributor to climate change. The Obama administration has imposed a ban on new coal-fired plants, but likely will pursue equally onerous restrictions on existing plants.
Congressional Republicans fear the greenhouse gas limits eventually will cause great harm to broad swaths of the economy, including consumers, employers and homeowners who rely on power plants.
"It's not just coal plants that will be affected. Under the Clean Air Act, churches, schools, restaurants, hospitals and farms will eventually be regulated," according to a report issued by Republican members of the Senate Committee on Environment and Public Works.
The EPA also has its sights set on hydraulic fracturing, or "fracking," the controversial technique used to extract oil and natural gas from areas such as the Marcellus Shale that stretches across a number of Mid-Atlantic and Midwestern states. The process has transformed the American energy landscape and put the nation on track to free itself from dependence on foreign oil within the next two decades — an unimaginable scenario even a few years ago.
The EPA is in the midst of a massive study to determine whether the practice contributes to water pollution and contamination of local drinking sources. The report may be a precursor to sharp federal limits on fracking.
Environmentalists and many congressional Democrats are pushing for restrictions, even though Mr. Obama has expressed support for expanded domestic drilling.
Congressional Republicans remain skeptical of Mr. Obama's words and the EPA study. They have questioned the EPA's science given the agency's unsuccessful attempts to indict fracking as harmful to sources of drinking water.
Those Republicans ultimately have few viable options to slow down the agency's efforts.
"There have been numerous proposals put out by the Republican House to try and stymie these overreaching regulations, but they're not going to go anywhere," Mr. von Schaumburg said. Senate Majority Leader Harry Reid, Nevada Democrat, "is not going to ever put them on his agenda."
Republicans, buoyed by sweeping gains in the House in the 2010 elections, have tried over the past two years to rein in regulations and limit wasteful government investment into renewable fuels. The House last year passed several measures to stop what they say is the administration's "war on coal," and passed the "No More Solyndras Act," legislation meant to ensure that taxpayers never again lose hundreds of millions of dollars in failed investments in solar- or wind-power technology.
In the end, any significant energy legislation stands little chance of clearing the divided Congress. That leaves the White House and its EPA to write energy and environmental policy with limited input from the House and Senate.
"The administration is looking at the laws in existence, reinterpreting them and pushing them through the regulatory process much further than the law was ever intended," Mr. von Schaumburg said. "This administration is not letting Congress make law."
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