May 2013, Vol. 240, No. 5

From the Burner Tip

New Leadership For Federal Agencies Raises Questions For New Directions

Carol Freedenthal, Contributing Editor

Three federal agencies that virtually control the energy industry are getting new leadership as President Obama completes his Cabinet selections for the start of his second term.

When he named nominees for retiring Secretary of the Interior, Ken Salazar, retiring Secretary of Energy, Steven Chu, and retiring Environmental Protection Agency Administrator, Lisa Jackson, he said the following: “They’re going to be making sure that we’re investing in American energy, that we’re doing everything we can to combat the threat of climate change, and that we’re going to be creating jobs and economic opportunity in the first place.”

Another agency that will have a one-time, big role in U.S. energy is the State Department which will be the final word on allowing construction of the second pipeline bringing Canadian tar sands oil to Gulf coast refineries, the Keystone XL Pipeline. State Department approval is needed since the pipeline will cross the Canadian/U.S. border. The decision will be made later this year but the new Secretary of State, John Kerry, while a “green energy” advocate, will have to make that decision.

The objectives outlined by the president are a bit more ambitious than in his first term. The comments on climate control, making sure of investing in American energy, and for creating jobs and economic opportunities will take additional effort by the agencies. There is also a need for the nominees to have a bigger political stature to help in convincing Congress of the changes needed to meet these goals.

Many environmentalists feel very little was done by the administration on climate control during the first term. While there is still much debate on the cause of climate control worldwide – the role of people influencing climate change – the president has promised to make this a bigger objective in his second term. While many blame greenhouse gases coming from fossil fuel use as the culprit of climate change, there is a rumored United Nations report that is allegedly being held back that gives more credit to the sun and its activity for climate change.

With evidence showing the possible deadlock of Congress in going after some of the greenhouse gas regulations – changes to bring a broader supply of energy materials including more “green” energy and narrowing the extent of fossil fuels used – there may be occasion where to accomplish the president’s desired goals an agency or executive edict will be used in place of congressional action. The proposed slate has already shown this ability and appears ready to assume even more responsibility.

The president seems to have selected relative outsiders and will allow them more policymaking responsibility than seen in the first term. All of the candidates bring a greater amount of business association and experience which will be important in the economic side as well as in making agency policy.

The three candidates are: for Secretary of Interior is Sally Jewell, president of an outdoor clothing and sporting equipment retailer, Recreational Equipment Inc.

At the Energy Department, the president picked another well-known educator in the energy field, Ernest Moniz, Ph.D., a faculty member at MIT. He was undersecretary of Energy during the Clinton Administration.

For the EPA, the president went back to the agency and named Gina McCarthy, assistant Administrator of the EPA’s Office of Air and Radiation (OAR). She has been very active in promoting clean air with tightened regulations on power plants and sulfur content in gasoline.

Each candidate requires Senate approval. Jewell was approved in early April. The other two should be approved as well but might meet with some stronger questioning by the Senate committee. Moniz, because of some of his prior working relationships and comments, and McCarthy, because of her prior involvements in air quality for coal-fired electric generating plants and car exhaust emissions, could come under more scrutiny

Moniz chairs MIT’s Energy Initiative which has worked on developing new fuels to meet environmental and economic needs. Some of the bigger contributors and sponsors of the MIT program are major energy companies. This has some environmentalists concerned he may be more partial to energy companies and fossil fuels.

McCarthy is open to questioning because of her role in enforcing clean air regulations on new power plants and automobile exhausts. She has used the authority granted to the EPA under the Clean Air Act and sited by the courts in making her regulations.

There is no question each is a top professional in their area of expertise. Each brings much experience that will be useful in accomplishing their agency’s goals. There is an abundance of challenges for each of them. Some decisions to be made are carry-overs from the last term and will require quick action.

Interior, which is responsible for public lands, drew criticism for not promoting oil and gas development. While U.S. oil and gas production is at an all-time high, very little of the new production has come from public lands even though they hold much potential.

Jewell, who expressed in her Senate confirmation hearing the importance of renewable energy and fossil fuels, picks up this responsibility to include more exploration and production on public lands. She will also need to improve the permitting process for drilling as it has been criticized as being too long and arduous. The offshore and Alaskan drilling would benefit from changes here.

Moniz also has a full agenda. A key decision pending is whether to allow exports of natural gas as LNG. While in recent history the worry was running out of natural gas, with new production methods and much greater supply, the question is whether producers should be allowed to sell in the Asian and European markets where natural gas prices are much higher.

In a hearing for his confirmation, Moniz endorsed exporting natural gas, but said each license would be decided on an individual basis. He is concerned with the financial impact exporting will have on natural gas prices and understands the concerns of many U.S. manufacturers who want low gas price to be market-competitive.

In the opposite direction, Moniz would be the leader for achieving independence of foreign oil. Moniz has the benefit of coming into the position as the country’s energy supply has gone from supply short to plentiful. When it comes to energy preference, he appears to be, much like President Obama, an “all of the above” person. He has praised everything from natural gas and nuclear to solar panels and is at ease with fracking in developing natural gas and oil reserves.

Most likely, the biggest challenge will be for McCarthy. Some feel she would likely become the face of that climate change push” as promised by the president. The EPA was very active in the previous term in setting the path for clean air including environmental concerns over climate.

The Washington Post outlined the accomplishments of the past EPA: “The slew of rules the EPA enacted over the past four years included the first greenhouse gas standards for vehicles, cuts in mercury and other toxic pollution from power plants and a tighter limit on soot.”

Recently, the EPA began enforcing new rules on refineries to lower sulfur content in gasoline which is expected to increase fuel prices. This was postponed until after the election to prevent any backlash.

McCarthy carries with her strong experience. At the Office of Air and Radiation she played a key role in developing new soot and mercury emission rules for power plants. She is well-versed in working between government and industry.

While she may turn out to be the president’s “green quarterback”, she does have a good history of working with industry, according to trade people. Even the coal-fired power industry and automobile manufacturers, traditional regulatory adversaries, respect her for her style and consider her an honest broker.

The new agency leaders will have a full slate to test them. To strike the right balance between environmental and economic conditions will be a challenge. Education, knowledge, and negotiating will play major roles in their success!

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