STATE OF THE UNION:

Obama's 'not if, but when' pledge on climate actions thrusts gas into spotlight

In the first State of the Union address of his new term, President Obama embraced a series of policy trade-offs that fall under the White House's "all of the above" energy rubric, including the expansion of oil and gas drilling and actions to combat global warming by reinvesting in clean energy technology.

The speech reflected positions that emerged quickly over the past year, as the president barnstormed outside the oil hub in Cushing, Okla., and shaped his energy message in preparation for a re-election campaign. Last night's message to Congress again put the energy security gained from more U.S. oil and gas production on the same fleet of energy and environmental prescriptions as technologies designed to replace carbon-intensive fossil fuels.

"We produce more natural gas than ever before -- and nearly everyone's energy bill is lower because of it," Obama said. "And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen.

"But for the sake of our children and our future, we must do more to combat climate change."

The president called for a "bipartisan, market-based" climate bill, reiterating that if Congress "won't act soon to protect future generations, I will."

The agency most directly responsible for regulating greenhouse gas emissions, U.S. EPA, is considering whether to set emissions limits on existing power plants. The top-down regulatory approach through the Clean Air Act is opposed by electric utilities concerned about having to transition to cleaner power generation too rapidly, requiring big capital expenditures and, some argue, threatening electricity system reliability.

The big loser in such a scenario would be coal-fired power plants, of which many of the older and least efficient are already scheduled to close down. Depending on where the limits are set, the main beneficiaries of such a plan could be natural gas-burning power plants, which produce less carbon dioxide emissions, but are not the zero-emissions solution environmental groups are promoting.

"The president has a full box of tools to strike back at climate chaos," said Francis Beinecke, president of the Natural Resources Defense Council. "The best tool he has is the Clean Air Act."

"The president was clear about the magnitude of the challenge and resolute in his determination to use his executive authority to take action, especially if Congress won't," said Carol Browner, Obama's former top White House energy and climate policy adviser, now at the liberal-leaning Center for American Progress.

Energy Security Trust proposal

To the Washington interest groups that listen carefully for tone and substance, the president's speech appeared to resonate. But for hot-button issues, including the prospect of exporting U.S.-produced natural gas, Obama's speech required reading between the lines. He urged Congress to adopt programs meant to boost manufacturing, a broad sector that includes companies aggressively opposing liquefied natural gas (LNG) exports out of fear that shipping more overseas could raise energy prices here.

One other big trade-off is the government's use of royalties, taxes and fees collected from oil and gas producers operating on public land. Obama floated the Energy Security Trust, an idea generated outside the White House.

"I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good," Obama said. "If a nonpartisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we. Let's take their advice and free our families and businesses from the painful spikes in gas prices we've put up with for far too long."

The president was referring to a group called Securing America's Future Energy, or SAFE. The group bills itself as a nonpartisan organization that aims to improve U.S. national security by slashing the nation's economic dependence on oil.

That means cutting petroleum imports, a goal that has been partially met in the past four years as the economic slump decreased demand, cars became more fuel-efficient and the United States produced more of its own oil.

The group, which includes corporate luminaries like FedEx CEO Fred Smith and a number of former military brass, presses policy agendas that tack toward both ends of the political spectrum. It supports opening up Alaska wildlife refuges to drilling and the expanding use of electric cars. It also promotes policies to promote natural gas vehicles because so much of the gas is developed in the United States.

Robbie Diamond, the head of SAFE, said after the speech that the group supported the establishment of an "Energy Security Trust" to shift some of the oil and gas largesse to advancing new technologies.

"The oil boom has created a unique opportunity to have our cake and eat it, too," he said. "We can use part of the revenue generated from expanded oil production to fund the research and development of the alternative fuels and vehicles required to end America's oil dependence."

He called on the fund to be "laser-focused" on technologies that create competition in the transportation sector.

Getting at more -- and cleaner -- natural gas

Still, Obama said the administration would speed up permits for drilling on public land, which so far has not been the focus of a natural gas boom that has played out primarily on private land.

In a statement reflecting the American Petroleum Institute's traditional position that oil and gas companies should be able to explore and drill on nearly every corner of public land and protected water managed by the U.S. government, API President Jack Gerard repeated his call on the White House to lift restrictions and "burdensome regulations."

"Unfortunately, 83 percent of the land and offshore areas controlled by the federal government are still off-limits to oil and natural gas development," Gerard said. "President Obama must follow through by implementing a national energy policy, lifting existing restrictions in support of responsible development of our vast energy resources, approving the Keystone XL pipeline, and standing up against unnecessary and burdensome regulations that chill economic growth."

For perhaps the first time, Obama talked about using research and technology to help "natural gas burn even cleaner and [protect] our air and water."

While the president wasn't specific, the Energy Department has continued to pursue technological breakthroughs tied to carbon capture and storage. That goal primarily targets coal-fired power stations, but advanced technology could also slash emissions at natural gas-burning plants.

Upstream, there continues to be tension between environmental groups and the president's "all the above" energy strategy when it comes to natural gas development. Critics of the process have urged the administration, through U.S. EPA, to take a stronger stand against shale gas drillers found to have polluted air or water. Today, much of the focus at U.S. national labs is on cracking geological codes still holding back some oil and gas production, but some of the emphasis has turned to shrinking the environmental footprint during the shale gas production process.

Obama's comment also suggests an emphasis on harnessing private-sector investment in advanced drilling and "green completion" technology. On some levels, General Electric Co., Halliburton Co. and Schlumberger Ltd. are pursing technology that could make the process safer.

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