What will President Obama's reelection mean for the future of energy and environment policy and regulation? During today's OnPoint, Kevin Book, managing director at ClearView Energy Partners, discusses key issues and opportunities for the President to work with the divided Congress. He also previews expectations for how Congress will address clean energy incentives, LNG exports, and carbon emissions.
Monica Trauzzi: Hello, and welcome to On Point. I'm Monica Trauzzi. Joining me today is Kevin Book, managing director at ClearView Energy Partners. Kevin, great to have you here for your election analysis.
Kevin Book: Good morning, Monica.
Monica Trauzzi: So, Kevin, a late night. President Obama retaining the Presidency, the Republicans maintaining the House, and the Senate going to the Democrats. Does this mean the status quo on energy and environment policy, or did you see some sort of paradigm shift where we can expect things to change from how they've been the last four years?
Kevin Book: Well, that's a, that's the kind of question that a mixed election outcome is going to bring a mixed answer. So here's your mixed answer. You have two years of a return to the regulatory agenda from 2009, which is to say that there's a lot of pent-up environmental energy, call it caged up, if you will, that is going to get released, because there's going to be lawsuits if it doesn't. So the regulatory agenda will be how energy policy moves until at least the midterm elections, and quite frankly, that regulatory policy is going to be left of center.
Monica Trauzzi: So we're going to get into more specifics on that in a second. On President Obama specifically, do you think that he is going to work with Congressional leadership differently now, because he doesn't have to worry about getting reelected? Is there going to be more compromise?
Kevin Book: The Bill Clinton question. Is this the moment where he can move to the center safely? And the answer is probably yes, except that he has to have somebody on the other side moving with him. If you look at the demographics of the Senate, you have another election in 2014 where the Republicans still have a chance. It may be that holding the line is the way to go. If the Tea Party comes in strong, and it looks like they're still holding, and we'll find out final results at the end of the day, probably, then what we'll know is that there's a, sort of a reinforced, emboldened Republican will to resist and to ask for the big deal, even though the President retained election, even though the Republicans didn't claim the Senate, because there is still a 2014 possibility. If that evaporates because Republicans are willing to do a deal in the Senate, then the centrist ovations of the President might be answered. But I wouldn't think it starts out that way.
Monica Trauzzi: In exit polling, voters said that the President's response to Hurricane Sandy played a role in their vote for him. Was it climate change or the politics of it that slowed Romney's momentum?
Kevin Book: It wasn't climate change, and in fact, the words climate change only came ex post Sandy. But what you did get was a chance for the President to show that government was good, and this election was as much as anything about the question of whether or not government was in the way or was at your back. And President Obama had a chance to be seen leading with the government helping people.
Monica Trauzzi: So what is the future of climate policy? Will we see lawmakers consider a price on carbon as part of their work on the fiscal cliff?
Kevin Book: The price on carbon conclusion is probably that it's going to come from overseas, in our view. Where things would have gone in a Romney outcome with an all-Republican Congress is that $16 trillion what now moment, where a carbon tax would not only have been feasible, but also an answer. Now a price on carbon is probably going to be handed to us through an expensive, painful, lengthy trade case process. April 30th, the European Union has to say, basically, "Pay up or we fine you," or they have to back down from their policies. I think the European Union stands strong. And then we get into a long discussion about whether a country can externalize a carbon price. If it succeeds, then there's a carbon price here, but it didn't start here.
Monica Trauzzi: You mentioned opening the cage. Does this election now open the door for EPA to really aggressively regulate greenhouse gases, and will they do that under Lisa Jackson?
Kevin Book: Well, the will they do that under Lisa Jackson question is open, but it would be hard to imagine an easy succession process for the EPA at this point. So I'd assume she'd want to stay to conclude some of what she started. And yes, EPA of its own momentum would have pursued an agenda, which is to say that you cannot restrain EPA for very long. It is configured to do what it's supposed to do, protect air and water, and it's full of people who will do it irrespective of the political leadership at the top. And now the Obama administration has a political price that it owes. It got grudging acceptance from environmentalists who were expecting a predicate to what had begun in the first administration, things like new source performance standards for new coal plants, not finalized, refineries forgotten. I think we'll see those coal plant NSPS finalized pretty quickly, and we'll probably see NSPS proposed for existing plants. EPA is probably going to be turned loose early so the work can be completed on the second term.
Monica Trauzzi: Throughout the campaign, Romney said that he would approve Keystone XL on day one, and it's long been thought that Obama was really just trying to punt until after the elections before making a decision. What do you think the future of this pipeline is now that he's won re-election?
Kevin Book: Well, I don't think anything's going to surprise us next year. I think Keystone XL will be approved by the Obama administration. Day one promises are hard to keep. You're busy on day one, and day one would have been day two, given the inauguration calendar. But where things are on Keystone is bigger than the pipeline itself. It's the question of whether or not the process comes with caveats that make it hard to build, and whether that sets a precedent for the next five pipelines that could bring 2.5 million barrels per day of oil sands products and oil down into the US over the course of the next decade.
Monica Trauzzi: DOE has faced a lot of heat and scrutiny under Obama's first term, particularly on loan guarantees. Will we see a change in the way that incentives are handled, and what do you think the future of Secretary Chu is?
Kevin Book: Well, DOE's incentives program is largely constrained now by the funding issue, which is to say that there isn't 1603 money likely to come from Congress. You're not going to see more 1705 money for loan guarantees on the new terms. And loan guarantees on the old terms, well, they're not that attractive to some of the nuclear plants that might have applied for them, so you may not even see that many of them. As far as Secretary Chu goes, he hasn't taken the fall for the perceived wrongdoing that Republicans have been complaining about at DOE, and frankly, if there's an incentive program that's in trouble, it's probably not his at all. If anything, it's the solar grants that are being investigated by the IG at the Department of Treasury and the question of whether or not the cost basis was inflated. So I'm not sure that Chu would necessarily jump in front of a bullet that's not his, and why would he leave, he stayed this long, Monica. Surprising he stayed this long.
Monica Trauzzi: DOE has been taking its time with the release of this macroeconomic study on LNG exports. Do you expect full steam ahead now that we've passed the elections?
Kevin Book: Taking its time? Taking its time would assume ...
Monica Trauzzi: Understatement.
Kevin Book: ... that there's a time. We've been told it's at the end of the year or by the end of the year, and that's our expectation. What do we expect? Well, that study isn't the end of the story. It's the start. The question is whether or not the federal government is going to executively make decision or whether or not Congress will get involved. And Ron Wyden has already signaled that he intends to get involved. The idea that you could presume LNG exports in the public interest, which was a '02 Energy Policy Act artifact, that is something that Senator Wyden, soon to be Chairman Wyden, contested over the weekend, and said, "You know, maybe FTA exports shouldn't be presumed in the public interest." So no matter what DOE says, it's going to be under fire not just from the parties involved, but also from the Hill.
Monica Trauzzi: And talking about Congress, any agenda shifts to the key energy and environment committees with the new makeup, the kind of new makeup of the House and Senate?
Kevin Book: I think that the agenda shifts are probably minimal on the Hill, because activity on the Hill is probably minimal. There's going to be a lot of rhetorical renewal. You'll probably see an entrenched set of stances. At the end of this year, there's a lame-duck question to be answered, and that question is do you kick things down the road another year? You know, kickers play long, healthy careers in the NFL. Punting's the way to go. We expect to see a punt.
Monica Trauzzi: It's still early in the day, but I'm sure you've been in contact with some of your folks around town. What have you been hearing from people in DC about the outcome of this election?
Kevin Book: Well, people are still making the sort of hedged calls you'd want to make. After all, there's still 2012 business to finish, and 2013, the new boss is the old boss, so you don't want to, you don't want to jump back too quickly to a partisan stance. What you're getting are the kinds of comments that say, "We hope things are going to work out," rather than the comments that we got before, which is, "If we don't get it our way, the world's going to fall apart." I think you'll see a lot more conciliatory prose in the weeks ahead.
Monica Trauzzi: All right. A lot for us to watch over the next few weeks. Thanks for coming on the show.
Kevin Book: Thanks, Monica.
Monica Trauzzi: Thanks for your analysis. And thanks for watching. We'll see you back here tomorrow.
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