Energy goes from symbol to surprise issue in bitter presidential race

BEAVER FALLS, Pa. -- John Jeffers guzzled a can of Orange Crush inside his small office here at United Steelworkers Local 8183. It was around 9 a.m. in late September, and the local union chief was getting ready for a trip to the USW national headquarters in Pittsburgh.

The 47-year-old had been waking up at 3 a.m. for weeks as part of a campaign to get union members out to vote today. From the union's "war room" in the Pittsburgh office, Jeffers and other union leaders were dispatched to factories throughout the region, where they would pass out leaflets and urge support.

Set against the backdrop of anemic job growth in the industrial corridor lining the Ohio River in northwestern Pennsylvania and eastern Ohio, the union's support for President Obama and Democratic candidates remained unshakable.

But this is still among the most contentious presidential races in the past 50 years. Jeffers said he had been called a communist and a terrorist.

"They don't know that my place is closing," Jeffers said.


Jeffers' union represents more than 700 workers at the Horsehead Corp. zinc smelter in Monaca, Pa., on the banks of the Ohio River. The plant plans to move its operations to North Carolina in the next couple of years, putting Jeffers and the others out of work.

If Shell Oil Co. signs an agreement to purchase the land, the site will be converted to an ethane "cracker" that will use a bounty of natural gas liquids in the Utica Shale in eastern Ohio.

There will be jobs lost and jobs gained, but Jeffers said the Republican governors of Ohio and Pennsylvania failed to fight for middle-class jobs.

"You've got to make this equal, a level playing field," he said.

From Keystone XL to CAFE standards

In the spring, as the Republican primaries roiled, the White House started the process of taking energy off the table for the general election campaign. On a rainy morning in late March, Obama's motorcade snaked through the small towns of northeastern Oklahoma toward Cushing, where the nation's largest hub of oil storage tanks and a confluence of pipelines are the pricing point for U.S. crude oil futures contracts (EnergyWire, March 23).

Obama stood in front of pipelines piled high in preparation for the construction of a $2.3 billion southern leg of the Keystone XL project to ship oil from Cushing to refineries along the Gulf Coast. He spoke to a small audience of local dignitaries and top Democrats in the state, but this was not meant for them. It was a TV moment for a national audience, aimed at neutralizing Republican charges that Obama's energy policies had curbed domestic oil and gas production and caused high and volatile gasoline prices.

The White House had landed itself in a bitter partisan dispute about whether to permit Keystone XL's northern leg, which would run from Canada's oil patch to the American Midwest. It had put Obama in the direct line of fire between environmental groups fighting the development of Canada's oil sands and a Republican Party that smelled blood over the issue of U.S. energy security and rising gasoline prices.

"Anybody who suggests that somehow we're suppressing domestic oil production isn't paying attention," Obama said on March 22. He had just come off a swing through Nevada and New Mexico to promote his "all of the above" energy strategy.

"We are drilling more, we are producing more," Obama said. "But the fact is, producing more oil at home isn't enough by itself to bring gas prices down."

For months, the White House succeeded in relegating energy to a lower-tier issue.

But as a symbol -- in a campaign season that would come to rely on symbols over energy policy prescriptions to explain partisan differences -- Keystone XL and the "war on coal" emerged in the closing months. Republican ads sought to cast doubt on the president's fidelity to American-made energy. They blasted the White House for interfering with North America's rapid rise as an unconventional oil and gas producer. The president has threatened to close tax loopholes, put too much federal land off-limits to drillers and refused to permit Keystone, said the campaign of GOP presidential contender Mitt Romney.

In the second debate, energy policy differences spilled onto the national stage. And, as have been most issues in this election year, the discussion was cloaked in the language of job creation.

"We're going to bring that pipeline in from Canada. How in the world the president said no to that pipeline, I will never know," Romney said. "This is about bringing good jobs back for the middle class of America, and that's what I'm going to do."

Bruce Oppenheimer, a Vanderbilt University political science professor who specializes in energy policy, said that as voters go to the polls today, much of the domestic debate is folded into the electorate's broader sense of the state of the economy.

"I would be surprised if a lot of people would be talking about energy in the final days," he said yesterday.

Gasoline prices -- still tethered to historically high global oil prices -- have moderated enough to be a secondary burden for most Americans, he noted.

Stripping away narrowly tailored political rhetoric also results in an energy neutral-zone for Obama and Romney. "It's not like if the president is re-elected, we'll no longer be drilling offshore," Oppenheimer said. "And it's not like if Romney is elected, we'll no longer be spending money on wind energy."

The most surprising thing, Oppenheimer said, was how little was said about a signature White House achievement: an increase in vehicle fuel-economy standards that fundamentally changed the auto industry's contribution to U.S. greenhouse gas emissions.

In late August, the administration released a final rule on new corporate average fuel economy (CAFE) standards that will require the average U.S. light-duty vehicle to get 54.5 mpg by 2025. The rule built on an early policy shift that will increase fuel economy to 35.5 mpg by 2016 for cars and light trucks.

The rules resulted from a White House-brokered deal that included the state of California, the National Highway Traffic Safety Administration and 13 major car companies, including the three largest U.S. automakers. Combined, the standards are supposed to slash U.S. oil consumption by 12 million barrels and reduce carbon dioxide emissions by 6 billion tons by 2025.

"With all the attention given to [Keystone] XL, drilling offshore and fracking, if you were going to go after the administration, the biggest energy decision they made was to move up the 2020 deadline to 2016 under the CAFE standards," Oppenheimer said.

"Behind the stimulus and health care law, it's probably their biggest domestic policy decision," he said. "It just dwarfs everything else."

A surprise, and 'a new golden age'

Hurricane Sandy was this election's "October surprise."

Disaster relief took center stage. Not far behind was a near-consensus among scientists that global warming had been a contributing factor.

Did it put proposals for federal programs that ratchet down greenhouse gas emissions from coal and gas-fired power plants back on the table? Or has the Obama administration, through U.S. EPA enforcement of the Clean Air Act, set the power sector on a course to slash emissions through 2035 as it replaces aging coal-burning generators with cleaner plants?

"He's always been supportive of taking more action, but he's never felt there's enough a political consensus," said Kelly Sims Gallagher, professor of energy and environmental policy at Tufts University's Fletcher School. "Because of Sandy, there might be more wind at his back."

Whether over the course of a Romney administration or during a second Obama term, the electricity industry faces a challenge: the escalating costs of upgrading the U.S. fleet of power plants as America's power consumption stagnates.

That is "uncharted waters" for much of the electric power sector, according to a new Deloitte report, but not necessarily one that is going to change if Romney is elected president today.

Electric utilities are expected to invest more than $150 billion in new power plants through 2020, according to U.S. Energy Information Administration forecasts. Stagnating power demand and rock-bottom natural gas prices won't change that scenario, said analysts with Deloitte. "This is necessitated by an aging fleet and early retirements of uneconomic plants often due to the costs of environmental compliance," the report notes.

Another $100 billion or so will be invested in expanding the power grid this decade to maintain reliability and integrate renewable energy, according to Deloitte, citing estimates by the Brattle Group.

Wall Street analysts following oil and gas companies yesterday were more fixated on supply and demand than on who occupies the White House in 2013.

On the eve of Election Day, Barclays analysts examining Hess Corp.'s prospects in the Bakken Shale oil formation in North Dakota and Montana focused on the trend lines for oil and gas, noting "structurally lower" U.S. energy prices that, through the prism of gasoline prices at the pump, could be the difference for Obama's re-election.

"Longer term, we believe the U.S. refining sector has been undergoing a major Phase-3, multi-year structural improvement, the return of a new golden age," Barclays said in its research note. "We believe this new golden age will be more sustainable than the industry's last strong cycle between 2003-2007, as we believe it will not be merely cyclical, but driven by structurally lower North American natural gas [and] oil prices."

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