Do President Obama's nominees to head up the Department of the Interior, U.S. EPA and the Department of Energy signal a shift on energy and environment regulation? During today's OnPoint, Kevin Book, managing director at ClearView Energy Partners, discusses how Sally Jewell, Gina McCarthy and Ernest Moniz will shape the direction of policy if confirmed.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi, joining me today is Kevin Book, managing director at Clearview Energy Partners. Kevin, it's always good to have you on the show.
Kevin Book:: Thanks for having me.
Monica Trauzzi: Kevin, change is coming to the three key energy and environment agencies here in Washington with the nominations of Sally Jewell, Gina McCarthy and Ernie Moniz. What's the overall impact of this new class of leaders on the future of policy and regulation? Are we seeing a material shift?
Kevin Book:: Well, Monica, you're not seeing a material shift in the sense that a lot of the big decisions got made in the first term, and there's a lot of continuity coming in the second term. And more importantly, as Frank Verrastro at CSIS likes to say, the nominees will sort of support the agenda. And what you have are nominees that are sort of sticking with the "give a little, take a little" program rather than a hard left turn, or for that matter, a hard right turn, towards a more production-focused energy policy.
Monica Trauzzi: Sally Jewell had her confirmation hearing before the Senate Energy Committee last week. Based on her testimony, did you see her try to sort of draw any distinct lines between the way that she will lead versus how Ken Salazar led?
Kevin Book:: Well, I think the most important thing with Sally Jewell is that most of those decisions that were being made in the first term are hard to unmake now. The ending of categorical exclusions for oil and gas permits on federal lands, for example, a very big change in the production profile of the US, happened under Salazar's watch. Would it change under Jewell? Absolutely not. You're carrying the status quo. So I think what you saw was a very good performance in terms of trying to get through the confirmation process smoothly, and in essence, that's probably why she was picked.
Monica Trauzzi: And obviously this issue of oil and gas production on federal lands will continue to be an issue, members of congress wanting to talk about it even at the confirmation hearing. What do you think Jewell will tackle first though?
Kevin Book:: Well, I think that the hidden agenda item that we're not probably considering is the use of the Endangered Species Act as a broader policy tool. Right now when we look at where oil and gas production are restricted or allowed, a lot of what we're talking about is things like national monuments and parks and some of the other mechanisms that are available to the Interior Department. But I think you might see an advanced awareness of endangered species, and some of those decisions, like the sage grass candidate species decision, which was extremely important for natural gas production, they may be revisited in response to environmental lawsuits yet to come.
Monica Trauzzi: Out of the three nominations, Gina McCarthy for EPA is probably the one where we have the best framework of understanding of what she might do in her position because she was most recently at EPA as air chief. So what does her record at EPA sort of foreshadow on how she might handle air regulations and how well she might work with industry?
Kevin Book:: Well, we know that Gina McCarthy knows how to pick her fights. Anyone seen the new source performance standards for greenhouse gases from refineries lately? I haven't. And I don't think they're likely to come up. For that matter, I don't think you're likely to see the new source performance standards from existing coal units until after her confirmation. This is a very good strategic player working within the framework that was established between her and really with Lisa Jackson, on climate, starting with the biggest regulated sectors, working your way down for greenhouse gases. That program is going to continue, but I think she's going to pick her fights.
Monica Trauzzi: Questions have been raised over former EPA Administrator Jackson's use of an email alias for business. Is this going to become an issue for McCarthy? What should she be watching for?
Kevin Book:: Well, I think the name Richard Windsor is probably going to be one of the best pseudonyms for joke purposes in Washington for some time, at least in small energy circles. But the question of how you handle the dual axes of communication where you have a large influx of communication through the public handle, and how you talk to your team, should be an administrative issue that's relatively simple to muster. And if Gina McCarthy trips over that, uh, she hasn't learned anything in four years. I have no doubts that she will steer clear of controversy.
Monica Trauzzi: So moving on to DOE. Ernie Moniz' background is chock full of history on several key technologies and energy sources including nuclear and CCS, is he a game changer for the Department of Energy?
Kevin Book:: Just the opposite. The game changer has left the building. Secretary Chu was brought in for transformation agenda. The idea was we were running out of oil, we needed new resources, we had a climate obligation to Copenhagen. And he was the man for that job. Well, that job got transformed, and the operator there was natural gas, and then the surplus of energy we have and the adequacy we're gaining in oil. And so Ernie Moniz is more like a "give a little, take a little" kind of guy. He certainly had a lot to say on every energy resource in his role at MIT. But more to the point, he's likely to look at the domestic production opportunities in a more balanced way, which is consistent with where the administration has been going.
Monica Trauzzi: So lets talk policy for a moment. We're seeing some movement in Congress on carbon legislation, specifically a carbon tax was proposed by Boxer and Sanders in the Senate. On the House side, House democrats have released a carbon price discussion draft. I mean, the thinking across town is that this legislation is not going to go anywhere. So what's happening behind the scenes? Why are they putting these pieces of legislation out there? Is this posturing at this point?
Kevin Book:: Well, tens or even hundreds of billions of dollars are available if you're willing to tax carbon. Uh, this makes it the most relevant energy discussion you could have in the context of budget management and deficit reduction. What are you going to do to come up with the money? Well, the carbon tax is a solution, and so Republicans are very quick to point out that they're not so happy about that solution, except for off of Capitol Hill where some conservatives are still for it. And Democrats are advancing it trying to keep the straw man alive. Chances are you're not going to see anything on a carbon tax until you have a real tax reform discussion, and that's not likely to happen until after the midterm elections.
Monica Trauzzi: So could this actually have legs in the near term?
Kevin Book:: Well, if the near term includes the next five years, sure. This is a big line item, and this is a government that needs to find a way to close gaps that are enormous. Where are you that to find your 1.5 trillion of mission deficit reduction? You're not going to find it from energy tax expenditures at 90 billion a year. You're going to need something bigger and that's where the carbon tax comes in.
Monica Trauzzi: Paul Ryan has included a provision in his budget proposal that would force approval of Keystone XL. We're getting close to a decision by the administration on this issue. If they don't approve, then can Congress effectively change the course of the pipeline?
Kevin Book:: Yes, Congress can always write a new law to supersede existing law, but the administrative process right now looks like it's trending towards approval. One of the most unsettling things about what could happen politically is if Keystone becomes a touchstone for controversy again. And if it really becomes partisan it could push the decision the other way. I think what you're seeing right now is a lot of waiting in the wings for what happens, and maybe not jumping in front of it this time.
Monica Trauzzi: All right, we're end it right there. Thank you as always.
Kevin Book:: Thanks for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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