Obama Environmental Picks Seen Focusing On Oil Boom

Four years ago, President Barack Obama said his energy and environmental advisers would work to develop a “new hybrid economy” based on wind, solar, and other renewable energy sources.

Lisa Jackson has announced her exit as head of the Environmental Protection Agency, and Energy Secretary Steven Chu, who faced congressional criticism over green-energy programs, could follow. Obama may end up assembling a second- term team for a different task: how to manage the boom in U.S. production of oil and natural gas.

“When the Obama team came in the first go around, there was great hope that the president would be transformative and really try to shift the energy policy much more heavily towards renewables,” Charles Ebinger, an energy policy expert at the Brookings Institution in Washington, said in an interview.

Instead, the growth of hydraulic fracturing to drill for oil and gas in shale rock formations is offering a “unique opportunity to revitalize the American economy and reinvigorate American manufacturing,” Ebinger said.

Oil production is at its highest level in 15 years, and natural gas development is at record levels. That pushed prices down to a decade low last year, enticing chemical companies that rely on natural gas to build new factories in the U.S.

‘Paradigm Shift’

“The whole paradigm has shifted over the last four years,” Stephen Brown, a lobbyist for Tesoro Corp. (TSO), which is based in San Antonio, Texas, said in an interview. The administration needs to “figure out how not to get in the way of this,” he said.

Ebinger said Obama should pick an Energy secretary, who can explain the benefits offered by natural gas development to a skeptical public.

“He needs a couple of people at the top who can go out and sell the message that we really are at a situation now where we can reduce our oil import dependency if we move to develop these unconventional resources,” he said. “I think he needs a salesman or a saleswoman.”

On the other side are environmentalists who want the U.S. to adopt stricter regulations to protect water resources and limit air pollution from “fracking.”

The Interior Department is developing the first rules for the drilling practice on federal lands to address some of those concerns as it also promotes oil and gas development as a source of economic growth.

Fracking Study

The EPA, meanwhile, plans to release its multi-year analysis of the potential risks of fracking in 2014. Margot Anderson, the executive director of the Energy Project at the Bipartisan Policy Center, a Washington-based group that says it promotes legislative consensus, said that study will probably determine the level of regulatory restrictions on fracking the administration pursues next term.

The oil industry hopes Obama chooses candidates who “are well versed in how an agency operates and what the agency is capable of doing,” Tesoro’s Brown said.

“Hydraulic fracturing regulation done poorly would put the brakes on development going on here in this country,” he said.

The emphasis for Obama’s new energy and environmental team appears to be on seasoned insiders who understand the politics of rulemaking and how to negotiate with diverse constituencies.

Governor Gregoire

Washington Governor Christine Gregoire, whose term ends next week, is a candidate to replace Jackson at the EPA, seattlepi.com reported on its Web site, citing a “very private prediction from a very senior source in Washington’s congressional delegation.”

Gregoire won praise from environmental groups such as the Ocean Conservancy for commissioning a report on the risks of ocean acidification, a consequence of climate change, last year.

No offer has been made either formally or informally from the White House about any administration position, Gregoire’s spokeswoman Karina Shagren said. “If conversations are happening, I’m not privy to those conversations,” Shagren said.

Other candidates for the EPA include Bob Perciasepe, the agency’s No. 2 official; Gina McCarthy, the assistant administrator of EPA for air pollution; and Kathleen McGinty, the former top environmental regulator for Pennsylvania, according to published reports.

Final Rules

The EPA’s new administrator will largely be responsible for implementing regulations already in the works, including a series of final or proposed rules that will curb the use of coal to generate electricity.

With those rules in place “at this point you can’t stop it,” William Bumpers, a lawyer at Baker Botts LLP in Washington, said in an interview.

Former Senator Byron Dorgan, a North Dakota Democrat, is reportedly being considered as to replace either Chu or Interior Secretary Ken Salazar.

Neither Salazar nor Chu has announced his future plans.

Salazar today declined to say if he would remain at Interior, although he did signal he would like to stay on. “I have a lot of work to do,” he told reporters, adding that he had no “personnel announcement” to make.

William Gibbons, an Energy Department spokesman, declined to comment on Chu’s plans.

Chu’s Legacy

Chu brought “real passion for the Obama’s administration’s long-term goals for clean energy and high-tech energy and really attracted top-flight people to come and work for the department,” said Anderson, who was an adviser at the Energy Department under Chu.

Chu is a career scientist and co-winner of the Nobel Prize for physics.

Some Republicans in Congress came to view his leadership as tarnished by the Energy Department’s endorsement in 2009 of Solyndra LLC’s $535 million U.S. loan guarantee. The solar panel maker went bankrupt two years later.

Regardless of who is in charge, the energy outlook has shifted considerably since the start of Obama’s first term in January 2009 when he sought to implement policies that as a candidate said could create 5 million green jobs in a decade.

The reality has fallen far short of that goal. The White House estimated in 2010 that 225,000 green jobs had been created.

Fiscal constraints will mean fewer resources to promote wind, solar and other environmentally friendly sources of power than the $90 billion provided in the 2009 economic stimulus bill, Ebinger said.

“It’s going to be very difficult for a major program to be supported fiscally by the Congress,” Ebinger said.

To contact the reporters on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net; Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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