* Tighter rules expected for oil, gas drilling
* Solar, wind likely to get renewed focus
* Chemical producers fear stronger emissions rules
* Coal stocks fall on regulation worries
By Nichola Groom and Braden Reddall
LOS ANGELES/SAN FRANCISCO, Nov 7 Energy
producers braced for tighter regulation in President Barack
Obama's second term, with coal companies expecting more
emissions restrictions and drillers anticipating less access to
federal land even as his platform promotes energy independence.
Opponents already believe Obama has waged a "war on coal"
through the administration's push for stricter regulation of
greenhouse gas emissions by the Environmental Protection Agency.
"Four more years of President Obama translates into
additional pressure on the coal industry from the EPA and
numerous environmental groups," energy investment bank Simmons &
Co said in a note to investors on Wednesday.
Analysts at ClearView Energy Partners in Washington expect
Obama to "continue prosecuting energy policy through regulation
and administrative action, with only the courts as a check on
Miners criticize Obama for not living up to a 2008 promise
to develop clean coal technology, arguing that his policies
actually preclude the construction of any new coal plants.
Shares of U.S. coal companies plunged on Wednesday. Arch
Coal and Alpha Natural Resources ended trade
down more than 12 percent, while Peabody Energy closed
9.6 percent lower.
Eric Green, senior managing partner at Penn Capital
Management, which owns coal stocks, said the sell-off was "100
percent related to election results."
Alpha Natural Resources Chief Executive Kevin Crutchfield
argued that the United States, with the world's largest coal
reserves, should use what it has. "We would hope the
administration remains true to its campaign promise to support
coal as an indispensable part of our nation's energy mix," he
Yet up to 33 gigawatts of coal-fired power generation is
estimated to be due for retirement - 3 percent of U.S. capacity.
While tougher emissions regulation play a part, that change is
also driven by cheap natural gas as an alternative power source.
Obama has paid plenty of lip service to natural gas because
it burns cleaner than coal, and his approach to the oil and gas
industry in general is more nuanced.
He has pledged to cut oil imports in half by 2020 and
advocates an "all of the above" approach to developing domestic
energy sources. Yet he has also said that he would roll back
subsidies for oil companies and reduce U.S. reliance on oil by
mandating production of more fuel-efficient vehicles.
"The Obama administration really hasn't helped the oil and
gas industry," said Michael Linn, founder and former chief
executive of Linn Energy. "It's going to be a tough
FOOT ON GAS, TAX BREAK THREAT
More restrictions are expected for companies drilling on
federal lands, as well as more rules governing water management
and methane emissions. Any new rules related to hydraulic
fracturing may drive up costs for active drillers including
Chesapeake Energy Corp and Exxon Mobil Corp.
"You are going to have less access to federal lands and
tougher government agencies," said Dan Pickering, chief
investment officer at TPH Asset Management, part of
energy-focused investment bank Tudor Pickering Holt in Houston.
Obama's solid support for natural gas on the campaign trail
won him praise from America's Natural Gas Alliance, a lobby
group. But he also wants to eliminate $46 billion in subsidies
for fossil fuel companies, a plan producers vigorously oppose.
Virginia Lazenby, chair of the Independent Petroleum
Association of America whose members supply 54 percent of U.S.
oil and 85 percent of its natural gas, worried about potential
"duplicate" federal regulation of what states already do, and
rejected the call to collect more tax from the industry.
"IPAA hopes President Obama will stop his call to eliminate
the crucial tax provisions of intangible drilling costs and
percentage depletion, which are not subsidies at all, but allow
independent producers to reinvest 150 percent of their cash flow
into new energy projects," she said.
While the Obama administration put approval of TransCanada's
Keystone XL pipeline on hold, eventual approval is
expected, which will increase the flow of cheaper crude oil from
Canada to refineries on the Gulf Coast at Port Arthur, Texas.
Companies with refineries in Port Arthur or in nearby
Beaumont include Valero Energy Corp, Royal Dutch Shell
, France's Total and Exxon.
FORECAST: SUNNY SPELLS, BREEZY
Obama has promised more assistance for solar and wind
technology, though he will need congressional support to extend
tax breaks that help those industries.
"Obama can love solar as much as he wants, but I don't know
that a whole lot more is going to happen in terms of new,
constructive policy," said Morningstar analyst Stephen Simko.
Obama's advisers include Energy Secretary Steven Chu, a
Nobel Prize-winner with expertise in renewable energy, who
regularly talks up the government's role in developing hydraulic
fracturing technology. The top White House energy adviser is
Heather Zichal, who has been an advocate for green jobs and
tackling climate change by reducing dependence on oil.
Obama's green policies had a major setback when solar power
company Solyndra collapsed after receiving a $535 million
federal loan guarantee. And his energy strategy shifted away
from climate change when a bill establishing a cap-and-trade
system to curb carbon emissions died in the U.S. Senate in 2010.
Renewable energy also faces obstacles that are not directly
related to policy: competition from low-priced natural gas; lack
of infrastructure to connect projects to the grid; and a glut of
solar panels putting manufacturers out of business. Yet having
Obama back was broadly welcomed by most in the green business.
"The renewable energy industry and solar have retained a
really important ally in the White House," said Arno Harris,
chief executive of U.S. solar installer Recurrent Energy, a unit
of Sharp Corp. "Solar and renewable energy were so
severely attacked during the campaign that the president's win,
I think, gives him a mandate in pursuing a clean energy agenda."
CHEMICALS BRACE FOR HIT
Obama is also likely to implement long-delayed emissions
regulations for industrial boilers that are commonly used by
chemical makers. The centerpiece provision, Boiler MACT (Maximum
Achievable Control Technology), was proposed in 2004 but
effectively shot down by courts before the EPA revived it in
It has been winding its way through courts again, and the
EPA is due to issue new rules by December.
Obama's victory may embolden EPA Administrator Lisa Jackson
to further tighten Boiler MACT regulations next month on limits
for dioxin, mercury and carbon monoxide emissions. It is not
clear if Jackson will stay at the agency in Obama's second term.
"While we don't agree with some of the provisions (of Boiler
MACT), we think that it will be pushed through more readily than
if Romney had won," said Lawrence Sloan, president of the
Society of Chemical Manufacturers and Affiliates, a trade group.