* Tough decisions on gas and oil exports will probably
* Carbon tax unlikely despite Superstorm Sandy
* EPA studies may offer clues on natural gas rules
By Timothy Gardner
WASHINGTON, Nov 7 Barack Obama could toughen
regulations on producing and burning natural gas, coal and oil
early in his second term, raising some costs for energy
companies, analysts said.
The president likely will take far longer to decide whether
the United States should export its newfound shale oil and gas
bounty. Opponents warn that exports would spike fuel costs for
consumers and undermine a domestic manufacturing recovery.
Obama slowed regulation of fossil fuels during his campaign
against Republican challenger Mitt Romney, who ran on expanding
drilling and letting states dominate oil and gas regulation.
Obama streamlined regulation on drilling for natural gas from
shale and delayed finalizing rules on mercury emissions from
power plants. The light touch may have helped the president gain
support from voters anxious about jobs in gas-rich Pennsylvania
Now that the election is over, regulations proposed and
studies undertaken by Obama's agencies will return to the
And environmental groups are increasingly lobbying centrist
Democrats like Obama to tighten regulations on hydraulic
fracturing - known as fracking - as efforts on pushing Congress
to fight climate change wither.
"It's going to be a rougher second term for oil and gas
given the way the environmental debate is going and the
diminished incentive Obama has to protect oil and gas after his
last election is behind him," said Robert McNally, a former
White House energy adviser during the George W. Bush
administration who now heads the Rapidan Group, a consulting
The Obama administration this year also delayed decisions on
exporting vast new natural gas finds to countries besides those
with which it has free-trade agreements. Skeptics on exports
including Senator Ron Wyden, a Democrat in line to head the
chamber's energy committee, have raised concerns about diverting
fuel that could be used to support domestic manufacturing and
raising prices in the process.
The Energy Department this year delayed a study on the
economic effects of gas exports. But even if the study
eventually projects limited effects, allowing the shipments
would be a difficult decision for any president.
"Are we about supporting domestic industries, about the
energy industry or about just low energy prices for American
citizens?" said Sarah Emerson, the head of Energy Security
Analysis Inc, in Boston, describing the difficulties of the
decision. "I'm not convinced either Obama or Romney would do
anything on any of this."
The lack of clarity means the United States faces huge
questions about what fuels it will use to power its future as it
inches toward greater energy independence.
During Obama's first four years, the United States unseated
Russia as the world's top natural gas producer, and oil output
last month hit a 17-year high. The gains were because of
advances in fracking and horizontal drilling - not policy
Until decisions on exports are made, it could make investors
hesitant to sink money into renewable energy or even know which
fossil fuel to favor.
"We have regulations for safety and clean air, but we've
never really had a concerted, careful and coherent energy
policy, and I don't really see us developing one," Emerson said.
SLIM CHANCE FOR CLIMATE TAX
With many scientists blaming climate change for fueling
stronger weather events like the deadly Superstorm Sandy, calls
have risen for Congress to pass a carbon tax.
But such efforts face an uphill battle. Many Republicans
would reject supporting anything resembling a tax. It could put
an unfair burden on the poor and raise fuel prices for consumers
weary of two years of high gasoline costs.
"Sounds great, but there are many issues with a carbon tax,"
said Whitney Stanco, an energy policy analyst at the Washington
Research Group, in a note to clients. Washington Research
advises institutional investors.
Until the U.S. economy significantly recovers, major climate
legislation is unlikely to pass, especially after Republicans
retained control of the House of Representatives.
As a result, the Environmental Protection Agency will likely
move forward on regulating greenhouse gases, Stanco said.
CLUES TO FUTURE GAS RULES
The EPA is expected to release soon two fracking reports
that could provide clues to how the Obama administration will
treat natural gas drilling over the next four years. The agency
is expected to finalize a report issued late last year that said
fracking polluted water supplies in Wyoming.
The agency has insisted Wyoming's unique geological
formations make it difficult, if not impossible, to assume that
the sort of pollution that happened there could occur in other
regions of the country. But if the final report confirms the
initial results, gas investors may watch headlines closer than
the details, Rapidan's McNally said.
In addition, the EPA is set to release initial results of a
study on fracking's effects on groundwater supplies. And the
Department of the Interior is expected to finalize draft rules
later this year on fracking on public lands. The administration
hopes these could be used as a template for rules on state