Obama to weigh energy boom, climate change in second term

WASHINGTON (Reuters) - President Barack Obama will face a two-fold challenge in energy policy in his second term: make good on his promise to act on climate change, while at the same time foster growth in oil and gas production that has spurred jobs and manufacturing.

That could mean a revival of regulations for producing and burning natural gas, coal and oil that had been on hold during the election, and possibly some new rules for hydraulic fracturing, or 'fracking,' the water and chemical-intensive technique used to extract gas and oil from deep within shale beds.

With a 'status quo' divided Congress focused on pressing debt and deficit issues, analysts expect Obama to use administrative tools to work toward his election-night vow on climate change.

'If the president focuses on dealing with our climate and security problems by addressing consumption and at the same time helps facilitate oil and gas production, I think he has a win-win on his hands,' said Michael Levi, an energy policy analyst with the Council on Foreign Relations.

'And that's roughly what he's been trying to do, so it would not be a big departure,' Levi said in an interview.

CLIMATE BACK ON AGENDA

Obama began his first term trying to work with Congress on a climate bill that aimed to curb emissions of greenhouse gases.

That effort failed, and his Environmental Protection Agency embarked instead on crafting an ambitious series of rules aimed chiefly at pollution from coal-burning power plants.

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.

After the devastation caused last week by Hurricane Sandy, New York City Mayor Michael Bloomberg endorsed Obama and made it clear he expected the administration to elevate action on climate change.

'Climate is back on the agenda, and I think Bloomberg especially is going to hold the president to some sort of action,' said Andrew Holland, an energy policy analyst with the American Security Project think-tank.

Obama steered clear of the issue during the election, but mentioned climate change in Tuesday's victory speech as one of a trio of challenges facing the country.

'We want our children to live in an America that isn't burdened by debt, that isn't weakened by inequality, that isn't threatened by the destructive power of a warming planet,' Obama said.

CARBON TAX TOUGH SELL

Now that the election is over, regulations proposed and studies undertaken by Obama's agencies will return to the forefront.

'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 White House energy adviser during the George W. Bush administration who now heads the Rapidan Group, a consulting firm.

Environmentalists are also increasingly lobbying centrist Democrats like Obama to tighten federal water and air regulations on fracking operations.

The EPA is set to release initial results this year of a study on fracking's effects on groundwater supplies. Separately, the Department of the Interior is expected to finalize draft rules later this year on fracking on public lands.

The administration also faces a tough call on whether the United States should allow more exports of its newfound shale oil and gas bounty. Critics have warned that too many exports risk triggering a spike in fuel costs for consumers and undermining a domestic manufacturing recovery.

With many scientists blaming climate change for fueling stronger weather events like the deadly Superstorm Sandy, some green groups have said Congress should look at passing a carbon tax.

That could raise significant revenue for the debt-ridden federal government, but many Republicans would reject supporting anything resembling a tax, said Scott Segal, a partner at Bracewell & Guiliani, a law and lobbying firm.

Still, the idea of a tax that could raise $144 billion in revenue by 2020 will receive a lot of discussion and study, Segal said on a conference call on Wednesday.

(Editing by Marilyn W. Thompson, Ciro Scotti and Alden Bentley)



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