In addition to my interesting conversation with EPA Advisor Bob Sussman which was covered in a separate post here, there were a number of other interesting findings that emanated from various meetings with federal government personnel. Among them were the following:
- Most federal agency representatives and Congressional staff personnel did not foresee any significant issues with fracking regulations that would impair the continued boom in oil and gas production from plays like the Eagle Ford, Bakken and Permian Basin formations.
- Regarding the Keystone XL pipeline, all government officials we spoke with, even Democrats, believed that it would be difficult for the president to turn down the latest initiative to move forward with the construction of the pipeline given the latest favorable EIS from the State Department. The fact that Canada will pursue expansion of oil sands production regardless of the administration’s decision on Keystone XL, appears to undermine the environmentalists’ argument. At the same time, some officials recognized that an agreement to move forward could come at a cost to his support from the green lobby. With that thought in mind, some government spokespeople believed that this might cause the president to make a bolder pledge to advance on the climate change regulation front.
- In reference to such a pledge to double down on efforts to effect climate change regulations, some government representatives believe that the president will be looking for legal maneuvers that will allow him to bypass Congress and the Senate should legislators fail to honor his request. Some believe that the president could find language within the Clean Air Act that would, at least in his view, justify his unilateral action on the issue.
- Coincidentally, two new appointees were named to key federal agencies the day the D.C. conference began. Ernest Moniz was named as Department of Energy Secretary while Gina McCarthy was named as the president’s appointee for the vacated top EPA position. The early read on Mr. Moniz is that while he may be more supportive of an “all of the above” strategy for pursuing a national energy policy, he appears to be a staunch believer in AGW. Likewise, Ms. McCarthy appears, based on past testimony during her work with the EPA, to be cut from the same cloth as other alarmist ideologues.
- On a final note, a different issue that just came to the fore in energy industry circles has to do with the needed purchase of blending credits by many domestic refiners. Because the EPA set the 2013 quota for ethanol blending last year at levels that now require blending beyond the 10% “blendwall” (beyond which refiners do not want to accept the risk for engine damage from ethanol blending), refiners may be required to make up the difference by purchasing credits (or RINs – renewable identification numbers). The perverse ramifications of this EPA requirement are that: 1)domestic refiners will be incentivized to export more gasoline and oil products, 2) there will be a disincentive for exporting gasoline to the U.S. given the added cost of the RINs and 3) domestic refiners will be otherwise likely to pass along the cost of RINs to consumers. Estimates are that gasoline could cost $.05/gallon or more in coming months as a result of the issue, notwithstanding other secondary effects mentioned above.