If you can’t legislate, then regulate.
President Barack Obama’s second-term agenda may end up depending as much on regulation and subsidization as it does on legislation.
Faced with a Republican-controlled House that rejects most of his legislative goals, and facing potential opposition from Senate Republicans and a half-dozen Democratic senators on issues such as gun control, Obama’s ability to carry out policy changes hinges on his Cabinet and his appointees running regulatory bodies.
Larry Downing / Reuters
President Barack Obama stands next to air quality expert Gina McCarthy, who will lead the Environmental Protection Agency in the East Room of the White House, March 4, 2013.
Three Senate confirmation hearings this week put the focus on the regulatory agenda: First up on Tuesday is Obama’s nominee to be energy secretary, MIT physics and engineering professor Ernest Moniz. On Wednesday is the confirmation hearing for Sri Srinivasan, an Obama nominee to the federal appeals court in Washington where most of the regulatory agenda will be litigated and could be struck down. And on Thursday comes the confirmation hearing for Gina McCarthy, Obama’s choice to head the Environmental Protection Agency.
The Moniz hearing will draw attention to Obama’s energy agenda. The president sounded a clarion call in his State of the Union address, proposing to use oil and gas lease revenues to create a fund to “drive new research and technology to shift our cars and trucks off oil for good.” Even if Congress doesn’t enact that idea, Obama said that he would direct his Cabinet “to come up with executive actions” to reduce pollution, prepare for climate change impacts, “and speed the transition to more sustainable sources of energy.”
With Moniz at the witness table before the Senate Energy and Natural Resources Committee Tuesday, the question remains: What role should federal subsidies play in any transition to non-fossil fuel energy? A related question: Should the United States allow the export of its newly abundant energy supplies, such as natural gas, or should it aim for a kind of energy self-sufficiency?
The Department of Energy has applications pending from 24 proposed Liquefied Natural Gas projects to export the natural gas produced in part by the boom in production of U.S. shale gas.
If confirmed, Moniz will need to decide the future of natural gas export policy. Bill Cooper, president of the Center for Liquefied Natural Gas, a trade association of LNG producers, shippers, and terminal operators, said, “The decisions that have been made at the Department of Energy that have caused this de facto moratorium (on LNG exports) are all internal decisions and not driven by statute or existing regulations. Therefore, he has a unique opportunity to come in and change that.”
Moving on from Solyndra failure
Loans and loan guarantees to alternative energy firms were the hallmark of Obama’s first-term energy policy. Those programs were created by the 2005 and 2007 energy bills that President George W. Bush signed into law and were expanded in the 2009 stimulus program.
Mandel Ngan / AFP - Getty Images
Massachusetts Institute of Technology (MIT) scientist Ernest Moniz smiles during his nomination by President Barack Obama to run the Energy Department on March 4, 2013 in the East Room of the White House.
But as the the Government Accountability Office -- the government’s fiscal watchdog agency -- reported last month, loan guarantee activity has slowed or in some cases halted at the Department of Energy.
The after-effects of the loss of $535 million in taxpayer money in a loan to Solyndra, the California solar company that went bankrupt in 2011, are still being felt. The GAO report said, “Some applicants (for Energy Department loan guarantees) noted that the Solyndra default and other problems have created a negative public image and political environment for the program, which has made its future less certain” and made Department of Energy bureaucrats “more cautious about closing on loan guarantees.” The Energy Department still has about $51 billion in unused loan and loan guarantee authority.
If confirmed, Moniz can decide how to direct the loan guarantee programs and cope with post-Solyndra taint.
Kit Kennedy, the clean energy counsel for the Natural Resources Defense Council, an environmental advocacy group, said, “It’s very important that Secretary Moniz, assuming he is confirmed, reboots the narrative on clean energy. Despite the great work Secretary (Steven) Chu did on clean energy, the Solyndra story stuck with him and got in the way of progress -- and Prof. Moniz is going to have to overcome that and be very clear with the American people about the jobs benefits and the economic benefits of energy efficiency and clean energy.”
Complicating Moniz’s job is the vast portfolio he must manage, ranging from issuing energy efficiency standards for refrigerators to overseeing the massive cleanup of millions of gallons of radioactive waste -- a legacy of the nation’s nuclear weapons programs since World War II -- at the Hanford Site in southeastern Washington state.
The GAO reported last December that because some Hanford Site contamination had reached the groundwater, DOE officials were “concerned that the contamination is now making its way to the Columbia River,” which borders Hanford and is a source for hydropower, irrigation, drinking water, and salmon habitat. Energy and Natural Resources Committee chairman Sen. Ron Wyden, D- Ore., whose hometown of Portland is downstream from Hanford, has said the cleanup will be one focus of his questions to Moniz on Tuesday.
'Fragmented' energy initiatives
Another complication for the new energy secretary is the fact it’s not the Department of Energy alone that's responsible for energy policy.
President Barack Obama announces the nomination of Sylvia Mathews Burwell as the Director of the Office of Management and Budget. Obama also introduced Gina McCarthy as nominee to head the EPA and Ernest Moniz to take over the Energy Department.
The GAO reported last month that it found 82 federal wind-related initiatives which had handed out $1 billion in subsidies, but were run by nine different agencies, in fiscal year 2011. The 82 initiatives, GAO said, were “fragmented across agencies, most had overlapping characteristics, and several that financed deployment of wind facilities provided some duplicative financial support.”
Economist Peter Grossman, a critic of U.S. energy polices who teaches at Butler University and author of "U.S. Energy Policy and the Pursuit of Failure", said Moniz “has experience both as an administrator and as a researcher; he's somewhat controversial among environmentalists for his open mind about fracking (hydraulic fracturing in natural gas drilling) and LNG exports and his support for nuclear power.”
Grossman said if he could question Moniz at the hearing, he’d ask, “Do you think energy independence should be a serious goal of U.S. energy policy and if so, could you explain just what you mean by energy independence?” And he’d ask the nominee: “If you had to pick one energy program to eliminate, what would it be?”
This story was originally published on Tue Apr 9, 2013 4:16 AM EDT