Energy Producers Brace for President Obama’s Second Term

on Nov 8, 2012

On 7 November 2012, Reuters reported that US energy producers were preparing for tighter regulations following the re-election of Barak Obama for a second term at the White House. And while the oil and coal industry expects tougher rules, solar and wind energy are likely to get renewed focus.

**Harsher Rules for Coal**
Opponents of President Obama believe that he has already declared a “war on coal”, with his administration pushing for stricter regulations on carbon emissions by means of the US Environmental Protection Agency (EPA). Reuters quotes energy investment bank Simmons & Co as saying that the President’s second term will result in “additional pressure on the coal industry from the EPA and numerous environmental groups.”

It is hardly surprising that following the news of the President’s re-election, shares of US coal companies plunged. Bloomberg reports that the St. Louis-based coal miner Peabody Energy Corp (NYSE:BTU) slumped 9.6 percent, whereas Alpha Natural Resources (NYSE:ANR), which supplies and exports metallurgical coal, dropped by as much as 12 percent. Shares of Arch Coal Inc (NYSE:ACI), Consol Energy Inc (NYSE:CNX), James River Coal Co (NASDAQ:JRCC) and Walter Energy Inc (NYSE:WLT) also declined.

“The coal industry has seen increased regulatory oversight from the EPA on a number of issues under Obama’s first term, such as stricter permitting requirements in Appalachia and new regulations for emission reductions at utilities,” noted Lucas Pipes, Brean Capital Carret & Co analyst, as quoted by Bloomberg. “There’s a perception that another Obama term is negative for coal.”

**Less Access to Federal Lands**
The US oil industry has Obama-related woes of its own. Although the President has pledged to cut oil imports by half by 2020, he has also indicated that he would roll back subsidies for oil companies and reduce US reliance on oil.
!m[Oil And Coal Companies Expecting Tighter Regulations ](/uploads/story/751/thumbs/pic1_inline.png)Yet, the biggest worry of the oil industry seems to be the anticipated restrictions for companies drilling on federal land. “You are going to have less access to federal lands and tougher government agencies,” noted Dan Pickering, chief investment officer at TPH Asset Management, as quoted by Reuters. Bloomberg reports that in July, President Obama threatened to veto a bill passed by the House of Representatives which would have almost doubled the number of oil and gas lease sales through 2015.

**Sunny with a Chance of Wind**
And while the traditional energy producers perhaps lament Obama’s re-election, the US renewable energy industry does have reason to celebrate, with the President promising more support for solar and wind technologies. “The renewable energy industry and solar have retained a really important ally in the White House,” points out Arno Harris, chief executive of Recurrent Energy, as quoted by Reuters. “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.”
Although the President’s green energy policy suffered a blow during his first term with the solar power company Solyndra collapsing despite hugely expensive government support, renewable energy companies now hope that the US Congress will extend renewable energy tax breaks, which have supported the industry. Bloomberg quotes Denise Bode, CEO of the American Wind Energy Association (AWEA) as seeing Congress as likely to renew the Production Tax Credit before its expiry at the end of 2012, with the PTC generally providing a 2.2-cent per kilowatt-hour benefit for the first ten years of a renewable energy facility’s operation. “Swing states with wind farms and factories went overwhelmingly for Obama and that helps remove uncertainty regarding the extension,” pointed out Ms Bode, as quoted by Bloomberg.


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