Policy Outlook

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EBJ’s man-in-Washington Andy Paterson provides the following snapshot:

Going into 2012:

  • With arch-conservatives (revanchist Troglodytes) splintering their vote among multiple candidates, Mitt Romney appears to be trotting to the nomination.
  • However, the mood is SO sour on the campaign trail that few politicians may be safe (save for those unopposed).
  • President Obama could face some anti-incumbent sentiment, but it may be concentrated in states he would not win anyway¡­
  • Republicans in the House derailed many efforts in Congress, and it is clear after the Debt Ceiling showdown that Recovery Act stimulus-style programs are dead; so is Keynes.
  • Because the (Not-very) Super Committee failed to reach a compromise (on the shape of the table), $1.2 trillion of budget cuts will take effect in 2013, half of it from DOD.
  • The White House presents the 2013 budget in mid-Feb., but the ripple effects could intensify acrimony and gridlock. Public opinion of Congress has never been lower, even in the 1880s.
  • Republicans will continue to assail EPA for loading regulations on industry during a recession, and the Democrats in the Senate will push back with the White House.

No environmental legislation is on the table for 2012, but if oil prices rise, there could be attention to energy tax policy (perhaps again in a Lame Duck session in Dec.). But, cheap natural gas in the wake of a shale gas glut, combined with a withering of incentives, is making clean energy deals more difficult comparatively. Still, the advent of stiffer air regulations and GHG reporting by EPA in 2012 looks like it is triggering retirements of the oldest coal plants.

The landscape for the November election looks like:

  • Either a narrow margin in favor of President Obama, or a weak Republican victory with less than 300 electoral votes (270 to win; 538 total).
  • Democrats carry a ¡°Core Blue State¡± edge of 19 states with 242 electoral votes that have voted Democrat all five of the elections from 1992. GOP claims only a dozen such states.
  • A Senate that flips from 53D-47R to perhaps the converse: 47D-53R, as the Democrats must defend 23 seats to only 10 for the GOP. More Democrats are retiring.
  • The House could shift the least, perhaps +/- 10 seats either way. The GOP holds a 24 seat majority (242Rs / 193Ds), and redistricting will likely be a wash roughly.
  • Democrats face further erosion in 2014 with 20 senators facing re-election versus just 13 Republicans; hence, there is no majority in view for major environmental initiatives.

Hence, because the country is truly divided, the 2012 election may offer only a weak mandate, at best. Congress is divided because states do not agree about the role for government. With a lack of clear strategic direction from the Federal Government, state and regional policies and actions will continue to prove important. Still, investment in energy deals, fossil and renewable alike, based on economics and incentives as a larger driver than compliance issues can prompt environmental service niches. In this light, two reactors could be licensed for construction, one in GA, one in SC. Biofuels will continue to be a growth industry with the federal mandate to 2022. A Farm Bill (with an energy title), and the renewal of SAFETEA-LU for transportation funding will be focal points in Congress that cut across the "Red-Blue divide".

The outlook for 2012-2014 then could be dependent on bigger exogenous factors, rather than any political leadership or initiatives:

  • Natural disasters: Katrina-size hurricanes, flooding, earthquake, power blackout from a solar flare, flu epidemic, extended heat wave.
  • A big industrial accident: Fukushima scale event, Deepwater Horizon blowout, refinery explosion, chemical disaster, wide power outage (recall 2003)
  • Some kind of military event, in the Mideast or elsewhere (despite the U.S. troop drawdown in Iraq). Arab Spring and the battle for Libya were surprises in 2011.
  • Social unrest in urban areas related to foreclosures, prolonged economic recession, and gridlock in Congress¡­ students burning college loan docs as a protest(?)
  • A de-stabilization in Mexico in the wake of declining energy revenues and a ¡°South of the Border¡± budget implosion that could stress border states.

Other events globally could have some bearing, as the U.S. is not an island:

  • Major elections in Russia, France, Mexico, Japan and a few other places, plus a new President in China.
  • China will continue to be a planet-wide force, scouring every pocket for energy, resources, and food sources not tied down. More skirmishes in Asian waters.
  • Rio ¡°Plus 20¡± Environmental Summit in Brazil, commemorating the Rio Summit of 1992.
  • A deeper market or financial calamity (banking collapse) in Europe or Asia, that negatively impacts the U.S economy.