Energy’s 2014 winners and losers

Source: By Timothy Cama, The • Posted: Monday, January 5, 2015

President Obama took a significant step toward substantially changing U.S. climate policy when the Environmental Protection Agency unveiled sweeping rules to limit emissions from power plants.

A fight over those regulations with congressional Republicans is likely to be one of several battles that will dominate the final two years of Obama’s presidency.

Here’s a look at 2014’s winners and losers in the energy sector.

These factors and others are shaking up the landscape for energy and the environment this year.

Here are some of the big winners and losers this year from those and other major themes.

Winner: Consumers

Thanks in part to high supply and OPEC’s decision to not cut production, consumers saw the lowest gasoline prices in five years.

As Americans traveled for the holidays, drivers found prices dipping well below $2.50 per gallon on average.

Treasury Secretary Jack Lew declared in December that the low gas prices had the economic effect of a massive tax cut by putting significantly more money in people’s and businesses’ pockets.

And that’s worked to the benefit of the Obama administration, which is expressing confidence that the economic gains will help Obama politically.

Winner: Natural gas

Natural gas drillers set record domestic production levels this year, thanks in part to controversial drilling techniques like hydraulic fracturing and horizontal drilling.

The industry started the year with a bang when Obama mentioned it in his State of the Union address, saying gas has brought the United States closer to energy independence than it has been in years, while serving as an environmental “bridge fuel” toward increased use of renewable energy sources.

Exports of liquefied natural gas are severely restricted by law, but Congress debated multiple bills to ease the restrictions, a move that many lawmakers saw as an opportunity to reduce Russia’s influence and aggression toward its neighbors.

None of the export bills became law, but the Obama administration moved to streamline the approval process, and ended up clearing the way for numerous future export terminals.

Gas’s prospects became even brighter with the EPA’s climate rule, which the agency expects to make gas the most used fuel for electricity, at coal’s expense.

Loser: Coal

As if stiff competition from cheap natural gas wasn’t enough, regulations that moved along this year paint a dim future for coal.

The power plant climate rule announced by the EPA in June is expected to reduce coal’s market share for power generation to 27 percent, from the current 39 percent, by 2030.

The coal industry expects the earlier rule for newly constructed power plants to make it all but impossible to build coal-fired generators without carbon capture technology, which is not commercially available.

The regulations that the industry and Republicans decry as a “war on coal” didn’t stop there.

The Obama administration also worked this year to finalize standards for cooling water systems for facilities including coal plants, coal dust exposure for miners and coal ash disposal and storage.

Congress did little to help, and the Supreme Court largely upheld regulations concerning air pollution across state lines, mercury standards for coal power plants and permitting for greenhouse gas emissions.

In coal country, meanwhile, thousands of miners were laid off throughout the year, with mining companies blaming federal rules and economics.

Loser: Keystone XL

TransCanada Corp.’s application to build the Keystone XL oil pipeline entered its sixth year since filing, and the Obama administration still hasn’t approved it.

Keystone’s latest major delay came in April, when the State Department indefinitely suspended its consideration of the permit while the Nebraska Supreme Court decides a case regarding the pipeline’s route through the state. That decision hasn’t come.

And despite a January report from State concluding that Keystone would not significantly exacerbate climate change, Obama has given mostly negative comments about it publicly, saying in December that the pipeline would “not even have a nominal benefit” to consumers.

Congress has tried to step into the process, to no avail.

After repeatedly refusing to allow a vote on the project, Senate Majority Leader Harry Reid (D-Nev.) decided in December to bring Sen. Mary Landrieu’s (D-La.) bill for the permit it to the floor. It failed by one vote.

Keystone’s future looks better, however. Incoming Senate Majority Leader Mitch McConnell (R-Ky.) has promised that a vote on the project will be the new Senate’s first bill, and it is likely to pass.

The newest challenge to Keystone may come from economics, with experts saying that low oil prices could make the pipeline unprofitable.

Loser: Ethanol

After delaying the final ethanol mandate for 2014 for nearly the entire year, the EPA announced in November that it would not set a blending volume under the Renewable Fuel Standard (RFS) until 2015 — after the year is over.

That delay, along with claims that the RFS hurts the environment and raises food prices, has pushed opposition to its highest level since Congress enacted it nearly 10 years ago.

The fight may soon play out in court, after the American Fuel and Petrochemical Refiners filed lawsuits against the EPA for delaying both the 2014 and 2015 volume mandates beyond their legal deadlines.

Additionally, market forces are working against the mandate. Gasoline consumption is much lower than Congress predicted when it set the minimum volume levels. And cellulosic ethanol, made from waste materials, has not been commercialized to the extent necessary to mandate the blending that the law calls for.