Obama's broken energy policy

US President Barack Obama has discovered too late that symbols matter.

His administration is trying and mostly failing to reverse the impression that it is hostile to fossil fuels such as oil, gas and coal after the president's peremptory and opportunistic decision to block the Keystone XL pipeline in January.

In a string of speeches, beginning with the State of the Union, the president has articulated a carefully scripted ‘all of the above' strategy which embraces clean energy from wind and solar, improvements in energy efficiency, and an increase in domestic hydrocarbon production - especially clean-burning gas but also oil from shale.

It is all part of a complicated balancing act that aims to mollify his environmental base, ease fears about the rising gasoline prices and neutralise opposition from the oil industry and congressional Republicans, angered by continued restrictions on drilling and pipelines, who are seeking to exploit rising oil prices to hurt the president ahead of November's election.

Pipeline dreams

So far the president has struggled to sound convincing. Obama cannot shake off the impression the administration's enthusiasm for clean tech is matched by an only grudging acceptance of the need to develop more fossil fuel resources.

So in a bold move, the White House last week stuck the president in a pipe yard in front of a stack of oil pipes ready to be laid at the industry's spiritual home of Cushing, Oklahoma, to reiterate its commitment to the fossil fuel component of "all of the above".

Reuters photojournalist Jason Reed has a superb set of pictures encapsulating the president's newfound enthusiasm for metal tubes here:

Politicians pick backdrops carefully (remember George W Bush and his "mission accomplished" banner on the USS Abraham Lincoln in 2003). So this was the most pointed way the White House could associate the president with expansion of domestic oil and gas, imply he is not anti-oil and suggest he is keen to promote ‘shovel ready' jobs in pipeline construction.

The charitable interpretation is that the president is charting a middle way between environmentalists staunchly opposed to fossil fuel development because of its global warming potential, and the ‘drill baby drill' enthusiasts of the oil industry and right-wing talk radio.

"Having pleased environmentalists in January, Mr Obama can now embrace Oklahoma oilmen with a straight face," Gregory Meyer wrote in the Financial Times last week.

The less charitable interpretation is that the president has alienated everyone by performing a series of tergiversations and is struggling to integrate the disparate elements of his energy policy into a coherent whole.

The White House took care to balance the trip to the pipe yard and a New Mexico oil field (very old dirty energy) with visits to a solar project in Nevada (nice clean energy) and the centre for automotive research in Ohio (ditto).

The president has stressed his support for the southern leg of the Keystone pipeline (from Cushing to the Gulf) while defending his decision to block the northern leg (from the Canadian border via Nebraska), insisting there was just not time to evaluate the impact on Ogallala aquifer, and hinting but not quite promising his administration would look favourably on another application once more studies have been done and the election is out of the way.

Alienating everyone

Whether anyone is convinced is doubtful.

The Natural Resources Defence Council (NRDC), one of the country's largest and most powerful environmental lobbies, is certainly not enthusiastic. NRDC President Frances Beinecke immediately responded to the president's embrace of pipelines with a blog entitled "All of the Above Can't Deliver All the Benefits the Clean Energy Economy Can".

"Instead of offering targeted policies, many leaders are suggesting an ‘all of the above' approach to energy development. The idea is that we should throw everything we have at the problem and see what sticks. It's a misguided strategy that would do more harm than good," wrote a clearly disappointed Beinecke.

"It's the equivalent of walking into a restaurant and ordering everything on the menu. Most people don't do that in real life, because we know it costs too much and will make us sick. Instead we select the best food for the best price. We can do the same with energy. We can choose the best and bypass the rest."

Oil and gas producers are scarcely less enthusiastic, though there are some signs that the debate is moving in their direction, with heavy hints the administration will not block further drilling and pipelines. The White House will probably even approve the northern section of Keystone, eventually, once it no longer needs environmental votes.

But planning long-lived capital intensive projects is hard when investors must struggle with a bewildering policy in which regulations covering everything from drilling to power plant emissions, nuclear permits and mountain top mining are proposed and withdrawn according to whether they are politically expedient.

Bipartisanship?

None of these problems is new. America's energy policy has been severely dysfunctional for at least 40 years, driven by a mix of political concern about gasoline prices, lobbying for misguided deregulation of power markets at the behest of companies like Enron, and a guerrilla war of litigation fought by environmental groups against anything and everything (from nuclear to coal-fired and hydroelectric plants) spawning a giant environmental-legal complex.

But the Obama administration has done nothing to provide leadership or try to impose coherence on energy issues. The president's short-term approach to Keystone and emission controls has simply made matters worse.

So there is a certain irony that Bill Richardson, energy secretary under the Clinton administration and a former governor of New Mexico, should lend his weight to Obama's four-state energy tour with an editorial in the Financial Times calling for partisans to "Stop the politics and adopt a national energy plan."

"As energy secretary in the Clinton administration, I came to realise this country needs to promote all types of energy production. Mr Obama is right to put us on this course but the US Congress makes his mission challenging, if not impossible," Richardson wrote.

"There is plenty of rhetorical agreement about ‘energy independence' but when it comes to the specifics – pipelines, drilling, efficiency standards and renewable energy tax policies – consensus is elusive."

Indeed.

According to Richardson, "The question for both Republicans and Democrats is whether such entrenched positions will prolong achievement of the ultimate goal that both sides agree on – energy independence and sustainable economic growth in the long-term."

"There ought to be sufficient opportunities, given the vast resources that are available, to find common ground."

There is certainly no lack of interest in energy policy. Legislators in both houses of Congress have introduced more bills dealing with oil and gas issues in the current session (2011-2013) than at any time in at least 20 years.

But actually achieving something will require compromise, on both sides. It will require congressional Republicans and coal-state Democrats to accept some of the regulatory agenda aimed at boosting fuel efficiency and cutting emissions. And it will require the president to face down some of the more extreme demands from green groups and end the thicket of guerrilla litigation around new energy projects.

So far there is no sign whatsoever that either side is willing to make the necessary compromises. Both are having far too much fun treating energy policy as a political football.

To go back to those photos, the president was proudly standing in front of tubes for a pipeline that currently has a section missing in the middle and won't take oil anywhere. It is an apt metaphor for America's broken energy policy.