INSIGHT: Business is welcoming but wary of Obama

05 November 2008 22:24  [Source: ICIS news]

By Joe Kamalick

 

WASHINGTON (ICIS news)--US business and industry officials were quick to hail and welcome President-elect Barack Obama’s election victory, but there were a lot of ifs, caveats and cautions buried in their best wishes.

 

Typical of election reactions among US trade and industry groups was that of the Natural Gas Council (NGC), which welcomed Obama’s victory and promised to work with his new administration toward the president-elect’s cleaner and greener energy goals.

 

“We will work with his administration to ensure new supplies of clean-burning, American natural gas,” the council said.

 

But the council also noted discretely that during his campaign Obama called for a windfall profits tax on energy companies in order to provide many American households with a $1,000 (€770) energy rebate - a policy that could burden oil and natural gas exploration and development companies with a special tax liability of $50bn or more.

 

“If enacted, those costs will be passed along to American consumers and negatively impact investors,” the NGC welcoming message noted.

 

Other US industry groups also said they welcomed the election outcome and vowed to work with Obama, but they too warned that aggressive Democrat environmental, tax and energy change policy goals must be tempered by business realities and the economic crisis.

 

John Engler, president of the National Association of Manufacturers (NAM), offered his congratulations to Obama and hailed his election as “a mandate and sweeping victory with a result that could only have been dreamed of just a few years ago”.

 

However, Engler noted that the overwhelming concern among voters who have sent the Illinois senator to the White House was the faltering US economy.

 

Engler, a former governor of Michigan, said economic worries and the developing US recession were key factors in Obama’s win and must compel the new administration’s attention.

 

“We believe President-elect Obama is serious about the economy and so are we,” Engler said.

 

“We believe Obama is sensitive to trade and manufacturing issues because he comes from a manufacturing state, Illinois, and our goal is to work with Obama in many areas of potential cooperation,” he added.

 

“But there is a desperate need right now for the US to strengthen its economy as fast as possible,” Engler said.

 

Engler noted, however, that Obama has championed an aggressive proposal for a federal cap-and-trade climate control law to bring US emissions of greenhouse gases (GHG) to 80% below 1990 levels by 2050, a policy that would greatly increase demand for natural gas as a lower-emissions fuel for electric utilities and even broader automotive and other transportation use.

 

Natural gas is a primary feedstock and energy source for chemical manufacturers and crucial as well to the broad spectrum of US manufacturing.

 

“President-elect Obama has moved somewhat on a number of issues since the primary elections of last year,” Engler noted, “and I hope he gets some good counsel on energy matters as he considers a cap-and-trade policy.”

 

“I was recently in Europe and heard many EU ministers talk about slowing their own cap-and-trade mandate because of the slow economy and the concern that emissions controls can have impact on getting a recovery,” Engler said.

 

“I hope Obama will proceed cautiously on this [cap-and-trade] because of the need to restore our economy,” he added.

 

“In fact, if we are going to move forward on these environmental issues, our energy issues have to be resolved before we can put a cap-and-trade plan in force,” he said.

 

Noting that a cap-and-trade emissions mandate would create major challenges for US coal-fired power plants, Engler said that “We can’t shut down the fifty percent of our electric utility capacity powered by coal unless we first make major alternative energy resources available”.

 

But even as the aggressive cap-and-trade plan advocated by Obama and his fellow Democrats in Congress would drive major demand growth for natgas, other high priority congressional policies would limit domestic US gas production.

 

Democrat leaders in Congress - which now will have an even stronger Democrat majority in both the House and Senate - have already vowed to reinstate the offshore drilling ban that expired at the end of September this year.

 

In an open letter to Obama on the morning after his stunning election victory, NAM cautioned that US industry’s access to those offshore oil and gas resources must be supported by the new administration.

 

NAM said manufacturers and others need assurances from the Obama administration that the expired offshore drilling ban - which represents a major change from a 27-year-old congressional policy - will remain expired.

 

“We need certainty that this change, which is critical to the long-term ability of the US to grow and retain jobs, is expanded and not reversed,” NAM said in its letter.

 

Obama has expressed support for “limited” offshore energy development, but he may be unable or unwilling to maintain even that undefined and uncertain promise in the face of strong opposition to offshore drilling among Democrat leaders in Congress.

 

NAM vice president Jay Timmons also hailed Obama’s campaign, which rode to victory under the slogan of “Change We Need”.

 

Change is good and even inevitable, Timmons said, but progress is not certain and could be optional.

 

After every US presidential election, it is customary that business and trade groups welcome the new administration and promise cooperation, even if they opposed the winning candidate.

 

After all, like it or not, those industry and commerce representatives are going to have to work with the new administration and the more Democrat-dominated Congress.  As the age-old lobbyist’s maxim goes, “If you’re not at the table, you’re going to be on the menu”.

 

At the very least, if you can’t say anything nice about the new administration, it is best to remain silent.  Notably, two major US chemical trade groups, the National Petrochemical and Refiners Association (NPRA) and the American Chemistry Council (ACC), had no immediate comment on the Obama victory.

 

Nevertheless, at least one chemical industry spokesman pulled no punches about what he sees as troubling times ahead for his industry and business in general under the new order in Washington.

 

“I think we are looking at what will be the most anti-business federal government in many years,” said Chris Jahn, president of the National Association of Chemical Distributors (NACD).

 

Jahn, who served as a senior staff advisor in the US Senate before returning to association management, said he is gloomy about industry’s prospects under new federal controls.

 

“I think federal policies over the next several years will be very anti-business,” he said, “because there will be a much larger, anti-business majority in Congress and no one at 1600 Pennsylvania Avenue [the White House] to act as a check on the pent-up ambitions in Congress.”

 

Jahn expects that the stronger Democratic majority in Congress next year will mean passage of more stringent anti-terrorism chemical security legislation that will include a federal mandate for inherently safer technology (IST) as a security requirement.

 

In environmental matters, he worries that the new Congress will take the opportunity to reshape the 30-year-old US chemicals regulatory law, the Toxic Substances Control Act (TSCA), as a US version of Reach, the EU’s programme for registration, evaluation and authorisation of chemicals.

 

“Certainly there will be far more regulations coming across the board,” Jahn said of the more Democrat-dominated Congress.

 

In addition, he expects higher taxes on businesses and greater energy costs if, as seems likely, Congress and Obama enact and implement a cap-and-trade law.

 

“If you want to paint a picture of gloom,” Jahn said, “put increased regulations and higher taxes on top of an economy that is already struggling.”

 

($1 = €0.77)

 

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By: Joe Kamalick
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