Obama’s expected climate push may herald Keystone approval

24 June 2013 18:50  [Source: ICIS news]

WASHINGTON (ICIS)--Energy sector analysts said on Monday that President Barack Obama’s new climate change regulatory initiatives may presage a decision later this year to give final approval for the Keystone XL pipeline project.

Obama is scheduled to give a major climate policy speech on Tuesday, and the White House has already indicated that he will call for strict new limits on carbon dioxide (CO2) emissions by existing electric power generating facilities.

A plan to sharply reduce emissions from existing utilities would follow on rules that the Obama administration proposed in March last year to restrict CO2 output for any new power plants.

Those proposed rules, widely criticised by those in energy sector and among manufacturers, essentially mean that no new coal-fired electric power plants could be built in the US.

In his speech on Tuesday, Obama is expected to announce similar emissions limits for existing power plants - caps that could eventually force shutdown of the nation’s coal-fired utilities, which currently provide about 40% of US electric power.

In his inaugural speech in January this year, Obama said he would redouble his focus on climate change issues as a top priority in his second term.

US petrochemical producers and downstream chemical makers have expressed concerns that further federal restrictions on coal-fired power would sharply accelerate the existing trend among utilities to switch from coal to natural gas, triggering sharp gains in gas pricing.

The US chemicals sector is heavily dependent on natgas as both a feedstock and power fuel.

In anticipation of Obama’s climate policy initiative on Tuesday, the American Chemistry Council (ACC) said: “An effective proposal [for further greenhouse gas limits] must reflect the need for energy diversity, including a place for coal in America’s energy future.”

The council also cautioned that the new initiative should reflect the importance of “continued affordable and ample supplies of natural gas, which are spurring a renaissance in US manufacturing”.

But energy sector analysts said on Monday that Obama’s expected new restrictions on utility industry emissions may have an upside for the sector.

ClearView Energy Partners said in a note to clients that the expected new emissions policy could in part be designed to mollify Obama’s environmental base in anticipation of a final ruling by the White House on the Keystone XL project.

ClearView said that Obama’s tough new utility emissions rules will be “a give” to the environmental community “ahead of the Keystone XL decision, ‘a take’ from environmentalists”.

ClearView said that it believes that Obama will approve the Keystone XL project by late in the third quarter or early in the fourth quarter this year.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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