By Brian Dumaine, senior editor-at-large
FORTUNE -- One curious thing about this year's presidential race is the prominent position energy policy has taken. This issue, which in past elections largely got relegated to the "too wonky to bother with" category, is now front and center because energy has become inexorably linked with job creation. Says Andy Karsner, a former assistant secretary of energy under George W. Bush and now executive chairman of Manifest Energy: "Both candidates see the current oil and gas boom as an opportunity to create employment."
The similarities end there. The shape of our energy industry will differ dramatically under Romney compared with a second Obama term. Jim Talent, a former U.S. senator (R-Mo.), sketches out Romney's basic philosophy in a white paper on the candidate's official website: "The problem is not that America does not have energy. The problem is that our government -- alone among the governments of the world -- will not allow its own people to recover the energy that they possess." Romney's policies heavily favor the development of America's fossil fuels, including an emphasis on more oil, gas, and coal production, the opening up of more federal lands and offshore sites for exploration and development, and severely curtailing the power of the Environmental Protection Agency to regulate carbon and other emissions.
Obama, too, favors more oil and gas production -- oil production last year hit an eight-year high -- but he doesn't stop there. Says Tom Steyer, a managing partner at the investment firm Farallon Capital and a Democratic supporter: "The President is trying to pursue all of the above, including renewables." Adds Dan Reicher, the executive director of the Steyer-Taylor Center for Energy Policy and Finance at Stanford and also a campaign adviser who spoke to Fortune on behalf of the Obama camp: "If we followed Romney's policies, we'd be in a much weaker position in terms of green energy technology and could put our health and environment at greater risk. I also worry that the progress we've made on reducing our dependency on foreign oil would be reversed." Reicher points out that the U.S. now imports only 45% of its oil, down from 60% in 2005, and argues that Romney's no-holds-barred approach to oil and gas production could create an environmental backlash that would actually slow the U.S. industry's significant progress at home.
Some in the middle of the road, like Jason Grumet, the head of the Bipartisan Policy Center, a Washington, D.C., think tank, believe that the outcome of the election won't significantly affect America's energy industry: "Presidents matter but not nearly as much as many assume. The future of energy policy is going to be dictated first by technology and second by Congress and third by the President." There's certainly some truth to this. The ability of fracking technology to produce cheap, abundant energy will ensure a continued boom in natural gas no matter who sits in the White House. Yet for certain industries, such as wind and solar, the repercussions could be severe if subsidies dried up under a Romney administration. (Obama would keep the subsidies for renewables while eliminating the $4 billion in annual subsidies for the oil industry.) Or it could mean a death knell for coal production if Obama's EPA ends up regulating carbon emissions. So the energy industry will indeed have a different set of winners and losers depending on which party wins. Here's how it might shake out.
The Obama administration likes to take credit for the current oil-drilling boom, and it is true that production has increased over the past four years. Yet Republicans claim that the increase happened in spite of Obama. The government, they say, has kept too much federal land and offshore area off limits to drilling. Also, the amount of paperwork and approvals necessary to develop federal land has slowed growth. Says Karsner: "The Obama administration has slowed the boom and what that could have meant for energy security through unnecessary delays. Romney would like to take oil production to a greater level."
The White House counters, saying it has taken steps to provide better access to oil by opening up millions of acres of federal land, not to mention large swaths in the Gulf of Mexico and in the Arctic petroleum reserve. It is even eyeing the Mid-Atlantic coast for offshore drilling. Moreover, it claims that it has sped up oil permitting compared with the previous Bush administration.
Another area of disagreement is over the construction of the Keystone pipeline meant to bring oil sands from Canada to the U.S. Romney has said he would give the project a green light "the first day I am in office." Obama has approved a portion of the pipeline but has called for more study of the northern segment to determine its environmental impact.
Inside line: The oil industry would benefit from lower costs and less red tape under a Romney administration.
Natural gas fracking
A relatively new technology called hydraulic fracturing, or "fracking," has unearthed a 100-year supply of natural gas in the U.S., which is trapped in a layer of shale as much as two miles below the surface of the earth. The industry, which is producing cheap, abundant fuel, is here to stay, and neither candidate is likely to affect its growth rate. Yet smarter regulations are needed because if the industry stays on its current course of unbridled development, it could trigger an environmental backlash. Done improperly, fracking can harm air and water quality and release methane, a potent greenhouse gas.
Romney would leave regulation to the states, where it currently resides. Obama basically is doing the same thing, although the Interior Department is drafting slightly tougher rules for fracking on federal land. Fred Krupp, the president of the Environmental Defense Fund, would like to see the feds take a role when it comes to regulating methane emissions. In the meantime, the states are taking the lead. Says Krupp: "The real story here is that there's a bipartisan coalition forming on the state level in favor of getting the rules right to protect the environment and to maintain the industry's license to operate."
Inside line: Because both sides seem willing to leave fracking regulations to the states, the next President will probably have a minimal impact on the industry.
In a Romney ad launched in late September, an announcer ominously says, "President Obama is attacking Mitt Romney because he supports coal miners. But it's Barack Obama who said, 'So, if somebody wants to build a coal-powered plant, they can. It's just that it'll bankrupt them.'" Here the two candidates couldn't be further apart. Romney wants to block the EPA from issuing new rules restricting carbon emissions, which would penalize coal producers. Obama thinks that coal is contributing to global warming and air pollution and believes that plants should be regulated more.
Inside line: No matter who wins in November, coal will face an uphill struggle. Cheap natural gas is prompting utilities around the country to switch to natural gas. An Obama win would simply hasten the decline.
The White House has seized a Republican energy initiative by becoming a supporter of nuclear power. In 2010 it announced an $8.33 billion federal loan guarantee for a pair of Georgia reactors operated by Southern Co. (SO) Romney has called for streamlining the approval process for new plants, but that's not really the issue. As with coal, the biggest obstacle keeping nuclear plants from being built is the low price of natural gas.
"The issue that could make a difference," says Christine Todd Whitman, a former Republican governor of New Jersey and now co-chair of the CASEnergy Coalition, which promotes nuclear power, "is what the candidates do about nuclear waste disposal." Currently the nation has no long-term solution for storing radioactive nuclear waste, a situation that adds uncertainty and cost to building new plants. Obama has abandoned any effort to open the partially completed Yucca Mountain waste depository in Nevada. Romney is keeping an open mind about it, saying, "The decision is up to the state."
Inside line: A Romney victory could make a solution to the nuclear waste issue more likely -- a boost to a struggling industry but no solution to its basic cost problems.
Of all the energy sectors, renewables have the most to gain (or lose) after the election. Obama has been a champion of wind, solar, and other renewable technologies. His administration has spent a record $90 billion to provide grants and loan guarantees to solar, wind, and other green companies. A startup called Brightsource, which is building a solar thermal plant in the Mojave Desert that will serve more than 140,000 California homes, received a $1.6 billion loan guarantee from the DOE.
The Romney camp believes that the Obama administration has gone so far over the top with its green revolution by throwing money at renewables that it's done a disservice to the wind and solar industries. After the debacle with Solyndra, the heavily subsidized maker of solar photovoltaics that went bust, investors have become more wary of investing in the sector, the Romney campaign argues. Romney has pledged to end all subsidies for renewables, including the federal tax credit for wind production due to expire at year-end. He believes that each new technology must be able to compete on its own on cost.
Inside line: A Romney victory would hit America's wind and solar industries hard. Financing for these emerging industries would be harder to secure, the new project pipeline would dry up, and jobs would disappear.
As important as these policy fights are, they fail to address what's perhaps most at stake in this election when it comes to energy: a leader who can discuss with the American people the challenges and threats posed by climate change. Romney, who believed in global warming as governor of Massachusetts -- he once called coal plants "killers" and for a time pushed for a carbon cap-and-trade system -- now says warming is occurring but the science is uncertain. Obama, a climate-change believer, would at least try to work with Congress to come up with solutions, including international agreements on greenhouse-gas emissions or even the politically radioactive carbon tax. Yes, both candidates believe the federal government should play a role in funding basic R&D for technologies that could lead to a green energy revolution. But that's not enough. According to a recent Yale University survey, two-thirds of Americans now believe in climate change, up from 57% two years ago, and they want answers.
Inside line: While Obama is more likely to address climate change seriously, don't expect a lot of action from a gridlocked Washington, D.C., anytime soon.
This story is from the October 29, 2012 issue of Fortune.
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