Houston (Platts)--19Feb2009

World leaders, including US President Barack Obama, must maintain focus
on climate change problem-solving and not push that to the back-burner while
trying to foster economic health, the senior Democratic aide to the US Senate
Energy and Natural Resources Committee said Thursday.

The Bush administration "sort of dropped out of the mainstream
discussions" on global climate change issues, Robert Simon, the committee's
majority staff director, said in a Houston speech to oil and gas lawyers. Now,
the Obama administration has an opportunity to return the US to the forefront
of such talks to put together an agreement for emissions reduction that also
benefits the US economy, he said.

As part of an engagement with other countries on climate change and
energy development policies, Obama was visiting Canada Thursday to discuss oil
sands development and coordination among countries on carbon capture and
storage technologies, Simon noted.

"Maintaining any kind of focus on getting an international joint action"
on climate change solutions "at a time of extreme economic distress is a huge
challenge," Simon said.

Others might say, "'well, let's just get the economy fixed first and then
we'll come back and deal with this problem.' Well, the problem is that it's
going to take a couple of years to get the world economy going again and every
year we wait before we start addressing this problem just makes the cost of
addressing it much greater," he added.

After reviewing recent changes in energy law, Simon also spoke of what is
on tap for the next wave of legislation. Clean energy technology development,
especially when the capital markets are stressed, should be addressed, he told
the Center for American and International Law's annual conference.

Given that Obama spoke of renewable energy while running for president,
enhancements for electric transmission systems to connect populations centers
with remote areas where most renewable resources are located will also likely
be debated, Simon noted.

Market transparency will also be a key area for legislative debate, Simon
said. With last year's spike in oil prices, it became clear that many people,
including analysts, did not grasp exactly what was going on, he said.

"Improving market transparency is clearly a problem that needs to be
addressed," he said.

To bring about changes in energy policy focused on renewables,
transmission expansion, carbon emissions and other issues, the government must
engage the general public in the debate, Simon said. "Something of this
magnitude cannot be done in a back room" and whisked through Congress, he
said.

Asked his opinion of the plan pushed by oilman T. Boone Pickens to switch
to CNG from gasoline for automobiles in the US, Simon called it "naive,"
because it does not appear to recognize the tremendous existing infrastructure
that delivers natural gas to power plants in the US. Nor does it recognize
that the costs of building that infrastructure are already in utility rate
bases. Also, overall, it would be more energy efficient to deploy plug-in
hybrid cars using the gas for power generation, he said.

Another idea that Simon said presents problems is a carbon tax. For
starters, industry can pass through the cost of carbon taxes to consumers
without making any improvements for emissions cuts, he said. Also, the notion
that a tax would be a simple enforcement mechanism is dubious, Simon said. "I
ask, can you show me another part of the Internal Revenue Service code that is
neat and clean and simple?" he said. "That kind of leaves us with cap and
trade."

--Katharine Fraser, katharine_fraser@platts.com