Obama Needs to Walk the Line With Cabinet Picks

President Obama is nominating Chuck Hagel to be the next Defense Secretary, much to the dismay of many members of the GOP, who consider him to be insufficiently hawkish and unfriendly to Israel. Early indications suggest that Hagel will have a rough run through the gantlet of the Senate confirmation process.

Change is also coming to State, Treasury and a host of other executive agencies. Big oil and green energy companies should be most focused on changes at the departments of Energy and the Interior. Both of these agencies play big roles in Obama’s massive green-energy agenda.

Bottom line: New leadership at these organizations will likely signal a double-down on policy from the first term.

Department of Energy

At the beginning of his first term, Obama made an inspired choice in picking Stephen Chu, a Nobel Prize-winning physicist to head the Department of Energy. Chu’s research focused on global warming and renewable energy, a priority of the Obama administration. Although Chu successfully refocused the department on clean energy, he was not able to get a cap-and-trade bill passed and took some of the blame for Solyndra’s bankruptcy.

Despite meager results on climate change in his first term, green energy will remain a top priority for Obama in his second term. In fact, extending tax credits for wind production made it into the last-minute bill crafted to avoid the fiscal cliff.

While many names have been floated as potential successors to Chu, one would be particularly interesting.

Apparently, finance titan Tom Steyer is on the short list of contenders to become the new energy secretary. Steyer is stepping down as head of Farallon Capital Management, one of the world’s largest hedge funds. At first blush, he may seem an unlikely pick for a supposedly anti-business president. But installing Steyer at the Energy Department makes a lot of political sense for Obama.

The president has been chided for being ignorant of the way business works and indifferent to the opinions of its leaders. He is actively trying to change that perception. Almost immediately after securing re-election, Obama called a slew of CEOs to the White House to enlist their support in encouraging Congress to avert the fiscal cliff at the end of 2012. At one point speculation abounded that Kenneth Chenault, the CEO of American Express (NYSE:AXP), was being considered for Treasury Secretary.

Steyer is a major Democratic donor who has a long history of investing in the green-energy sector and advocating for pro-environment policy in California. He delivered a speech on energy policy at the Democratic National Convention this year, championing Obama’s green agenda, and has been advising the president on how to sell the green agenda as a tool for job creation.

Installing a wildly successful green energy investor at the Energy Department may grease the wheels for more public-private partnerships in this space. Steyer would be an interesting pick on Obama’s part … but the Senate may not confirm a big Democratic donor.

Perhaps a safer choice politically would be former Senator Byron Dorgan from North Dakota. He is well-liked on both sides of the aisle and served on the Senate Energy and Natural Resources Committee. If Dorgan takes over the Energy Department, he may focus more on oil and natural gas fracking, which has been a source of economic revival in his home state.

Department of the Interior

The Interior Department, among other responsibilities, oversees drilling, conservation and energy production on our public lands and waters. The current secretary, Ken Salazar, may or may not step down from that post. Regardless of who’s at the head of Interior, Obama is expected to continue to pursue the development of renewable energy on public lands as well as traditional drilling for oil. Vast tracts of public land are currently being designated for solar energy production and wind farms.

Washington Gov. Chris Gregoire has been considered the frontrunner to replace Salazar. However, Obama may tap her to head the Environmental Protection Agency, which will also need a new chief in the coming months. She has served as Washington’s governor for eight years, the last four of which have been under the fiscal restraints of the recession. Gregoire has experience negotiating among all of the various stakeholders in land-use, including energy companies, tribes and local citizens and their governments in large-scale environmental projects, including the cleanup of Puget Sound. She would be a competent leader of the Interior Department.

Two other names being floated to lead at Interior are John Berry and Raul Geijara.

Berry is currently the head of the Office of Personnel Management, which means he oversees the administrative aspects of the federal workforce. He’s a career bureaucrat, having served as the undersecretary for policy at Interior as well as head of the National Zoo.

Raul Grijalva, a Democratic representative from Arizona, is being championed by environmental groups as the ideal choice for the Interior Department. If Grijalva is picked, we may see even more of an emphasis on clean energy and conservation on public lands than we saw under Salazar. Grijalva was on the short list for Interior four years ago and was passed over because he was considered too liberal and not fully supportive of Obama’s desire to continue drilling while also pursuing renewables. Consequently, his nomination is likely a pipe dream for progressives, as he would have a very difficult time being confirmed by the Senate.

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