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WASHINGTON, Jan 9 (Reuters) - The next head of the U.S. Department of Energy is likely to guide the agency through a fundamental shift: easing up on a push to commercialize renewable energy and instead focusing on the surprising domestic oil and gas boom and management of U.S. nuclear security.
President Barack Obama is widely believed to be considering candidates to replace Energy Secretary Steven Chu, the Nobel Prize winning physicist who managed an ill-fated $40-billion effort to promote the green economy with loans and grants to solar, wind and biofuel companies.
The program, part of the 2009 economic stimulus bill, suffered a public relations nightmare when solar panel maker Solyndra and battery manufacturer A123 declared bankruptcy last year after receiving hundreds of millions of dollars in U.S. backed financial assistance.
"The four years under Chu were the least typical of the entire DOE," said Paul Bledsoe, an independent energy consultant. The agency was formed by President Jimmy Carter in 1977 in response to high oil prices after the Arab oil embargo.
"They had this huge amount of money to push out the door, which became not only a priority but a challenge to spend wisely," said Bledsoe, a former White House aide to Bill Clinton.
The focus at the DOE in the years ahead is likely to return to where about two-thirds of its budget goes: security of nuclear weapons, reactors and waste.
"DOE policy is going back to a business-as-usual situation where, essentially, military nuclear spending tail-wags the energy policy dog," said Robert Alvarez, of the Institute for Policy Studies who was a senior DOE official in the 1990s.
The agency's renewable energy initiatives will permanently move back to research and development and away from commercialization, said Bledsoe.
DOE sources and analysts at think tanks in Washington said an announcement from Chu to step down could come any day, with a replacement to be named within weeks, possibly after the Jan. 21 inauguration.
The administration would not officially comment on whether Chu will step down. None of the potential candidates for the job commented either.
Two of those thought to be on the short-list have deep experience on nuclear issues.
Christine Gregoire, the outgoing governor of Washington state, has had a long career working with the federal government to clean up the nuclear waste mess at the federal Hanford Site in her state.
Ashton Carter, the deputy secretary of defense, led a program to dismantle thousands of nuclear weapons in the former Soviet Union. Carter's experience managing money and annual procurement at the Pentagon could also make him a strong candidate, said David Goldwyn, who led international energy affairs at both the State Department and the DOE.
Former politicians, though, could be better suited for the position because they could better handle calls from members of Congress to hack away at the DOE budget, some analysts contend.
"The primary job of the secretary is to protect the DOE's core budget in the face of Congress. This is an area where a politician might do the job best," Goldwyn said.
Byron Dorgan, the former senator of North Dakota, could be another good choice, said Charles Ebinger, the director of the Energy Security Initiative at the Brookings Institution.
Dorgan once chaired the Senate energy and natural resources committee and is now a fellow at the Bipartisan Policy Center, a Washington think tank peppered with former lawmakers.
Other politicians mentioned include former Colorado governor Bill Ritter, who helped reform regulations on oil and gas in his state. Ritter now advocates for responsible oil and gas drilling from a post at Colorado State University.
Susan Tierney, a former assistant secretary for policy at the DOE, has also been mentioned as a candidate, although she withdrew from the running for deputy energy secretary in 2009.
Chu, who joined the department in 2009, had next to no experience dealing with the oil and natural gas industry and was tagged by critics as a symbol of the Obama administration's efforts to move away from petroleum.
But the remarkable boom in domestic oil and gas production over the last few years has made that lack of experience - not just from Chu but from some of his top deputies - a liability, experts said.
"It's singularly ridiculous, quite honestly, that you could go several people down into the DOE's leadership before you actually ran into somebody who knew anything about oil and gas," said Ebinger.
The boom has reduced U.S. oil imports and led to serious discussions about whether the country should export its bounty of crude and natural gas. The next DOE leader may have a role in promoting those exports, which could boost the U.S. economy.
Dorgan, whose state is home to the giant Bakken shale oil field, or Ritter, whose state is also experiencing a drilling boom, could be good at balancing the department's several tasks, analysts said.
In the next year the DOE also may start to make decisions on which facilities are given LNG export licenses out of a long list of applicants.
The secretary could also push for ways to get newfound domestic oil and gas to market, as thousands of miles of pipelines may have to be built. Many of the pipeline decisions could fall to other agencies, though, such as the Federal Energy Regulatory Commission.
But as a cabinet member, the new energy secretary could play an important role in articulating the importance of building such infrastructure to the American people.
"If the administration wants this to happen it has to be out there fighting for it," said Ebinger. (Reporting by Timothy Gardner; Editing by Ros Krasny and Claudia Parsons)