Disappointment with energy and debt policy in the US may prompt a Republican presidential bid from former New York Governor George Pataki.

Pataki told Breaking Energy today that he is thinking about running for President, capping a career that has included state governor, state senator, and mayor. Pataki is currently also Counsel at the New York office of law firm Chadbourne and Parke LLP. Even if he doesn’t run, Pataki said he will “get actively involved” in the race.

Pataki is “unhappy” about the Obama Administration’s approach of “picking winners and losers” in the energy business for federal incentives and with its short-sighted approach to tax and investment policy, he told Breaking Energy. He is also unhappy about the debt and deficit spending, reduction of which is the focus of his organization No American Debt.

Fracking policy should be addressed at the state level, Pataki said, where local factors and cost-benefit analyses can be taken into account.

Unlike fellow former Republican governors, Pataki says he is hopeful that a meaningful debate on energy policy can be had in the 2012 race. The US public can and will focus on the hundreds of billions of dollars spent on imports of foreign oil and on the challenges and opportunities of the next generation of electricity production during the election cycle, he said.

In many cases the US federal government needs to step out of the way of business and states, Pataki said, with longer-term horizons for results-based incentives and freedom for states to set environmental policy on natural gas hydraulic fracturing (better known as “fracking.”)

“I think fracking is a tremendous technological breakthrough that we need to encourage obviously you have to surround it with appropriate environmental safeguards,” Pataki said, addressing one of the most controversial issues in energy markets today. Access to hundreds of years of clean fuel supply is “an enormous breakthrough for the American economy and the American consumer,” he said.

Fracking policy should be addressed at the state level, Pataki said, where local factors and cost-benefit analyses can be taken into account. He cited a recent New York state decision to limit natural gas drilling in the New York City watershed and said it was an “appropriate” decision for the state government to make given the local cost and benefit analysis. “States are and should be the laboratories of democracy,” he said.

One exception to his focus on state policy is permitting for high-voltage transmission lines across state lines. Businesses are ready to invest in that capacity but are hampered by permitting, which the federal government could solve by mirroring its policy on eased permitting approach for trans-state natural gas pipelines in the electricity transmission sector.

Policy-makers needs to focus on getting out the way of the consumer and technology developers, Pataki said, who both make up-to-date decisions based on evolving market signals that outpace the capacity of the federal government to regulate.

“When the light bulb came along, they didn’t ban candles for being unsafe,” he said, referring to the federal mandate to replace incandescent light bulbs, which he disapproves of. “Create things that work, and people will be there [to support it]” he said.