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Gulf Spill Puts Energy Bill on Slippery Slope

May 14, 2010 by White House Chronicle Leave a Comment

 

With energy, Senate Democrats find themselves between a rock and two hard places. Nonetheless, Sen. John Kerry, D-Mass., and Sen. Joe Lieberman, I-Conn., have introduced their climate and energy bill.

Its timing is awful. Its fate is uncertain. Yet its sponsors felt it had to be done now.

While the Gulf of Mexico is being damaged by a runaway well, spewing millions of gallons of oil-like bile from hell, any energy bill has the chance that it will be amended to become an anti-energy bill and will fail when hoped-for Republican support evaporates.

At present there is fairly wide industry support for the Kerry-Lieberman bill, particularly from the electric utility industry. Leaders of the industry and its affiliated groups, like the Nuclear Energy Institute, were in on the writing of the bill. Tom Kuhn, president of the Edison Electric Institute, and Jim Rogers, president of Duke Energy, stood shoulder to shoulder with Kerry and Lieberman when they announced their bill.

The three pressure sources driving the bill are:

•The November elections and the desire of endangered Democrats to show that they have done something about climate change and have tackled long-term energy problems.

•The Environmental Protection Agency plans to start regulating carbon dioxide as a pollutant next year, if Congress does not act.

•The environmental disaster in the Gulf, and its effect on public attitudes to energy development and energy companies.

The bill differs from the House bill, passed last June, which emphasized cap-and-trade to control carbon emissions; although both bills introduce carbon restriction by sector over time, and could be reconciled in a House-Senate conference committee, according to Chris Holly of The Energy Daily.

The carbon-reducing provisions in the Senate bill not only rely on pollution credits but also a wide range of incentives, including carbon capture, enhanced subsidies for nuclear and alternative energy.

The bill’s original intent was also to give a boost to offshore drilling, thus pleasing Republicans and the oil industry. But the Gulf disaster has changed that. The bill as introduced now contains language that will allow states to prohibit drilling off their shores—a potential killer of nearly all new leasing and exploration. And drilling is pushed 75 miles out to sea.

Just weeks ago, the bill looked as though it could pass the Senate with support from at least one Republican, Sen. Lindsey Graham of South Carolina, one of the original authors. But Graham withdrew when Senate Majority Leader Harry Reid, D-Nevada, said he would put immigration reform ahead of the energy bill.

While Sen. Mitch McConnell, R-Ky., the minority leader in the Senate, has come out against the bill, Graham still likes it but believes its chances of passage are slight. Kerry still believes Graham would vote with the bill, giving the Democrats that essential 60th vote, if the Democrats all stick together, which is unlikely with the bill’s nuclear and offshore leasing provisions.

A more likely result is that the bill will open old debates about big energy, like oil and nuclear, and pit it against alternative energy, mostly wind.

Comment on the bill has come slowly, as interest groups calculate the political alignment and realignment that the bill will bring about.

Offshore drilling gets more politically toxic as each day of failure to contain the situation in the Gulf passes. Nuclear gets more dubious as cost calculations rise. With or without legislation, the smart money is turning to natural gas for electrical generation and interstate trucking. At present, gas is cheap and plentiful.

There is a lot of money—$2 billion—in the bill for carbon-capture and sequestration, but this is ill-defined; and the idea of pumping millions and millions of tons of carbon dioxide into the earth remains a legal nightmare and a hard sell to some environmentalists. Clean coal, it seems, can never be pristine.

Here, then, is a bill for all seasons. Actually, more of a manifesto: an election manifesto. –For the Hearst-New York Times Syndicate

Filed Under: King's Commentaries Tagged With: British Petroleum, climate change, Duke Energy, Edison Electric Institue, Environmental Protection Agency, Gulf of Mexico, Kerry-Lieberman energy bill, November elections, Nuclear Energy Institute, offshore drilling, oil spill, Sen. Harry Reid, Sen. Lindsey Graham, Sen. Mitch McConnell, U.S. electric utility Industry

Obama on Oil’s Slippery Slope

August 4, 2008 by White House Chronicle Leave a Comment

 

Way back in the 1970s, the old Mobil Oil Company paid $212 million for an oil shale lease in Colorado. The company did not produce a single barrel of oil from that lease. After leasing the land, Mobil shied away from developing the resource because of substantial environmental problems, involving water and degradation of the high desert.

Traditionally, oil companies have taken leases that they have had to abandon either because the resource was not as substantial as they had hoped, or because the economics had changed or as in Colorado, other impediments appear.

Also, there are physical limitations on where the oil companies can look for oil. And sometimes the judgment of their geologists is just wrong. Even in this age of seismic sophistication, there are dry holes.

A modern deep-sea oil rig is nearly as complex and sophisticated as a refinery. Every off shore rig (there are a little over 400 of them around the world) is working flat out; sometimes in the service of international oil companies, and sometimes in the service of state-owned oil companies, which control a majority of the world’s resources.

When it comes to offshore drilling, the oil industry feels that there would be a better chance of finding reserves in new leases rather than old leases, which they acquired defensively at a different time.

To the Democrats, this is evidence of oil company ineptitude and greed. To the oil companies, it is a situation reminiscent of the David Mamet play “Glengarry, Glen Ross,” where the real estate salesmen are denied the best prospects in order to shift lousy inventory.

The best oil-drilling prospects are in the eastern Gulf of Mexico and the Arctic National Wildlife Refuge (ANWR). Not only do these areas have the best expectation of good reserves, but there is already a sophisticated infrastructure in place in the Gulf and Alaska. No such infrastructure exists on the Atlantic Coast or the West Coast north of Santa Barbara. Infrastructure is important because it reduces cost, and especially because it speeds the time it would take to bring new oil to market.

The drilling controversy has been a gift to the Republican Party because it enables John McCain to go after Barack Obama on an issue that people understand: the price of gasoline. Seventy percent of Americans, according to the polls, favor drilling offshore now. Yet Nancy Pelosi, speaker of the House, refuses to allow an up or down vote on this simple issue. She wants a vote to be part of a larger energy and environment bill.

Pelosi is handing the best issue yet to John McCain. The public cannot understand many of the complex problems confronting the country, but it can understand the price of gasoline, even if new drilling will not lower that. It does not matter to the public that it was a Republican president, George H.W. Bush, who originally blocked drilling in the Outer Continental Shelf, or that John McCain was a supporter of not drilling there and still opposes drilling in ANWR.

The Democrats have boxed in their presumptive presidential nominee. Unless Pelosi softens her position, the issue is going to dog Obama through to the election. Even if he comes out in favor of drilling, he is vulnerable to McCain’s attacks if he is at odds with the speaker of the House.

Democratic antipathy to Big Oil goes back many decades. To many Democrats, the dislike of Big Oil is visceral. They have convinced themselves that somehow the oil companies represent a malign international conspiracy to block alternative energy sources and to run up prices. The left wing of the party has never been able to separate the oil industry from John D. Rockefeller and his kerosene cartel.

For their part, supporters of more drilling onshore and offshore are overselling what can be expected in the way of new supplies. The United States has about 2.5 percent of the world’s oil reserves and consumes about 25 percent of the world’s oil. Nothing can be done about the former, so something will have to be done about the latter. Right in the front of doing something about the latter are–surprise, surprise–the oil companies. British Petroleum has enormous investments in alternative energy, including hydrogen. And Chevron, as it likes to remind us, is the largest geothermal producer in the United States.

The oil companies are not perfect, but they are quite good at what they do: getting oil out of the ground and to your local gas station.

Filed Under: King's Commentaries Tagged With: 2008 presidential election, alternative energy, Arctic National Wildlife Refuge, Barack Obama, Gulf of Mexico, John McCain, Nancy Pelosi, oil, oil companies, outer continental shelf

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