Tuesday, August 05, 2008

A New Era in Energy?

41386996 We’ve viewed somewhat nervously the seeming effort to strip away a forward-looking energy policy in favor of the sparkly but short-sighted goal of replacing our dependence on foreign oil with a dependence on domestic oil. It’s an election year diversion that has taken way too much attention away from broader energy issues, especially since there seems no actual way to achieve the stated goal – lowering gasoline prices - with the stated approach – loads of new drilling. The arguments over drilling have done nothing more or less than successfully sucked the light of a reasonable approach to energy issues into an oily black pool.

So it is heartening to see some Senators – the informal Gang of 10, with five from each party - try to claw their way out of the blackness to find a way back to broader and more urgent energy issues. Calling their bill the New Energy Reform Act of 2008 or New Era, it allows some drilling while proposing a fairly ambitious portfolio.

This is what they propose for new drilling:

It would permit producers to explore beyond a 50 mile buffer zone off Florida's Gulf coast and those of Virginia, the Carolinas and Georgia, if those states opt in to the deal. It requires all new oil and gas production to be used domestically.

Well, not great, but not awful. You’d have to be pretty ideologically pure not to accept it.

Everything else seems a reasonable mix of carrot-without-stick that legislators like to give constituents and a show of support for moving forward with renewable energy sources.

  • A tax credit of up to $7,500 per vehicle if you purchase an advanced alternative fuel vehicle and up to $2,500 to retrofit your 1976 Pinto with an advanced alternative fuel engine. ($7.5 billion in research money will go to the struggling auto industry to boost electric vehicles, mostly to improve the batteries that store electricity.) The goal is that 85 percent of new vehicles on the road will be powered by fuels other than gasoline and petroleum diesel within 20 years.
  • Continue with renewable energy, carbon mitigation and energy conservation and efficiency tax incentives, including the production tax credit, through 2012 to spur greater investment in renewables. Where to get the money? By stripping oil companies of at least $30 billion in tax breaks. (We’re guessing this obviates the Obama-touted windfall profits tax and still spanks the gas industry for its profitable ways.)
  • Provide grants and loan guarantees for the development of coal-to-liquid fuel plants with carbon capture capability.

And nuclear? How could we forget that?

And it supports nuclear energy by increasing staff at the Nuclear Regulatory Commission, providing workforce training, accelerating depreciation for nuclear plants, and supporting research and development on spent fuel recycling to reduce nuclear waste.

This is a pretty good laundry list of nuclear industry wants, though the R&D on nuclear fuel recycling seems to be another feint away from Yucca Mountain. Well, it’s a good goal regardless.

Here’s Sen. Kent Conrad’s (D-S.D.) summation of the bill if you want to start digging a little deeper.


Here’s McCain on the bill:

"Anybody who says we can achieve energy independence without using and increasing these existing energy resources either doesn't have the experience to understand the challenge we face or isn't giving the American people some straight talk," McCain said.

And Obama:

"Today's announcement includes many of the policies I've been fighting for during my time in the Senate and over the course of this campaign," Obama said. "It would repeal tax breaks for oil companies so that we can invest billions in fuel-efficient cars, help our automakers re-tool, and make a genuine commitment to renewable sources of energy like wind power, solar power, and the next generation of clean, affordable biofuels."

Boy, you have to give these guys credit for staying on message.


As you might expect from such a compromise, none of the trough feeders like it.

The bill is already generating some heavyweight opposition. The oil industry is warning that revoking its tax breaks could slow its production of new energy supplies. Environmentalists support the tax credits for wind, solar and electric vehicles, but strongly oppose the new offshore drilling and coal-to-liquid fuels provisions.

Sounds like a go to us.

Your Gang of 10, with Mary Landrieu (D-La.) at the podium. They do love their charts, don’t they? The others gang members are Saxby Chambliss (R-Ga.), Kent Conrad (D-N.D. ), Bob Corker (R-Tenn.), Lindsey Graham (R-S.C.), Johnny Isakson (R-Ga.), Blanche Lincoln (D-Ark.), Ben Nelson (D-Neb.), Mark Pryor (D-Ark.), and John Thune (R-S.D.).


Per Peterson said...

I'm a bit disappointed with the blog's disapproval of opening more off-shore drilling.

Why are oil and natural gas prices double those of coal? What is it that makes oil and natural gas different from coal? We import very large amounts of oil and gas when clearly, from an energy perspective, we have more than enough coal to do everything.

The difference is hydrogen. What you pay for when you pay the higher price for oil and natural gas is enough hydrogen to make these fuels flow around as fluids, rather than behaving as a solid like coal.

In the longer term, nuclear can produce copious hydrogen, and we can convert all sorts of carbon bearing materials (coal, tar sands, shale oil, biomass) into high value liquid fuels, at the same time that we move to eliminate the combustion of carbon (coal) to make electricity.

But in the intermediate term, the U.S. foreign trade balance is bleeding our wealth away. Offshore drilling provides an intermediate term strategy to cut our oil imports, and our trade deficit. At the same time we can be moving toward the capability to use nuclear energy to produce low carbon fuels, and to substitute for coal in base-load electricity production. But while we do this we need to keep the cost of liquid transportation fuels reasonable, which means recovering more fossil hydrogen from domestic sources, instead of increasing our production of fossil carbon alone (e.g., offshore drilling rather than more coal production).

David Bradish said...

I'm a bit disappointed with the blog's disapproval of opening more off-shore drilling.

I'm totally for more drilling. I think we should consume as much energy as possible, as efficiently as possible, and as responsible as possible.

Mark's statement, in my opinion, doesn't necessarily lead to the conclusion that he disagrees with drilling. But I'll let him clarify his position.

Mark Flanagan said...

To Per and David - I'm not in favor of unfettered drilling, especially when it's used as a political weapon rather than as a piece of a full energy plan that imagines a new role for it. Even in the purest circumstances, I look highly askew at a policy that seeks to put more public land in the hands of private industry - the latter's history of good stewardship has been mixed at best.

What I really want is what the gang here is aiming for: a forward-looking policy that moves energy production away from carbon emissions without crippling swaths of the economy. Not perfect, but steps along the right path.

We really shouldn't do thing one about drilling until after the election - there's too much bad faith around the subject now. That can only lead to bad policy.

Anonymous said...

What does this mean?

"accelerating depreciation for nuclear plants"

Per Peterson said...

The world's largest strategic problem is its reliance on increasingly expensive fossil hydrogen, which allows us deliver fuels in valuable fluid forms to transportation, industry, and residential uses. This points to the importance of developing non-fossil sources of hydrogen as a chemical feedstock, since virtually all hydrogen we use today comes from fossil sources.

I'm not sure about "unfettered", but I am quite sure that with over half of our trade deficit being spent to purchase fossil hydrogen from elsewhere (dominantly the Middle East and Venusela), we need to think about domestic offshore drilling differently.

Natural gas and oil provide an important bridge to a non-fossil economy. Developing domestic off-shore oil resources will not have a substantive impact on U.S. oil consumption, because it will not bring down oil prices significantly. But it will improve the U.S. trade deficit in a major way, and it will create time to develop technologies that can deliver economic non-fossil hydrogen to produce low-carbon fluid fuels.

Our fossil energy reserves have a wide variety of carbon intensity. McCain has supported putting a price on carbon (by introducing actual legislation, defeated by Senate Republicans), and has supported increasing the production of lower-carbon fossil fuel sources (e.g., off-shore drilling), while also being a strong proponent for nonfossil energy sources, both nuclear and renewable.

How much different it would be if McCain were supporting increasing coal (fossil carbon) production, as the political stereotype would have done. Instead his long-standing position is to increase the cost of using fossil carbon, but not fossil hydrogen, and thus to support technologies that would sequester or avoid carbon emissions. This is clearly a more practical strategy to combat climate change, because it provides necessary time to bring non-fossil energy sources up to full production capacity.