We’re doing a lot of energy blogging today, but there’s a lot to cover — and it’s a topic that has become pressing for a number of reasons, not the least of which is the rapid increase in retail prices for families whose incomes haven’t risen over the last few years. Last night, Sarah Palin issued a ringing indictment of the Obama administration’s energy policy, with specifics on actions taken by the White House to squelch production. This means making budget deficits worse, not just from a weaker economy but also more directly in lost revenue opportunities:
Exhibit A: His drilling moratorium. Guided by politics and pure emotion following the Gulf spill instead of peer-reviewed science or defensible law, the President used the power of his executive order to impose a deepwater drilling moratorium. The Administration even ignored a court order halting his moratorium. And what is the net result of the President’s (in)actions? A large drilling company was forced to declare bankruptcy, the economy of the region has been hobbled, and at least 7 rigs moved out of the Gulf area to other parts of the world while many others remain idle. Is it any surprise that oil production in the Gulf of Mexico is expected to fall by 240,000 bbl/d in 2011 alone?
But that’s just the Gulf. There’s also the question of a moratorium on the development of Alaska’s Outer Continental Shelf. It seems the Obama Administration can’t agree with itself on whether it imposed a moratorium there or not. The White House claims that they didn’t, but their own Department of the Interior let slip that they did. To clear up this mess, Gov. Parnell decided to sue the DOI to get a solid answer because such a federal OCS drilling moratorium would violate federal law.
Exhibit B: His 2012 budget. The President used his 2012 budget to propose the elimination of several vital oil and natural gas production tax incentives. Eliminating these incentives will discourage energy companies from completing exploratory projects, resulting in higher energy costs for all Americans – and not just at the pump. According to one study mentioned in a recent Wall Street Journal op-ed, eliminating the deduction for drilling costs “could increase natural gas prices by 50 cents per thousand cubic feet,” which would translate to “an increased cost to consumers of $11.5 billion per year in the form of higher natural gas prices.”
Exhibit C: His anti-drilling regulatory policies. The U.S. Geological Survey found that the area north of the Arctic Circle has an estimated 90 billion barrels of technically recoverable oil and 1,670 trillion cubic feet of technically recoverable natural gas, one third of which is in Alaskan territory. That’s our next Prudhoe Bay right there. According to one industry study, allowing Royal Dutch Shell to tap these reserves in Alaska’s Chukchi and Beaufort seas would create an annual average of 54,700 jobs nationwide with a $145 billion total payroll and generate an additional $193 billion a year in total revenues to local, state, and federal governments for 50 years. This would be great news if only the federal government would allow Shell to drill there. But it won’t. It’s been five years since Shell purchased the lease to develop these fields, but it’s been mired in a regulatory funk courtesy of the Obama Administration. After investing $3.5 billion in exploration programs (a significant portion of which went to ensuring responsible spill response and prevention), Shell announced last month that it has given up hope of obtaining the required permits to conduct exploratory drilling this year. That means no jobs and no billions in oil revenue from the Arctic anytime soon thanks to this Administration. Let’s stop and think about this for a moment. Right now Beltway politicos are quibbling over cutting $61 billion from our dangerously bloated $3.7 trillion budget. Allowing drilling in the Chukchi and Beaufort seas will enrich federal coffers by $167 billion a year without raising our taxes. If we let Harry Reid keep his “cowboy poetry,” would the White House consider letting us drill?
I’d trade a few bars of “Streets of Laredo” for a sensible energy policy. On the issue of subsidies, there is a counterargument that tax breaks for oil companies are a luxury the US can’t afford, especially given the profits of those corporations and the deficits of the federal government budgets. The profit argument is weak; their margin typically runs around 9-10% of sales, which is decent but not spectacular (the computer industry regularly ran margins more than twice that overall before the recession). But assuming that we’re discussing the effectiveness of subsidies to certain energy sources and not a more principled argument against all federal subsidies for energy production, then perhaps we need to revisit this chart from Reason TV to show which subsidies wind up being used more efficiently for actual energy production:
CNS News reports that Energy Secretary Steven Chu argues that the Obama administration is doing everything it can to produce oil and gas, except in ANWR, which Chu refused to discuss:
After testifying before the House Energy and Water Development Subcommittee about his department’s FY2012 budget, CNSNews.com asked Energy Secretary Steven Chu if — given the high price of gasoline — he supports increasing offshore drilling and opening up ANWR [Arctic National Wildlife Refuge] to domestic drilling?”
Chu responded, “I’m not going to talk about ANWR, but I think there’s many areas in the arctic that are potential exploration sites. We have opened up deep shore oil drilling; as I said, there are now two new leases since the Macondo well in deep shore. There have been some 33 or 35 shallow wells, so that has continued.”
Wow, two whole new leases since April of last year? Why didn’t they say so? Obviously, that makes it all better. And why, exactly, does the Secretary of Energy refuse to talk about ANWR, a strategic reserve meant for later exploration and oil production?
With prices going through the roof at the grocery store and the gas pump, this administration has to do a lot better than two new leases in a year to convince people that they’re serious about domestic production.