The impact on oil markets of civil war in Libya proves again that while history repeats itself, the price of repetition goes up every time. Three years after we last saw $100 oil – which forced a Democrat Congress to end the official decades-long drilling moratorium on the U.S. Outer Continental Shelf (OCS) – no serious policies have been put forward to break our dangerous vulnerability to unpopular oil oligarchies in the Middle East.
Indeed, few serious pro-production policies have actually been enacted since the 1973 Arab Oil Embargo, and – with the exception of the Trans-Alaska pipeline – successive congresses and administrations have mostly ratified and subsidized vastly exaggerated claims for politically correct and inherently low-energy “renewables,” at the expense of the energy-dense fuels (oil, coal and early nuclear) that built post-war America, and sustained (1945-1973) the greatest and most transformative period of innovation and wealth creation in the history of the world, until the Arab Oil Embargo.
The debate will always be about energy density, and the kinds of economies — low-wage services, or high-wage manufacturing – that can be supported by diffuse or dense fuels, respectively.
America was energy independent for much of what many scholars still refer to as our Golden Age, and that ground needs to be reclaimed – along with investment-friendly tax, monetary and labor polices – as a foundation for re-building our increasingly out-sourced manufacturing base, and recreating upward mobility from the broadly rising real wages that most Americans once enjoyed in a high-energy economy that was geared to actually “making things.”
But high wages in our lower-energy service economy are limited to a relatively narrow stratum of expensively trained (or uniquely talented) lawyers, media and sports stars, asset managers, medical specialists, computer specialists, and engineers of all sorts. Those without the years-long training for fields like these are finding themselves consigned to government, retail, restaurants, low-end sales, and the like.
The lower-energy economy has denied America the potential productive contributions of millions of its citizens, and it’s helped deny those same citizens their own human potential. Though the technology boom of the last four years of the Clinton Administration – when “Asian Contagion” recessions helped push oil to a low of $11.00 per barrel in 1998 – brought back glimmers of the Golden Age, much of the post-1973 period is characterized by anemic wage growth, de-industrialization, and debt.
America’s cultural and political elites respond to this with “class war” rhetoric and wealth redistribution proposals. They dismiss any notion of their having been co-opted by a fashionable and wealthy Green lobby that pushes subsidized, diffuse and wildly inefficient wind and solar technologies that would lock in ever-diminishing opportunities for most Americans.
To the Green lobby, the sin of “cheap energy” enabled worse sins: “consumerism” and the hubris of man’s transcending the somehow Holy “capacities” of “The Planet.” The Green lobby’s pop theology must be rejected in the main so that Americans will demand real energy development as a pre-condition for sustained and real economic revitalization. Adolescent energy plans and subsidies, and forty years of indulging them – and the smoothness and political tantrums of their advocates – must finally, finally end.
Libya is a dramatic sign, the fourth after Kuwait (1991); Iran (1979); and the embargo of 1973. That’s at least a fourth sign too many. Enough is enough: pop culture energy must give way to wealth-building development of America’s oil, gas, coal and nuclear resources, ensuring real economic growth, while strengthening America’s national security interests.
- Oil: Every possible judicial action, and every possible legislative strategy should be used to access the 108 billion barrels of oil that are estimated by the Department of Interior’s U.S. Geological Survey (USGS) to lie beneath either on-shore federal lands, or beneath the OCS. Given that only a tiny percentage of federal on-shore resources are “accessible under standard lease terms,” and that 85 percent of the OCS remains subject to the Obama Administration’s de facto drilling moratorium, pressure needs to be supplied to put the leasing machinery in motion everywhere – and that includes Alaska’s ANWR and Chukchi Sea. Exploratory drilling must begin at once in the most promising federal areas to develop reserve estimates that are more accurate than USGS’s traditionally conservative estimates. Significant gains in domestic production on the mostly private lands sitting atop the Bakken Formation (North Dakota and Montana) – for which USGS’s 2008 estimate was 25 times higher than its 1995 estimate – have been made possible by innovations in directional drilling and “hydraulic fracturing.” These innovations must be protected from activists’ demands for Environmental Protection Agency (EPA) restrictions.
- Natural Gas: Technological innovation has recently enabled America to surpass Russia as the world’s largest gas producer. Hydraulic fracturing of shale gas in AR, TX, LA, WVA and PA (New York has a moratorium for its portion of the Marcellus Shale Formation), must also be protected from any creeping EPA regulation. As the brightest spot of real energy development in the U.S., shale gas producers can benefit from the assertion of preemptive protection by Congress, rather than waiting for the need to take defensive action against EPA (see Coal below). The U.S. could even become a significant net exporter of natural gas by taking every possible judicial action, and using every possible legislative strategy to access natural gas on public lands and beneath the OCS, estimated by USGS to hold, “as undiscovered and technically recoverable resources,” 182 and 420 trillion cubic ft. of gas, respectively. The Congress needs to see this as a significant balance of trade issue, especially since USGS estimates tend to low-ball the numbers (see Bakken).
- Coal: EPA’s constant attack on the source of 47 percent of America’s electricity must be permanently ended. Denied authority to regulate carbon as part of a “cap and trade” plan, EPA is using a 2007 5-4 Supreme Court decision – which declared carbon a “pollutant” under the Clean Air Act – to rush unilateral “Best Available Control Technology” regulations into place. The Congress must continue to use the Appropriations process to stop EPA from realizing a vision that candidate Obama shared with the San Francisco Chronicle in Jan. 2008: “So, if somebody wants to build a coal plant, they can – it’s just that it will bankrupt them, because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.” Congress must go beyond stopping carbon regulation, and impose a moratorium on all the many lower-profile initiatives that EPA is pursuing against the coal industry, e.g., mercury.
- Nuclear: Neither Congress nor the Nuclear Regulatory Commission (NRC) should allow the tragedy of Japan to be used against nuclear energy in the United States. Though a trove of “lessons learned” will develop around Tepco’s nuclear operations in the months ahead, the learning process should not become a pretext for a “timeout” in the NRC’s certifying a new generation of simplified and passively safe reactor designs. This is especially true of the Westinghouse AP 1000 – the closest that a Generation III machine is to crossing the NRC finishing line – which has seen its NRC Design Certification (DC) subjected to repeated revisions. Congress must also understand that even a more accepting climate of public opinion, and a more rational (though still untested) NRC licensing system, will not alone significantly lift nuclear’s 20 percent share of U.S. electricity generation. Given the credit environment, and the investment risks in a number of “de-regulated” regional electricity markets, investments in big ($7-$10 billion) reactors will not alone create what had been a media-hyped “nuclear renaissance” in the near term. But Congress can encourage a new generation of small modular reactors (SMRs) that are passively safe; factory produced; and can be added to sites incrementally with significantly reduced upfront financial risk. These machines are only now at the very beginning of the NRC’s DC approval process, and Congress can encourage them by suspending NRC user fees for each of the representative modular technologies going through the years long DC process. This should not be done, though, at the expense of existing NRC licensees, and it should not be considered a subsidy because each developer would continue to pay for all its own detailed design and engineering work. A user fee suspension would simply relieve developers from paying regulators to regulate. Congress must also use aggressive oversight to push the NRC to expedite DCs for SMRs that are outside of the Agency’s regulatory experience (e.g., gas and liquid metal-cooled machines). This is appropriate for reactors whose very physics make them passively safe, and so, deserving of “liter touch” regulation generally.
- Renewables: It’s time for Congress to pull the subsidy plug on solar and wind. Even with years of investment and production tax credits, to say nothing of decades of research, these mostly diffuse and inherently inefficient technologies have failed to make more than a negligible dent in the U.S. electricity generation mix. Moreover, the advocates and cultural fashions that keep large scale solar and wind alive through the Tax Code (and through mandates in many states) use them as political cudgels against energy-dense conventional fuels. They’re “alternatives” to conventional fuels, after all. And if they are indeed viable “alternatives,” then Congress should have no qualms about releasing them to the market place. Congress should take the Green lobby at its word, and end all production and investment tax credits, loan guarantees, and the outright 30 percent cash grants made available by the Obama Administration’s 2009 “Stimulus” legislation.
- EPA: It’s not enough to impose a coal-applicable regulatory moratorium on this most out-of-control and ideological of federal agencies. Congress must review not only current EPA budgets and programs, but also undertake a top-to-bottom review of the cumulative impact of the layer upon layer of rulemakings and enforcement actions made by the agency since, say, passage of the 1990 Clean Air Amendments Act. A cumulative impact analysis would not be limited to any one statute, i.e., air and water, but also to the interpretive expansion of its authority that EPA has built from the National Environmental Policy Act of 1969 aka NEPA (the wellspring of endlessly litigated “Environmental Impacts Statements”); the Endangered Species Act of 1973; CERCLA (“Superfund”); the Resource Conservation and Recovery Act of 1976, etc. At the very least, a cumulative impact analysis should convince Congress to strip EPA of much of its discretionary authority so that it cannot regulate any substance or activity without the explicit permission of Congress. At the very least, EPA should never be able to decide on its own, as it has with carbon, what constitutes a “pollutant.” EPA should not remain on “autopilot” to ratchet up the restrictiveness of National Ambient Air Quality Standards in the name of “children” or the elderly. Finally, Congress must delve into the quality of the “science” that EPA gets from its own contractors to justify many of its actions. As a general principle, a regulator should never, alone, be able to select the “inputs” that are used to justify its regulatory “outputs.”
ON THE WEB
- Loan Guarantee to Solar Firms by Michael Barone
- The Center for Public Integrity: i watch News
- Institute for Energy Research
- Independent Petroleum Association of America
- Louisiana Mid-Continent Oil & Gas Association
- American Gas Association
- America’s Natural Gas Alliance
- West Virginia Coal Association
- Pennsylvania Coal Association
- National Mining Association
- Nuclear Power in the USA