ENERGY DEAL OR GOVERNMENT SHUTDOWN?

All indications are that there is a deal in Congress on legislation to fund New Energy.

Celebrations would be premature.

Not only is the deal to bring legislation to the floor tentative, but if the deal falls apart or the legislation fails to pass this week, Republicans could shut the government down in the last week before the election season recess by refusing to pass a continuing resolution (CR) to keep the government going if itdoes not include what they want.

What they want is drilling.

Rumors indicate the House of Representatives and Senate will debate and vote on the New Energy Reform Act of 2008, a measure that will allow extensive drilling for oil and gas in previously protected U.S. coastal waters. It will also extend the federal tax credits for New Energy and Energy Efficiency. And it will contain the proverbial "variety of other provisions," some of which could prove to be highly controversial.

Senate Majority Leader Harry Reid (D-Nev) made statements at the end of last week’s Hurricane Ike-truncated session to the effect that “increasing consensus” on the measure is emerging.

As reported by NewEnergyNews September 12 (See ENERGY GAMES… ), the former Speaker of the House Newt Gingrich-led American Solutions “drill here, drill now” lobbying movement has been transmuted into the “drill,baby,drill” movement on behalf of the McCain Republican presidential bid and necessitated a position shift toward drilling from the Obama-led Democrats.

The rise and impact of Gingrich’s lobbying group, as fully chronicled by Marianne Lavelle’s Mixing Oil and Politics Is Formula for Newt’s “Solutions”, has moved the Democrats into a deal that will trade formerly-protected-area drilling privileges for a shift of budget monies from oil and gas industry subsidies to New Energy subsidies.

Lavelle: “…if Congress voted tomorrow to lift the protections now in place on the Atlantic and Pacific coasts and the Gulf of Mexico close to Florida, it would all but certainly be a long wait for the crude to reach the gas pumps. Drilling rig shortages assure that development would be slow. The U.S. Energy Information Administration, the federal agency that compiles official government energy statistics, says there would be no impact on prices until 2030. Even then, because the amount of oil gained would be a drop in the bucket of the global market, the impact could be “insignificant,” EIA said. But Gingrich and American Solutions have pressed their case for vastly expanding the areas open to drilling…”

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The deal was reportedly brokered by the Senate’s bipartisan “Gang of 10 (subsequently 20),” a coalition of moderate Republicans and conservative Democrats that has won conciliation with its “states-rights” compromise: A protective restriction will still keep drilling outside a 100-miles-from-shore limit UNLESS a state’s legislature passes a law permitting it to come in.

The legislatures can allow drilling even inside the once sacrosanct 50-mile limit. It is not yet clear if there remains a sacrosanct limit. Republicans want to drill inside a 12-mile limit, though they are reportedly agreeable to respecting designated marine sanctuaries.

In addition to crucial funding for vital New Energy tax credits and other subsidies and incentives, Democrats retain all rights to revenues from the drilling (no matter what the states do or don’t allow).

Aside from Senator Reid’s widely reported hint there is a deal afoot, there were 2 other indications the Gang of 10 is prevailing: (1) At its much ballyhooed “Senate Energy Summit” on September 12, both sides of the compromise were well represented by experts and academics, and (2) the “Gang” became 20-strong with the addition of more influential members such as Senators Elizabeth Dole (R-NC), Susan Collins (R-Me), Amy Klobuchar (D-Minn) and Evan Bayh (D-Ind).

It is yet to be reported which party got drilling in the Alaska National Wildlife Refuge (ANWR) as part of the compromise.

Why is it too soon to join hands and sing?

Senator Ken Salazar (D- Colo) used the Democrats’ weekly national radio address not to talk about the war in Iraq, as President Bush did in his radio talk, but to echo the party line about the pointlessness to drilling: “We consume 25 percent of the world’s oil, but we have less than 3 percent of the world’s oil reserves…We simply can’t drill our way to energy independence…Yet that was the only idea that John McCain and his friends at the Republican national convention offered…”

This is not the conciliatory attitude of a party ready to wholeheartedly submit. It is more the guarded attitude of Senate Minority Leader Mitch McConnell (R-Ky), who expressed serious doubt about the validity of the compromise, calling it “half measures.”

Senate Minority Whip Jon Kyl (R-Ariz.):“Is this just an opportunity for members to have a cover vote — to vote for something knowing it never becomes law?”

Many Republicans are unwilling to sign on to the agreement as long as the revenues from drilling monies ($2.6 trillion) and from oil and gas industry subsidies ($16 billion) are used to fund New Energy. Speaker of the House of Representatives Nancy Pelosi (D-Calif) last week expressed a strong commitment to this part of the deal.

Money is what the fight for New Energy and drilling will be over in the next 2 weeks and, because it is a lot of money, the fight could get bitter. No measure is likely to get out of Pelosi’s House without funding and any measure with funding from money the oil and gas industry considers its own may not beat a filibuster by the Senate’s recalcitrant minority of fossil fools.

Finally, if all efforts at energy legislation fail, Republicans could refuse to allow a CR to pass unless it includes the expanded drilling. Depending on how the fight goes this week over energy, Democrats may be strongly opposed to including drilling in a CR.

Without the CR, government functions could not go forward. Shutting down the government would dramatically call attention to the Republicans’ stand for more domestic drilling. Will the Democrats dare them to do it?

Republicans refused to pass a CR in 1995, in order to call attention to their fight for a balanced budget. The move backfired, making them more unpopular. Some leaders now are disinclined to risk Senator McCain’s narrow lead with such a risky move.

Senator Mel Martinez (R-Fla.): “Those politics are pretty well-known…No one in our caucus that I know of is seriously even uttering the word ‘shutdown.’ ”

Other Republicans believe it would make the very point necessary for them to make to win over voters. They are talking about compromise in very strong, hostile terms.

Sen. Jim DeMint (R-S.C.): “Any Republican would be foolish to vote for a ban on energy after this issue has been so front and center…”

Mr. Gingrich, whose lobbying efforts on behalf of “drill, baby, drill” brought the party the current confrontation, led the 1995 shutdown. He will likely be instrumental in which way the party goes.

It is not yet clear what Democrats will do about a fight over the CR. They are reported to be entirely focused on the coming energy legislation votes.

What a footnote: By all reports, the national Renewable Electricity Standard (RES, aka Renewable Portfolio Standard, RPS) is still in the legislation. That’s good. On the other hand, so are multiple provisions in service to the nuclear energy industry. (See Billions of Dollars of Nuclear Subsidies Hidden in “New Energy Reform Act of 2008” ) Not so good.

Finally: What comes out to play on Monday morning is unlikely to bear much resemblance to what is left, if anything is, at the end of the week. Watch this space.

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Senate leader says consensus building on energy
H. Josef Hebert, September 12, 2008 (AP via Yahoo News)
and
Dems fend off energy attacks
Alexander Bolton, September 13, 2008 (The Hill)
and
Renewable efficient energy touted to U.S. lawmakers
Ayesha Rascoe (w/Jim Marshall), September 12, 2008 (Reuters)
and
Senate Energy “gang” Grows To 20
Martin Kady II, September 11, 2008 (Politico via CBS News)
and
Senate GOP wary of shutdown
Manu Raju, September 11, 2008 (The Hill)

WHO
Senate Majority Leader Harry Reid (D-Nev); Senate Minority Leader Mitch McConnell (R-Ky); Senate Minority Whip Jon Kyl (R-Ariz.); The Gang of formerly 10, presently 20 and gathering momentum (Senators Kent Conrad, D-ND, Saxby Chambliss, R-GA, Sens. Elizabeth Dole, R-NC, Susan Collins, R-Me, Amy Klobuchar, D-Minn, Evan Bayh, D-Ind); Former Speaker of the House Newt Gingrich; Academics and executives from oil, auto and other industries (Daniel Yergin, chairman, Cambridge Energy Research Associates; Frank Verrastro, director (energy and national security), Center for Strategic and International Studies)

WHAT
Against the background of the fight over extended drilling rights on federally protected lands and extension of the New Energy incentives and tax credits, a bipartisan Senate energy summit helped move Republicans and Democrats closer to agreement on legislation and especially on the controversial expansion of offshore oil drilling.

WHEN
- The Senate Summit was September 12.
- Votes on the elements of the energy bill are expected between September 15 and 20 in both the Senate and House.
- The continuing resolution (CR) to keep the government going in the absence of a settled appropriations bill would be passed the following week, expected to be the last week before the election season recess.
- 1995: Republicans refused to pass a CR and shut down the government, resulting in hostility toward the party and losses in the 1996 election.

WHERE
Drilling for oil and gas in all federally protected lands and offshore areas of the outer continental shelf is in play. Regions of the Rocky Mountains, Alaska (the Alaska National Wildlife Refuge) and offshore areas of 4 Southeastern states (especially the Eastern Gulf of Mexico off Florida’s west coast) are of concern.

Tom Friedman explains the gravity of the situation. From CharlieRose via YouTube.

WHY
- Senators discussed ideas for dealing with the energy issue in the one-day summit: New Energy, energy efficiency, increased domestic oil and gas production, volatile fuel and power prices, pending energy legislation.
- Panelists at the summit said increasing offshore drilling would not solve all of America's energy problems and they agreed more drilling will be necessary as the nation transitions to alternative fuels.
- Panelists at the summit encouraged Senators to invest in research and technology and make tax credits for renewable energy consistent.

QUOTES
- Daniel Yergin, chairman, Cambridge Energy Research Associates: "An on-again, off-again production tax credit is not a way to promote stable development of renewable energy…Uncertainty is the enemy of investment, whether for renewables and alternatives or for conventional energy."
- Frank Verrastro, director (energy and national security), Center for Strategic and International Studies: "Eliminating fossil fuels any time soon, I would argue, is impossible because we have nothing to replace them with,"
- Sen. Judd Gregg (R-N.H.): “Obviously, there will be an interest for getting a vote on drilling in the CR, but it’s not going to lead to any dramatic event…”