THE ENERGY GAMES REJOINED

With the public clamoring for national leaders to take action to control rising gas pump and electricity prices, Speaker of the House Nancy Pelosi (D-Calif) presented the outlines of the House Democrats’ most recent energy plan on September 9.

This issue has been debated as many as 13 times by one house or the other in the last year. At stake for Republicans is the precious extended drilling rights they have convinced the U.S. public, in defiance of truth and logic, will bring gas pump prices down. At stake for Democrats are incentives for the development of New Energy, including extension of the vital wind industry production tax credit (PTC) and solar industry investment tax credit (ITC) set to expire at the end of this year

Though not a simple sound bite ready for on-the-fly consumption, here is the heart of Speaker Pelosi’s statement. It is worth taking a moment to read:

"This comprehensive energy legislation is the result of serious compromising among Democrats to bring down gas prices now and invest in a renewable future. Republicans must set aside their 'drill only' policy; even their own supporters have said we cannot drill ourselves out of this emergency situation.

"It will come down to this when it comes to energy. Whose side are you on? The side of the American consumer and the taxpayer, or Big Oil?

"If they want to drill offshore we say, 'Okay, if you want to drill on the outer continental shelf, let's have a discussion and a change of the relationship between our oil, which is owned by the American people, the desire of Big Oil for us to subsidize their drilling, and us not to, the American people not getting the benefit of the profits.' So more drilling, no subsidies, and we want our royalties, in order to pay for investments in renewable energy resources…

"And if you oppose that, what are you saying? 'I'm for drilling and for subsidized Big Oil and I want all of the profits to go to Big Oil, and I don't want to visit this relationship of getting the funds that we are owed from the royalties of holidays in the late 90s.'

"It's pretty exciting because we're at a crucial place in our energy future and this decision will be an important one, and we want the American people to see the distinction between the Democrats and the Republicans on this…"

The proposal was immediately rejected by House Republicans. Though it allows drilling 100 miles off the Atlantic coasts from Virginia to Georgia, and in the Gulf of Mexico off Florida's western coast, Republicans want more territory in which to drill.

Congressman Joe Barton (R-Tex), ranking Republican, House Energy and Commerce Committee: "Hurricane Ike isn't the only storm headed toward America's offshore oil platforms…Here comes Hurricane Pelosi with an even more destructive threat to our energy supply."

The plan (1) shifts tax breaks now provided for oil companies to fund subsidies for New Energy, (2) requires back royalty payments from oil companies that profited from Clinton administration-botched oil lease agreements and (3) provides loan guarantees to the Big 3 automakers to help them shift to production of more fuel-efficient cars.

The bill reportedly also includes a provision for a national Renewable Electricity Standard (RES), requiring U.S. utilities to develop the capacity to obtain 15% of their power from New Energy sources.

Details are still being hammered out. Many of these provisions have been passed in previous House bills only to fail in the Senate.

A greater challenge for Pelosi’s party than Republican rejection is how the final bill will be received by a segment of fellow Democrats. Conservative Democrats from oil and gas producing states are worried about running in November against Republicans who can tell voters Democrats passed an energy plan that did not allow enough drilling and therefore did not provide the kind of relief from high gas pump prices Republicans claim extensive drilling in protected areas offers.

Cathy Landry, spokeswoman, American Petroleum Institute: "[The allowed drilling area] seems fairly little for ... the taxes they want to impose on the industry…The American public is well ahead of Congress on this. The American public realizes they need more access, not piddly access…"

Environmentalists on the more activist side of Pelosi’s party are also worried about the bill, fearing the ecological devastation of an offshore drilling oil accident. The Democrats hope to negotiate between the conservatives and environmentalists in the party to establish a drilling zone far enough offshore to protect beaches from harm but close enough in to satisfy oil interests and quell the “drill baby drill” argument.

Insiders say the final drilling areas in the House bill will be determined by an ongoing bipartisan negotiation among leaders in the Senate. The Senate bill is scheduled for debate next week and will be based on the measure the House passes. It is possible such a joint process will get the legislation through both houses but the Senate’s filibuster rule has so far allowed a minority of recalcitrant members mired in 1950’s thinking to reject a national RES and the shifting of oil industry subsidies to New Energy.

If the legislation, therefore, goes through the House but gets amended in the Senate to eliminate the funding, it could not be reaffirmed in the House. Without funding for New Energy’s incentives and tax credits, it would not meet the House pay-go requirement stipulating that no legislation can go through without budget money allocated to pay for it.

Should the legislation, by some miracle of election year timing and strategic horse trading, get through the Senate with funding from oil industry subsidies shifted to pay for New Energy incentives, it still would not become law until it is signed in the White House and President Bush has always promised to veto any legislation raising taxes for oil companies.

It could be that the Democrats’ only goal is to get the legislation as far as the President’s desk to force a veto.

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Democrats Start on Energy Plan; Bill Would Permit Increased Drilling Off Atlantic, Gulf Coasts
Paul Kane, September 10, 2008 (Washington Post)
and
Pelosi on Energy Bill: Whose Side Are You On? The American Consumer and the Taxpayer, or Big Oil?
September 9, 2008 (PR Newswire via MarketWatch)
and
More of Gulf may open; Democrats are working on drilling bill
David Ivanovich, September 9, 2008 (Houston Chronicle)

WHO
Nancy Pelosi (D), Speaker, U.S. House of Representatives; John A. Boehner (R), Minority Leader, U.S. House; Democrats favoring more extensive drilling (Rep. Nick Lampson, D-Tex; Rep. John Peterson, R-Pa; Rep. Neil Abercrombie, D-Hawaii); Republicans demanding extended drilling opportunities (Rep. Joe Barton, R-Tex)

WHAT
Congressional energy legislation is being crafted by House and Senate leaders. Efforts are aimed at working out the Republican clamor for “drill baby drill” and the Democrats’ commitment to New Energy.

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WHEN
- Though inadequate to Republicans, the Democratic plan opens areas to offshore drilling that have been off limits for 25+ years.
- The existing moratorium on offshore drilling expires at the end of 2008.
- The wind industry’s vital PTC and the solar industry’s vital ITC expire at the end of 2008.
- Democrats insisted on rejecting extended oil drilling until August 2008.
- September 9: Details and strategy hammered out in a nearly 2-hour meeting with the Democratic caucus.
- House vote expected: September 12.

WHERE
- Democrats are trying to find an allowed amount of drilling area far enough off shore to satisfy environmentalists and close enough in to satisfy conservatives from oil and gas districts.
- Drilling is prohibited within 200 miles of Atlantic and Pacific coasts.
- The current House proposal allows drilling 100 miles off the Atlantic coast from Virginia to Georgia, and in the Gulf of Mexico off Florida's west coast.
- Florida’s west coast in the eastern Gulf of Mexico is an area oil and gas companies have long wanted drilling rights for because of it is near existing rigs, pipelines and other infrastructure.
- The bill allows drilling as close as 50 miles if a state's governor and legislature endorsed approve.

WHY
- Florida’s Governor Crist is on record in favor of drilling off his state’s coast in the eastern Gulf.
- Republicans say the 100-mile limit eliminates areas with the most oil and gas production potential.
- Republicans also want access to drilling in Alaska's Arctic National Wildlife Reserve (ANWR) and to oil shale resources on federal lands.
- Democrats want to include several controversial items in the legislation, including a national RES, increased taxes and fees for oil companies, and a $25-to-$50 billion loan-guarantee program for Detroit automakers to shift to more efficient vehicle-manufacturing.
- With Michigan a crucial battleground state in the presidential election, both candidates (McCain and Obama) support the loan guarantee program.

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QUOTES
- Speaker Pelosi: " [The plan will] make America energy-independent of foreign oil within a decade."
- Minority Leader Boehner: "It would permanently lock up 80 percent of our nation's offshore energy resources -- holding hostage billions of barrels of American oil."
- Anna Aurilio, D.C. director, Environment America: "We're extremely disappointed that the House leadership is considering lifting coastal protections. It's a hoax…"
- Speaker Pelosi: "So more drilling, no subsidies, and we want our royalties, in order to pay for investments in renewable energy resources, make a strong commitment to [a heating assistance program for the poor] and the land and conservation fund…"