ENERGY GAMES – TO BE CONTINUED

In a lengthy investigation of American Solutions for Winning the Future, the Newt Gingrich-run Republican lobbying group that spawned the “drill baby drill” phenomenon, energy writer Marianne Lavelle reports this:

“…70 million or more acres of undrilled coastal water are already open to the oil industry. And 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, arguing that even if no supplies reach consumers for years, the prospect of expanded U.S. oil development would lower current prices by dampening speculation in the oil futures market…”

The mark Gingrich's American Solutions campaign has made is nothing short of remarkable. It could very well be a determining factor in the 2008 presidential election. It has already affected the energy fight in the U.S. Congress. It has forced the Democratic leadership to include drilling considerations in its strategies despite the fact that Speaker of the House Nancy Pelosi (D-Calif) and Senate Majority Leader Harry Reid (D-Nev) are long time opponents of opening up protected federal coastal waters.

The U.S. public wants its ice cream and, because it is an election season, the Democrats don't want to risk saying, "No, it isn't healthy, finish your supper." Especially when the Republicans are saying, "You should be able to have as much ice cream as you want whenever you want it."

As chronicled yesterday in THE ENERGY GAMES REJOINED, it has come down to this: How close to shore must Democrats allow drilling in order to take away the Republicans’ campaign issue and can they keep drilling far enough out to satisfy allies in the environmental movement?

Latest reports suggest the compromise will permanently prohibit all oil and gas exploration in marine sanctuaries and nominally prohibit drilling inside a 100-mile limit while essentially kicking the issue to the states by allowing drilling even inside 50 miles if a state legislature legalizes it. (See also OCS Lands Act history)

Republicans remain unsated and are reportedly demanding drilling rights inside a 12-mile line. They also want the states to share in the revenues generated by the drilling.

John Boehner (R-Ohio), House Minority Leader: “Democrats are going to pretend to ‘open up’ a large portion of the outer continental shelf for energy exploration – but without giving states any of the revenue for the oil and gas off their coasts…”

Rep. Rahm Emanuel (D-Ill), chairman, House Democratic Caucus. “That leaves you addicted to oil…Our strategy is tap domestic production but fund the new technologies in the wind, solar and other areas, that will lead towards America’s energy independence.”

Speaker Pelosi seems to have substituted an adamant stand for using revenues from oil company subsidies and oil company royalties to pay for the New Energy incentives in place of her once adamant stand against offshore drilling.

The drilling provisions are reportedly similar to those proposed in 2006 legislation by Republicans. This is seen as a ploy to make it harder for them to reject the Democrats’ plan.

Apparently, the Alaskan National Wildlife Refuge (ANWR) may still be vulnerable to new leases in return for the release of part of the Strategic Petroleum Reserve (SPR).

Provisions for a national Renewable Electricity Standard (RES) and for New Energy incentives including extension of the PTC and ITC remain.

That the RES is part of this legislation is extremely interesting. It was passed by the House in 2007 but staunchly rejected by the Senate and has been considered DOA in the Senate because of opposition from a minority of recalcitrant Senators who contend their states have inadequate New Energy capacity to meet a standard. Has a deal finally been made?

American Solutions has become a driving force in the 2008 political season. It is growing in wealth and power. (click to enlarge)

The Pelosi Manuever: Energy Chess
Tom Grieve, September 11, 2008 (Politico)
and
Vote on offshore drilling appears likely
Patrick O’Connor, September 10, 2008 (Politico)
and
House Dems likely to punt energy bill to next week
Jared Allen, September 10, 2008 (The Hill)
and
House Bill Would Loosen Coastal Drilling Restrictions
Carl Hulse and David M. Herszenhorn, September 10, 2008 (NY Times)
and
Mixing Oil and Politics Is Formula for Newt’s “Solutions”
Marianne Lavelle, September 10, 2008 (Center for Public Integrity)

WHO
Nancy Pelosi (D), Speaker, U.S. House of Representatives; John A. Boehner (R), Minority Leader, U.S. House; Rep. Gene Green (D-Texas), bill co-sponsor; Rep. Nick Rahall (D-W.Va.), Chairman, Natural Resources Committee/bill co-sponsor; Rep. Rick Boucher (D-Vir); Rep. Rahm Emanuel (D-Ill)

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.

What Newt hath wrought. (click to enlarge)

WHEN
- September 26: House scheduled to adjourn for election campaigning.
- Some reports said the House could vote September 11 but remembrance ceremonies and Hurricane Ike appear to have postponed further action until next week.
- The Senate will hold an Energy Summit on September 12.
- 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.

WHERE
- Offshore drilling will be allowed in federal waters: Within 100 miles of shore, within 50 miles if states allow it. Only special marine sanctuaries remain fully protected.
- 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 currently prohibited within 200 miles of Atlantic and Pacific coasts.
- 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.
- 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.

WHY
- Provisions for a national RES and for New Energy incentives including extension of the PTC and ITC remain.
- The measure, which would retain current restrictions on drilling off the Gulf Coast of Florida, would repeal some federal subsidies for oil companies and seek to improve the collection of royalty payments.
- It does not allow states to derive revenues from drilling done in federal areas.
ANWR leases and SPR oil may be part of the legislation.
- The plan includes funding fund a popular home-heating assistance program, enticing politically vulnerable Midwest and Northeast Republicans whose constituents clamor for lower home heating bills.
- A Boucher amendment funds “clean” coal trials.
- An Emanuel amendment funds tax credits for car owners and gas stations to convert to natural gas equipment.

The OCS areas formerly known as protected. (click to enlarge)

QUOTES
- Carl Hulse and David Herszenhorn, congress watchers, NY Times: “Democrats say the legislation will rob Republicans of a potent issue by giving Democrats an opportunity to vote for more drilling and claim credit for responding to high gas prices. Top Republicans said that they had successfully forced the Democratic hand on drilling but that the emerging proposal still fell far short of what was needed.”
- Speaker Pelosi: “[The Democratic energy plan] will bring down gas prices, protect taxpayers, invest in clean renewable energy and provide an American-owned energy policy that the Bush-McCain Republicans have failed to deliver for the past eight years.”
- Minority Leader Boehner: “[The Democratic energy plan is] a hoax on the American people, something that looks like an energy plan but does nothing about more oil and gas and more American-made energy.”