Bob Williams
Bob Williams, director of research for PennWell Publishing's Oil & Gas Journal Research Center
Bob Williams is a Contributing Editor for PennEnergy. Previsouly, he worked as Director of Research for PennEnergy's Oil & Gas Journal Online Research Center and PennEnergy Online Research Center. He worked for 4 years for the US Department of Energy writing about energy R&D, including the power sector. Prior to that, he spent 24 years on the Oil & Gas Journal staff, and has authored and managed many ancillary publications and editorial products for PennWell over the years. For a detailed bio…


Energy politics vs. energy policy
October 20th, 2008
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We Americans are in the thick of the silly season—no, not football, for in these parts that subject is discussed in hushed, reverential tones.

This silly season in fact involves a much less rational game: US energy politics in an election year.

Note the specific reference to US energy politics, not US energy policy. The former term is said silly game, the latter, an oxymoron.

There is no and never has been a US energy policy. There have been occasional, piecemeal efforts to address concerns—meaning when the public gets riled up—about energy supply and prices. As in, respectively, not enough and too high. Those efforts have included white elephants (Synfuels Corp.) and the creation of a giant (is there any other kind?) agency that has “energy” in its name yet devotes 39% of its budget to maintaining the nation’s nuclear weapons stockpile.

But no one in the US talks about energy policy unless Joe Sixpack is getting apoplectic at the gas pump and Granny is shivering under layers of clothing because she had to choose between paying her heating bill and paying for her medicine.

There have been some fairly respectable efforts at cobbling together a US energy policy. The energy task force led by US Vice-Pres. Dick Cheney—whatever your opinion of the man—was one such effort. Unfortunately, much of the momentum the resulting task force policy report might have had was dissipated by Cheney’s truculence over not disclosing the participation of energy producers in policy discussions. Gee, input on energy supply from the entities that actually supply energy. The horror.

Energy “policy” often has been framed in the context of the “moral equivalent of war” that quickly lost resonance when its symbol was a cardigan sweater.

Sometimes energy “policy” initiatives are couched in terms of an Apollo Project or a Manhattan Project. But those accomplishments, however technically impressive and important, were engineering feats with a single goal in mind. Energy is such a multifaceted and all-pervasive part of an even more multifaceted world that addressing it as a single “mission” is, well, silly. Move along, no magic bullets here.

What passes for US energy policy is really the crazyquilt legacy of decades of knee-jerk measures on energy from politicians reacting—often overreacting—to an irate public that itself needs education on basic economics.

In other words, the best energy policy may be none at all. The market pretty well sorts things out by itself, as has been borne out by the 50% drop in oil prices since July owing to demand destruction and a similar decline in natural gas prices because of an emerging supply glut.

And yet politicians still talk about taking on Big Oil—yeah, the guys who own a whopping 3% of the world’s oil reserves—and smacking them with a new “windfall profits” tax. Yes, the same WPT that crippled upstream investment in US E&P that in turn helped get us to almost $150/barrel oil. Of course, that WPT applies only to US operating companies. So our government would slap a massive confiscatory tax on US companies that already have among the highest finding and development costs in the world, while the state oil companies in countries often hostile to the US and that enjoy the lowest F&D costs garner an even bigger competitive advantage. As we saw before, such a tax simply causes capital investment to shift abroad and ultimately results in reduced flow to US Treasury coffers.

One of the few semi-bright spots in the US energy scene has been the lifting of the ban on Outer Continental Shelf leasing. Or so it would seem. It must be recalled that congressional Democrats reluctantly agreed to let the 26-year-old OCS leasing ban expire at the end of September because President Bush threaten to veto a stopgap funding bill—which would have shut down the federal government amid a financial crisis—because it contained the ban renewal. And yet those same congressional Democrats and their friends in antidevelopment pressure groups have vowed to reinstate OCS leasing bans, under the presumption that they will have the White House and bigger majorities in Congress next year. I’m sure that was music to the ears of Hugo Chavez and Mahmoud Ahmadinejad.

These are the same folks who brought you the “analysis” that concluded that oil and gas companies were “stockpiling” federal leases they weren’t drilling and thereby “hoarding” potential oil and gas production in order to keep energy prices high. As preposterous as that claim was, it no doubt resonated with some of the True Believers, or every Democratic Party leader wouldn’t have repeated it ad nauseam in the weeks that followed the claim.

Now that gasoline prices have plummeted in recent weeks, perhaps the chants of “Drill, baby, drill” will die down. And antidevelopment forces will seize the opportunity created by lower energy prices and a friendlier DC regime to redouble their efforts in 2009 to hobble new US oil and gas production.

It’s true that new production from lifting the OCS ban won’t do much to lower oil and gas prices in the near term. The impenetrable thicket of permitting delays, environmental impact studies, lawsuits, etc., will ensure that such new production is years away.

But it boggles the mind that, in the midst of an emerging economic catastrophe, the US government isn’t doing everything it can to bolster revenues to the Treasury and create more jobs right away in a way that doesn’t hit the average American with still more taxes or further indenture future generations with once-inconceivable debt through subsidy of unproven energy technologies.

A recent Congressional Research Service analysis found that leasing and developing acreage on the OCS and in the Arctic National Wildlife Refuge would generate roughly $1 trillion in federal royalty and corporate income tax revenue. That doesn’t include the economic ripple effects of the additional high-paying jobs such development creates. Or lease sale bonus payments in the tens–perhaps hundreds—of billions of dollars that new leasing in these untouched and highly prospective areas would bring.

So instead of a coherent energy policy in 2009, we will probably see more incoherent—and self-destructive—energy politics that reduce revenues, shift investment overseas, destroy jobs, help keep energy prices high, and help bolster some unfriendly regimes.

One wonders whether we will run out of toes before we do bullets.

So as you go into that voting booth Nov. 4, please try to remember the distinction between energy policy and energy politics and consider who comes closest to an energy policy that makes sense for America.

Maybe that is just a really simple energy policy that rests upon a borrowed phrase from the physician’s oath:

“First, do no harm.”

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