Bi-partisan Energy Effort forms in U.S. Senate

Good news - there seems to be emerging a bi-partisan effort to roll out better energy policy in the Senate. Nothing is perfect - and this proposal will certainly contain imperfections -- but its looking like it has the potential to be the most productive thing this Congress has done so far.
------------------------------------------------------------------------------------------------
E&E Daily

OIL AND GAS: 'Gang of 10' nears roll out of energy plan as floor talks collapse
Ben Geman, E&E Daily senior reporter (07/31/2008)

The collapse of Senate leadership negotiations over energy legislation is prompting greater attention on a bipartisan group planning to roll out a proposal they say would require concessions from both sides.

The so-called Gang of 10 is planning to unveil a framework this week that relaxes oil-and-gas leasing bans on the outer continental shelf (OCS), coupled with conservation and alternative energy measures. The group, led by Sens. Kent Conrad (D-N.D.) and Saxby Chambliss (R-Ga.), has been meeting frequently in recent days and weeks.

"I think they have become very important," said Sen. Lamar Alexander (R-Tenn.), the chairman of the Senate Republican Conference.

Members of the Gang of 10 also have called for a bipartisan energy summit. Majority Leader Harry Reid (D-Nev.) yesterday wrote to Minority Leader Mitch McConnell (R-Ky.) stating they should together take the group up on its call for a summit to address various dimensions of energy policy, such as economic security, global warming and our "addiction to oil."

Reid cited the current impasse over the speculation bill, S. 3268, which Republicans want to amend with offshore drilling and other production measures -- and extension of renewable energy tax credits. "Given we have been unable to make progress on these measures, I think it is important that we both look at other ways to break the current legislative impasse on energy," Reid wrote.

Other members of the Gang of 10, which is modeled on the Gang of 14 that in 2005 that helped broker a deal on judicial nominees, are Sens. John Thune (R-S.D.), Ben Nelson (D-Neb.), Lindsey Graham (R-S.C.), Blanche Lincoln (D-Ark.), Mary Landrieu (D-La.), Johnny Isakson (R-Ga.), Bob Corker (R-Tenn.) and Mark Pryor (D-Ark.).

A Democratic aide close to the process said it was a serious effort, with daily meetings at the member level. "I don't want anyone to have the misconception that is some show caucus that announces something and then has their LAs [legislative assistants] talk from time to time," the aide said.

Oil taxes, royalties in play?

Lawmakers and aides say the Gang of 10's plan will be comprehensive, encompassing domestic production, alternative transportation fuels and measures to reduce energy demand.

"Hopefully, we can get something out there that can be talked about over the August break," Thune said yesterday. "We will continue to build support and expect that when we get back, the leaders ought to move on this and give us a chance to debate it and get it voted on."

The framework is expected to include changes to the structure of drilling bans that currently cover both coasts and the eastern Gulf of Mexico.

The Democratic aide, stressing the plan is not finalized, said OCS proposals floated in the negotiations have included a systems in which the bans would change depending on the distance from shore.

For instance, one approach includes a zone closest to shore where they are retained, followed by an area where states would have discretion over whether to OCS leasing would be allowed, while the bans would be lifted even further out.

"The consistent theme to all the zone proposals is a system by which the state authority diminishes and the federal authority increases the further you get offshore," the aide said. Another idea floated would create compacts of coastal states that would make decisions jointly about leasing in the region.

The expanded leasing would be coupled with a share of offshore oil-and-gas development revenues for the states that have leasing in adjacent OCS regions.

This aide also said that repealing a moratorium on commercial leasing for oil shale in Western states, which Republican leaders have been pushing for, was not expected to be included, nor is drilling in the Arctic National Wildlife Refuge.

Offshore drilling is one of the stickiest issues because relaxing leasing bans faces heavy -- though not unanimous -- opposition in the Democratic caucus. Thune said yesterday that the proposal is being crafted with the goal of winning 60 votes in mind (E&ENews PM, July 30).

But "there will be some pain in this for Republicans, too," he added.

Another Senate aide said one idea being explored would repeal the Section 199 deduction on domestic manufacturing for oil producers, which would raise billions of dollars, while the Democratic aide said changes in royalty rates is also under consideration.

To date, most GOP lawmakers have strongly opposed repealing oil industry tax incentives.

The brewing Senate effort comes as a bipartisan group of 13 House members is also proposing a plan that links wider offshore drilling with renewable energy. But a proposal to ease OCS leasing bans faces very high hurdles due to opposition by Democratic leaders, especially House Speaker Nancy Pelosi (D-Calif.), who has not allowed a vote on the issue.

Rhetoric or Energy Policy - Can't Have Both

I really like the article below from the Financial Times. What we really do need is leadership on the energy question -- and that means admitting some hard truths on both sides. Developing a massive alternative energy infrastructure is NOT going to be cheap or easy. Enviros should quit acting as if its "no big deal" to get rid of fossil fuels. And on the other side, we can NOT drill our way out of this problem. We MUST start planning now for the steady and stable transition away from fossil fuels for BOTH our own security as a nation and to protect the one planet we all live on.

Its not that complicated to understand -- unless you start pandering to all the various egos involved and regional/political prejudices.

America - we have to ask ourselves -- do we want to solve this energy problem more than we want to blame the "other" side?

I surely hope the answer is yes! For our strength comes when we set our mind and wealth to a goal.

Sara
-----------------

Hot air clouds the energy debate

By Clive Crook Financial Times

Published: June 22 2008 18:58 | Last updated: June 22 2008 18:58

Week in and week out, Washington gives master classes in making simple questions complicated. It is a bipartisan effort of mutually assured irrelevance. Perfected over years, a combination of tribal ideology, empty posturing and feverish displacement activity generally does the trick. You see it everywhere, but nowhere more than in energy policy.

The US constitution makes it difficult for politicians to do much (except fight wars) and this avoids a lot of damage that would otherwise result. But now and then some intelligent policymaking is needed, and energy is again a case in point.

Nowadays most Americans want to see action on global warming. Sensing the mood, both presidential candidates advocate a cap-and-trade approach to reducing carbon emissions. However, even more than they want to see global warming addressed, Americans demand cheap fuel for their urban assault vehicles. So the candidates must cater to that appetite as well – with petrol tax holidays and new plans for offshore drilling (John McCain) or windfall taxes to punish oil company gouging and “help families to pay for their skyrocketing energy costs” (Barack Obama).

The US does not know whether to tax energy or subsidise it, promote domestic oil production or forbid it, treat ExxonMobil and Chevron as champions or pariahs. So it does all of the above. What it knows for sure is that it wants energy security, energy independence and clean air – plus the inalienable right to recreational trucks (not to mention freezing its citizens in summer and broiling them in winter) as though energy were a free good.

What would political leadership on this issue look like? It would dispel confusion, insist that expensive energy was necessary and confront voters with choices – as if they were intelligent adults. Somebody should try it.

Mr Obama has lately been pandering to the anti-business sentiment that blames $4-a-gallon petrol on Big Oil and oil-market speculators. It is true, of course, that oil companies are enjoying a profit windfall from the oil price spike. It is also true, or plausible, that futures trading has driven spot prices above their market equilibrium. But these are not the main drivers of the oil price – nor for that matter is the high price of oil a bad thing, if you care about climate change. Done right, a surtax on oil company windfall profits is defensible – as long as one admits it would deter future investment and that working out what “reasonable profit” means would open a can of worms better left closed. The main thing, though, is that it would do less than nothing to cut the price of petrol. It is a sideshow.

Mr McCain is pandering as well – to the view that $4-a-gallon petrol is caused by bunny-hugging curbs on domestic supply. He is busy chasing votes with his own sideshow: new offshore drilling.

Like Mr Obama, Mr McCain has a point. The present ban on offshore drilling is a mistake – just as it would have been a mistake for Britain to ban production in the North Sea. If oil can be extracted profitably and with appropriately strict environmental safeguards from offshore wells (or, for that matter, from the Arctic National Wildlife Refuge, which Mr McCain still wants to protect), well and good. But the reasons to extract it are that it is a valuable resource that would otherwise be wasted and that diversifying US oil supplies has some benefit, not that it would lower the price of petrol. New oil would take years or even decades to come on stream; when the new supplies arrived, they would most likely have no more than a marginal effect on the world market price.

The US has a compelling economic and geopolitical interest in curbing both its use of oil, especially oil imported from unstable suppliers, and its emissions of greenhouse gases. The right thing is to pursue that goal in many different ways: diversified sources of supply, energy conservation, alternative fuels (including nuclear), carbon capture and sequestration, and so on. But whether you strive to achieve this balance through top-down control and a labyrinthine system of quotas, taxes, subsidies and regulations, or else through a simple and explicit carbon tax, energy will have to get a lot more expensive. How refreshing it would be to hear a politician say so.

If the Democratic party were correct about speculation and gouging, it should be demanding a Nobel Prize for futures traders and oil titans. They have done more for the planet than Al Gore, making the pump price of petrol so unthinkably expensive (almost half as dear as in Europe!) that the country has started to economise. Americans are driving less and buying smaller cars.

If ever there were a case for the maxim, get prices right, this is it. The way to curb carbon emissions is to add the environmental cost of carbon to the price of energy. The current oil price offers a good opportunity: when it falls (as it probably will) a carbon tax could be used to set a floor, making the transition to correctly priced energy much easier.

Once the price of energy is right, other decisions become simpler, or can be left mainly to the market. There is no need to legislate fuel economy standards or subsidise conservation and low-carbon forms of energy; no need for an emissions trading regime, with all the waste and complexity and gaming that that entails (witness Europe’s experience); no need to scapegoat oil companies or environmentalists; no need to mislead or pander. For sure, the politics is a challenge – but not, I am willing to bet, as hard as conventional wisdom insists. Carbon is bad: tax it and use the money to cut other taxes. A new kind of politician could do something with that.