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Vol. 224 No. 11 |
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| JOHN MCCAUGHEY, CONTRIBUTING EDITOR, WASHINGTON |
German sausages (manufactured in Washington). Well, you have to give the Washington “pols” credit for trying. After generations of presidential “national energy strategies,” (each more pointless than the one before it) and after around 10 years working on the latest “comprehensive national energy bill,” they are still “beavering” away.
Probably the current version (in conference committee between the House and Senate versions as this column was written) will be stalled. Capitol Hill sources say the bill may be stalled until at least January, because of bickering about how to fix the national electricity grid and passionate differences of opinion over tax breaks, drilling in the Arctic National Wildlife Refuge (ANWR) and those scandalous ethanol subsidies. Also, heaven knows how many other issues are involved – several hundred amendments have been hung on this would-be Christmas tree.
Still, the plan has pleasing predictability and is as fully packed with pork as a German sausage. Congressmen and senators have not merely their snouts in the federal money trough, but their front trotters, too. The thing is as stuffed with wildly uneconomic subsidies as even a sauerkraut could bear. Tax break benefits to industries, it is reported, could add $19 billion to the federal budget deficit in the next decade. A billion here, a billion there; soon, you’re talking about real money (as first described by Illinois’ late Sen. Everett McKinley Dirksen in the 1960s).
Politicians probably have never heard of (Count Otto von) Bismarck’s aphorism, that the public should never see two things: lawmaking and the manufacturing of sausages. In Washington’s eternal battle between principle and pork, the latter invariably triumphs.
The problem with a National Energy Plan is that US energy demands are so complex and shifting, as to defy centralized planning. Just to point to two major players, the environmentalists are both vocal and effective, while (reference economist Adam Smith’s invisible hand) the likely course of energy markets is entirely unpredictable. Renewable energy, hydrogen and global warming are three big issues also in play. Still, God bless them, none of this deters our brave solons or public servants on The Hill.
Paradoxically, the U.S. economy is seriously affected only by major energy crises, the last of which was in 1973. Small crises (such as the recent Northeast electricity blackout) don’t really make a significant difference. However, politicians react excitably and badly to minor crises, so (as is happening now) any loony-tunes policy may be passed.
Long-term, there is plenty to worry and speculate about. Some pessimists see global output peaking early. Even the US Energy Information Administration (a well-regarded subset of the poorly regarded Dept. of Energy) sees output peaking, perhaps before 2030 – a scary scenario for SUV owners.
This becomes tricky politics for Dubya Bush. The US depends upon oil imports from low-cost, swing producers like Saudi Arabia. On the other hand, the Bush White House knows full well that some Saudis finance and export terrorism. So what’s to be done? As they say in New York, “Go figure.” Domestically, policymakers are preoccupied by a potential natural gas shortage, or (at least) a shortage of affordable gas. Some 90% of all new, proposed power plants will be gas-fueled, so its supply and demand relate directly to use of other fuels, and the economy in general.
It is scarcely rocket science, but one congressional task force report linked gas shortages to policies that lack regulatory certainties, and incentives to produce and transport gas on federal lands. Indeed, the latter refers to a difficulty in obtaining access to federal lands or offshore areas. This is despite drilling technologies reducing the “footprints” of wells to fractions of what they once were. In other words, US producers are, to a very large degree, disbarred from drilling on sites where they might find useful (even sizeable) reserves. Does the name Al Gore ring a bell?
In a recent letter to House Speaker Dennis Hastert (Republican-Illinois), House Energy and Commerce Committee Chairman Billy Tauzin (Republican-Louisiana) wrote, “The United States is on a trajectory towards an energy future which threatens Americans’ livelihoods and quality of life, and puts at peril our national manufacturing and industrial base... Our current [natural gas] supply chain is near the breaking point...Low supply levels are resulting in natural gas prices that are two to three times above the historic average.”
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Rep. Billy Tauzin (Republican-Louisiana) is a rare voice of reason on oil and gas issues in the US Congress.
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Elsewhere, he wrote, “Access to affordable natural gas is clearly one of this country’s most urgent needs, and our new policy must allow for more natural gas exploration, development and transport to meet them.” Even allowing for political hyperbole, this is strong stuff.
Off the record, though, EIA staffers believe that nothing in the legislation under consideration by the House-Senate conference committee is likely to impact energy markets much. The bottom line? America does not need an energy policy or bill, especially if it’s designed by politicians (witness electricity’s fate in California under “Fade-to-Gray” Governor Davis).
Left to themselves, members of Congress will pass an energy bill that is just a give-away to industry, because the nation’s putative energy crisis is a hot topic. With billions of dollars in handouts up for grabs, it’s snouts in the trough time, for greenies and energy firms, alike – this bill will leave no lobbyist behind. 
John McCaughey edits and publishes Energy Perspective, a Washington-based, fortnightly publication featuring in-depth coverage of major energy topics. Mr. McCaughey has written and edited for Irish newspapers, an international news agency, the London-based Financial Times and the U.S.-based Energy Daily newsletter, and contributed to many other newspapers. He regularly contributes to this column.
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