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The good, the bad and the ugly of the Gang-of-10 drilling deal, Part 2: Something for nothing?

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"The good, the bad and the ugly of the Gang-of-10 drilling deal, Part 2: Something for nothing?"

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http://images.rottentomatoes.com/images/movie/coverv/26/222726.jpgMajor legislative compromises are unsatisfying by design. They invariably have good, bad, and ugly parts.

I have previously argued that the Democrats would be smart to compromise on offshore drilling (see “Since offshore oil is de minimis, why shouldn’t Obama and the Dems make a deal? Part 1“) The rest of this series will examine whether the so-called Gang-of-10 deal is in fact a smart compromise.

That question can be rephrased as, does the good beat out the bad and the ugly [as, of course, Clint did in the epic spaghetti western]?

I will focus here on the main good-and-bad pieces of the “New Energy Reform Act of 2008.” Part 3 will cover the smaller pieces, including the one I think is really, really ugly.

THE GOOD

The best part by far is:

Enhancing Conservation [sic]
To ease gas prices and protect our environment during the transition, the proposal includes a significant federal commitment to promoting conservation and efficiency [sic]. These include:
• Extending renewable energy, carbon mitigation and energy conservation and efficiency tax incentives, including the production tax credit, through 2012 to create greater certainty and spur greater investment.

[Note to Gang-of-10 Dems: Please stop buying into the GOP frame that renewables are the same as "conservation and efficiency." That's how they try to pigeonhole all progressive solutions -- Doing with less. New renewables, including solar baseload, are a serious supply option that are all but certain to deliver more new kilowatt hours through 2050 and beyond than new nuclear power plants and coal with carbon capture and storage combined.]

Assuming this includes the solar investment tax credit along with the PTC, then this is far and away the most important piece of the legislation. Renewables have had to contend with uncertain year-by-year renewal for a long time. Consider the effect on the wind power, as this chart from a Union of Concerned Scientists study shows:

US Wind Power Capacity Additions 19992005

A 5-year extension of the PTC and ITC would all but insure that wind, solar PV, and solar baseload see continued rapid growth and price decline. And that insures they — along with energy efficiency — become the core strategies for how the nation and the world solve our energy and climate problems while maintaining economic development.

THE BAD

So just how much drilling is in this compromise?

Opens additional acreage in the Gulf of Mexico for leasing (in consultation with the Defense Department to ensure that drilling is done in a manner consistent with national security) and allows Virginia, North and South Carolina and Georgia to opt in to leasing off their shores. Retains an environmental buffer zone extending 50 miles offshore where new oil production will not be allowed. Requires all new production to be used domestically. Creates a commission to make recommendations to Congress on future areas that should be considered for leasing. Provides for appropriate revenue sharing for states that allow leasing off their shores.

From my perspective, that ain’t bad. Yes, I am aware this will never have any impact whatsoever on the prices Americans pay at the pump (see “The cruel offshore-drilling hoax“).

But as I said in Part 1, if the Dems don’t give in to some coastal drilling at $4 a gallon gasoline, they will eventually at $6 or $8. Why keep taking any serious political pain if you can get some real clean energy gain — especially if the drilling is far less than de minimis, as it is here?

In 2006, the country opened for drilling the vast majority of the Gulf of Mexico, which was estimated to contain 41 billion barrels of oil. Since then, oil prices doubled. So much for the idea that drilling will lower prices. [I would note that Democrats didn't get anything in return for not blocking this bill -- which is just one more piece of evidence as to which side tends to win the messaging war.]

The Gang-of-10 deal leaves out the entire West Coast and half the East Coast, and the other states must opt in. Drilling in the state that seems most excited, Virginia, will almost certainly be vetoed by the Pentagon because the Navy uses the state’s coastal waters for a variety of activities.

So coastal waters with maybe 6 billion barrels of oil will be open for drilling. Very little if any major drilling will occur for the next 10 years in these areas, and not much after that with the possible exception of the Eastern Gulf. That means essentially no extra oil beyond business as usual until 2020. And then from 2020 to 2030, the extra oil production might average about 50,000 barrels of oil a day — some one part in two thousand of projected oil demand then (which should exceed 100 million barrels of oil a day, unless, of course, we have peaked in production or are about to).

Someone is going to have to explain to me why allowing this doubly de minimis drilling in return for a five-year extension of the renewable tax credits is not getting something for nothing.

Now I do agree with my colleague Dan Weiss, Senior Fellow and Director of Climate Strategy that “The New Energy Reform Act … will do nothing to reduce oil prices today, tomorrow, or next year.” Indeed, I would add, “or for the rest of eternity.” But I believe that none of the policies that would actually have either a short term, medium-term, or long-term impact on oil prices could possibly be passed as long as George Bush is presiden.

So what I am focused on here whether this bill is worth voting for, whether the benefits outweigh the harm. And in that regard, the rest of the bill also does more good than harm, although it has one very ugly provision — as we will see in Part 3.

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12 Responses to The good, the bad and the ugly of the Gang-of-10 drilling deal, Part 2: Something for nothing?

  1. Mauri Pelto says:

    I completely agree with the compromise aspect, as it seems the only way to progress. I look forward to reading what is ugly about it. I must say it was very interesting this summer to actually see the number of new wind projects popping up in the state of New York and in Washington. To date everyone I meet thinks they are not an eyesore but a good spectacle.

  2. Ben says:

    Many would argue that the “ugly” would include reforming the nuclear waste and storage policies to allow for increased reprocessing of spent fuels, though I don’t know if that is what Joe is referring to.

  3. Steve H says:

    Mauri-

    My guess is that Joe will spell ugly with three letters. However, I was pleased to see that the deal actually has some forethought in starting to train people to build nukes again. I was actually just thinking about that yesterday, and how the people with experience actually building them are about ready to retire. That, and welders were hard to come by in the nuclear boom times, so I can’t imagine how hard it will be to find them now. I still don’t think more than one or two will ever be built, though.

    [JR: I do in fact spell it with three letters, but not CTL. I spell it EOR.]

  4. David B. Benson says:

    EOR?

  5. Ben says:

    EOR = Enhanced Oil Recovery?

    Uses injected chemicals, gases (CO2) or steam/heat to increase oil yields…thanks, wikipedia!

  6. phillip says:

    Nuclear spent fuel reprocessing is not cost effective. Not even close. The congressional budget office did a cost analysis on this

  7. erotik says:

    So coastal waters with maybe 6 billion barrels of oil will be open for drilling. Very little if any major drilling will occur for the next 10 years in these areas, and not much after that with the possible exception of the Eastern Gulf

  8. sikis says:

    The Gang-of-10 deal leaves out the entire West Coast and half the East Coast, and the other states must opt in. Drilling in the state that seems most excited, Virginia, will almost certainly be vetoed by the Pentagon because the Navy uses the state’s coastal waters for a variety of activities.

  9. hii says:

    Very little if any major drilling will occur for the next 10 years in these areas, and not much after that with the possible exception of the Eastern Gulf

  10. amcik says:

    my favorite and best western movie.

  11. sikiş says:

    Would it be possible to get the downloads up before 8am Fridays? I’d like to be the show with me for my train ride to work on Friday morning. By Monday, the news is getting stale so I don’t bother downloading it. You guys

  12. sikiş says:

    Very few if any major drilling in these areas for the next 10 years, but then the East Bay is made with the possible exception.