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Chill, Baby, Chill

Domestic drilling goes under the bus if Obama wins

The familiar refrain of “Drill, baby, drill” has become a rallying cheer at all John McCain and Sarah Palin campaign events. It puts an exclamation mark on the GOP ticket’s all-of-the-above energy policy. That policy calls for tapping all of America’s bountiful energy resources, including renewables and other alternatives. When McCain and Palin make appearances in the coal belt of the eastern states, the mantra is expanded to include, “and mine, baby, mine.”Due credit: The chorus of “Drill, baby, drill” was first heard at the GOP convention when former Maryland Lt. Governor Michael Steele took his turn at the podium on Wednesday night:

“So, do you want to put your country first? Then let’s reduce our dependency on foreign sources of oil and promote oil and gas production at home.”

“In other words: Drill, baby, drill! And drill now! “So, do you want to put your country first? Then let’s make decisions about our security based on what keeps us safe and not on what’s politically correct.”

Later, the delegates spontaneously burst into the chorus when, during Rudy Giuliani’s rousing keynote address, the former New York City Mayor mentioned that McCain’s all-of-the-above approach to energy independence included offshore drilling.

A victory for McCain and Palin could lead to a revival of the U.S. domestic energy sector, with ramped up oil drilling both offshore and on, increased natural gas production and advances in the efforts to make our most abundant energy resource – coal – burn more cleanly. All of this will be needed as we work on longer-term solutions from alternative sources. A great spillover effect from this increased activity in the energy sector would be the hundreds of thousands of new jobs which would be created. Those jobs are sorely needed.

But if the election goes the other way, the emphasis will be on the alternatives, with oil, gas and coal taking a back seat. Indeed, only those energy resources which the environmental lobby has proclaimed to have a “low carbon footprint” will be pursued.

Barack Obama has been intentionally vague on offshore drilling:

Sen. Barack Obama today softened his opposition to new offshore drilling, saying in a speech at Michigan State University that he is “willing to consider” allowing additional drilling in a limited number of offshore areas if it helps Congress pass energy legislation.

That legislation would be a compromise proposal a small group of Senators worked out which would mandate massive federal spending on energy efficiency and non-fossil fuels. It calls for having 85 percent of new motor vehicles sold burning alternative fuels within 20 years. The price tag? $85 Billion, and like most other grandiose ideas cooked by the federal government, it would most likely cost much more than any $85 Billion when all is said and done.

Obama’s own energy plan is full of pretty words and a great deal of optimism that the shift to an alternative-fueled fleet of vehicles on our highways could be managed in such a short span of time. And if you believe that the Sierra Club and other enviro interest groups are going to let an Obama administration and Democrat-controlled congress get away with any meaningful increase in domestic oil, natural gas or coal production, even should they be disposed to do so (which they aren’t), then I’ve got a great deal for you on some AIG and Countrywide stock. Face it, lower prices on the oil market, combined with Obama’s “windfall profits” taxes on the oil companies, are not going to offer much of an incentive to either Big Oil or independents to explore and produce.

McCain’s energy plan has an advantage over that proposed by Obama. That edge is found in McCain’s economic plan. As Fortune’s Brian Dumaine concludes, in an analysis of both plans:

Obama’s plan does have a weakness, which McCain’s supporters are quick to point out. The $100 billion pouring into the U.S. Treasury annually would be mother’s milk to special-interest groups. A chunk of the money, for instance, would be earmarked for green-collar training – whatever that is. Senator John Kerry has suggested that federal funds be used to protect New England’s lobster industry from the effects of global warming. Says Douglas Holtz-Eakin, McCain’s senior policy advisor: “There’s no reason to turn this into a big cash cow for the federal government.” And he’s right. Once low-income citizens, green R&D, and the business incentives have been taken care of, the rest of the revenue should be returned to the U.S. taxpayer, which could help offset some of the drag on the economy that cap and trade is likely to create. And even better, cutting taxes would make such a bill easier to sell to the American people.

The Democrats allowed the moratorium on offshore drilling to expire recently, but expect them to reinstate it next year, especially if Obama wins the presidency. Instead of “drill, baby, drill” an Obama victory would mean that those who envision hundreds of thousands of new jobs created by a domestic boom in oil and gas production would have to “chill, baby, chill.”

- JP

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