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FRONT PAGE CONTRIBUTOR

Obama’s Clueless Energy Policy

From the President’s State of the Union Address:

We need to get behind this [green] innovation. And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don’t know if you’ve noticed, but they’re doing just fine on their own. So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.

Now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling. So tonight, I challenge you to join me in setting a new goal: by 2035, 80% of America’s electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal, and natural gas. To meet this goal, we will need them all …

Already, we are seeing the promise of renewable energy. Robert and Gary Allen are brothers who run a small Michigan roofing company. After September 11th, they volunteered their best roofers to help repair the Pentagon. But half of their factory went unused, and the recession hit them hard.

Today, with the help of a government loan, that empty space is being used to manufacture solar shingles that are being sold all across the country. In Robert’s words, “We reinvented ourselves.”

Let’s take a closer look, shall we?

…I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies.

Those billions of dollars we “give the oil companies”? Prior Congresses, going back nearly 100 years, purposely tweaked the tax code to encourage drilling. Their “investment” resulted in the stable, secure and affordable energy supply that enabled our nation’s industrial might. By taking those benefits away, drilling becomes less attractive to the investor.  Fewer wells will be drilled, and more jobs will be lost. Energy prices will rise, making the U.S. less competitive in international markets and more dependent on foreign energy producers.

Several of the proposed tax breaks available to energy are available to other industry: energy is being singled out.

A point often missed by Democratic policy wonks: You can’t punish oil without punishing natural gas. The two are inextricably linked; what we refer to casually as “oil companies” are also America’s biggest natural gas suppliers. The tax code for drilling is the same for oil and natural gas. Since 80% of America’s domestic drilling targets natural gas, you can’t take away those tax breaks from oil without crippling gas. More on that later…

I don’t know if you’ve noticed, but they’re doing just fine on their own.

I don’t know if Mr. Obama noticed (he certainly didn’t bring it up in the SOTU), but there was an oil spill in the Gulf of Mexico last summer. He imposed a moratorium, with a subsequent “permitorium” that has much of the industry in limbo. We’re already hemorrhaging jobs, thanks to Obama’s misguided overreaction.

…by 2035, 80% of America’s electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal, and natural gas.

According to the Department of Energy’s base case projection, renewables will account for 12.7% of electrical generating capacity by 2035, vs 10.4% in 2009. (“Renewables” includes Hydro, geothermal and biomass, in addition to solar and wind.) That’s not much growth. “Some folks” may want solar and wind to be major contributors, but their share of generating capacity will always be tiny.

Mr. Obama has belatedly acknowledged that “other” clean fuel, natural gas. As I pointed out above, oil and natural gas are inextricably mixed. Most of “the billions in taxpayer dollars we currently give to oil companies” has had the effect of making natural gas cheaper and more available. Mr. Obama is unclear on how we’re going to stimulate gas production while punishing gas producers.

No, the big winner here is clean coal, another technology dependent on massive infusions of government dough. This time the beneficiaries will be the big coal-dependent electrical generating utilities: the government will heavily subsidize their new-generation plants, while increased costs will be passed along to ratepayers. The electric utilities, unlike oil and gas companies, enjoy the risk-free world of regulated returns.

Now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling.

He’s talking about a government-mandated mix of energy sources. Require consumers to buy a product, and sure enough someone will fill the demand.

This government-centric model is inefficient and backward. The government should not be picking winners and losers, the marketplace should.

GPS and the Internet, Obama’s models of government-led game-changing technologies, do not owe their commercial success to a government mandate for their use. They succeeded because some entrepreneur saw a way to make a buck by using the technology in a different way.

Government “investment” in energy research is not a new idea. President Carter created the Department of Energy over 30 years ago in response to the oil embargoes of the 1970s, with “energy independence” as its goal. About the same time I graduated college with a degree in Petroleum Engineering. After 33 years in the business, I can’t think of a single significant technology that the DOE can call its own. All of the significant breakthroughs happened in the private sector.

As long as the government throws money at renewable energy and green jobs, we are guaranteed one resource in limitless supply: “green” company owners like the Mssrs. Allen who can be trotted out like props at State of the Union addresses.

Cross-posted at VladEnBlog.

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