Political Class Pursues Costly, Counterproductive and Irrelevant Policy Schemes with Alacrity

By Kevin Mooney –

What is the connection between the Deepwater Horizon oil disaster and the stated need for anti-emissions regulations and higher energy prices? This question goes unexplored in the front page coverage the New York Times devoted to President Obama’s address to the nation earlier this week.

Obama has called for a renewed commitment to “clean energy” policies that would de-emphasize fossil fuels and reduce oil dependence. He has also imposed a six-month moratorium on deep water offshore drilling.

“Today, as we look to the gulf, we see an entire way of life being threatened by a menacing cloud of black crude,” Obama said in his speech. “We cannot consign our children to this future. The tragedy on our coast is the most painful and powerful reminder yet that the time to embrace clean energy future is now.”

In his coverage, The Times does an effective job of hitting on some of the highlights. The report, for example, discusses the president’s “adversarial tone” toward BP officials at some length and touches on regulatory failures evident within the Interior Department’s Minerals Management Service.

However, the relevance of a “cap and trade” bill to the environmental challenges that now beset the Gulf of Mexico is debatable. Moreover, as TimesCheck has previously reported, Sen. Lindsey Graham (R-S.C.), who has supported earlier versions of the legislation, now concedes that regulatory schemes have no connection with climate change.

Even so, Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) have discussed the possibility of folding the Senate’s response to the Gulf of Mexico disaster with a plan that would price carbon. The idea here would be to portray the legislation less as a tax and more as a vote against oil companies.

Meanwhile, the Environmental Protection Agency (EPA) has delivered its economic modeling results to Kerry and Lieberman for the “cap and trade” bill they introduced in May that shows the bill will have minimal long-term costs for Americans; a claim that does not pass the laugh test. The Heritage Foundation has released an analysis of the EPA’s methodology that questions agency’s “generous assumptions” and its use of discounting.

“Discounting is a legitimate tool in finance and for cost-benefit calculations,” the Heritage analysis explains. “But discounting can give a much distorted view of costs, as is done by those misrepresenting the EPA analysis.”

“Even the most generous scenario in this EPA report shows that costs will be forced on the economy—higher energy prices and lost income,” Heritage points out. “…Regardless of whether the lower cost estimates are true, this bill provides negligible environmental benefit. Global temperature reduction from Kerry-Lieberman would be .077 degrees Fahrenheit by 2050 and 0.200 degrees by 2100. And despite the best attempt for politicians to marry the Gulf oil spill and cap and trade legislation, even the EPA analysis shows cap and trade will do very little to cut petroleum use.”

Despite Obama’s renewed commitment to “cap and trade” he appears to be short in the Senate.

“I don’t think Senator Kerry has 60 votes,” Mark Helmke, a top aide to Sen. Richard Luger (R-Ind.) has been quoted as saying. Luger has offered up his own energy bill, which does not include emissions caps. But where is legislation that would help to unleash America’s natural resources and the creative energy of free people?

The problem with Obama’s speech is that it was mostly filled with non-sequiturs unattached to challenges of the BP oil spill and America’s energy needs. The president has often cited Spain as model for the clean energy economy of the future. But here again, facts and economic realities intrude. Gabriel Calzada, an economics professor at Universidad Rey Juan Carlos in Spain, has produced a new study that shows green jobs are mostly temporary, heavily subsidized and subtract away from economic performance.

Remarkably, a “news analysis” piece that accompanies the front page report does touch on the irrelevance of the president’s proposals. The commentary here is as follows:

“The connection to the spill, of course, only goes so far.While he called for more wind turbines and solar panels, for instance, neither fills gasoline tanks in cars and trucks, and so their expansion would not particularly reduce the need for the sort of deepwater drilling that resulted in the spill.”

Several trade groups including the Louisiana Mid-Continent Oil and Gas Association have released some telling statistics that should also find their way into future reports as the political class continues to pursue costly, counterproductive and irrelevant policies with aclarity.

They are as follows:

*  Gulf production represents 27% of the US oil and 15% of US natural gas production.

* Deepwater production represents more than 70% of total Gulf of Mexico production, so the moratorium will ultimately make us more dependent on foreign sources which don’t share our environmental standards. The oil will arrive via pipelines or on tankers, which are also at risk for spills. America will lose tens of thousands of jobs.

* The offshore drilling industry is responsible for 200,000 jobs in the Gulf region.

* The moratorium could cost 3,000 to 6,000 Louisiana jobs in the next two to three weeks alone, and potentially 10,000 in the coming months. To put that in context, the entire U.S. economy created only 41,000 new private jobs in May, according to the Louisiana Department of Economic Development.

* For each of the 33 Louisiana platforms idled by the work stoppage, up to 1,400 jobs and potentially $330 million in lost wages per month are at risk.

* The moratorium will cost the federal government approximately $120 to $150 million in lost royalty payments in 2011, and $300 to $500 million in lost corporate taxes, according to Consultants Wood Mackenzie.

* Since 1947, oil companies have drilled more than 42,000 wells in the Gulf. Current production is about 1.6 million barrels a day, and four-fifths of that is from deep water. Yet in a typical year, spills equal only several hundred barrels, according to the American Petroleum Institute.

* Nearly 60% of today’s 7,300 active Gulf leases are in deep water, including the 20 highest-producing leases in the Gulf.

* According to the International Energy Agency (IEA), a moratorium in the Gulf puts 300,000 barrels a day at risk.  That’s 300,000 barrels a day that will now need to be imported from foreign sources, sending revenue and jobs overseas and raising its own safety issues.

Kevin Mooney is a Contributing Editor at NetRightDaily.com.

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