Old Lobbies Prevent New Energy Policies

WASHINGTON – A while ago, a former high ranking Republican technocrat, senior staff member in many administrations, almost casually indicated that the root cause of America’s inability to extricate itself from its total dependence on oil and consequent paralysis in charting a new energy future was and is the extraordinary power in Washington of the oil and automobile lobbies. We do have new energy technologies –he said. We do have alternatives to oil and to the old gasoline powered internal combustion engine. We do have workable, cost effective solutions. But  these lobbies have been and are so strong that they managed to suffocate any policy alternatives that would threaten their historic primacy.

The price of the entrenched lobbies

And so, while they safeguard their rent positions, kept in large measure via friendly legislation and regulations bought through political favors, America suffers as we have no energy policy; while we spend a fortune every year to buy abroad most of the oil we continue to rely upon, there being no viable alternatives in place. (Our Congress complains with cause about our staggering trade deficit with China. But our oil imports bill is much larger. To buy oil in 2010 we sent abroad 337 billion, according to T. Boone Pickens. This equals to transfering approximately $641,172 per minute to foreign suppliers.  If oil stays above 90 dollars a barrel, expect a an even higher bill for 2011).

Natural gas is not a story

But there are additional policy distortions in the energy-transportation sector caused by other entrenched lobbies. A recent article by Christopher Swann in The New York Times, (Time to Tap the Bounty of US Natural Gas, January 16, 2011), finally gave some real space to the good news of incredibly abundant natural gas reserves in America. However, the author wonders why, despite the good news, official Washington has not reacted positively to the doubling of American natural gas reserves, following the successful deployment of technologies that allow industry to recover “shale gas”.  In terms of public policy, it is as if this dramatic increase of the domestic energy supply did not happen.

Coal lobby keeps a lid on it

The fact that now we have enormous reserves –most of them located in the highly populated, industrial North East–of a relatively clean fuel that  costs about one third of oil derived fuels (if used for transportation) and that pollutes much less than coal (if used for power generation) has not quite registered. And why not? Well, the article says, it would appear that the powerful coal lobby, in tandem with the freight rail lobby, (coal travels by rail), is trying to keep a lid on the economic implications of this epochal gas discoveries so that their entrenched positions will not be jeopardized. Clearly, if abundant natural gas displaces coal, the coal mining industry would be hurt. Likewise, the freight rail industry would see a lot less coal business and they would be hurt as well.

Old America prevents the growth of New America

And there we have it. Once more we see Washington based special interests at work –for themselves. And this is hardly news. Except that this time  they are clearly working against the national interest. Lobbying is an incurable Washington disease. In theory, nothing wrong for economic sectors making a case for themselves in front of policy makers. But when special interests manage to stifle changes –cost effective changes– that would be beneficial to America’s growth and prosperity then we have a huge problem. “Old America”, using its influence, is doing its best to prevent the growth of the “New America”. But what is truly bad is not so much that the lobbying effort is taking place, but the fact that the Congress and the administration apparently are  listening.

Washington blindsided

As a result of these efforts via political contributions and what not, both the Congress and the administration have been blindsided, up to the point of ignoring revolutionary changes in the domestic energy supply that have been described by industry leaders as a “game changer”. We have now more natural gas than Iran has oil. We have more gas than Russia. Doesn’t that change anything regarding the American energy and economic outlook?

Gas is good for power generation

The low hanging fruit is of course natural gas as fuel for power generation. Natural gas is already used for this purpose; but we can do much more now, because of abundant supply and low prices. Given the large quantities and  the proximity of the new fields being exploited to large population centers in the North East, (most of the new gas is in Pennsylvania, in the so called “Marcellus shale” basin),  it is indeed cost effective to phase out old, polluting coal fired plants, while increasing capacity for gas fired plants. This would be economically beneficial; while it would make a huge contribution to lower emissions, with enormous public health benefits because of improved air quality.

Gas is better as a transportation fuel

Further down the line, the obvious target is to use natural gas for transportation, starting with heavy vehicles. This is a bit more complicated, as it would entail retrofitting existing fleets and switching industrial production to new vehicles so that they will be able to run on both gas and diesel. All this would take time and it would cost money. However, given the lower cost of natural gas compared to oil derived diesel and the almost endless domestic supply, it is obvious that switching to natural gas makes economic sense.

Massive adoption of gas makes sense

Adopting gas on a large scale makes sense economically, as it is cheaper. It makes sense from a balance of trade stand point, as we would save tens of billions of dollars otherwise sent abroad to pay for imported oil, while we invest in our own domestic assets, boosting domestic enterprises. It would make sense from a national security perspective, as reliance on domestic fuel diminishes our dependence on uncertain foreign sources. It would make sense environmentally, as natural gas pollutes far less than oil derived fuels. And, finally, boosting this domestic industry and its supply chain, from wells to a national network of filling stations, creates new jobs, right at a time in which we need them.

All this is clear and fairly simple. But the fact is that official Washington, hostage to backward looking entrenched special interests, has yet to grasp the situation and unveil an energy policy in which domestic natural gas would have a new central place. All this is very disappointing.

Americans do not believe that Washington gets it

Much has been said about a general public discontent in America with the effectiveness of the federal government. It is not so much that Americans distrust government as such. Opinion polls reveal that they no longer believe that government is on top of the key issues, showing that it can get stuff done, that it can put in place public policies that help the nation out of its troubles.

Ditching the oil and coal lobbies while changing policies so that we could take full advantage of this natural gas gift could be a good way to show that Washington finally gets it.

For President Obama an opportunity to do the right thing and get a political windfall

President Obama will give his State of the Union Address on January 25th. During the 2008 presidential campaign then candidate Obama pledged that he would work hard to diminish America’s dependence on foreign oil. This could be an opportunity to unveil a new energy policy heavily reliant on our own natural gas.  Gas has created an excellent opportunity, based on real, quantifiable new resources, for Obama to advance his campaign promise. This would be good for America and, incidentally, very good politics as well.