July 17, 2019 / by 


A Gas Tax Instead of CAFE

I’m working on a post describing what I think the Big Two and a Half ought to propose on December 2 when they drive their hybrids to DC (in lieu of flying) to beg for money again. As part of that, I will suggest that they ask Congress to levy a stiff gas tax. But since I am getting into more and more discussions with environmentalists who want any bailout to be tied to increased CAFE standards, I’m going to lay out why I think a tax is much better than increased CAFE standards for everyone.

Why CAFE Standards Suck at Achieving their Goal

I’m going to start with the assumption that the goal of CAFE standards is to force auto manufacturers to build more environmentally efficient cars (arguably that’s not what it was originally intended to do). It does so with brute force regulation that does not, at the same time, change the actual market-wide interest (or not) in environmental efficiency.

Until gas reached $4 plus this summer (and things are returning–though haven’t entirely returned–to where they were now that gas has gotten cheaper again), people calculated "energy efficiency" into their considerations when buying a car in terms of cost of ownership–that is, as one factor among others: how much the car cost, how much monthly loan payments would be, how much maintenance cost, how much insurance cost, and how much gas to run the car cost (this is reflected by the stickers dealers use to sell their cars, which usually describe efficiency both in terms of MPG but also in terms of year gas costs). For most people, efficiency is still a cost issue, and not a benefit per se.

Now consider how that will factor into the choice of a vehicle. For a lot of people, all those cost calculations will be less important than perceived safety or utility arguments. So if having something that feels like a tank is really important to you, you’re going to buy something that feels like a tank and only then consider how much it’ll cost you to run your psuedo-tank. The cost calculations will weigh, overall, much less in your consideration.

But if cost of ownership is your primary consideration, then you’re going to look at the cheapest cars that meet your basic needs, and pick which one is actually cheapest to run. And so long as energy efficiency remains one cost calculation among others, when people choose to buy based on cost of ownership, you can bet they’re going to be choosing to forgo a bunch of other bells and whistles–things like upgraded radios or fancy interiors or navigation devices or things like that–precisely the kinds of bells and whistles that contribute to higher profit margins on cars. In other words, for consumers who are looking at cost of ownership, chances are very good that they’re looking for cheap (which, for the auto industry, means low profit margins).

What you don’t have, in this calculation, are very many consumers who are interested in environmental efficiency and are willing to pay more for it the way a pseudo-tank driver will pay more to feel powerful on the road. As of May–at a time when rising gas prices were already affecting consumer choices–hybrids made up 2.2 percent of the US market. (I realize this grossly undercounts the people who value energy efficiency, but it’s a fair measure of the people who will pay 10% to 25% more solely for efficiency and environmental cache.) That was when gas averaged $3.76 a gallon; it’s down to $2.02 a gallon. And manufacturers are still selling those hybrids at a loss or with slim profits, so while those 2.2 percent of consumers will certainly spend more to have an energy efficient car, manufacturers aren’t necessarily making more.

All things being equal, the market suggests that manufacturers make their energy efficient cars cheaply and their gas guzzlers more expensively, because consumers buy energy efficient cars because they’re cheap to own, whereas consumers buy trucks or SUVs or sports car because some other feature: speed or pseudo-tank or utility. And so long as gas is cheap, that will remain true.

And CAFE standards don’t change this equation at all. They force manufacturers to make more of those cheap energy efficient cars to get their fleet-wide averages down (which cuts into their profitability). And, to some extent, make those cars more palatable to less price-sensitive consumers by adding in things like air bags. But because CAFE standards don’t change the market calculations of consumers, CAFE standards don’t make energy efficiency more valuable to consumers. CAFE standards basically force manufacturers to put costs into their cars that–unlike, say, safety, for which there has been a dramatic increase of value over the years–consumers don’t value. Even while the costs of energy efficiency went down over time, those were still costs with little market value, and therefore costs that cut into the profitability of cars in the short term.

Of course, the increase of gas prices this year dramatically changed that. Fairly quickly (measured, at least, in terms of an industry that things in terms of 3-year cycles), people decided the utility-based reasons they invented for needing a full-sized pickup were less important reasons than getting a car they could afford to drive. All of a sudden, the percentage of people who valued energy efficiency spiked way, way higher than just the people who could buy a hybrid.

This meant that a lot more people who would pay for the bells and whistles that contribute to a profitable car sale also wanted a car that got very good gas mileage.

A Good Gas Tax

One good way to get auto makers to make super-efficient cars and allow them to remain profitable is to ensure that market conditions continue to value energy efficiency as a benefit unto itself, above any consideration of cost of ownership. And one way to do that is to ensure that gas prices remain high enough–with the kind of stability and predictability that would drive 3-year product cycle calculations–such that consumers continue to place energy efficiency at the forefront of their decision-making about new cars.

You could do this by imposing a gas tax that would keep gas prices up at levels that make energy efficiency a leading factor in choosing cars. Make it a big gas tax, maybe a dollar a gallon, so that the value of energy efficiency remains where it was in August. (Obviously, phase it in, but even at a dollar a gallon gas would still be cheaper than where it was in August.) And use it as a revenue source to accomplish a number of things you need to do to enhance energy efficiency all around.

  1. Retire US auto pension debt
  2. Continually invest to help all US manufactuers (incl Toyota and Honda and Tesla) retool to meet higher standards (ha! Richard SHelby, got you some cash, I did!!)
  3. Invest in public transportation
  4. Invest in infrastructure
  5. Give credits to middle and working class people to pay their gas bills
  6. Give credits to middle and working class people to get out of their gas guzzler and into something efficient
  7. As part of 6, implement a recycling program designed to meet European requirements on recycling, which will simultaneously get gas guzzlers off the road while also creating a new green economy

Retiring auto pension debt

Use some gas tax proceeds to help the American car companies become more competitive by eliminating the biggest remaining budget item that they pay that their Japanese competitors don’t pay. The more you free up the pension debt with a dedicated tax, the more the American car companies can invest in new technology and–just as importantly–the less chance there is that the Pension Benefit Guarantee Corporation has to pick up that pension obligation.

Continual investment to help all US manufactuers (incl Toyota and Honda and Tesla) retool to meet higher standards

Rather than offer one-time $25 billion packages, a gas tax could fund an ongoing investment fund, both for manufacturers of all kinds (including transplants and smaller manufacturers like Tesla) invest in production. It might also fund a general fund for technology, that would result in technologies that any manufacturer could implement.

Invest in public transportation

Goes without saying.

Invest in infrastructure 

Also goes without saying–but also addresses an ongoing problem in that decreased driving has cut into the tax-based road fund as it is. Some of this could go to pay for plug-in and/or hydrogen infrastructure.

Credits for middle class and working class people

These credits would serve to do two things. In the very short term, it would help people pay for the higher gas prices, so there were some offset of the tax for those who genuinely couldn’t afford it (but obviously not a total offset, since you still need to change the valuation of efficiency). At the same time, part of the revenues from the tax could pay for a program that got people out of old clunkers and into new, efficient cars.  (Obviously, this would stimulate the kind of good production we want manufacturers to focus on). This way, you’d increase efficiency in the short term, and keep the customer base at dealers up.

Credits for recycling

But you don’t junk those clunkers. Instead, you have the manufacturers dispose of them, with the expectation that they salvage everything possible as materials (that is, no sales of big engines, but you can sell the steel). You spend some of the funds to offset the costs of a recycling program aiming to match the European standard, with the expectation that new cars would begin to have to meet these standards. Thus, in addition to the credits for new efficient cars, the tax would also lead to a support of a vehicle recycling program. 

T. Boone or not T. Boone

h/t www.thewindturbines.com/

h/t www.thewindturbines.com/

We have had quite the go lately here at the FDL Borg Hive over the automaker bailout and, more specifically, the most pressing of which is GM. For the moment though, I want to touch on a corollary to the future of the American auto industry, and that is the transition to clean and green that needs to occur for long term sustainability of Deetroit wheels.

If we could flip the switch on a perpetual motion device, heck even the Chevy Volt, tomorrow, that would be wonderful. But we cannot. The path back to health and profit prosperity for American auto will be a process that takes time, and it is going to take intermediate steps while the new technology comes on line, gets refined and evolves into maturity.

The guy, for better or worse, that has been out front making noise about the transition from oil to clean and green is none other than the infamous, and legendary, Texas oil man T. Boone Pickens. Transition is the key word regarding the Pickens Plan as it relates to our topic de jour, automobiles. Because the Volt is not scheduled for release until 2010, and even assuming GM and its Volt makes it that far (which is no given), it will take a while for plug in technology to become deeply rooted. And, of course, a massive shift all at once to electric autos would crash our strapped and deteriorating power grid.

Pickens’ main point on internal combustion transition is that natural gas should be a, it not the, transition fuel for cars, and, more significantly, fleet vehicles.

Pickens’ Plan proposes that the natural gas that is currently used to fuel power plants could be used instead as a fuel for thousands of vehicles. Ken Medlock says that the US will continue to use natural gas for electric power generation. Natural gas burns cleaner than coal, making it an increasingly popular fuel for power plants. Gas plants also produce fewer greenhouse gas emissions.

The technology needed for Compressed Natural Gas (CNG) vehicles such as City buses, fork lifts and passenger cars with CNG drivetrains is available now. Honda sells the Civic GX, with a 170-mile range. In addition, it is possible to convert vehicles to run on CNG in addition to leaving the conventional fuel injection intact, allowing the driver to switch back and forth at will. Kits are available for the do-it-yourselfer. One can buy a CNG compressor called Phill that hooks up to the city natural gas line making it possible to refuel a CNG car at home.

There are a lot of issues to be taken with T. Boone Pickens however, there is some merit to the compressed natural gas (CNG) idea as an interim fuel to power the transition to the clean and green engine/power modalities of the future. Especially for municipal and other fleet vehicles; however, the Honda Civic GX and conversion kits are viable ideas for daily driving by individuals as well.

Now, as to whether T. Boone or not T. Boone, well that is a much more difficult proposition. It is pretty hard to listen to the Boonester preach about all this after being one of the leading right wing asshole oil men of all time. Very hard. Is he genuine? Probably not entirely, no; he stands to profit from the build out, production and sale of facilities and the product, and, make no mistake, at some point there is a domestic and global natural gas peak limit just like that of oil.

As a short term, interim part of the transition, however, there are some real merits to consideration of CNG, especially on fleets. And as to T. Boone, well I am not buying in very far to his schticht, but his relentless hawking of his plan on TV, radio, and every other forum he can get his mug in front of has some incredible side benefits of getting the public inured to alt fuels and new ways of thinking on energy. That is a very good thing. We don’t want to throw in with the man and his plan, but the publicity for wind and solar, and alt fuels is priceless.

Putin Invades Alaska

Apparently, while Alaska’s eagle-eyed governor has been traipsing about the lower 48 inciting lynch mobs, the Russians have invaded Alaska.

OAO Gazprom offered to help Alaska develop its natural resources, as Russia’s largest energy producer seeks to expand into the U.S. amid the worst chill in relations since the Cold War.

State-run Gazprom sent eight senior executives to Anchorage for talks yesterday with Alaska’s Department of Natural Resources and ConocoPhillips Chief Executive Officer Jim Mulva, state and company officials said.

Gazprom, which already supplies a quarter of Europe’s natural gas, is seeking to increase its reach with projects around the world, including in North America. The courtship of Alaska comes three weeks before the U.S. presidential election, in which Russia’s resurgence has become a campaign issue.

"The timing is as interesting as the visit itself,” said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow.

Sarah Palin, governor of Alaska and Republican candidate for vice president, has criticized Prime Minister Vladimir Putin for "rearing his head” over Russia’s sea border with her home state. Relations between the countries hit a low after Russia routed U.S. ally Georgia in a five-day war in August.

"Gazprom’s entire senior management goes into Sarah Palin’s backyard during a contentious election,” Weafer said. "There’s a message there.”[my emphasis]

Actually, I think one of two things is going on. Vote for which you think it is–or give your own explanation in the comments.

It’s possible that Vladimir Putin took one look into Sarah Palin’s eyes (between winks, of course) and saw they were soulmates: authoritarian, vindictive, and power hungry. So he decided Alaska was a place he wanted to be. (Plus, Putin’s been known to be impulsive when it comes to beautiful women.)

More likely, he saw Sarah Palin as an easy mark, and thought it’d be fun to fuck with Palin’s bid to be Vice President.

Update: Looks like the answer’s B! Putin snuck into Alaska and negotiated with Palin’s direct appointees without Palin knowing about it. 

Palin has argued that her state’s proximity to Russia, as well as trade missions between the between Alaska and Russia, have helped give her the foreign policy experience necessary to be Vice President. But the campaign said the governor did not know that the Gazprom delegation was meeting with the commissioner of the Alaska Department of Natural Resources, who is a Palin appointee. [my emphasis]

 Ut oh. I guess Putin found the weak point in our defenses…

From Pollan to the President

I’ve been arguing for a while that Michigan–the state with the second greatest agricultural diversity after California–ought to use innovations in sustainable agriculture as part of its plan to drive economic recovery.  Agriculture is going to have to be more sustainably produced in the future, and MI is uniquely suited to lead in developing the policies and technology to accomplish this goal.

But then, we should be talking about how to pursue this sustainable future more widely.

Which is what Michael Pollan does in this long letter to the next President, recommending a number of changes to our food policies. Here are Pollan’s comments on the ties between our food and the petroleum that goes into it. 

After cars, the food system uses more fossil fuel than any other sector of the economy — 19 percent. And while the experts disagree about the exact amount, the way we feed ourselves contributes more greenhouse gases to the atmosphere than anything else we do — as much as 37 percent, according to one study. Whenever farmers clear land for crops and till the soil, large quantities of carbon are released into the air. But the 20th-century industrialization of agriculture has increased the amount of greenhouse gases emitted by the food system by an order of magnitude; chemical fertilizers (made from natural gas), pesticides (made from petroleum), farm machinery, modern food processing and packaging and transportation have together transformed a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food. Put another way, when we eat from the industrial-food system, we are eating oil and spewing greenhouse gases. This state of affairs appears all the more absurd when you recall that every calorie we eat is ultimately the product of photosynthesis — a process based on making food energy from sunshine.


The F.D.A. should require that every packaged-food product include a second calorie count, indicating how many calories of fossil fuel went into its production. Oil is one of the most important ingredients in our food, and people ought to know just how much of it they’re eating.


And you should also let it be known that the White House observes one meatless day a week — a step that, if all Americans followed suit, would be the equivalent, in carbon saved, of taking 20 million midsize sedans off the road for a year. Let the White House chef post daily menus on the Web, listing the farmers who supplied the food, as well as recipes.

There a many other great suggestions in the letter. The only problem is that Pollan uses arugula as an example–one I’m sure the lizard brains will use to discredit these ideas. 

John McCain and Sarah Palin Wallowing in Oil

I noted the other day that John McCain had falsely claimed that Sarah Palin was governor of the state that provided 20% of the nation’s energy.

Now aside from the fact that McCain is wrong about his claim that Alaska provides 20% of our energy supply (it provides 20% of our oil, relatively little–at least thus far–of our natural gas, and insignificant amounts of coal, nuclear, wind, or solar power), he’s basically arguing that a guy like George Bush has the national security qualifications to be President.

And we saw how well that worked out. 

All in all, I’d say, McCain’s making a great case for voting against Sarah Palin.

Apparently, the woman McCain says more about energy than anyone else in the country–Sarah Palin–believes the same erroneous thing.

GIBSON: But this is not just reforming a government. This is also running a government on the huge international stage in a very dangerous world. When I asked John McCain about your national security credentials, he cited the fact that you have commanded the Alaskan National Guard and that Alaska is close to Russia. Are those sufficient credentials?

PALIN: But it is about reform of government and it’s about putting government back on the side of the people, and that has much to do with foreign policy and national security issues Let me speak specifically about a credential that I do bring to this table, Charlie, and that’s with the energy independence that I’ve been working on for these years as the governor of this state that produces nearly 20 percent of the U.S. domestic supply of energy, that I worked on as chairman of the Alaska Oil and Gas Conservation Commission, overseeing the oil and gas development in our state to produce more for the United States.

GIBSON: I know. I’m just saying that national security is a whole lot more than energy.

PALIN: It is, but I want you to not lose sight of the fact that energy is a foundation of national security. It’s that important. It’s that significant.[my emphasis]

 Here’s FactCheck.org correcting McCain and Palin (and me–turns out I was too generous to Alaska in my earlier post):

Palin claims Alaska "produces nearly 20 percent of the U.S. domestic supply of energy." That’s not true.

Alaska did produce 14 percent of all the oil from U.S. wells last year, but that’s a far cry from all the "energy" produced in the U.S.

Alaska’s share of domestic energy production was 3.5 percent, according to the official figures kept by the U.S. Energy Information Administration.

And if by "supply" Palin meant all the energy consumed in the U.S., and not just produced here, then Alaska’s production accounted for only 2.4 percent.

Now, I’m not so interested that McCain and Palin have been caught in a lie, again. After all, that’s getting to be old hat. Rather, I’m interested in what it says that a team claiming to support all sorts of alternative energy sources simply forget about those sources when they’re making up talking points?

Is this the proof that McCain, who used to support alternative energy has ditched that support in favor of an exclusive love affair with big oil?

Or is Sarah Palin just using this opportunity to shamelessly booster for Alaska’s oil industry, in case this Veep thing doesn’t work out?

I don’t know the answer–but the consistency of this erroneous talking point sure suggests that when they were screaming "Drill! Baby! Drill!" they meant "Drill and Do Nothing But Drill!"

McCain Makes the Case that Energy State Governors Are Great on National Security

Joe Sudbay is rightthis interview, in which McCain is challenged to explain why Governor Palin is qualified to be a 72-year old heartbeat away from the presidency, is terrible.

But I’m most interested–disturbed, really–by his latest explanation of how Sarah Palin is qualified on the matter that McCain says matters most: national security. 

Reporter: You say you’re sure she has the experience, but I’m just asking for an example. What experience does she have in the field of national security?

McCain: Energy. She knows more about energy than uh probably anyone else in the United States of America. She represe–is a governor of the state that 20% of America’s energy supply comes from there. And you all know that energy is a critical and vital national security issue.

McCain is basically arguing that serving as governor of a state that supplies a lot of America’s energy gives a person great national security credentials.

Hmmm. Governors of states that supply lots of energy … states that supply lots of energy … lets see, those would include Alaska, Louisiana, …

Ut oh.

And Texas.

Now aside from the fact that McCain is wrong about his claim that Alaska provides 20% of our energy supply (it provides 20% of our oil, relatively little–at least thus far–of our natural gas, and insignificant amounts of coal, nuclear, wind, or solar power), he’s basically arguing that a guy like George Bush has the national security qualifications to be President.

And we saw how well that worked out. 

All in all, I’d say, McCain’s making a great case for voting against Sarah Palin.

What ELSE Mukasey Declines to Prosecute: Sexual Assault of a Subordinate

I’ve just gotten through the first Department of Interior IG report, and wanted to pull out these few discrete details as an example of what Attorney General Mukasey has declined to prosecute.

The first report describes the corrupt acts of Gregory Smith, who managed the Royalty in Kind program. In that program, companies drilling on Federal land, give the government oil or gas, which the government then contracts to sell in lieu of payment for the drilling; one of the scandals underlying this program is that the companies contracted to sell the oil were getting contracts because they were cozy with someone in DOI, not because they could get us the best price. 

Among other things this report reveals is that Smith repeatedly offered himself as a consultant to companies doing business with RIK, promising to alert those companies of opportunities with other companies doing business with RIK.

But what really fries my ass is this bit. 

We interviewed yet another RIK employee who stated that in approximately 2005, Smith "insisted" that she ride in his car from one business establishment to another, and she agreed. 

The employee stated that Smith took "the long way" between the two businesses, and during the drive, he asked to go to her nearby home, but she refused. "He wanted to have sex; I said no," she recalled. Smith then asked if she would have oral sex with him, but she told him she did not want to. She said then Smith "basically forced [her] head into his lap," and she performed oral sex on him while he drove the car slowly. She said she resisted Smith when he pulled her head into his lap, but Smith did not relent and continued to pull her head down. She said Smith was "real persistent" but not violent, and she did not feel as though she had been sexually assaulted by Smith. She stated that it was difficult for her to have sex with Smith because he superivised her and RIK, but she "felt like [she] could get fired," so she did what Smith wanted. SHe said she was "scared" that if she did not do what Smith wanted her to do, it could possibly affect her employment. 

The report goes on to describe Smith telling this employee, when the OIG investigations began, that he was going to deny it if asked about it by investigators.

And the outcome?

The results of this investigation, to include a substantial amount of information obtained through federal grand jury process that is not included here, were provided to the Public Integrity Section of the U.S. Department of Justice (DOJ) in March 2008 for prosecutorial consideration. In May 2008, DOJ advised that it was declining to prosecute Smith on various charges.

Now, perhaps this woman just refused to serve as a witness to her own sexual assault. Perhaps DOJ has a good reason not to prosecute this guy that they’re not telling us.

But Smith did this while you and I were paying his salary. And Michael Mukasey’s DOJ seems to think a government manager sexually assaulting a woman on our dime is okay.

Update: Link to report added.

What Republicans REALLY Mean When They Say Drill! Baby! Drill!

They mean sex, corruption, and political scandal.

I first covered the scandal that is breaking big today at about the same time as Governor Palin took the oath of office in Alaska. 

This appears to have been the scam: Some time ago, the Interior Department introduced a "royalties in kind" program, which allowed oil companies to pay for the privilege of drilling for oil on our land in kind–in oil and gas–rather than in cold hard cash. The gimmick is that it was supposed to facilitate accounting. Up until recently (don’t worry–I’m going to figure out these dates), the oil went into the Strategic Petroleum Reserve (SPR).* But the SPR apparently is all filled up now, so recently the US government started contracting with companies to sell the oil on the "open market." But, as these things are bound to happen in the BushCo world, we didn’t take open bids for the contracts to sell the oil. We apparently just gave companies with ties to a bunch of Interior Department employees in Denver the contracts, which of course meant we got less money than we otherwise would have.

I even predicted,

How appropriate–this Administration will begin with an oil scandal. And it looks like it will end with one, too. 

That looks to be prescient, as the Department of Interior Inspectors General’s Report describing the scandal has thrown a whole lot of sex and drugs and improper gifts into the mix.

Government officials handling billions of dollars in oil royalties engaged in illicit sex with employees of energy companies they were dealing with and received numerous gifts from them, federal investigators said Wednesday.

The alleged transgressions involve 13 Interior Department employees in Denver and Washington. Their alleged improprieties include rigging contracts, working part-time as private oil consultants, and having sexual relationships with — and accepting golf and ski trips and dinners from — oil company employees, according to three reports released Wednesday by the Interior Department’s inspector general.

The investigations reveal a "culture of substance abuse and promiscuity" by a small group of individuals "wholly lacking in acceptance of or adherence to government ethical standards," wrote Inspector General Earl E. Devaney.

The reports describe a fraternity house atmosphere inside the Denver Minerals Management Service office responsible for marketing the oil and gas that energy companies barter to the government instead of making cash royalty payments for drilling on federal lands. The government received $4.3 billion in such Royalty-in-Kind payments last year. The oil is then resold to energy companies or put in the nation’s emergency stockpile.

Between 2002 and 2006, nearly a third of the 55-person staff in the Denver office received gifts and gratuities from oil and gas companies, the investigators found.

And don’t forget–those "improper gifts" even included a scam on a house for Sue Ellen Wooldridge and Stephen Griles. Sounds like … Ted Stevens, doesn’t it? Or, for that matter, Duke Cunningham, but that wasn’t oil and sex and drugs, just defense contracts and sex and drugs.

See, this is why those Republicans get so worked up when they scream for drilling. It’s not a solution to an energy crisis for them. It’s a shortcut to a gravy train that might just get them laid.

Update: the reports (there are three of them) are here

Oil Wars

alaska-oil-drilling.jpgThe Hill reports that, rather than forcing John McCain and a lot of endangered Republican incumbents to vote againt children’s healthcare again, Democrats in Congress are going to work on an energy bill that will include some allowance for drilling.

House Democrats are ready to propose an expansion of offshore drilling as part of a broader energy bill  they plan to introduce this month, according to a top Democrat.

Democratic Caucus Vice Chairman John Larson (Conn.) said the majority is prepared to back “responsible” offshore drilling through a bill that could be brought to the floor as early as next week.


“We will consider responsibly opening portions of the Outer Continental Shelf for drilling while demanding that Big Oil companies use the leases they have already been issued or return them to the public,” Larson said Saturday in the Democratic response to the President’s radio address.

Larson said the legislation will also seek to curb excessive oil market speculation and call for a reinvestment of government royalties into alternative energy technology.

This is not actually news. When Obama said he would reluctantly accept more drilling as part of a package that included a lot of other, smarter energy policies, it became clear the party would follow his lead.

And, if it is done well, it might actually be brilliant jujitsu. If the bill were to define "responsible" by requiring that states agree to the drilling and by demanding that the drilling actually look like it would do some good, it would result in very little new drilling at all–because drilling is, from a policy standpoint, not "responsible." And a package could take the Republicans’ most successful (arguably, their only) policy recommendation, drilling, off the table for the election.

Of course, that all assumes this would be done well…

Meanwhile, in Alaska, the Caribou Barbie is trying to pull of her own energy jujitsu, though it’s not yet clear what that jujitsu might entail. Andrew Halcro reports that Governor Palin is trying to get the oil companies onto a conference call this week, but it’s not yet clear why she wants to talk. 

Governor Sarah Palin has requested a conference call this week with the CEO’s of the major oil companies playing a role in the potential development of Alaska’s natural gas pipeline.

The requested participants include Tony Hayward from BP, James Mulva from ConocoPhillips, Rex Tillerson from Exxon along with others. According to my source, no one knows exactly what the purpose of the call is, but some have never the less speculated.

Last week in her address to the nation, Palin stepped far over the line of truthiness (thanks Steven Colbert) when she told the country, "I fought to bring about the largest private-sector infrastructure project in North American history. And when that deal was struck, we began a nearly forty billion dollar natural gas pipeline to help lead America to energy independence."

Halcro lists the following possible reasons she’s requesting the call:

  • She has realized she actually has to deliver on the promise she made in her acceptance speech–so she has finally decided to make nice with the oil companies and start negotiating terms for the natural gas project that will be economically viable for the oil companies.
  • She wants to persuade the oil companies to stop referring to the massive new taxes she levied against them as a "windfall profits tax" (which of course Democrats support but McCain and the Republicans oppose strongly).
  • She has realized she has to at least be speaking to oil company executives if she wants to claim to be an energy expert–so she has decided to play nice to achieve, at least, some dialogue.
  • She wants to publicly browbeat the oil companies again, to bolster the McCain campaign’s claim to being assholes mavericks.

Mind you, that is all speculation from Halcro, not verified facts.

Now, Sarah Palin may be utterly inexperienced in most things that pertain to being a Vice President; she may be a more interesting subject for stories about her false maverickyness, her love of pork, and her lying. But she is definitely in a position to offer Republicans a story to tell about energy plans. We would do well to consider both these developments–Congress’ negotiation of an energy package and Palin’s attempts to do who knows what with the oil companies in AK–as two skirmishes in the battle over who gets to claim their party has a real plan to solve the current energy pinch. 

This may be one of the policy issues that could decide this election–whether one or both of these sides successfully pulls of their jujitsu. I say "may," because who knows whether it will remain the one policy issue on which Republicans outpoll Democrats, what with the price of a barrel of oil down to $107 but with OPEC threatening to cut production. But both sides are treating it as the one policy issue that one or another side might be able to show real progress on between now and the election.

Photo by kristen.

Is Dick Stealing from the US and Giving to His Friends, Again?

Remember the Minerals Management Service? That’s the Department of Interior agency that is supposed to make sure that when oil companies drill on US or Native American lands, the landowner gets a sufficient return for the oil or gas they take out of the land, or, alternately, that a sufficient amount of oil to account for the royalty on the drilling rights is given back to the US. It’s been at the center of scandal before:

For a while, when oil companies drilled oil on federal land, one of three things would happen:

  • The oil companies would cheat and tell the government they drilled less oil than they had
  • When such fraud was identified, DOI would order its auditors to overlook the cheating
  • The byzantine rules governing royalties would make it hard to collect the money you and I are owed

So DOI started a new program. We’d let someone drill oil, and in exchange, the oil company would put a similar amount of oil into the strategic reserve. But when the strategic reserve filled up, the government started using brokers to sell our oil.

It turns out that Susan Wooldridge and Steven Griles had some close ties (as in, sharing a house) to one of the companies bidding to be that broker company, and that that company got to sell our oil even though another broker was willing to charge a higher rate (and therefore pay taxpayers more money). So basically, these two lovebirds accepted a bribe and sold our oil to the lowest bidder.

To fix that problem, they established a Royalty Management Subcommittee, which was supposed to watch out for our interests:

it’s supposed to study:

  • The extent to which existing procedures and processes for reporting and accounting for federal and Indian mineral revenues are sufficient to ensure that the Minerals Management Service receives the correct amount.

  • The audit, compliance and enforcement procedures and processes of the Minerals Management Service to determine if they are adequate to ensure that mineral companies are complying with existing statutes, lease terms, and regulations as they pertain to payment of royalties.

  • The operations of the Royalty in Kind program to ensure that adequate policies, procedures and controls are in place to ensure that decisions to take federal oil and gas royalties in kind result in net benefits to the American people.

Though the Royalty Management Subcommittee proved it wasn’t really interested in transparency and oversight, seeing as how it had a penchant for meeting in secret.

Now, to be fair, the Royalty Management Subcommittee just got started last year, and it takes a long time to reverse Dick Cheney’s corrupt ways. But an IG audit by the Department of Energy has discovered that there are completely inadequate controls on the oil that’s supposed to go into our Strategic Public Reserve, and over a quarter of the oil is disappearing.

To help add to the reserve, DOE receives a portion of the royalty oil that the Department of the Interior gets in return for allowing petroleum companies to drill on government lands and waters.

The department’s Inspector General Gregory H. Friedman and his auditors found that in 28 percent of the oil transfers they examined, the amount received did not match the estimated amount to be shipped by the Interior Department’s Minerals Management Service.

"To illustrate our findings regarding discrepancies, during a four-month period in Fiscal Year 2005, two Department contractors reported receiving 308,000 barrels of royalty oil less than the amount that MMS had scheduled for delivery to the market center. Yet, despite this significant shortfall, the Department took no action to resolve the discrepancy and to ensure that it had received all of the oil shipped by MMS," according to the audit. [my emphasis]

If you’re not vomiting up dinner yet, let me add this detail. Last year, as the Administration was putting together this year’s budget together, there was a bit of a squabble, which Dick (as is typical) won:

No, if there’s anything about the economy that keeps Dick Cheney up at night, it’s the prospect of sabotage aimed at disrupting the oil market, he told FORTUNE.

"Clearly the world depends on a global supply of oil, and that will continue to be true for some considerable period of time. Efforts to shut down the flow of oil could conceivably have a significant impact."

So when President Bush’s 2008 budget was coming together, with the goal of balancing the budget in five years, Cheney nevertheless insisted on a $947 million line item: a speedup of the flow of crude into the Texas and Louisiana salt caverns housing the nation’s Strategic Petroleum Reserve.

The budget guys pushed back: Can’t we wait until crude prices level off? No, the word came back from Cheney, this was urgent. That was all it took. "He doesn’t weigh in on a ton of issues," said a person close to those negotiations. "But when he does . . ."

When he does, the Vice President tends to get his way. "He’s an extremely effective bureaucratic operator," says Peter Wehner, formerly Bush’s director of strategic initiatives.

You see, the SPR had been full already–filled up when oil was at then-record prices (before now, when oil is again at record prices). But the Administration, under Shock Doctrine cover of Katrina, went ahead and expanded the SPR, environmental impacts be damned.

So let’s see. Dick Cheney’s buddies have, for years, outright refused to charge oil companies fair amounts for the right to drill on my and your land. When the excesses of corruption were discovered, they implemented other ways to try to fix the corruption; we would just get the oil, rather than quibble over an appropriate royalty. But come to discover that that method, too, is apparently at least ripe for massive corruption, if not already being exploited for graft. And Dick Cheney’s response?? Expand the opportunity!! I want all my buddies to get an opportunity to steal from the American government, and I’m not above invoking national security to do so!!!


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Originally Posted @ https://www.emptywheel.net/energy-policy/page/15/