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My Drilling Proposal is on the Table

I said I wasn’t going to update until Wednesday, but have a little free time this morning. Imagine my surprise to read this headline today:

Senate Democrats offer deal to break energy bill standstill

Turns out they are proposing the same deal that I proposed in my essay from last week on coming to a compromise on the drilling question:

WASHINGTON (CNN) — Senate Majority Leader Harry Reid surprised Republicans on Monday by offering them a chance to vote this week on four GOP-backed amendments to an energy bill, including one that would expand offshore oil drilling.

The possible breakthrough comes days before Congress recesses for August and lawmakers return home to face constituents anxious for relief at fuel pumps.

Reid, D-Nevada, said Democrats would allow votes on GOP amendments that would permit new drilling on the outer continental shelf; the development of oil shale in Western states; construction of new nuclear power plants; and broader legislation that Republicans have dubbed “find more, use less.” That legislation includes expanded offshore drilling, conservation initiatives, the improvement of battery technology, and language to curb speculation in the oil futures market.

Energy legislation also has been stalled in the House. A bipartisan “energy working group” of 28 lawmakers hopes to break the impasse this week by proposing a compromise that couples new offshore drilling with conservation and renewable energy programs.

Yet House Speaker Nancy Pelosi, a California Democrat, says she won’t allow a vote on a bill that includes new offshore oil drilling.

It is exactly this coupling that I think will get both sides to an agreement. Pelosi runs the risk here of losing all negotiating power if she blocks this sort of compromise. Pressure to drill will continue to increase, and right now the Democrats could still demand pretty generous concessions. I predict that unless supplies can grow (and I don’t expect them to grow much) and stay ahead of demand, then the pressure to drill will only increase over the next few years – and the Democrats will be in a weaker negotiating position. On the other hand, I think we are going to end up with a Democrat for president, and he will have something to say on the matter as well.

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July 29, 2008 - Posted by | Alaska, alternative energy, ANWR, energy policy, Harry Reid, Nancy Pelosi, OCS, oil exploration, oil imports, oil prices, politics

29 Comments

  1. Well, I’ll be darned.

    I’m still a little skeptical that this will get off the ground, but the fact that it’s been proposed is excellent news. I’m not really a supporter of expanded drilling, but, like Robert, I see it as pretty much inevitable. Given that, I’d much rather see a compromise like this that would at least have some positive effects.

    Comment by Sean Daugherty | July 29, 2008

  2. Hey, while RR has nearly ditched us, he has been carousing around with those lulus on the TOD mass hysteria website.
    Sometimes I think RR’s website actually has some meaningful influence. He was “against” ethanol before it was widely understood there was serious downsides, and now his oil drilling idea is catching on.
    I do think a better energy plan is to tax gasoline, but no one is going to propose that…..

    Comment by benny "peak demand" cole | July 29, 2008

  3. Benny, gasoline is taxed. During the presidential primaries, Hillary Clinton made a big deal of her gas tax “holiday.”

    It’s not taxed very much, granted, especially in comparison to some other countries (most of Europe, for example). I’d support increased taxes if there was some sort of guarantee that the revenue would go towards research and/or development of alternative energy sources. But you’re right about no one proposing an increase: if that couldn’t get traction a decade ago when oil was hitting historic lows, what hope is there now?

    Comment by Sean Daugherty | July 29, 2008

  4. Reading the political tea leaves, RR? Here’s what I see:
    1. Congressmen and Senators from both parties have to face an angry public, hence the talk of compromise. The Dems, as the party in control of Congress are more vulnerable to the public’s anger. Hence Harry’s conversion – Nancy is apparently still clueless. Let’s hope it leads to something meaningful before the recess.
    2. On the presidential race, I’m a bit surprised that it is still a horse race, what with the Republican Party pretty much in disarray, McCain seemingly off message for the most part, and Barrack just back from a very successful overseas trip (Thanks for the suggestion, John). Nine points would, of course, be more than enough come November, but for right now, it suggests that this is still anybody’s race.

    Comment by Optimist | July 29, 2008

  5. The Senate deal is for show. Both sides want to hold votes for campaign purposes. They won’t actually pass any drilling bills.

    The GOP wants four bills so west coast senators can vote nay on CA and Alaska drilling but yea on Florida and oil shale. Florida senators can of course vote the opposite. The Dems wanted a single bill to force the GOP into a corner. If they vote yea on a unified bill they suffer NIMBY effects in November. But if they vote nay then Dems can say “don’t blame us for high gas prices — Republicans voted against drilling, too.”

    The House action is a little more interesting. The GOP is trying to push Pelosi into a corner, with some success.

    Comment by doggydogworld | July 29, 2008

  6. Oil is trading near $121 a barrel today. I just tanked up for $3.85 a gallon. At this rate,if oil drops another $100 a barrel,I can fill up for $2.99 a gallon.

    Comment by Maury | July 29, 2008

  7. The Senate deal is for show. Both sides want to hold votes for campaign purposes. The GOP wants four bills so coastal senators can vote nay on offshore drilling but yea on oil sands/nuke/whatever. The Dems wanted a single bill to force the GOP into a corner. If they vote yea on a unified bill they suffer NIMBY effects in November. But if they vote nay then Dems can say “don’t blame us for gas prices — even Republicans voted against drilling.”

    The bigger risk for the Dems, though, was adjournment while still in stalemate. Angry voters want action. Thus the compromise.

    The House action is a little more interesting. The GOP is trying to push Pelosi into a corner, with some success.

    Comment by doggydogworld | July 29, 2008

  8. Does the GOP have any west coast senators? Who are they trying to protect?

    Comment by robert | July 29, 2008

  9. Senator Gordon Smith of Oregon is Republican

    Comment by clee | July 29, 2008

  10. It’s about damn time Robert. When you’ve finished sorting out the States, can you come and fix the energy mess in Australia?

    Comment by Anonymous | July 30, 2008

  11. Maybe US congressmen are more worried about real estate exploding or rather imploding before they get re-elected?

    America’s house price time bomb
    http://news.bbc.co.uk/2/hi/business/7529277.stm

    If that takes more big banks down, exhausts the FDIC and US Treasury actions don’t go at all well, the price of gas won’t be nearly as much an issue.

    Comment by Anonymous | July 30, 2008

  12. I’m flabbergasted – even a blind squirrel finds an acorn now and then, eh? I just hope this isn’t more posturing – people are really not going to put up with the stalemate any longer.

    As for senators from coastal states that want to vote against drilling, here’s my idea: vote in favor of this bill and then help your state legislature vote against drilling if that’s what the people back home want. The federal government should get out of the way, that’s all.

    Comment by Anonymous | July 30, 2008

  13. OT, but there is an article on TOD today from Rigzone, that says Venezuela has perhaps 1 trillion barrels o heavy crude, and its is tricky to lift. So difficult, it costs as much $1 a barrel to get it out. Yes, a whole dollar.
    Chavez by himself is the greatest menace to world prosperity ever known.

    Comment by benny "peak demand" cole | July 30, 2008

  14. OT, but there is an article on TOD today from Rigzone, that says Venezuela has perhaps 1 trillion barrels o heavy crude, and its is tricky to lift. So difficult, it costs as much $1 a barrel to get it out. Yes, a whole dollar.

    If you read the article, it says less than 10% can be recovered using this method. The article notes “[it] is remarkable, because at room temperature, the oil is as thick as peanut butter.”

    It really is not about reserves, but flow rates.

    Comment by bc | July 30, 2008

  15. bc-

    Actually the article talks about 20 percent recovery…at $1 a barrel. Can we go to 30 percent for $5 a barrel?
    And at $40 a barrel, what becomes possible?
    1 trillion barrels!
    I am extremely dubious about Peak Oil. What we are enduring is Thug OIl.

    Comment by benny "peak demand" cole | July 30, 2008

  16. ==Benny, gasoline is taxed. During the presidential primaries, Hillary Clinton made a big deal of her gas tax “holiday.”==

    But thats not a gasoline tax.

    Thats a tax on using roads, which just happens to be attached to the price of gasoline.

    EVERY CAR (eventually) is going to have to pay to maintain the roadways, one way or another.

    Comment by GreyFalcon | July 30, 2008

  17. That said, this bill looks fine assuming 2 things.

    1. Strict Liability for Offshore Drilling
    2. No drilling in endangered habitat (i.e. ANWR)

    Comment by GreyFalcon | July 30, 2008

  18. http://www.nytimes.com/2008/07/24/business/24fuel.html?ei=5124&en=d1584131a6282abd&ex=1374638400&adxnnl=1&partner=permalink&exprod=permalink&adxnnlx=1217448060-7WSTf205e7Po3CHtxlb7CQ

    Biofuel VC funding in the first half of 2008 is about $612 million, up from $375 in all of 2007 (Thomson Reuters.)

    Interesting estimate: "PFC Energy, a Washington consulting firm, counts projects worth perhaps $1.5 billion that will total more than 300 million gallons of capacity by 2011"
    Is this gallons per year? $1 of investment resulting in $0.60 in annual revenue (not profits.) That is a low RoI. I wonder how quickly bio fuel production increases.

    I am using a wholesale price of $3 per gallon to be conservative. Biofuels might also have lower energy intensity than ordinary gasoline or diesel.

    Comment by Anand | July 30, 2008

  19. “…democrats will be in a weaker negotiating position…”

    i suppose it all depends on the results of nov elections. the electorate has another opportunity to speak. will they take it? what will be their message. whatever the rsults, this will be the only opinion poll that counts on the issue for a significant time.

    fran

    Comment by Anonymous | July 31, 2008

  20. “Is this gallons per year? “

    Unfortunately,yes anand. But,2011 is like day one for biofuels. Cellulol and biocrude production will scale up quickly imo. LS9 claims they can make a barrel of biocrude for $50. They claim it will pack more energy than fossil crude,and will be much cleaner. Of course,we’ll have to wait for 2011 to see what comes of it. It’ll be interesting to see how the economy is affected by biofuels. More and better jobs is my hunch.

    Comment by Maury | July 31, 2008

  21. re: Maury,
    ==Cellulol and biocrude production will scale up quickly imo.==

    I somehow doubt that.
    Not enough resources for it.
    http://greyfalcon.net/biolimits.png
    greyfalcon.net/mythsofbiofuels

    Comment by GreyFlcn | July 31, 2008

  22. greyfalcon,estimates are all over the map. I’ve seen the “30% of biofuels from waste alone” bandied about.

    “Enough biodiesel to replace all petroleum transportation fuels could be grown in 15,000 square miles, or roughly 12.5 percent of the area of the Sonora desert (note for clarification – I am not advocating putting 15,000 square miles of algae ponds in the Sonora desert. This hypothetical example is used strictly for the purpose of showing the scale of land required). That 15,000 square miles works out to roughly 9.5 million acres – far less than the 450 million acres currently used for crop farming in the US, and the over 500 million acres used as grazing land for farm animals.”

    http://www.unh.edu/p2/biodiesel/article_alge.html

    Comment by Maury | July 31, 2008

  23. Why not ANWR, GrayFalcon? You call it “endangered habitat”, what exactly is meant by that, is it the habitat that’s endangered (if so, how?) or is it habitat for something that’s endangered (if so, what?). I’ve seen pictured of the area they want to drill in, it’s the coastal plain that looks an awful lot like Prudhoe Bay to me.

    Comment by Anonymous | July 31, 2008

  24. One of the amusing side items in this whole drilling topic is the way the R-Party has shifted blame. Let me tell you something: Coastal areas in the US are rich areas. That means they are R-Party areas.
    And nobody wants those oil wells in their view.
    Try drilling off the coast of Newport Beach in Orange Co., CA. See what happens. The R-Party guv of Florida, Jeb Bush, has promised to never allow any more drilling off the coast of Flroida. And so on.
    I predict not much more drilling off of US coasts. Rich people own those homes, and rich people run this country.
    And I always say: Everybody becomes a greenie-weenie when the rendering plant is proposed for their neihborhood.

    Comment by benny "peak demand" cole | July 31, 2008

  25. Funny, I was reading that 51% of Californians and 77% of Republicans surveyed in California, support off-shore drilling.
    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/30/BAHL122B1T.DTL
    I’m betting that a lot of them are the Republicans in the Inland Empire and other such places that have no view of the ocean.

    BTW Jeb Bush hasn’t been Governor of Florida for 3 and a half years.

    Comment by clee | July 31, 2008

  26. From the St. Petersburg Times

    “June 25, Crist: “Only when we are able to do so far enough from Florida’s coast, safe enough for our people, and clean enough for our beaches, should we even consider increasing our oil supply by drilling off Florida’s shores.”

    June 26, McCain adviser Doug Holtz-Eakin, in the Tampa Tribune: McCain backs the 2006 law that bans drilling in the eastern Gulf. “If the people of Florida view that as something that should be off limits, it remains off limits.”

    Comment by benny "peak demand" cole | July 31, 2008

  27. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/17/MN0511QA3H.DTL

    51% of Californians OPPOSE offshore drilling.

    Comment by robert | July 31, 2008

  28. Dueling opinion polls. Whether it’s 51% in favor, or 51% opposed, either result is within the sampling error of both polls.

    Comment by clee | August 1, 2008

  29. Wait a second, did you get this plan from Paris Hilton?

    Comment by odograph | August 6, 2008


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