Kerry’s Energy Non-Policy

National Politics 152Comments (3)http://mickc.whizardries.com/archives/2004/05/25/kerrys-energy-non-policy/Kerry%27s+Energy+Non-Policy2004-05-25+22%3A35%3A50MickC

Four years ago, George W. Bush was criticized for merely asserting that he had a plan. Last year, Arnold Schwarzenegger was criticized for not discussing the details of his plans to get California out of its financial morass. So, in 2004, now we have John Kerry come along and say… you got it: “I have a plan.”

Let’s look at the “features” of his Kerry Energy non-Plan:

1. John Kerry will create an Energy Security and Conservation Trust Fund capitalized by existing oil and gas royalty revenues and dedicated to accelerating the commercialization of technologies that will reduce America’s dangerous dependence on oil.

Let’s see. In FY 2000, the Department of the Interior, Mineral Management Service said that the US Government made approximate 8.2 billion dollars from oil and gas royalties. After various fund (like the Historic Preservation Fund and the Reclamation Fund) and return payments (to the various states and Indian tribes), some 5.1 billion dollars was sent to the federal treasury for appropriation by Congress to various other programs.

Now, John Kerry is not telling us some things in his plan:

1. What percentage of funds he’s going to reallocate for this grand purpose
2. How he will replace the now earmarked funds that he is removing from discretionary spending
3. What the priorities are in spending this new Trust money
4. Why the existing Land & Water Conservation Fund with its annual budget of $899 million isn’t sufficient to this task

All he has done is some handwaving and muttering of platitudes. “I’ll move money around” is not really a plan without saying what programs or services will be cut because funding got moved to this new fund. You can’t really evaluate the wisdom of this approach because you still don’t know what he’ll do other than move money around.

2. Americans should drive the cars, SUVs, minivans and trucks of their choice, but that these vehicles can be safer, more efficient and affordable. Kerry believes that we should increase our fuel economy standards to 36 miles per gallon by 2015 and will also provide tax incentives for consumers to buy the vehicles they want and incentives for manufacturers to convert factories to build the more efficient vehicles of the future. Taken together these proposals will enhance national security, strengthen the American auto industry, and protect and create jobs.

Wow. Now that’s ambitious. He’s talking about the national fleet standards. In other words, the average fuel efficiency of all vehicles on the road should be 36 miles per gallon. This includes cars, SUVs, minivans, and trucks. According to the Energy Foundation, the EPA’s 2000 figures are 24 miles per gallon. So, John Kerry wants us to have the average of all vehicles on the road increase by 12 miles per gallon in 15 years.

How is he going to do that? Hold on to your socks! John Kerry plans tax cuts incentives for the rich! Yes, that’s right, boys and girls, Sen. John Kerry wants to cut taxes for those rich, EVIL, “Benedict Arnold,” automobile corporations to retool their plants to produce more fuel efficient vehicles. He also wants to cut taxes for those people wealthy enough and willing to fork over the cash (it’s usually a LOT of cash) to buy a more fuel efficient vehicle.

Those really are some pretty good ideas. I am in general support of tax cuts, for whatever reason, so I say “Bring on the tax cuts!” But, it is also flawed. This is the reverse of getting people to stop smoking by raising cigarette taxes. Yes, some people will do it, but you do not usually reach a critical mass by tax manipulation. The problem with alternative fuels is cost and infrastructure. It simply costs too much to buy an alternatively fueled vehicle. In comparison, internal gasoline combustion engines are still too cheap and cost-effective. If you want to do this through tax manipulation then Kerry needs to go further and advocate some other things:

1. A 100% tax on the purchase of internal, gasoline combustion engine vehicles, including private sales.
2. Bring back the idea of the additional $0.50 per gallon federal tax on gasoline.
3. Institute a new “infrastructure tax” on sellers of petroleum products (like Joe’s gas station there on the corner and your heating oil supplier — remember this is really about energy independence, not warmth, comfort, or alternatively fueled cars, so buck it up!) of 1% of gross sales and forbid it being passed on to consumers.

If he does these things, then tax manipulation will likely bring about the critical mass of alternative fuels that he claims to be wanting. Of course the drawbacks to that plan are: (1) getting Congress to pass it, and (2) getting re-elected in 2008.

3. While John Kerry believes our nation needs a strategy to reduce dependence on oil today, he knows we can harness technological innovation and ingenuity to develop a hydrogen-based economy for the future. Hydrogen has great promise as a clean, domestic, and reliable energy source for the future. It has the potential to power our cars at 100 miles per gallon without pollution and, with the right technology, can be produced efficiently from natural gas and coal. Eventually, John Kerry believes that we can build a truly clean and secure economy based on hydrogen — a clean fuel that we can eventually get entirely from renewable sources from our farms, the wind, solar energy, hydropower and geothermal sources.

Ah. So, he wants to use hydrogen! Forget propane, butane, and all of those other -anes. We need HYDROGEN!!!! We can get it from water, guysers, the wind, the sun… and cow farts.

Again, note the lack of specifics other than “WE NEED HYDROGEN EVENTUALLY!!!!” Which may, or may not, be true (and probably isn’t since we’ll be talking about coal here shortly). How is he going to get us to build a hydrogen-based economy? Well, he doesn’t answer that. And what will he do about gasoline prices while we get to 100 mile per gallon “hydrogen economy based” vehicles? We’re currently operating at 96% of total capacity at our refineries, so the supply is there but we are getting choked by the fact that refineries cannot produce gasoline as fast as we can consume it.

We can’t bring down prices without increasing that refined supply to meet demand. Saying “We’re going HYDROGEN!” does nothing to bring down those prices during the years that it would take to make the transition. Remember that it generally takes five to seven years for a country to convert from leaded gasoline to unleaded gasoline, and Russia still hasn’t fully converted even though it has been almost twenty-five years since their first, abortive efforts. Converting to an entirely different energy source (i.e.: petroleum to hydrogen) is more likely a fifteen to twenty year undertaking than a five to seven year task.

4. The American economy is twice as efficient today as it was some 30 years ago. In part, that’s because we accomplish more with less through efficient technologies. But studies by the Department of Energy and other agencies show that we can save significantly more energy through advances in energy efficient technologies – heating, lighting and manufacturing – that only need to be implemented. John Kerry believes that the government should promote the efficient use of energy in the places that we work and live. Kerry will cut the Government’s energy bill 20 percent by 2020 – saving the Federal government $8 billion over the next ten years – and will challenge municipalities, corporations, universities, small businesses, and hospitals to do the same. He will also provide tax credits for energy-efficient buildings and homes.

First of all, let me tip my hat to John Kerry for doing something that very few other Presidents have been able to do since the time of George Washington: hold such sway over both the public and the government that he will be able to single-handedly cut the Government’s energy bill by 20% some eight to twelve years after he leaves office (assuming, of course, that he wins in November). That’s truly an accomplishment there, John! It’s also the only thing of true substance in this plan, other than maybe the hint toward the (likely annual) John Kerry Energy Savings Telethon (I propose that it air opposite Jerry Lewis on Labor Day so we can make a political statement WHILE we help out Jerry’s Kids).

And again with the tax cuts for the rich. And this time, it’s a tax “credit”! So, if you have so many other tax write-offs that you owe no taxes then John Kerry proposes that the government actually pay you for having an energy-efficient home. Now, why do I say “the rich”? Because people with low incomes tend not to be able to own their own homes. As prices continue to climb due to higher energy costs (which is something still unaddressed in this “plan”), more and more middle class families will find themselves priced out of the market.

5. John Kerry believes that America needs a national market for electricity produced from renewable energy, such as wind, solar, biomass, geothermal and hydrogen. Kerry supports a national goal of producing 20 percent of our electricity from renewable sources by 2020. This standard will encourage the market to respond by finding the most efficient and effective way of meeting that goal through a credit trading system.

This I won’t really comment on. It’s not a plan it’s a goal. If we don’t make it, well, it was a goal. If we surpass it, then we can pat ourselves on the back. Although I find it interesting that John Kerry advocates the idea that the market is subject to the government (notice that it’s the market’s job to meet the government’s goal). Back in the day, we called that a “command economy” not a “market economy.”

6. Natural Gas. This is broken down into sections, so I’ll tackle a section at a time.

While much of the expected pressure on the natural gas market is due to supply shortages, there have been abuses in the market for natural gas – such as alleged manipulation of capacity in the western markets, inaccurate filing of trade data – that ultimately have an adverse effect on the prices consumers pay. John Kerry will make sure that any abuses are dealt with effectively and prevented from reoccurring. This will require the Federal Energy Regulatory Commission to be more diligent and aggressive in pursuing anti-competitiveness practices.

John Kerry’s plan: Make the Government be more diligent! More aggressive! Well, at least now we know that he’ll tap Elliot Spitzer for Attorney General. But he does not outline how the FERC could be more diligent or aggressive.

John Kerry believes that the United States should reach out and develop a long-term partnership with our immediate neighbors and friends Canada and Mexico to develop and expand North America’s robust energy supplies. By looking beyond our borders, as well as to our nation’s huge stranded gas supplies on the North Slope of Alaska, we have the potential to secure long-term energy supplies that help meet our demand for energy. For example, Canada has huge stranded natural gas capacity that has no way to reach major markets, and Mexico likewise lacks an adequate energy infrastructure to allow it to tie into major North American energy markets. Presidential leadership must be interjected into this equation, and John Kerry would make this a priority issue with our North American neighbors.

“The Plan” gets more ambitious now: John Kerry for Emperor! You see, Canada and Mexico aren’t serious about energy production and John Kerry sees this as the obvious swipe at America that it is! And, what’s more, he’s going to make this a priority issue with them!

As for what he can really do…

He proposes drilling for more in Alaska! What a novel idea! Too bad that even back in 2000 it was pointed out (in opposition to George Bush’s energy plan, no less) that 95% of the North Slope was already open to exploration. When it comes to ANWR, Kerry opposes it because he thinks it will take 20 years before we “see a drop of oil.” So, perhaps he thinks that expanding drilling into that other 5% of the North Slope won’t take quite as long and provide us with all we need.

7. John Kerry supports developing natural gas sources in the Gulf of Mexico on areas already open for drilling. He supports temporary incentives that encourage development in this area.

He really could have collapsed these two into one: “I support more drilling. Get production caps off of the backs of producers so that they will drill more.” Well, except that he doesn’t mention production caps. He just says “drill more.”

8. We need a domestic pipeline infrastructure that is capable of delivering natural gas where it is needed, when it is needed, in a safe and reliable manner. For example, the lack of pipeline infrastructure may be impeding development of natural gas on public and private lands on the eastern front of the Rocky Mountains, which are believed to hold very significant reserves of natural gas. Over 60 percent of the natural gas reserves in this region are available for lease under standard lease terms, according to a recent government report. John Kerry’s plan would ensure that we develop needed pipeline infrastructure and supplies in appropriate areas in an environmentally sound and safe manner.

More pipelines! Now we’re talking! Actually, this would do little to help. Those $2.00/gal. gasoline pump prices? That’s a lack of refining capacity. Even if Saudi Arabia, Iraq, Venezuela, and the rest of OPEC flooded the market with oil and the natural gas that usually accompanies it, there is little overhead capacity to process that theoretical additional supply. If he wants to be helpful, he needs to be talking about building more of those ugly refineries so we have something to take oil and gas and turn out the refined products we actually need.

9. There are ways in which we can improve our ability to import natural gas from reliable foreign sources. The current infrastructure for importing natural gas from overseas is limited as the natural gas must be liquefied at super cold temperatures for shipping overseas and returned to gas form before it can be put in the domestic pipeline system. There are currently only four terminals in the U.S. where liquefied natural gas is delivered and these facilities often raise challenging local issues. John Kerry would support new technologies under development to address some of the local concerns about this transportation system, including development of ship-based regasification systems that would allow the LNG to be regasified offshore and moved to shore by connecting to underwater pipelines.

Not a bad idea actually. I think he could even find support in Congress to develop ship-based regasification systems for LNG. But, he does this to seemingly offset the “challenging local issues” presented by LNG regasification terminals. So his solution? Move the problem offshore and into the water. This will eventually mean problems with his “base” as the realize the potential for the release of massive amounts of LNG and refrigerant into a marine ecosystem.

10. Advanced technologies, commercially available today, can dramatically increase the efficiency of natural gas use for power generation and end use applications, including heating and cooling. For example, combined heat and power systems which provide both electric and thermal energy to commercial and industrial users can achieve efficiencies greater than 70%, compared with power plants that operate often at half that level. And gas-fired appliances available today can substantially cut homeowners natural gas bills which may hit record levels this winter.

Cool! Energy policy and economic stimulation…. Um, sorry. I thought we were getting yet another tax cut with this energy policy. Pointing out that something is available off the shelf is not energy policy. I think it’s really cool that we have 70% efficient combined heat and power systems. But this isn’t a plan. This time, it’s not even a goal. It’s news. And some of it not even new.

11. John Kerry’s plan does not necessarily spend more than the Republican energy bill, he just has different priorities. While John Kerry wants to invest in renewable energy that can reduce our dependence on foreign oil, the Republican bills advocate big subsidies for large, well-financed energy companies. The House Republican energy bill authorizes billions in new spending and tax cuts for the industry. The Senate bill also has subsidies for the industry. John Kerry believes we need an energy policy that puts federal resources into creating the technologies that will create energy security, create jobs and protect the environment.
At the same time, John Kerry believes that the nation can save money through targeted policies to improve the management of energy and public resources. For example, we can modernize the sale of mineral rights on public land by ending the sale of public land rights at $5 per acre and save $519 million over five years. John Kerry’s plan to cut electricity in the Federal government would save $8 billion over the next ten years. And John Kerry would close a loophole that allows small-business owners to deduct $100,000 for luxury sport-utility vehicles through a law meant to benefit farmers and others from being penalized [sic] by the luxury tax when they purchase pickup trucks and tractors.

I won’t comment on the first paragraph there. Really, it’s not worth it.

But, the second paragraph is actually starting to look like a plan.

Modernization of land rights sales. I’d be all for taking that $5 and adjusting it for inflation. The idea behind that law was to make it affordable to settle. So, we adjust that cost up so that we’re talking rough equivalances here.

But then it stops. Next he tells us again about how he is going to make government save money, even after he is out of office, and suggests that small businesses (note we’re talking about small business owners here, not people who work 8 to 5 for someone else) shouldn’t be able to buy an SUV for business use the way that a rancher can buy a new pick-up truck. I would submit though that he’s double-talking here. Note that he says “and others”. So, who are those others? Maybe, just maybe, that would be “small business owners.” Nah. Too obvious.

12. For too long there has been a deadlock between those who support using coal and those who support improving the environment. George Bush tells coal producing regions to fight environmental protections because they will hurt the industry. Others believe there is no future for coal. The reality, however, is that coal is an abundant domestic fuel that is used to produce more than one-half of our electric power. John Kerry believes that coal should be part of the solution to our energy and environmental challenges and that we need to forge a new way to harness technology to develop and deploy clean electric power from coal. At the same time, John Kerry believes that we need clear benchmarks and a flexible framework by which to measure the emissions performance of existing and new uses of coal.

Yay coal! And your mama always told you that Santa only brought lumps of coal to you if you were a bad kid!

13. John Kerry believes that we need leadership to lower the four leading power plant emissions – nitrogen oxide, sulfur dioxide, mercury, and carbon dioxide. He also is committed to helping the coal industry and the communities that support it be part of America’s energy future. He wants to make the coal industry part of the effort in developing and implementing new cleaner coal technology. John Kerry believes we must invest $10 billion over the next decade – a five-fold increase – to help transition from the current generation of older and dirtier coal plants to cleaner and more advanced coal-fired power plants Kerry believes we must also invest in new research that can make sure clean coal is a major contributor in meeting future energy needs, including playing an important part in the production of hydrogen. This approach will be good for the environment and public health and will assure coal workers and their families are an important part of the next generation of energy technology for our nation.

And finally, we get to the last paragraph of this “plan.”

Leadership! That’s what we need! The industry is adrift on the sea! Get Cap’n Kerry at the helm! Oh. Wait. He was only a Lt. (j.g.). Maybe he means that he’ll be leading from the front and we’ll see a line-item in his first budget to put a lab in the White House so he can find the way to lower emissions!

The $10 billion for new factories idea is something I would consider to be a part of a plan, although we can only assume that these plants produce more electricity per ton of coal since this is, after all, an “energy” plan. It’s probably even a good idea. But, again, he doesn’t outline where this money is coming from so we cannot decide if his shifting of budget priorities is even a good idea. The total of the numbers he gave above in savings as a result of his energy savings and raising the price on land ideas is $8.5 billion, which leaves us $1.5 billion short. Maybe he thinks that soaking small business owners to the tune of $1.5 billion is a good idea.

So, to recap, here’s Kerry’s plan:

1. Set up a Fund.
2. Tax cuts.
3. Get Elliot Spitzer to be Attorney General.
4. Tax credits.
5. More drilling for fossil fuels.
6. More pipelines to transport gas to already over-worked refineries.
7. Modernize land rights sales
8. Raise taxes on small business.
9. $10 billion to transition to new, cleaner coal plants

It’s not much of a plan, but some of it is good. On the other hand, as my German professor used to say, “Even a blind chicken occassionally finds some corn.”

MickC @ May 25, 2004