Bacons Rebellion

The House of Representatives narrowly passed the American Clean Energy and Security Act last Friday by a very narrow 219-212 vote. Sponsored by Representatives Henry Waxman (D-CA) and Ed Markey (D-MA), this legislation – perhaps the most sweeping legislation ever passed by Congress – mandates reductions in U.S. carbon emissions (17 percent below 2005 levels by 2020 and 83 percent by 2050), requires that 20 percent of all electricity in the U.S. come from renewable sources (or energy efficiency offsets) by 2020, and requires new carbon emission standards for cars, trucks, off-road vehicles, railroad locomotives, boats and airplanes.

While the politics of the Waxman-Markey bill are fascinating – House Speaker Nancy Pelosi has made passage of the bill her highest priority, President Obama and his White House staff pulled out all stops to lobby for the bill, opponents of the bill have called it an economy-killing energy tax, environmental groups have said that it doesn’t go nearly far enough (or fast enough) in curbing carbon emissions and the bill now faces almost impossible odds in the Senate – a singular focus on this legislation ignores the fact that America is on the verge of its second energy crisis in as many years.

Although it is hard to believe that anyone in America could forget the pain caused by $4.00 gasoline and $4.75 diesel last summer, we now know that at least 219 members of the House of Representatives have forgotten.

If there was one lesson to be learned from last year’s energy price spike, it was that the American economy cannot function without affordable, reliable energy.

Unfortunately, litigation-happy environmental groups, the Obama Administration and leaders in Congress seem intent on ensuring that the prices we experienced last summer – the same prices that triggered the economic collapse and led to the current recession – become a permanent fact of life rather than a frightening anomaly.

The playbook that environmental groups are playing from is hardly a secret (one has only to go to their websites where they proudly announce every lawsuit and ask for donations to support their cause): block the development of domestic energy resources, block imports of energy from our allies in Canada and Mexico, block the development of renewable fuels like ethanol and biodiesel, block the development of electricity generation from all sources (including coal, natural gas, wind or biomass generation) and block new transmission development.

This litigation campaign has recently produced a decision by the DC Circuit Court of Appeals to vacate the Outer Continental Shelf (OCS) oil and gas leasing program – prohibiting future development of offshore energy resources (including a lease sale in Virginia waters scheduled for 2011). Similar lawsuits have targeted offshore development in the Chukchi Sea of Alaska that holds as much oil and gas as Kuwait and even the development of oil shale in Colorado, Wyoming and Utah where we have more oil on federal lands than in all of Saudi Arabia.

The American people overwhelmingly support increased domestic energy production in order to provide high-paying jobs and lower gasoline and diesel prices.  A recent survey that showed 70 percent of Virginians support offshore oil and gas development. Yet, Congress and the Obama Administration have adopted the agenda of the radical environmental groups and moved us significantly closer to another energy crisis.

Over the last six months, the Obama Administration has suspended the development of a new offshore leasing program, suspended oil and natural gas leases in Utah, announced its opposition to a high-level nuclear waste repository, proposed regulations that will hammer the ethanol and biodiesel industry, suspended an oil shale research and development program and announced its intention to declare that carbon dioxide endangers human health and welfare. These actions will trigger a massive landslide of federal regulations on every human activity that requires the use of energy.

In addition to the Waxman-Markey bill, Congressional leaders have introduced legislation to raise taxes and royalties on oil and natural gas production, prohibit the development of unconventional domestic resources (such as oil shale, oil sands and heavy oil), block imports of oil and petroleum products from Canada and Mexico through the development of a Low Carbon Fuel Standard and block production of natural gas using hydraulic fracturing (potentially cutting domestic production by over 30 percent).

The economics of energy are pretty darn simple – when demand outstrips production (as it did last summer), prices will go up.

The price collapse that we experienced in gasoline and diesel prices last fall was a direct response to demand destruction caused by the economic collapse – not by a sudden increase in supply. In fact, there has been no appreciable supply increase over the last year at all – meaning that when the economy recovers, we can expect both energy demand and prices to rise in direct proportion to economic growth.

Unless Washington gets a major wake-up call from the American people, the restrictions on domestic energy production that the Administration and Congress are putting into place will only exacerbate the supply-demand imbalance and cause prices to climb even higher.