Energy Scorecard: Romney vs. Obama

By Larry Bell -- October 8, 2012

Elections have consequences, and the upcoming one promises to have dramatic impacts for our energy-driven economic future.

Consider what each major contender has said regarding these key issues, with the incumbent promoting an “all of the above, but not too much fossil fuel” policy, and the major challenger promoting more of an “all of the best” energy policy.

Oil and Gas

The energy industry begins from the ground. The two candidates’ drilling policies are markedly different.

Obama: Last May, President Obama seemed to be expressing a drilling epiphany when he said: “we should increase safe and responsible oil production here at home.” There was his oil moment in Cushing, Oklahoma. Yet nearly two-thirds of federal lands are currently off-limits to drilling and mining, and leasing has slowed in recent years.

Oil production has been declining on federal lands, while booming on private and state lands. As America continues to dive deeper into debt and export industries and jobs overseas, the lifeblood oil and gas industries essential to fuel recovery are being constricted. Meanwhile, our neighbors, along with Russia and China, are aggressively pursuing offshore development adjacent to our borders.

Mexico is drilling a deepwater well only 22 miles from U.S. waters in the Gulf of Mexico; Cuba plans to drill 60 miles from Key West; the Bahamas are proceeding with leases not much farther away; Canada is actively drilling near the Maine coastline and in the Beaufort Sea just east of Alaska; and Russia is aggressively moving into the Arctic Ocean at Alaska’s western boundary.

At the same time, a massive Chinese-built semi-submersible oil rig has been dispatched from Singapore to a position off northwest Cuba, about 50 miles from Key West. Spanish oil giant Repsol YPF is leading a consortium that will operate the rig at depths more than a mile deeper than the Deepwater Horizon.

Thanks to snail’s-pace permitting policies, eleven deep water rigs have departed U.S. Gulf waters for Brazil, Egypt, Angola and other opportunities since April 10, 2010. Although the Obama administration recently proposed to allow a modest expansion of offshore drilling in the Arctic Ocean and the Gulf of Mexico as the first concessions since the 2010 Deepwater Horizon spill, Atlantic and Pacific sites will remain off-limits to avoid a controversial decision before the 2012 election.

Romney: The major Romney’s six-point energy plan revolves around increasing domestic oil and gas production in order to spur job growth. Key features entail expansion of offshore drilling along the Continental Shelf, streamlining regulations, and reducing wait times for drilling on federally controlled lands by turning over permitting authority to states. He also calls approval of completing the Keystone XL pipeline to bring oil in from Canada, consent that Obama has withheld, a “no brainer.”

Romney maintains that in addition to the 15 million daily barrels of oil the U.S. currently produces, his approach will produce two million more from offshore reserves plus an additional two million from “tight” oil production made possible through horizontal drilling and fracking. He also predicts an equivalent of 2 million barrels/day can be obtained from natural gas deposits.

Romney’s running mate Paul Ryan has voted to open up the Outer Continental Shelf to oil drilling, has voted against keeping an offshore drilling moratorium in place, and against prohibiting oil drilling and development in ANWR. Ryan has also voted against removing oil and gas “subsidies” (corporate tax breaks available to all corporations), and in favor of permitting and constructing new oil refineries.

Coal

President Obama is obviously using the EPA to make good on a 2008 campaign dictum that “if someone wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.” And thus electricity rates will, in his words, “necessarily skyrocket.”

According to the U.S. Government’s Energy Information Administration, declining demand for increasingly expensive electricity in combination with a stagnant economy and costly EPA regulations are likely to result in closures of 175 coal-fired generators, representing 8.5% of America’s coal-fired capacity. A record 57 generators are expected to shut down this year (nine gigawatts of electricity), and nearly ten gigawatts more from 61 coal-fired plant closures will occur by 2015.

While Romney has come out in favor of utilizing coal, the industry is likely to be in for a tough time regardless of which party rules the White House and Congress. Coal’s primary survival battle is in the electric utility marketplace where it is facing tough price competition from abundant and cheaper supplies of natural gas.

Whereas coal produced 51% of net U.S. electricity generation in 2003, its share fell to 43% during the first nine months of 2011, while natural gas’s share jumped to nearly 25% from under 17% in 2003. Coal prices jumped an average 6.7% per year over the past decade. A continuation of the Obama-controlled EPA’s unrelenting regulatory onslaught against coal will, of course, rapidly hasten that decline.

Nuclear

Much like coal, the U.S. nuclear power industry’s biggest problem is price competitiveness with much less expensive natural gas. There can be little doubt that a major reason for the dearth of new nuclear development has been the industry’s inability to compete in the energy marketplace without subsidies, including loan guarantees.

The two presidential candidates share some similar views on this subject. The Obama administration, in support of what it calls “prudent deployment of nuclear energy through loan guarantees,” has conditionally committed to use federal guarantees to reduce the cost of financing two Georgia reactors. He has supported Department of Energy loan guarantees, (a very bad idea in my decidedly libertarian opinion).

Unfortunately, Romney has also supported Department of Energy loan guarantees. On the plus side, his energy plan gives the Nuclear Regulatory Commission greater “capabilities for approval of additional nuclear reactor designs” and streamlining ” NRC processes to ensure that licensing decisions for reactors on or adjacent to approved sites, using approved designs, are complete within two years.”

The contenders also embrace similar approaches for managing radioactive waste. After Obama vowed during the 2008 presidential campaign to abandon the technical review for the Yucca Mountain used fuel repository in Nevada, his administration halted Nuclear Regulatory Commission review of the project’s safety permit, then convened a Blue Ribbon Commission to explore approaches for used fuel management. Its recommendation was to begin a consent-based process to develop consolidated storage facilities.

Romney apparently agrees with the consent-based approach. During the 2008 presidential debate in Las Vegas he said that “The people of Nevada ought to have the final say [on Yucca Mountain]… If Nevada says, ‘Look, we don’t want it, then let other states make bids and say, ‘Hey, look, we will take [it]. Here is a geological site that we have evaluated, here is the compensation we want for taking it.’

PC Renewables (Solar and Wind)

Despite Solyndra and other spectacular debacles, you can bet that an Obama win will continue to throw lots more taxpayer green at costly wind and solar projects. Never mind that combined, they currently produce about 2.3% of all U.S. electricity (2.3% wind and 0.01% solar), and lack capacities and economies to ever make much of a difference.

Both industries would soon die if taken off feeding tubes provided by generous federal and state government subsidies and other preferential benefits (which may occur for wind by year’s end regarding the Production Tax Credit).

Solar and wind each receive many times more subsidy per kilowatt hour than conventional energies, as documented by the U.S. Energy Information Administration. As summarized by the Institute for Energy Research:

Over a 3-year period, from fiscal year 2007 through fiscal year 2010, total federal energy subsidies increased from $17.9 billion to $37.2 billion, an increase of 108 percent over the 3-year period. Of the increase, 77 percent was due to the Obama administration’s economic stimulus law. The largest increases in federal energy subsidies were in renewable and end-use subsidies. Over the 3-year period:

• Renewable energy subsidies increased by 186 percent from $5.1 billion to $14.7 billion. Renewables saw by far the largest jump in federal benefits. Of the $14.7 billion in fiscal year 2010, $6.2 billion (65 percent of the increase) was related to the Obama administration’s economic stimulus law.
• Wind led the various renewables with a more than 10-fold increase in subsidy from $476 million to $4,986 million.
• Solar subsidies increased by more than a factor of 6 from $179 million to $1,134 million and led the electricity sector subsidies on a unit of production basis.
• Subsidies for biofuels increased by 66 percent, from $4 billion to $6.6 billion.
• Conservation and end-use subsidies more than tripled from $4 billion to $14.8 billion. Conservation subsidies increased from $369 million to $6,597 million, a factor of almost 18. End-use subsidies increased from $3,618 million to $8,241 million, more than a doubling.

In contrast,

• Federal subsidies for coal increased 44 percent from $943 million to $1,358 million.
• Federal subsidies for oil and natural gas increased 40 percent from $2,010 million to $2,820 million.
• Federal subsidies for nuclear energy increased 46 percent from $1,714 million to $2,499 million.

Romney also approves of renewables, but recognizes that windmills and sunbeams will do little to offset needs for fossils to supply commercial, military and residential energy needs.

As Governor, Romney voted against building a large and costly 130-turbine Cape Wind development off Nantucket Sound, which many of the prominent coastal residents–the greedy “one percenters” including Senator John Kerry, the late Senator Ted Kennedy, and his environmentalist nephew Robert F. Kennedy Jr…–didn’t want disturbing their pristine views.

But it didn’t seem to be the unsupportable energy cost or environmental impacts the former Massachusetts governor objected to. No, it wasn’t because he doesn’t like wind power. Rather, it was because such a project would depress property values and damage the local economy which depends heavily on tourism. Project supporters accused him and federal lawmakers of “back-door deal-making” to kill the project.

Ethanol: Romney/Ryan Too

This said, Romney’s energy plan continues to support the bi-partisan lunacy of “Federal Renewable Fuel Standard” (RFS) ethanol mandates, although it doesn’t detail how this would be accomplished. Okay, some may be inclined to cut him some slack in recognition that those corn states are vital to the November election.

Following suit, Congressman Paul Ryan of Wisconsin has endorsed Romney’s ethanol-laced plan. On the other hand, he has previously voted against tax credits for renewable electricity, as well as against tax incentives for alternative fuels, federal government investments in homegrown biofuel, and raising automotive CAFÉ standards

But regardless, the rent-seeking ethanol mandate picture is plenty ugly enough. The RFS forces refiners to sell larger amounts of corn ethanol and other biofuels each year, regardless of weather, supply demand, or cost influences. These “volumetric targets” increase from 4.0 billion gallons in 2006, to 36 billion gallons in 2022. While the amount of corn ethanol qualifying as “renewable” will max out at 15 billion gallons in 2015, it already consumes about 40 percent of U.S. corn crops.

Conclusion

Yes, there are similarities in some Romney/Obama energy positions, and certainly more than I would wish to be the case. Yet on balance, there are some huge and extremely important differences too. Moreover, it doesn’t require a crystal ball to forecast the future of American energy development in the event current Washington politics and policies prevail through another election cycle.

For example, we can count on expanded promotion of costly government-sponsored “next generation” alternatives purporting to offer salvation from climatic catastrophe, environmental pollution and dependence on foreign oil.

We can count on escalating anti-carbon regulatory obstructionism which will continue to artificially raise fuel and power costs, drive businesses and jobs overseas, and sabotage international free market competitiveness.

And we can continue to helplessly sit back and watch as China and other foreign countries cut deals with our allies and foes to exploit oil reserves in Canada and off our shores.

America, you have an energy choice come November.