Romney’s new Energy Plan: Wrongheaded and Unbalanced

In early August I posted an analysis of Mitt Romney’s proposals for energy policy taken from his website and related materials.  I showed that his policies were a tangible threat to Colorado’s developing clean-energy economy.  You can access that analysis on this blog.

On August 22 Romney published “The Romney Plan for a Stronger Middle Class: Energy Independence.”  This post is an overview of his new plan.

The new plan is wholly consistent with his earlier energy policies, but he doubles down on some of his ideas and provides “evidence” of the merits of his positions by cherry-picking articles and reports from think tanks, newspapers and various interested parties.  The whole thing reads like a post-trial brief written by a lawyer, in which he bases his argument on the evidence that supports his position and ignores everything else.

I found the new plan wrongheaded and unbalanced, a throwback to an earlier era and, frankly, horrific.

The New Plan

The central feature of the new plan is the achievement of North American energy independence by 2020.  Note that this is North American energy independence, including Canada and Mexico, not U.S. independence.  Romney would rely on increased oil, gas and coal development in the U.S. to help meet this goal.

A principal tool on which he would rely is to turn management of federal public lands for purposes of energy development over to the states, “excluding only lands specifically designated off-limits.”  Plan, p. 8.  State regulatory processes and permitting programs for all forms of energy development would be deemed to satisfy all requirements of federal law.  Id.

Romney would also establish a new five-year plan for the leasing of off-shore energy resources that would aggressively open new areas for development.  Plan, p. 10.

He would immediately approve the Keystone XL Pipeline and establish a regional agreement to facilitate cross-border energy investment, infrastructure and sales.  Plan, p. 12.

He says that he will bring about a re-assessment of U.S. energy resources, on-shore and off-shore, especially targeting public lands on which “no exploration is allowed to occur,” apparently paid for by the federal taxpayer and apparently including national parks, wilderness areas and other special places.  Plan, p. 14.

Another key component of the new plan is regulatory reform, including “measured reforms” of environmental statutes and regulations as well as the prevention of agencies from settling challenges to regulations.  Plan, p. 16.

He would also facilitate “private-sector-led development of new technologies,” focusing government support on basic research rather than, as he says, “picking winners in the market.”  Plan, p. 19.  He implies that President Obama is responsible for the loss of 10,000 jobs in the wind industry, Id., even while Romney opposes extension of the wind production tax credit.

While he does not discuss it in the new plan, his website stresses the need to relieve the EPA of its authority to regulate carbon emissions in order to encourage the construction of new coal power plants by electric utilities.

Romney claims that his new plan would create three million new jobs, generate more than $1 trillion in royalties for the federal Treasury and create an economic resurgence in the country.

Problems with the new plan

1. To a substantial degree, Romney’s new plan is a solution looking for a problem.  Oil and gas production in the U.S. is the highest today since 1998, and oil imports are the lowest since 1997, falling below 50% under the President.  So, we’re on the right track.  Can we really go faster?  Many believe that we cannot or should not.

2. Energy independence, a long-held goal of politicians since Richard Nixon, has never made much sense.  The costs, both economic and environmental, would be very high to achieve true independence.  What seems to matter more is reduction of the share of GDP that is spent on energy, a goal that Romney ignores.

3. The new plan ignores the fact that federal public lands, especially on-shore, are managed for many purposes in the name of the citizens of the U.S., including, in addition to energy production, recreation, wilderness preservation, hunting, water resource development, ranching and timber production.  Under Romney’s plan these purposes would be subordinated to energy production managed by the states, whose capability to handle a vast expansion of responsibility is questionable at best, especially in the West.  A race to the bottom, where money from royalties for the states from development or political contributions from developers are the main prizes, would likely ensue.  The collateral damage to other values could be immense.

4. Growth in production of oil and gas on federal public lands has not kept pace with production on private lands, but this is not because the U.S. has failed to lease or permit such production.  57% of leased lands on-shore and 70% of leased off-shore acres are inactive.  One of the reasons for the lack of development on federal lands appears to be that oil- and gas-containing shale formations, the new center of development, are found mostly on private lands.  In any event, the President has recently opened new lands in Alaska, in the Interior West and elsewhere to development.

5. According to data from the U.S. Bureau of Land Management, the regulatory lag in processing applications for permits to drill appears mainly a result of delay by operators in filing required paperwork, not federal officials sitting on their hands.

6. Approval of the Keystone XL Pipeline, assuming it would actually be built, would not keep Canadian tar sands, refined or otherwise, from China, if that is where developers can command the highest price.

7. There is nothing that significant expansion of reliance on North American fossil fuels can do to insulate Americans from oil-price shocks, since all oil is priced in a world market, no matter how much of it we produce.  Demand from China and India, among other countries, will continue to put upward pressure on the price of crude, no matter how much we produce.

8. There is no mention in Romney’s new plan of developing alternatives to oil as a transportation fuel.  This is a step back from the Bush Administration.

9. The new plan is 100% about enhancing energy supply.  The demand-side, still the cheapest way to meet a portion of our needs, is completely ignored.  There is not a word about energy conservation or energy efficiency.  In fact, Romney has pledged elsewhere to repeal vehicle fuel efficiency standards.

10. There is no mention of climate change or global warming.  There is no acknowledgement of the risks inherent in a pedal-to-the-metal program for fossil fuels.

11. Jobs claims are exaggerated, according to other estimates.  It is not clear, on a net basis, that massively opening up new public lands to oil and gas drilling and coal mining will create new jobs, since other uses of these lands will be discouraged.

Is there anything in Romney’s new plan that is worth consideration?  Maybe.  Perhaps some Interior Department regulations governing drilling on- and off-shore can be streamlined without adverse impacts.  But would this lead to more production, given that most leased lands are inactive?  The notion of looking at the U.S., Canada and Mexico togther is intriguing, although what this means for on-the-ground development is unclear, since all are sovereign nations subsject to domestic political pressures.  The support of basic research by the federal government makes sense.  Maybe an update on energy resources on public lands would be useful, but until developers drill a particular area, no one can really know the extent of the resource.

But the big problems in his plan are just overwhelming.  Turning over management of federal lands to the states for on-shore energy development is incredibly wrong-headed and, likely, politically impossible.  And, of course, the new plan is wildly unbalanced.  It is as far away from the “all of the above” plan that the President has been trying to implement.  It is all supply-side and all fossil fuels, with no acknowledgement of any of the risks inherent in following this path forward.

Bruce Driver

Crested Butte, CO

September 3, 2012