Monday, September 8, 2008

Congress returns today for an abbreviated session, with energy being the number one issue on the agenda. Republicans, led by Senate Minority Leader Mitch McConnell and House Minority Leader John Boehner, spent the August recess pushing for Congress to enact an “all of the above” package to increase energy supplies and lower gasoline prices, and they will continue to do so. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, clearly thrown off balance by public opinion polls showing that a decisive majority of the electorate agrees with the Republicans on drilling, have a different, irresponsible agenda: running out the clock and preventing a straight up-or-down vote on drilling. But to do this successfully, they will have to continue their strategy of pretending to support compromise, while loading up energy legislation with poison pills that will make expanded drilling impossible.

Before leaving town five weeks ago, House Appropriations Committee Chairman David Obey, Wisconsin Democrat, realized that his panel was likely to approve Republican-proposed amendments to the Interior Department and Labor-HHS appropriations bills that would have permitted drilling in the Arctic National Wildlife Refuge and the Outer Continental Shelf. So, he adjourned his committee to spare the Democratic leadership several embarrassing defeats. Mrs. Pelosi and company have also embraced “use it or lose it” language that would prevent the government from issuing new exploration or production leases unless the applicant could certify (to the satisfaction of lawyers, judges and bureaucrats) that every lease currently held is being “diligently developed.” The problem is that no company can certify that because exploration is a difficult, time-consuming task in which success follows years of expensive, time-consuming failures. Forcing oil companies to drill immediately or lose the leases based on some arbitrary political dictate will make exploration prohibitively expensive.

In the House, the Democratic leadership will offer a “compromise” plan to allow drilling more than 100 miles from shore. (Which presumably means that if the next Prudhoe Bay is discovered 25 miles off the coast of Virginia or 50 miles from North Carolina, consumers should just shut up and be happy with oil from Mexico, Saudi Arabia or Venezuela instead.) The House Democrats’ bill is also expected to include tax increases and royalty increases for oil companies - actions that will decrease rather than increase production - which would pay for alternative energy research, among other things. It also mandates that companies use some government-dictated percentage of “renewable energy sources.” Some “alternative energy” research could prove useful; in other cases, it can squander taxpayer dollars like the infamous Synthetic Fuels Corporation did in the early 1980s. But the most irresponsible course of action of all is the course that congressional Democratic leaders are taking, which is to demagogue against oil companies and punish producers with higher taxes and new mandates.

Democrats are talking about a $50 billion “economic stimulus” package that provide largess to state and local governments and fund highway projects. On top of that, the Big Three automakers are seeking government loans to help them retool their plants and build fuel-efficient cars. The car companies want $50 billion in government loans, while lawmakers seem to be suggesting a smaller amount that would be folded into the stimulus package. As for the Big Three, while ill-considered regulations bear some of the blame for their current problems, it would be difficult to imagine an industry responsible for so many self-inflicted wounds. The woes of Freddie Mac and Fannie Mae should be a cautionary note to politicians who think it is a good idea to put taxpayers on the hook to bail out private enterprises that make bad decisions and fail in the marketplace.

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