The Politicians' Energy Crisis -- And Its Cure

The Politicians' Energy Crisis -- And Its Cure
by Newt Gingrich (more by this author)
Posted 05/13/2008 ETUpdated 05/13/2008 ET

In this week's Winning the Future I am going to focus on how Washington has created the high energy prices Americans are paying and what we can do to bring them down. But first, I want to say a few words about last week's newsletter.

A Note on Last Week's Solutions: They Were Just the Beginning
Several commentators have noticed the difference between the scale of the challenge facing the Republican Party that I outlined in last week's newsletter and the relatively small number of proposals for change in that newsletter.

What they did not notice was that I specified in the newsletter that those proposals were just the beginning. There is a lot more to come.

This week's newsletter on energy is another building block toward creating the new, more solution-oriented movement toward real change. Anyone who wants to get a sense of the full scope of the changes I am working on can go to the Center for Health Transformation (healthtransformation.net) and to American Solutions (American Solutions.com).

You will read a lot more bold proposals in this newsletter over the next few months. (And it is encouraging to note that John Boehner and other House Republican Leaders are moving forward with outlining an aggressive agenda for real change of their own.)

We Can Thank Shortsighted Politicians for High Energy Prices
The starting point of any discussion of America's energy future has to be this: Shortsighted politicians have created the current energy crisis.

For decades left-leaning politicians have advocated higher prices and less energy. They were going to save the environment by punishing Americans into driving less and driving smaller cars. Now their policies have succeeded with a vengeance.

The very left wing politicians who favored a policy of no oil and gas exploration, no use of coal, no development of nuclear power, and no aggressive development of new technologies are now panic-stricken that their policies of higher prices have led to higher prices. And now the same shortsighted, dishonest politicians who created the crisis are blaming everyone but themselves for the crisis. Because they refuse to be honest about the policies which led to this crisis, they can't be honest about the policies that will lead us out of it.

The politicians want scapegoats. The American people just want solutions.
The Solution? A Pro-Investment, Pro-Creativity, Pro-Production Energy Coalition

Politicians with vision -- working with entrepreneurs, scientists, and engineers -- could rapidly replace the current shortages and high prices with a flood of new energy at lower prices. And America's current vulnerability to blackmail by foreign dictators could rapidly be turned into virtual independence with a North American energy strategy that includes Canada and Mexico.
The key is to create a new coalition of Americans who favor greater investment, greater discovery, greater creativity, and greater production.

That coalition could lead to a new era of American prosperity with a more prosperous economy, more abundant energy, a healthier environment, and greater national security.

The Current Crisis of High Prices and Limited Supply

The fact is, with leadership that unleashes the potential of the American people, there is no reason why America can't have safe, abundant, and relatively inexpensive energy.
America still has the world's largest supply of fossil fuels. We have more coal than any other country by a huge margin. We have abundant oil and gas reserves. We have the potential for nuclear, wind, solar and biofuels in tremendous quantities. And, critically, America is still technologically the most advanced nation in the world, despite decades of bad policies. We have the potential for enormous breakthroughs in future technologies such as hydrogen power.

Without Real Change the Energy Problem Will Get Much Worse
The second inescapable fact of America's energy future is this: India and China are realities. As they become more prosperous their people want to have better lives. And having better lives means using more and more energy.

This year Asia bought more cars than the United States for the first time in history. The pressure for more energy on a worldwide basis is going to continue to grow.
The only solutions to the current high prices and scarcity are higher energy supply and/or lower energy demand.

In the long run we will almost certainly find dramatic breakthroughs including electric cars (super hybrids) and hydrogen-powered vehicles. But in the short and near term, oil is going to remain the primary source of energy for transportation. And any strategy that does not substantially increase the production of oil and the use of coal is a strategy for much higher prices and growing scarcities.

The Left's Strategy is Anti-Oil and Anti-Coal
Yet the current strategy of the left is anti-oil and anti-coal.
It is a recipe for very high prices for Americans who drive.
It is a recipe for higher inflation as the cost of energy is driven through the entire economy.
It is a recipe for growing vulnerability to blackmail by foreign dictatorships. And it is a recipe for starving poor people in the third world. The price of oil has a much bigger impact on the cost of food than the production of biofuels. Higher oil prices mean higher fertilizer and transportation prices. Combine that with the impact of speculators and really destructive government policies (including the Left's opposition to scientifically improved food production), and you have a formula for starvation for the poorest people.

Americans Support Energy Independence, Innovation, Incentives, and Nuclear Power
At AmericanSolutions.com you can view the Platform of the American People, a collection of 91 planks with the support of the majority of Democrats, independents, and Republicans.
The Platform shows that the American people overwhelmingly agree that we should use our resources to become independent from foreign dictators.

Brazil recently discovered two very large oil fields in the Atlantic Ocean. They are so large that they will make Brazil completely independent from Middle Eastern oil.

This is important because the Minerals Management Service has estimated a mean of 85.9 billion barrels of undiscovered recoverable oil and a mean of 419.9 trillion cubic feet of undiscovered recoverable natural gas in the Federal Outer Continental Shelf of the United States. And that estimate does not include any Brazil-size surprise discoveries.

The Platform also shows that Americans believe deeply in the power of technology, incentives, and innovation to develop new sources of energy and new methods of energy conservation. For example:
"We can solve our environmental problems faster and cheaper with innovation and new technology than with more litigation and more government regulation. (79 to 15)
If we use technology and innovation and incentives we do not need to raise taxes to clean up our environment. (68 to 29)."

And Americans also believe in the safety and reliability of nuclear energy.
"We support building more nuclear power plants to cut carbon emissions. (65 to 28)."

The First Step: Replace Warner-Lieberman with Domenici
In a sign of how out of touch the Congress is with the current realities of the average American, the Senate is planning to bring up the Warner-Lieberman bill. This "tax and trade" bill will be an economic disaster. A better name for it would be "The China and India Full Employment Act" because it is going to raise the costs of doing business in America so dramatically that most future factories will be built outside the United States.
SUMMARY OF WARNER-LIEBERMAN
FINANCIAL COSTS OF WARNER-LIEBERMAN
ESTIMATED JOB LOSS DUE TO WARNER-LIEBERMAN

"Tax and trade" is a more accurate term than "cap and trade" because buried in this bill is a massive tax increase which will lead to a much bigger federal government with much more bureaucracy and a much smaller private sector operating only with the permission of federal bureaucrats.

LEARN MORE ABOUT CAP AND TRADE
At a time when the American driver is already complaining about the cost of gasoline and the American homeowner is beginning to complain about the cost of natural gas and home heating oil, the Warner-Lieberman bill will make those costs much worse.
Instead of turning to Warner-Lieberman, the Senate would send a better signal to the American people by taking up the American Energy Production Act, sponsored by New Mexico Senator Pete Domenici (R)

LEARN MORE ABOUT THE AMERICAN ENERGY PRODUCTION ACT
Where the Warner-Lieberman bill is one more step toward higher prices, more scarcity, and less production, the Domenici Bill is a first step toward trying to increase production.
If the Senate votes to bring up the Domenici Bill, they are beginning to get the message that we want more energy and lower prices.

The Next Steps to Clean, More Abundant, Lower Cost Domestic Energy
After switching focus from the Warner-Lieberman bill to the Domenici bill, here are the next steps toward an energy abundant American future:
Change federal law to give all states with offshore oil and gas the same share of federal royalties Wyoming gets for land-based resources (48%). Today most states get zero royalties from offshore oil and gas development while states like Wyoming reap 48% of federal royalties for its land-based oil and gas. If Richmond, Tallahassee, and Sacramento suddenly had the potential to find billions of dollars a year in new revenues, their willingness to tolerate new oil and gas development with appropriate environmental safeguards might go up dramatically.
Change federal law to allow those states that want to permit exploration with appropriate safeguards to do so. Companies could be required to post bonds to pay for any environmental problems, and a share of the state and federal revenues from new offshore development could be set aside to finance biodiversity and national park projects.

Allow companies engaged in oil and gas exploration and development to write off their investments in one year by expensing all of it against their tax liabilities. This will lead to an explosion of new exploration and development.

Immediately renegotiate the clean coal (FutureGen) project for Illinois to get it built as rapidly as possible (see the chapter in Real Change for rapid contracting techniques with incentives that can reduce construction time from years to months). It is utterly irrational for the Department of Energy to postpone the most advanced clean coal project in America (LEARN MORE ABOUT

DOE'S FAILURE ON FUTURE GEN).
Coal is America's most abundant and lowest-cost energy resource. If clean coal technologies can be demonstrated to produce power with virtually no carbon release, then coal becomes environmentally very acceptable. America IS the Saudi Arabia of coal. We simply must fund the most advanced experiment and get on with using our most abundant resource.

Congress should pass a series of tax-free prizes to accelerate innovation in developing new technologies for using coal. The result will be a better environment, more energy independence, and more energy at lower cost. Eliminate half the Department of Energy bureaucracy and turn the money into paying for prizes. America will get a much bigger, faster return on its investment.
Develop a tax credit for refitting existing coal plants. There are a lot of existing coal plants which are going to be around for a long time. The most efficient way to make them more environmentally acceptable is to create a tax credit for retrofitting them with new methods and new technologies.

Pass a streamlined regulatory regime and a favorable tax regime for building nuclear power plants.

Make the solar power and wind power tax credits permanent to create a large scale industry dedicated to domestically produced renewable fuel. A contractor recently told me about a solar project he had planned for the American southwest that is now being built in Spain because he distrusts the American Congress and is tired of it playing games with short-term tax credits. We have enormous opportunities in solar, wind, and other renewable fuels; and they can be developed with a stable tax policy.

Develop long distance transmission lines to move wind power from the Dakotas to Chicago. The potential is there for an enormous amount of electricity generation, but it is locked up geographically because the neighboring states have no reason to be helpful. The Dakotas can generate the power and Chicago can use the power, but the federal government may have to make the connection possible.

Allow the auto companies to use their tax credits for the cost of flex fuels cars, hybrids, and the development of hydrogen cars including necessary retooling for manufacturing. The American auto companies have billions in tax credits, but they have no profits to turn the tax credits into useful money. The federal government could make the tax credits refundable and therefore useful if they were spent on helping solve the energy problem. This would be a win-win strategy of much greater power than the fight over CAFE standards.

Conservation as a Parallel, Co-Equal Strategy with Production
At the same time we work to increase production of energy, we must work to find ways to increase energy conservation. There are a number of steps that can be taken.
Congressman Roy Blunt notes that we currently spend eight times more money on federal subsidies for low income heating than we spend on modernizing homes so they don't use as much energy.

A variety of tax credits should be developed to accelerate maximum efficiency in energy use and to accelerate the replacement of inefficient systems with more modern, more efficient systems.

The Choice is Ours
The time has come for Americans to demand a fundamental change in energy policy.
If we want less expensive gasoline, then we have to demand the policies that will increase the supply of oil and reduce its cost.

If we want a reliable energy policy that reduces our dependence on foreign dictatorships, then we have to demand greater use of American resources and American technology.
If we want these changes to come before we are blackmailed or bankrupted by foreign dictatorships, then we must demand that politicians cut through the red tape, change the bureaucracy, and get the job done. And if our elected officials want to stick with the current scarcity-producing, high price-resulting energy policies, then its time to retire them for leaders who want more production at lower cost.
The choice is ours.

Your friend,

Newt Gingrich

P.S. -- Father's Day is just around the corner and there are great gift ideas available at great prices at Newt.org. Just click here to order personally signed copies of my new novel, Days of Infamy, as well as Pearl Harbor and Real Change. With the purchase of either of these three personally signed books, you can get a signed copy of Gettysburg for only $5. If you buy both a personalized copy of Pearl Harbor and Days of Infamy, you will receive a signed Gettysburg for free!

P.P.S. -- Callista and I had the pleasure of seeing Barry Manilow in concert this weekend. You can view pics taken by Callista here.

Mr. Gingrich is the former speaker of the U.S. House of Representatives and author of "Winning the Future" (published by Regnery, a HUMAN EVENTS sister company).

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