Energy Policy will change under GOP House

Santa Fe New Mexican November 8, 2010

By Dr. Daniel Fine

With the Republican Party’s newly won control of the House of Representatives, national energy policy could be rolled back to 2005, with all legislative advances under a Democratic Party majority at risk. Republicans could adopt a dual-track strategy that attacks energy regulation through budget reductions of the Environmental Protection Agency that de-fund efforts to impose carbon emissions on industrial infrastructure, at a minimum coal-burning utilities and the gas and oil complex of extraction and refining.

With a Republican House majority, no further loss of tax code advantages for the oil and gas industry is anticipated. While the Oceans Management remake of the Department of Interior’s Mineral Management Service can be indirectly restrained through the Interior Department budget, originating in the House of Representatives, its existence and mission as a regulatory enforcer of off-shore oil and gas development is beyond a roll-back. This is a permanent institutional change as a direct consequence of the BP oil spill in the Gulf of Mexico.

No consideration of carbon cap and trade is even remotely expected. In New Mexico, oddly enough, with a Republican majority in the House opposed to a federal cap-and-trade law, conditions for a state version will in theory become more favorable. However, the rejection by both candidates for governor of the current initiative should block local efforts to fill the federal void.

The new Republican majority could impose restrictive legislation on renewable energy strategic tax incentives which provide Treasury Department cash pay-outs of 30 percent of construction investment costs of solar energy and other renewables. This could be done in several committees holding hearings on the dependency of renewables manufacturing and capacity expansion on continued government support in conflict with market conditions of abundantly cheap natural gas as a price-setter and competitor.

Partial repeal of the Energy Independence and Security Act of 2007 will be a target of the new Republican majority. Although approved by President George W. Bush, the mandate for 36 billion gallons of renewable fuel by 2022 could be subject to revision. There is currently popular resistance to the ethanol requirement of 10 percent from 5 percent per gallon of gasoline because of consumer issues with the risk to pre-2007 engines. A Republican majority could attempt to cap the requirement at 16.3 billion gallons, which is scheduled in 2013, freezing the 10 percent change and avoiding further consumer problems at the pump.

Sen. Jeff Bingaman, leading a Democratic Party majority in the Senate, will be compelled to defend both renewable energy and the moderate renewable portfolio standards (15 percent by 2021) he has proposed in the remnant of the current session of Congress. He could invoke a call to Republicans for a bipartisan consensus to recognize what has been done and avoid the bitter and costly fight to roll it back. Some Republicans might consider this opening as preparation in 2012 for the contest over the White House: a consensus position avoids the tag of anti-renewable energy and environment in that presidential campaign . A consensus framework would stabilize at least $275 billion in renewable energy research, investment, finance and development costs.

Some of this is carried on the books of major oil and gas companies. New Mexico research universities and national laboratories have established innovative technology capabilities along with student career commitments in renewable energy. Whatever the direction of the market, a Republican majority in the House of Representatives could discover national economic and energy security value of supporting renewable energy basic and applied research.

World green energy technology leadership has been taken by China. With the exception of final technical mastery in solar power, China is now the dominant low-cost developer, producer and exporter. A Republican majority in the House of Representatives could find itself defending renewable energy against China in much the same way as it rejected China’s bid to buy UNOCAL (oil and gas) five years ago — on national security and energy security grounds.

A roll-back to 2005 could revive the compromise that former Sen. Pete Domenici achieved that year under a strategy of energy diversity that emphasizes national energy output expansion from all sources without political discrimination. To roll-back to a fossil fuel policy preference would violate 2005.

Daniel I. Fine, Ph.D., is a research and energy policy associate for New Mexico Center for Energy Policy, New Mexico Tech.