Energy


BP Execs Arrive at White House / AP Photo

By: Brian Sikma

When Congressman Joe Barton (R-Texas) used his position as ranking member of the House Energy Committee to apologize to the leadership of BP for the way they have been treated by the federal government, he quickly found himself in hot water from both sides of the aisle. The black oil spreading across the Gulf has created a toxic environment in Washington towards anyone attempting to excuse the actions of the company that lauds itself as being “Beyond Petroleum.”

Unquestionably, BP has not been treated right by the Obama Administration. Forcing BP to set up a $20 billion escrow account was yet another advance by this administration in an all-out assault on the free-market system that is the only thing that will power our economy back to prosperity. When the Administration demanded that BP give the federal government a lien on $20 billion worth of U.S. assets as collateral on the escrow account, we saw a brazen power-play that resembled Chicago-style politics more than legitimate Constitutional government. Make no mistake: BP had no choice in this matter, and it was not a voluntary action on their part.

The unacceptability of the Administration’s effort to hold BP accountable is not justified even by the magnitude of the disaster. Government should never leap beyond its Constitutional bounds and arbitrarily seize control of private enterprise and private resources. We are a nation of laws, not bureaucrats with good intentions and limitless powers to resolve catastrophes and crises however they see fit. Elected officials, citizens, and even private sector players must respectfully and ardently oppose the BP arm-twisting and a repeat of similar actions in the future.

This is not to say that BP should not be held responsible for the damage it has caused. The billions of dollars worth of damage to the states and people along the Gulf should be compensated to them by BP. BP should bear 100% of the disaster clean-up costs because this problem, whether caused by an accident or a purposeful and willful negligence towards safety and good operating standards, is BP’s responsibility.

Individuals, corporations, and organizations are free to sue BP for real damages that they suffered. Those who immediately covered the bill for the clean-up effort, primarily the federal government and state governments, should seek to be compensated by BP for the costs that they incurred. Small business owners who suffered actual and real damages, for which there are definite monetary figures available to measure the extent of harm, should be free to join together in class-action lawsuits against BP to recover what they lost. Larger corporations and other entities that lost money may find it more appropriate to sue BP singly for compensation.

The problem that has marked the Obama Administration’s response to the crisis is not that they want to hold BP to account for what happened and make sure that BP pays for the damage it has caused, but that they have done so in a way that violates core Constitutional principles and unnecessarily bypasses established legal procedures. President Obama and his team like to focus on action and it is not at all disconcerting to them to place action – any action – ahead of the careful pursuit of justice via well established channels that serve to protect our nation and the freedom that we enjoy.

Unless held in check, the greatest damage to the country that results from the Gulf disaster will be the Obama Administration’s sacrifice of the rule of law on the altar of expedient action. Eventually the oil will be cleaned up, and with much effort the lives of the people along the Gulf Coast will return to a level of normalcy, but our nation will be negatively impacted for a very long time by the precedents set up by the government’s response to the disaster. Right now, both BP and Big Government are to blame for the disaster in the Gulf.

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By: Brian Sikma

As Rep. Henry Waxman (D-California) works to move cap and trade legislation through his House Energy and Commerce Committee, he’s finding it a bit hard to sell the whole idea to members of Congress who come from districts that would be hit hard by carbon taxes. States with heavy industry or states that rely extensively on existing energy sources as part of their economy would be hardest hit with job losses, price increases, and taxes should the legislation pass.

In an effort to secure much needed support, Waxman has started talking to individual members about providing credits to various industries that are a big part of their local economies. While the cap and trade bill would apply across the board to many industries and businesses, specific exemptions for coal fired power plants, for example, would allow them to feel less pain from a new tax and regulatory structure.

What this kind of behind the scenes maneuvering seems to boil down to is green earmarking. If a member of Congress wishes to show his dedication to the folks back home he or she can do so by securing an earmark for this project or that project, a bridge, a dam, or some other public works initiative that would generate jobs and goodwill for the incumbent member. With the high economic costs of cap and trade standing tall against any future plans by businesses and industries to expand and grow, affected communities and businesses would benefit by exemptions and built in carbon credits that give them a pass from the otherwise broad regulations.

Green earmarking will allow members of Congress to appear to be concerned about the environment and be on the politically correct side of the climate change discussion while at the same time giving them a tool to make sure that nothing they do is going to really harm their districts. If we thought that earmarks were a bad part of the process now, let’s imagine what they will be like when a new program designed to raise hundreds of billions of dollars becomes open to special amendment by individual members of Congress.

By: Brian Sikma

President Obama and House and Senate Democrats have joined forces with the environmental lobby to promote a “cap and trade” plan for dealing with global climate change. Under a cap and trade plan the government would sell carbon credits to businesses and the money raised by those sales (where the customer has no other option to turn towards outside of simply closing up shop) goes towards carbon reducing programs and policies. Companies that cannot buy enough credits will-if they intend to keep up production-need to invest in expensive new technology designed to reduce carbon emissions.

The creation and implementation of these carbon reducing measures is not just about saving the environment but is, according to Democrats, about jobs. Indeed, this plan is about jobs. I will cost the American economy jobs, increase unemployment, and drive up the cost of products and services that Americans use every single day. With cap and trade, while the net amount of carbon emissions will decrease, so will the number of good American jobs. Without a specific tie between carbon emissions and global warming being scientifically proven and without a meaningful cost/benefit analysis showing that it is better to impose an entire new class of taxes than to allow the current situation to exist, cap and trade legislation is not a good idea.

The problem of cap and trade was addressed by Rep. Mike Pence (R-IN) earlier this week on the House floor. In the key line he declared “The Democrat plan actually caps growth and trades jobs. The truth is, this cap and trade legislation is essentially an economic declaration of war on the Midwest by liberals in Washington, D.C., and it must be opposed.”

See the video below for Rep. Pence’s entire remarks:

By: Luke Puckett

Recent events have showed us how important it is that we become energy independent not only for our own economic prosperity but also for our own security. Over 30 years ago our nation experienced a severe energy crisis because 12% of our annual oil supply was provided by foreign sources of oil. Today, we are even more vulnerable as nearly 70% of our oil energy needs are met by foreign sources that are all too often hostile to our interests and our values.

The threat posed by our reliance on foreign oil is illustrated by the recent conflict between Russia and our brave but small ally Georgia. Russia’s irresponsible, unfortunate and inappropriate bullying of Georgia is not about liberating some radical groups from imagined atrocities. It is about Russia’s expansion of power not just into neighboring states but into the global scene.

A key network of oil and natural gas pipelines stretches across Georgia. This network, which was due for an expansion until Russia’s aggressive destruction jeopardized the construction of new pipelines, is a vital link between Caucasus oil and natural gas resources and the energy users of Europe and the United States. Russia’s drastic invasion has allowed them to seize strategic control of the pipelines and it has given them the power to negotiate for world acceptance of their heavy-handed and anti-freedom actions.

Also looming large as a threat to our security is Iran’s control of the flow of roughly 40% of the world’s daily oil output. Iran’s leaders have stated that it is their aim to end America and destroy the ideals of liberty. We may consider these thugs crazed and incoherent, but we must take their apocalyptic declarations seriously because they are even now building and honing their capacity to execute their dark visions.

The time for words should be over; the time for action is now. We must put the world on notice that we will not sacrifice the strength of our national security on the altar of outdated government red-tape regulations that form a nearly impenetrable dam to the flow of our own domestic energy resources. We must move boldly and quickly to allow for a dramatic expansion of environmentally responsible domestic oil drilling.

Our children should not have to grow up in a world where their freedom and their mobility is dictated to them by backward looking tyrants who desperately seek to maintain some semblance of control in a world where their ideology has been discarded as a failure. You and I have a responsibility to strengthen our security and secure our future. I pledge to you that if you elect me to Congress this November, I will go to Washington to fight out of touch politicians to lower your gas prices.

Luke Puckett is running for Congress in Indiana’s 2nd Congressional District on a platform of common-sense solutions. You can learn more about him by visiting his website at http://www.puckett08.com.

If you’ve kept an eye on the U.S. Senate this week you know they’ve been debating the merits of the largest tax increase in human history.  Only in the Senate would the merits of a tax increase running into the trillions of dollars be given serious consideration.  

Of course, supporters of the tax increase don’t call it a tax increase.  The call it a ”cap-and-trade” policy that will help the country fight global warming.  What they don’t like to talk about, and what has taken the Heritage Foundation, among others, to figure out, is that the Lieberman-Warner climate change bill contains mandates for a new government bureaucracy (actually one of 45 new bureaucracies) that will oversee the operation of 85% of the American economy.  The last time a large country practiced top-down management of an economy millions of people suffered and, ultimately, the economy collapsed on a massive scale.

As of today, the Senate failed to end debate on Lieberman-Warner (a bill, by the way, who’s basic policy concept is endorsed by John McCain) and so it is highly unlikely that the Senate will continue to debate this bill.  It takes 60 votes to end debate on a particular matter and only 48 Senators voted to end debateand move to the next phase, which would be an up or down vote on the entire bill.  Unfortunately, Sen. Evan Bayh (D-IN) voted to end debate and keep the measure moving forward. 

Read more below the fold.

Over the past few days the Heritage Foundation has been posting on its blog a state-of-the-day analysis on the impact of Lieberman-Warner on a particular state’s economy.  Yesterday the state they focused on was Indiana.  According to their research, Indiana would lose 11,917 jobs in the year 2025 alone as a result of “cap-and-trade” policies to combat “global warming”.

Below is the text of a letter that I submitted to Sen. Richard Lugar on Wednesday presenting to him the case for why he should oppose Lieberman-Warner.

Dear Sen. Lugar:

As a staunch supporter of Republican candidates and as one who deeply cares about the future of this country, I am writing to you in regard to a significant piece of legislation that relates to climate change and the American economy. The legislation, submitted by Senators Lieberman and Warner and titled America’s Climate Security Act of 2007, contains serious flaws premised on dubious assumptions about the best way to combat climate change.

Under S. 3036 the American economy would be subjected to a new and unprecedented era of regulation that would burden our industries, cripple our current energy market, and saddle many average Americans with indirect taxes in the form of higher energy bills and indirect cost of living increases. Not to be overlooked are the thousands of jobs that would be lost as a result of the new federal regulations.

While proponents of S. 3036 declare that the revenues from the cap-and-trade program will be used to establish new “green-collar” jobs, what they fail to acknowledge is that the hundreds of pages of regulations and the astronomical collective impact of tax increases (in the form of carbon credit auctions), a significant drop in GDP, and soaring energy prices (according to the EPA gasoline prices could increase more than 53 cents simply as a result of the policies contained in this bill) will combine to create an economic nightmare for our country.

The theories of collective central control of industry and commerce were discredited by the spectacular failure of the old Soviet Union, yet today Lieberman-Warner sets up a regulatory body that will regulate 85% of the American economy. This proposed venture stands in stark contrast to America’s heritage of freedom and free enterprise. A system where entrepreneurs are free to dream and pursue a better way of doing things; a system where hard-working, freedom-loving and God-fearing folks can make a better life for themselves and their children.

Senator, I submit to you that we cannot tax our way to prosperity or regulate ourselves into a robust economy. The provisions of Lieberman-Warner are inconsistent with the American dream and the ideals of our founding. America doesn’t need more government regulation and interference. America needs strong leadership that will reject policies and proposals that will lead to failure and hardship. Senator, I humbly and sincerely ask you to cast a “Nay” vote on the Lieberman-Warner climate change proposal.

Sincerely,

Brian Sikma

bp-logo.pngBy: Brian Sikma

Gas prices have been hovering at higher than normal levels partly because our national refining capacity has not significantly expanded at any time during the past 30 years. Over the past several decades gasoline and petroleum companies have only expanded the capacity of existing refineries and have been unable to construct new facilities. This inability to build new refineries does not come from a lack of revenue on the part of the corporations, but instead comes from overly burdensome environmental regulations that either raise the price of construction to point where its not worth it or totally prevent that construction all together.

Some in Congress have proposed instituting price controls on gasoline sales. Price controls however would exacerbate the problem by further reducing the supply of fuel available at the pump. Others have proposed higher mpg fuel standards for vehicles. Mandating that newer vehicles be more fuel efficient will not help those of us that drive vehicles without the new technology. Additionally, consumers had better be willing to pay more for that new vehicle if Congress does succeed in passing fuel standards that require signification amounts of innovation and new technology.

So what’s the solution to energy problem? First, reduce our dependency on foreign oil by shedding short sighted environmental regulations that do not take into account the environmentally friendliness of new drilling technology. In other words, expand the supply here at home by taking advantage of large domestic oil reserves. Secondly, allow an increase in domestic refinery capacity by allowing companies to expand their refineries and, if necessary, build new ones.  Finally, we need to allow private industry-and not government subsidies-to determine which alternative energy sources have enough potential to be used on a large scale.

Right now, British Petroleum is trying to expand its refining capacity at the BP Whiting refinery. Located in northwest Indiana, BP Whiting is strategically placed near Lake Michigan, not too far from Chicago. The expansion of the refinery would increase the amount of fuel available in one of the highest priced gasoline markets in the country.

BP initially announced its plan to invest $3.8 billion in the refinery some time ago. This investment in northwest Indiana was estimated to have the overall impact of $21 billion being added to the regional economy. This benefit does not include the impact that an increased fuel supply would give to people all over northern Indiana, southern Michigan, and northern Illinois.

In recent days however, the BP expansion project has come under intense fire from local activists and state and Congressional leaders. The ire of these individuals focuses on the fact that BP will be releasing more “waste” water into Lake Michigan if it increases refining capacity. Illinois governor Rod Blagojevich has urged Indiana governor Mitch Daniels to rescind the state issued permit that will allow BP to release the water (which is actually cleaner than some of the water that is pumped into the lake) back into the lake. So far Gov. Daniels (R) is holding the line on doing what’s right for not only the state but also the region.

The fact that Gov. Blagojevich (D) has felt qualified enough to comment on Indiana economic affairs is interesting since he was the target of a scorching Wall Street Journal editorial that criticised his very short sighted policy proposal to impose a business gross receipts tax on Illinois businesses.

Congressional critics of the plan include Illinois’ Sen. Dick Durbin (D) and Rep. Rahm Emanuel (D). Everyone of Indiana’s Democratic members of Congress have also expressed opposition to the plan. Criticizing the plan was apparently not enough for some members. On Wednesday, July 25th the U.S. House passed H. Con. Res. 187. The resolution condemned the State of Indiana and BP for moving ahead with plans to release more “pollutants” into Lake Michigan.

Indiana’s own congressional delegation was split on the measure. Every Indiana Democrat voted against increasing oil refining capacity and every Hoosier Republican voted to support the economic growth of Indiana and the environmentally sound expansion of refining capacity. The argument used by Democrats in supporting the condemnation resolution was that BP and Indiana were allowing the wholesale pollution of Lake Michigan. The scene painted by them was one of a big oil company collaborating with a pliable state government to create a situation that benefited BP and campaign coffers while reducing the standard of living of individuals who live near Lake Michigan.

While the rhetoric ran high about pollution, there was almost no attempt by Democrats to put the situation it its proper light. Congressman Mark Souder (R-IN) summed the affair up well when he said “BP is investing more than $3 billion in our state, and Democrats are targeting it, ostensibly, for environmental reasons, despite the fact that the plant will still fall within the federal pollution guidelines.” Souder also referred to the resolution (which, by the way, doesn’t have any legal binding to it) as a “sham.” Even though Congressman Souder’s district doesn’t border on Lake Michigan, he rightfully understands that amidst all the talk of pollution and the need for clean water, the increase in release materials will still be well within federal guidelines. In fact, the release levels are also within the bounds laid out by Indiana state guidelines, and these state guidelines are more restrictive than the federal regulations.

At the end of the day the question each member of Congress is going to have to ask him or herself is, “Did my vote help reduce our dependency on foreign oil and reduce gas prices, or did my vote promote a feel-good set of talking points with no basis in fact?” Rep. Souder (R-IN), Rep. Pence (R-IN), Rep. Burton (R-IN), and Rep. Buyer (R-IN) all voted to reduce gas prices and allow individuals to conduct there affairs without big government condemning their efforts. Rep. Visclosky (D-IN) voted, as he normally does, to condemn private enterprise and promote baseless charges. Rep. Donnelly (D-IN), Rep. Ellsworth (D-IN), and Rep. Hill (D-IN) were all elected in 2006 amidst a political atmosphere that found fault with Republicans for not doing enough to lower gas prices. If these three are seriously seeking reelection in 2008, they didn’t help their chances when they voted for a resolution that condemns a private enterprises attempt to provide more fuel, and lower fuel costs, to Hoosiers.

oil.jpg 

By: Brian Sikma 

Today, our nation faces higher gas prices that leave consumers fuming over the cost of a fill-up. While some have been quick to blame the oil companies for the rising prices, a closer look at what is taking place will help us understand the situation. Taking shots at “windfall profits” makes for rousing reading, but it doesn’t give us a real picture of what is going on.

While today’s prices are high, according to the Energy Information Agency, gasoline prices in 1924, when adjusted for inflation, were $3.10 per gallon. While inflation has caused the price of goods to rise, the real price of gasoline fell until the energy crunch of the 1970s; then in 1980-1982 adjusted prices rose to $3.20 per gallon. Since that time gas prices dropped until just a few years ago.

Prices rise when demand outpaces supply. If the market demands more gasoline than oil companies can produce, prices are going to rise until the demand and supply levels balance each other out.

This simple cause and effect situation is sometimes tampered with as artificial limits are placed on one side of the equation.  These artificial limits usually come in the form of government regulations. The federal government and some state governments, impose environmental regulations on both refineries and the gasoline that those plants produce. The result of this tampering is a gas price that is higher than the normal effect of the supply and demand ratio.

If any entity is making a “windfall” off of higher gas prices it is the state and federal governments. In 2005 government consumed $71 billion in taxes from gasoline sales. That figure is double what government took in taxes from the oil industry in 2003.

A new refinery has not been built inside the United States for nearly 30 years. While fuel companies have been able to expand their existing refinery capacity, heavy handed environmental regulations have prevented the construction of badly needed new plants. This inability to build new refineries strangles the ability of companies to quickly refine enough gasoline to meet an expanding market need.

While America continues to import most of its oil, massive oil reserves in Alaska and parts of the American west, as well as off shore reserves, go untapped. With an increased demand don’t you think it would be wise for companies to be able to access this domestic oil? Welcome to Potomac Logic. Regulations handed down from Washington bureaucrats continue to prevent the effective use of domestic oil supplies. While legislation passed in 2006 cracked open the door of access to some oil reserves, a Washington imposed dam still stops the flow of more domestic oil.

According to the AAA, part of the reason for the recent gas price spike comes from the inability of refineries to quickly switch over from federally mandated winter fuel blends to the federally mandated summer blends. The EPA has mandated 12 types of gasoline blends for different parts of the country. Additional state regulations bring the total number of separate fuel blends to 30. Each blend must be kept separate from each other. This means that companies are forced to maintain separate production, transportation, and storage facilities, all at a higher cost to the consumer.

After looking at the facts, we can see that we do not have to be in our current energy situation. The solution to our problem is not more government regulation or increased bureaucratic oversight. The solution is to get the federal government out of the way and let the market run itself.

We need to increase our oil supply by allowing environmentally responsible drilling to take place. By drilling for our own oil we will lessen the number of geo-political situations that have the potential to adversely affect our energy prices.  We need to loosen the environmental regulations that strangle gasoline producers’ ability to build new refineries. New technology now allows cleaner oil refining to take place and we need to update our regulations to reflect this change.

Big Oil is not wholly to blame for the high gas prices, Big Government bears much of the burden. If politicians wish to enact meaningful energy policy that will reduce prices they would be wise to start breaching the regulatory dam that keeps domestic oil from flowing into the marketplace. They need to cut through the red tape that has the energy market in a strangle hold. Now is the time to look beyond self serving special interests and towards common sense solutions that will allow the market to correct itself.