New Mexico Center for Energy Policy
Series on Energy Policy 10-25-2010
Dr. Daniel Fine, New Mexico Tech
ENERGY POLICY ROLLBACK WITH REPUBLICAN MAJORITY
If the Republican Party wins 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 budgetary reductions of the Environmental Protection Agency thatde-fund efforts in that agency to impose carbon emissions on industrial infrastructure, at a minimum coal-burning electric 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 US House opposed to a Federal cap and trade law, conditions for a state version will, in theory, become more favorable. However, attempts by the current administration to fill the Federal Legislative void through regulation, have been rejected by both candidates for governor and should block the initiatives. A New Mexico cap and trade law will have very little or no job or revenue stimulus to attract votes.
The new Republican Majority, if it comes to pass, could impose restrictive legislation on renewable energy strategic tax incentives which provide Treasury Department cash pay-outs of 30% 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 Bush, the mandate for 36 billion gallons of renewable fuel by 2022 could be subject to revision. There is currently popular resistance to raising the ethanol requirement (a renewable fuel made mostly with corn which is also a universal food) from 10% to 15% 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. This would freeze the 10% change and avoid further consumer problems at the pump.
Senator Bingaman, assuming a Democratic Party majority in the Senate, will be compelled to defend both renewable energy and the moderate renewable portfolio standards (15% 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 Mexican 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 despite the Obama Administration campaign challenge two years ago. 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 Senator Domenici achieved that year under a strategy of energy diversity which emphasizes national energy output expansion from all sources without political discrimination. To roll-back to a fossil fuel policy preference would violate 2005. Perhaps energy market conditions currently make such a policy choice irrelevant. Can a wind turbine in your neighborhood, under
contract with an electric utility, compete against a long-term low price of natural gas?