A Take on Obama vs. Romney

Source:  John Miller, The Energy Collective, September 5, 2012.   Mr. Miller is an Energy Consultant and Professional Engineer with35 years experience in the petroleum and clean energy businesses.  He has Chemical Engineering/Chemistry degrees from the  University of California–Davis and an M.B.A. from Saint Mary’s College/Berkley.

What is (Obama vs. Romney) Energy Independence?

Webster’s Dictionary defines ‘energy’ as: capacity or power for action, a resource such as fossil fuels, wind, etc. from which usable energy can be produced for doing work. Webster defines ‘independence’ as: freedom from influence or control by others, self reliant/governing, not dependent on others, or freedom of thought, decision, and actions. When you think about ‘energy independence’ how do you define this concept? With the upcoming Presidential election we all have a choice to make on which candidate’s energy plan is most consistent with our personal view of ‘energy independence’.

If you are primarily concerned with possible global climate change you might define energy independence as becoming independent from fossil fuels. If you are an energy security advocate you may define energy independence as reducing U.S. exposure to potentially unreliable oil imports from outside North America. If your political bent is towards being progressive you could define energy independence as increasing government control over supply, demand and energy costs. If your political bent is towards being libertarian you could define energy independence as having minimal government influence over energy markets. Or, if you are more moderate, you may believe that energy independence is a balanced approach between the extremes.

After researching energy independence or security for years it’s clear that the numerous different views of energy independence can frequently become confused. Depending on an individual’s position, debate about energy independence can readily become disjointed, resulting in two reasonably intelligent individuals just talking past each other. A high profile example of different views of U.S. energy independence is the upcoming Presidential election. We have the current Obama Administration’s ‘All-of-the-Above’ plan to secure U.S. energy vs. Mitt Romney’s ‘Energy Independence’ plan. The following briefly highlights some of the fundamental differences between the two Presidential candidate’s energy plans:

Petroleum oil

  • Obama: The All-of-the-Above energy plan claims to include supporting oil production. The President recently announced plans to open additional Federal on-/offshore to new oil development. The Administration also claims credit for the significantly increased domestic oil production 2008-12. The amount of actual production possibly attributed to this Administration is relatively small since it takes multiple years to obtain permits, develop and put new oil fields into full production. The large increase of domestic oil production comes from drilling permits issued during the last Administration or from production on non-Federal or private lands. Under the current Administration, regulatory and drilling permit barriers have directionally increased, which can further constrain significant short-term new domestic oil development. Blocking the Keystone XL pipeline was another example of constraining secure petroleum oil supply. This action had the unfortunate consequence of negatively impacting our most important trading partner, Canada. As a result, Canada is forced to work with China on developing their oil resources.
  • Romney: The Energy Independence plan largely focuses on increasing domestic oil production. The plan also calls for further increased access to Federal on-/offshore oil reserves, and, improving the regulatory review and permitting process to make it more efficient and effective, while properly addressing environmental issues. The recent oil trade logistics barriers with Canada would be removed.

Natural Gas

  • Obama: The Administration recognizes that cleaner natural gas is a solution to replacing higher carbon intensity fossil fuels such as coal. Once again recent domestic production growth has overwhelming come from non-Federal or private land. The barriers to new hydraulic fracturing technology and further natural gas development have directionally increased due to the EPA’s recently intervening into permitting processes that normally fall under the responsibility State agencies.
  • Romney: The Energy Independence plan also largely focuses on increasing domestic natural gas production. Improving the regulatory/permitting process would cover future oil & gas development and ensure all environmental issues are properly addressed.

Clean Power and Renewables

  • Obama: The Administration strongly favors clean power and renewable biofuels over fossil fuels. Since 2008 wind and solar power capacity have doubled. This continued growth in clean power has been largely due to building on past Government subsidies and additional financial support from the 2009 Recovery and Reinvestment Act. Given the opportunity, the recent levels of clean energy financial support and subsidies would be continued and possibly be increased. This includes Government financial support for all stages of clean energy development – research, new commercial facilities, and subsidies for delivered clean energy. In addition, the Administration strongly supports the latest renewable fuel standard (RFS2) that mandates producing and consuming increasing levels of biofuels including corn ethanol, soybean biodiesel and future cellulosic/algae biofuels. The RFS2 was created under the Energy Independence and Security Act (EISA) in 2007.
  • Romney: The Energy Independence plan would shift development decisions for clean power and other renewables more towards the free market. This would include reduced government financial support and subsidies, but continued support for energy research. New project capital and operating costs, and overall project risks would be shifted to the free market.

Energy Efficiency

  • Obama: In 2009 the Administration increased the CAFE standards up to 34 mpg for MY2016 in compliance with EISA 2007. The Administration recently further increased the CAFE standards up to 49.5 mpg (54.5 mpg based on carbon) for MY2025. Although some of the CAFE benefits are exaggerated, this strategy should significantly help reduce Transportation sector petroleum consumption. The Administration also supports Residential energy efficiency improvements through various Government financial support and subsidies.
  • Romney: The Energy Independence plan would reduce Government involvement in mandated energy efficiency regulations and switch the responsibility and accountability more towards the free market.

Carbon and Coal

  • Obama: Despite the Democratic controlled Senate’s failure to pass the H.R. 2454, American Clean Energy and Security Act in 2009 (Congress’s version of cap-n-trade) the Administration has taken actions to significantly restrict U.S. carbon emissions. These include the EPA aggressively restricting most coal power plant stack emissions, which will prematurely shutdown existing and be a major barrier to new coal power plants. The EPA also based the new CAFE standards on tailpipe carbon emissions. The projected shutdown of substantial existing/new fully dispatchable-base load coal power capacity creates a potential risk to future power grids’ reliabilities. The justification for further expanding all forms of clean energy or renewables is also largely based on reducing the U.S. carbon emissions.
  • Romney: The Energy Independence plan does not address carbon emissions since Congress has failed to address climate change or pass any regulations restricting carbon emissions.

Do you recognize a pattern? The Obama All-of-the-Above (the ground) energy plan does not strongly support domestic fossil fuels production or our important trade relationship with Canada. Instead the Administration supports aggressively replacing coal and petroleum with lower carbon clean energy and renewables, and mandating energy efficiency improvements in order to further reduce the consumption of fossil fuels and associated carbon emissions. The Administration proposes even greater Government support and control over most energy markets. The Romney energy plan strongly supports domestic fossil fuels production and rebuilding our energy trade relationship with Canada. The Energy Independence plan places the responsibility for energy efficiency and developing alternative energy sources more on the free markets. The plan clearly puts highest priority on energy independence or security and rebuilding the economy.

Each energy plan has its strengths and weaknesses. Although the Obama plan more strongly supports further development of clean power, renewables and reduced carbon emissions, the plan fails to address the economic impacts and the power grid reliability risks created by not comprehensively addressing overall cost-energy impacts. Obama’s energy plan will continue to support clean power and renewables largely through deficit spending. The Administration has also overlooked the potential risks to U.S. power grid reliability by aggressively shutting down coal power capacity and possibly adding much larger amounts of variable, non-dispatchable wind/solar power capacity. Without including adequate base load and peaking power backup, many U.S. power grid regions could face increasing brown- and black-outs in the future (Re: the North American Electric Reliability Corporation). The strongest part of the Administration’s energy plan towards U.S. energy independence and security is substantially increasing energy efficiency of the Transportation and Residential sectors.

The Romney plan does not address carbon emissions. The decision on ‘if and how’ best to reduce carbon emissions is essentially shifted to the free market and public consumers, or until Congress passes a formal regulation. Possibly one of the largest weaknesses with the Romney Energy Independence plan is lack of stronger focus on energy efficiency. Realistically replacing all the highest risk oil imports from the Strait of Hormuz, the balance of OPEC, and most other high risk countries outside of North America by 2020 will likely require significant energy efficiency improvements in addition to aggressively expanding domestic oil & gas production. The economic impacts are the strongest part of the Romney energy plan. Rather than increasing Government deficit spending and creating even larger investment risk for the taxpayer, the costs of energy development and commercialization will primarily become the responsibility of the free markets.

Both energy plans can definitely be improved. In the case of Obama’s All-of-the-Above plan, more significantly recognizing the need for fossil fuels during the interim decades required to build substantial clean energy would be a major improvement. As clean energy is gradually and steadily increased in the future, fossil fuels should be reduced in a coordinated and well managed manner. Developing a comprehensive, long-term plan on how best to retire fossil fuels without creating significant risk to power grid reliabilities or shortages of motor fuels is needed. Putting more focus on renewable energy or fuel standards strategies and getting the Government out of the high-risk loan capital guarantee and perpetual subsidies business is also needed to prevent further waste of taxpayer dollars.

In the case of the Romney Energy Independence plan significant improvement can be made by including many of the existing efficiency standards as needed to ensure future energy security is more fully achieved. If or when Congress actually approves significant required carbon reductions, the energy plan should then be modified to include this scope. Similar to previous suggested improvements, developing renewable energy/fuel standards and empowering or making the free market industries accountable for deciding how best to achieve renewable energy standards is recommended. Some level of Government research support and limited term clean energy supply subsidies may also be required.

Implementing the current Obama energy plan without the suggested improvements will risk creating further significant future taxpayer debt. Not only will we face potential future power outages, but the energy costs (to quote the President) could “necessarily skyrocket”. With or without substantial Government subsidies the price of all forms of U.S. energy supply will increase and could eventually double to similar levels found within the EU. Implementing the current Romney energy plan basically risks not achieving the level of energy security envisioned. The issue of carbon emissions will continue to be somewhat unclear until Congress passes a future regulation requiring specific targets and objectives towards reducing the U.S. carbon footprint or removes carbon dioxide as a pollutant under the Clean Air Act.

Come November voters will have to make a choice on U.S. ‘energy independence’. Do we totally trust the current Government to make most decisions on how best to achieve U.S. energy independence or security over the free market? Or, do we support an energy independence plan that shifts more of the responsibility for making the critical development, investment and production decisions back to the free market and the public consumers?

Neither Presidential candidate’s energy plan is perfect. The question then becomes, which candidate would be more capable of objectively analyzing their plan’s actual results and making needed changes to improve the short- and long-term performance, and, which candidate would be most inflexible, ignore their plan’s results and just double-down with the same plan actions again-and-again, and hope that past poor performance will somehow change to more acceptable performance in the future?