March 31 was a groundbreaking day of such historic significance that had its developments come one day later, it might well have been mistaken as an April Fool’s Day joke.

President Obama has proposed opening large swaths of the country to offshore drilling, reversing the staunch anti-drilling stance he took while he was campaigning. It a decisive move that also marked a dramatic departure from the delays that have characterized Obama’s Interior Department in recent months.

Obama’s proposal is not perfect and today, as so many not-in-my-backyard types are attacking the new policy, it will be tempting for those of us who support a strong domestic oil sector to criticize the president for not going further in supporting drilling in many of the country’s oil rich regions, like Alaska, or to question the timing or the political motives behind his decision.

While there will be time to examine the proposal in more detail, our first order of business must be to applaud Obama’s courageous move, and offer to help him keep true to his words. In announcing a plan to open much of the Gulf of Mexico and the East Coast to drilling, he has not only opened up some major new sources of oil within our borders, he has also shown a willingness to break with his core allies for the greater good of the country.

At CEA, we have consistently chronicled the battle to produce more homegrown energy, but it has too often felt like a losing battle. We have offered all the arguments, from how domestically produced oil creates jobs and strengthens national security, to how a strong oil sector can coexist with strong environmental protections. We have offered all those arguments, but at times it felt like we weren’t getting through.

Obama’s support of offshore drilling has shown us that there need not be two sides in this issue; that anyone who is for a strong economy and strong national security should include development of more oil and natural gas here at home, and buying less of it from distant markets – while, of course, we also develop all forms of alternative energy.

“Given our energy needs, in order to sustain economic growth and produce jobs and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable homegrown energy,” Obama explained.

Surprising? Yes. Courageous?  Definitely. Practical politics? That too.

But, if the appropriate actions follow the President’s words, it’s no joke.

First the good news: Domestic oil production last year increased for the first time since 1991.  For folks who tend to be amazed by how time flies, that’s almost 20 years: clearly reason to celebrate. The not-so-good news? Oil production declined in Alaska last year: The latest report from the U.S. Energy Information Administration shows that increased production in the Gulf of Mexico and in North Dakota helped offset declining production from several other states, most notably Alaska, where oil production has been on a pretty much steady decline since 1988.

While it’s encouraging to see improved drilling technology produce increased yields from North Dakota to the Gulf of Mexico, it is a little hard to envision a strong and enduring domestic oil sector without a thriving Alaskan oil sector. Even with so much of the state off limits to drilling, even after a 22-year decline in production, Alaska accounts for almost 15% of total U.S. production – a testament to the vast stores of reserves the state holds. One study by the University of Alaska estimated that Alaska’s outer continental shelf could produce an additional 1.8 million barrels per day, or 300,000 barrels per day more than we currently import from Saudi Arabia.

But in recent years, there have been some troubling signs that, the decline in Alaska’s oil sector could be accelerating. Last year, ConocoPhillips announced that for the first time it 40 years, it has not plans to drill new exploratory wells in Alaska. BP cut its 2010 development budget for Alaska by 15%. And volume on the trans-Alaska pipeline has dropped so dramatically that the 800-mile-long system is facing an early demise. All these distress signals for the state’s critical industry fly in the face of the fact that estimates for oil reserves in the state continue to grow.

For all the challenges Alaska faces, there are some reasons for encouragement. BP this spring is beginning production of a grade of heavy crude oil that has long been considered off limits because of its thick consistency.

And last year the Interior Department ruled that Shell Oil could drill three wells in the Chukchi Sea, considered one of the most underdeveloped sources of oil in the U.S. – although today Shell is still waiting for all the permits needed to go forward.

Finally some context: While oil production did increase last year, the 5.32 million barrels per day produced are still well below the 1991 average of 7.42 million barrels per day.

We have a lot of ground to make up. In order to maintain a truly strong domestic oil sector, the U.S. must grow production significantly, from all our key sources, including Alaska.

As industrial states like Michigan pin their hopes of an economic revival on renewable energy, a lot of people are understandably skeptical that the Rust Belt will ever be green. One innovative Sun Belt company says it can help. ElectraTherm, of Reno, Nevada, makes a product called the Green Machine designed to capture waste heat from manufacturing plants and then recycles it to create electricity.

It’s a concept that has long held appeal: wouldn’t it be nice to make use of all that steam coming out of factory smoke stacks? But like so many nice-sounding renewable technologies, it was never before successfully executed. ElectraTherm, which last year won the Wall Street Journal Technology Innovation award in the energy category, says it is the world’s first commercially viable waste heat generator, and last week, it struck a major deal in the nation’s industrial capital that could lead to broad adoption of its Green Machine.

ProRenewables, a Michigan energy solutions company working to bring more renewable energy to the region, has entered a deal to distribute the Green Machine in seven industrialized states in the Midwest. In case you’re wondering, it is green, and it is an actual machine. One of the investors in the deal said the Green Machine had the potential to change the image of industry:

The things that we’re being criticized for – that we’re industrial, that the Midwest is an industrial mecca – are exactly the characteristics that make the Midwest such a great potential marketplace for us.

Frankly, what we’d like to see in the future is the opportunity for every organization that generates excess heat and waste in Michigan – and hopefully in the Midwest – to be looking seriously at this technology.

One of the reasons ElectraTherm is getting noticed is because of the sheer abundance of waste heat. The Department of Energy estimates that the amount of waste heat emitted in the United States exceeds the current production of all other renewable power sources in the country. If the company is able to demonstrate that it can really capture this waste heat on a large scale, we might never look at smoke stacks the same way again.

A footnote: the Green Machine also works on waste heat generated from solar power. That’s effectively generating a new kind of renewable power from the waste of another renewable power source, and it offers some sense of all the different kinds of power out there waiting to be tapped.

In a perfect world, the U.S. would be 100% oil independent. In today’s less-than-perfect world, tapping Canada for some of our energy needs would seem to be the next best thing.

Canada, after all, is our friend and our neighbor. And, it just put the finishing touches on a $1.2 billion pipeline that will move oil from Alberta, across the U.S. border, through Minnesota and into Wisconsin, where it will either be refined or transported to other U.S. markets. The U.S. section of the pipeline was one of the larger construction projects in Minnesota’s history. Which would make you think that the U.S. is committed to Canadian crude oil for the foreseeable future.

Yet, at the same time workers were welding the final stretch of pipeline, Canada’s ambassador to the United States was in Washington speaking out against a proposed policy that could severely limit how much Canadian crude oil makes it to the U.S.

He was talking about the Low Carbon Fuel Standard, which as CEA President David Holt recently outlined on this blog, would effectively block energy resources from Canada and Mexico from entering the country, creating a vacuum likely to be filled from much more distant sources in Africa and the Middle East. The standard, which has already been adopted in California and is being seriously considered by 11 other states, applies a misguided measure of a fuel’s carbon footprint, factoring in the way it is extracted, but failing to account for the fuel that it takes to transport it. Saudi crude oil would win, even though it takes a lot of fuel and money to transport it. Canadian crudes lose, even though they’re right in our own backyard. Of course, as we’ve noted before, many U.S. grades of crude oil would lose too, all because of an overly simplistic formula for determining carbon profiles.

For all the talk of conserving energy, it is astonishing how rarely we talk about all the energy we use transporting oil from halfway around the world. We use fuel to transport fuel from far away, even though we have fuel here at home and right over our borders. And then we promote measures like the Low Carbon Fuel Standard that sound good but actually encourage our use of far-away oil. How do we think all that oil gets here?

Much of our work here at CEA focuses on identifying the most practical policies for serving the country’s significant energy needs. Sometimes the issues are complicated. But sometimes they seem rather simple. There is oil close to home and oil much further away. You can move oil from nearby via pipeline. But you need a massive tanker to get it across an ocean.

Incidentally, Canada already has a backup plan in case the Low Carbon Fuel Standard becomes law across the U.S. Plans are reportedly underway to build another pipeline, this one to the west coast of Canada, where tankers could ship its oil to Asia. Sound a little roundabout to you?

Everyone who works in renewable energy – or American manufacturing for that matter – let out a collective sigh of “What is the world coming to?” last November, after Evergreen Solar www.evergreensolar.com an up-and coming solar panel maker in Marlboro, Mass., announced that it would move manufacturing of solar panels to China.

The company blamed its disappointing move on falling prices for solar panels as well as increased competition from overseas suppliers, like those in China.

Now, the cynical interpretation here is something like, “If you can’t beat them join them.” But in reality, when jobs flow overseas, it’s not always a matter of the other country like China winning the business fair and square. Evergreen, like so many renewable energy companies, started out with the best of intentions for creating jobs here in the United States. But along the way, it ran up against a level of competition that was simply impossible to match. How severe is competition from China? Companies are increasingly complaining that it’s not just that the finished goods are cheaper, but that finished goods from China are cheaper than the costs of the raw materials here in the U.S.

How does China do it? Recent reports suggest that China is far more protective – some would say protectionist – of its industry than we are here in the United States. Earlier this week, the National Foreign Trade Council issued a report finding that China is ordering its large state enterprises to favor Chinese manufacturers in their purchases of energy-related equipment, in violation of agreements it made when it joined the World Trade Organization in 2001. And the cries of Chinese currency manipulation making its goods unrealistically cheap have grown so loud that a group of Senators have introduced a bill to take action against China over its currency policy.

We’ll leave it up to lawmakers to examine the possible WTO violations and currency manipulation. But you don’t need an investigation to see that a lot of countries do a lot more than the U.S. to support domestic manufacturing. It’s easy to attack American industry as lumbering and ineffectual when it loses out to overseas companies, but the fact is, these industries need a lot more support than they often get. If we allow a critical industry like solar to move overseas just because solar panels are cheap at the moment, we are being short sighted. Demand will continue to grow, and prices will invariably rebound, but if we are not careful the damage will have already been done.

This is not a story unique to the solar sector, but one that is being played out again and again across the country’s manufacturing base.

By David Holt, President of Consumer Energy Alliance

We are pleased to be able to engage in a thoughtful conversation about Low-Carbon Fuel Standards (LCFS), because, until now, there really hasn’t been enough discussion about an this issue that will impact so many.

That’s been true even as LCFS supporters are leading aggressive campaigns in more than 20 separate states – each aimed at imposing this mandate on a state or regional basis, and then drawing on that momentum to demand its implementation nationwide. All the while, there has been very little substantive discussion on how this “energy” initiative will affect fuel prices, the lives of consumers and the consequences it will have on our ability to import secure, affordable energy from Canada.

As we wrote on our blog last week, NRDC’s engagement on this issue is a welcome development – and one we hope will lead to a more constructive debate (or at least: some debate at all) on the real-world consequences associated with an LCFS. Some LCFS proponents continue to mistakenly claim that an LCFS will actually produce a chemical change in the carbon content of the fuels we use. To its credit, and as point on which we can agree, NRDC doesn’t seem to support this notion. That said, some of NRDC’s statements indicate a misunderstanding of the basic mechanics of how an LCFS would actually work. And who would be forced to pick up the bill for the increased fuel costs that will accompany their implementation.

On these issues, though, CEA can provide some meaningful assistance. Below we take a look at NRDC’s most recent posting on the LCFS and the Canadian oil sands, and humbly offer a few key corrections where needed.

NRDC says: “[T]he reality is that the LCFS starts to wean us from the choke-hold that oil has on today’s transportation and will help us gradually transition to more diverse, cleaner choices for fueling our mobility.”

The reality is: Under an LCFS regime, the amount of energy imported each day that’s needed to fuel our cars, trucks and minivans wouldn’t necessarily change – but the places from which those resources come (and the amounts provided by each) would certainly see a dramatic shift.

Implementing a policy that has a direct consequence of preventing Canadian and Mexican energy from crossing the U.S. border will create a significant short-term vacuum, to be sure – but one that suppliers from the Middle East, Africa and the Far East will be more than happy to fill. You see, under the accounting methodology of the LCFS, oil originating from unstable regions half-a-word away generally receives a better carbon score than energy resources produced in Canada, Mexico and even the U.S. Intermountain West – even though these resources bear carbon profiles that are chemically identical to crudes from far-away lands.

Maybe that’s why study after study has shown that an LCFS may actually increase global emissions of carbon dioxide, not reduce them. Remember: Foreign crude doesn’t arrive in U.S. refining centers via teleportation. It has to travel more than 12,000 miles before it gets here. Remarkably, the LCFS scoring mechanism doesn’t seem to account for those emissions – but those who know the issue best certainly do. Just ask the U.S. Department of Energy’s top energy policy analyst. This slide, we think, is particularly relevant to this question:

A more direct approach calling for the long-term diversification of our transportation fuel mixture must be considered and would be a better approach than an LCFS.  We will simply not be able to convert enough vehicles in the near-term to alternatives to meaningfully reduce imports.  The infrastructure, technical know-how and alternative fuel availability simply do not exist today.  Hoping that alternative energy can & will make a significant difference today does not make it a reality.  We need to diversify our energy resources and we need to start now so that in 40 or 50 years alternative energy will actually make a meaningful contribution.

NRDC says: “The low carbon fuel standard is expected to reduce our fuel costs by making America more fuel efficient and by providing alternatives to our oil dependency.” (emphasis theirs)

The reality is: The truth is, an LCFS is not designed to improve fuel economy or efficiency – precisely because it has nothing to do with the fuel in your gas tank – and will actually raise our fuel costs substantially.

How is that so? For starters, it’s important to understand first what an LCFS actually seeks to regulate. It regulates the production of oil. It regulates the transportation of it. It regulates the refining of it. And it regulates the distribution. The only thing it doesn’t regulate, in fact, is the combustion of that fuel in your gas tank – which, incidentally, happens to account for 80 percent of CO2 emissions that come from the transportation sector.

We’ll repeat that: The LCFS doesn’t even attempt to address the source of more than 80 percent of carbon emissions that arise from the transportation sector. But that doesn’t mean that an LCFS would let American consumers off cheap. Far-away oil may receive a better score under the LCFS accounting regime, but it also happens to be a lot more expensive to buy than the secure, affordable energy resources available to us closer to home. According to one study published recently in the American Economic Journal, the price you pay at the pump could jump $0.60 a gallon under the best case scenario.

NRDC says: “The low carbon fuel standard will … help us protect our precious North American environment, improve the health of communities already living with too much pollution, and reduce the need to commit U.S. troops in unstable, oil rich areas of the world.”

The reality is: An LCFS regime would actually prevent sources of secure, reliable energy from crossing the border, thereby creating the circumstances that will allow sources of far-away, unstable, and expensive energy to increase its share of the U.S. market. In other words, the clear, direct consequence of an LCFS is to reduce Canadian imports, as well as production of crude in parts of the United States.

As far as NRDC’s suggestion that an LCFS would “protect our precious North American environment,” here we have another assertion that simply isn’t grounded in the facts. The truth is, Canada’s oil sands are found beneath 140,000 square kilometers of land in Canada – part of a forest that’s more than 3.2 million square kilometers in size. Here’s the kicker: Of those 3.2 million square kilometers, only 4,802 of them are actually mined – and every square inch of that is required by the government to be fully reclaimed, returning the land to a sustainable landscape equal to its condition prior to development. Further, preventing imports of fuel derived from the Canadian oil sands into the US will not prevent development of these resources – they will simply be developed and sold into other overseas markets.

NRDC says: “Policies like the LCFS will help make the U.S. more competitive by encouraging the use of more sustainable resources and complement the creation of millions of clean energy jobs under new climate policies.”

The reality is: It may indeed be true that an LCFS will someday help create new jobs – but no one can credibly claim that those jobs would be based in the United States. More realistically, an LCFS will spur job creation and economic development in the regions of the producing world that stand to win under the system (the Middle East), and achieve roughly the same effect for regions of the consuming world that stand to claim secure and affordable energy resources from Canada that, without an LCFS, would have been sent to the United States instead (Asia).

But what would happen to this country? Fuel prices would be rendered prohibitively expensive. Our dependence on foreign, unstable oil would go even higher. And thousands of jobs would likely be lost – all sectors of the U.S. economy – or, at least, all sectors that require affordable and reliable sources of fuel to remain in operation.

NRDC says: “While CEA claims that Wall Street will be enriched at the expense of Main Street, we don’t expect Wall Street to be involved in [the LCFS] credit market.”

The reality is: One of the least talked-about elements of the LCFS is the credit trading scheme that the implementation of such a policy would necessarily create. NRDC’s suggestion that it doesn’t “expect” LCFS credits to be bought and sold on the open trading market shows a lack of full understanding of LCFS regimes in the best case, and downright disingenuous in the worst – especially when considered in the context of the effort’s broader (and stated) goal, which is to force an LCFS to be imposed nationwide.

So there you have it: For those interested in having a genuine, substantive debate on the LCFS and its potential impact on American energy consumers, U.S. energy security and efforts to rejuvenate U.S. job creation, consider this an invitation to join an open, honest debate.