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David Holt: What ‘Back Burner’ Issues Need Attention?

The following op-ed from David Holt, President of Consumer Energy Alliance, appeared on the National Journal website here, in response to the discussion question “What ‘back burner’ issues need attention?”

August 24, 2009   There are indeed critical issues being overlooked in the current energy discussion. By focusing so much attention on the climate change component of energy policy, issues like jobs, energy prices, and the development of the full spectrum of energy resources available to us are being overlooked to the detriment of our economy. What we need is a comprehensive, balanced and long term approach to energy policy – one that looks at ways to not only to control climate change, but also to lower prices, create jobs and build the US economy.

The fact of the matter is that for decades to come our global economy will rely on oil and natural gas for the vast majority of our energy needs, while we continue to work towards developing a diverse energy portfolio that includes wind hydro and nuclear (among others). To get there from here, we need to focus on a sensible and balanced US energy policy that includes provisions for access to our offshore and onshore oil and gas supplies. Failure to do so is costing this country millions of jobs and putting us as significant competitive disadvantage relative to other countries that more effectively utilize their natural resources.

Testimony by Dave Harbour, Ocean Policy Task Force Public Meeting, Aug. 21, 2009

Madam Chair and members of the Interagency Ocean Policy Task Force[1]:

I am Dave Harbour, a retired Alaska regulatory commissioner[2].  I publish an energy website and serve as a volunteer member of the Consumer Energy Alliance Board of Advisors[3].

Since you wish to recommend Ocean policy that is based on science and facts I offer you these additional recommendations on ‘process’ as a former Alaskan regulator.

First, On Timing.   There are few courts or regulatory bodies that would commit in advance to a full and complete, science-based, factual adjudication of a complex issue within a brief timeframe of six months or three months—especially when multiple parties, as here, should be given ‘due process’.  The president has given you one of the most complex challenges in the entire history of natural resources policy making.  The president has ordered that you produce recommendations for a national ocean policy, a framework for policy coordination of ocean stewardship and an implementation strategy within three months of June 12.  He has ordered that you produce a framework for ‘effective’ coastal and marine spatial planning within 6 months of June 12.  If quickly transformed into laws and administrative rules, the result could change America and change the world—not just ocean policy–and not necessarily for the better.  Deadlines now loom within sight.  As good advisors, please ask for more time if, as I suspect, this greatest of all natural resources planning projects cannot, by application of science and facts, be comprehensively and competently organized and completed within the dictated timeframe.

Second, On Comprehensive Policy. A sustainable ocean policy presupposes a comprehensive approach.  A little while ago, University of Alaska-Anchorage Chancellor Fran Ulmer spoke of the importance of your producing a ‘comprehensive’ policy.  She made reference to the significant body of knowledge available to you through the University of Alaska.  To not identify, subsume into your record and analyze such relevant material, along with that produced from other oceanographic, sea grant, aquaria, military, maritime and similar public and private sources would be to debase the importance and value of your work.  Nor should the body of knowledge you assemble and analyze be restricted to U.S. institutions since the oceans, like knowledge, are not limited by national boundaries.

Third, Other Relevant Ocean Policy Issues.  A valid oceans policy must recognize the dangers of creating unintended consequences by fully understanding and evaluating related issues.  I would urge the task force to create–as full and equal portions of your recommendations–analyses of the social, economic, cross-polar, cultural, energy and national defense implications of America’s Ocean Policy.

Fourth, Other Alaska and National Concerns.

  • Money.  With Trans Alaska Pipeline throughput dipping by about 6% annually, America’s dependence on foreign sources increases proportionally, just as Alaska’s state government revenue—over 80% dependent on oil—creeps dangerously lower.  Alaska’s and America’s most prolific new energy resources will come from the Alaska OCS.  To properly survive, Alaska’s government needs the full, undiluted 37.5% of OCS rents, royalties and bonus moneys now accorded some Gulf of Mexico states[4].  The Federal government, seeking to repay the enormous economic stimulus spending could help control inflation and repay debt by sponsoring a strong, Federal OCS program in Alaska and the Lower 48.  OCS activity monitored under current laws and regulations will produce hundreds of thousands of jobs for Americans and jump start the economy unlike the way that any artificial stimulus could.

National Security.  Yesterday Prime Minister Harper was visiting our neighbors to the East, in the northern territories.  It was his 4th Arctic tour.  He came with Arctic announcements, including infrastructure to be provided by CanNor, a new, Arctic regional economic development agency.  The agency will provide for roads, ports and other infrastructure.   He also observed Operation Nanook, the Canadian Forces’ annual sovereignty exercise in the eastern Arctic.  And protecting our sovereign Arctic waters—as Mr. Harper is doing—is arguably as important as protecting the natural values.  We in this room have heard of the Russian Federation plans for the Arctic.  Today our Coast Guard Commandant articulated his three-fold mission in this Task Force effort but none of those missions seemed focused upon establishing, extending and safeguarding the United States’ jurisdiction and sovereignty in the Arctic…when the Canadians and Russians are making sovereignty and jurisdiction a high priority mission.

Yes, Madam Chair, the task force assignment may be well intended.  But you can only fulfill your purpose by carefully considering the web of interconnecting environmental, economic, natural resources, cultural, intra-polar, political and military imperatives and realities.  To create within a half-year an ocean policy recommendation that treats some Arctic values but not all would be to predetermine winning and losing values before assembling and analyzing a complete and factual record.  Your recommendation would be labeled incomplete or incompetent, in spite of dedication or herculean efforts, simply because you were not granted sufficient time to professionally complete the mission.  Please tell the President that you need more time to do it properly.

The President’s direction concerning, “National Policy For The Oceans, Our Coasts, and the Great Lakes,” is a concept that must be fully–not partly–investigated to assure the avoidance of very bad, unintended consequences—including those which could unintentionally harm American citizens or the very oceans themselves.

[1] http://www.whitehouse.gov/administration/eop/ceq/initiatives/oceans/

[2] http://www.naruc.org/Resolutions/Harbour%20Honorary.pdf

[3] https://consumerenergyalliance.org/cms/about/

[4] http://www.mms.gov/offshore/GOMESARevenueSharing.htm

Letter to the U.S. Commodity Futures Trading Commission

August 20, 2009

The Honorable Gary Gensler
Chairman, U.S. Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581

Dear Chairman Gensler:

Consumer Energy Alliance (CEA) is a non-profit, non-partisan organization that supports the sensible utilization of energy resources to improve U.S. economic and energy security. Our diversified membership represents a significant cross-section of the American economy and shares the simple goal of ensuring stable energy prices for consumers.

It is paramount for both producers and consumers of energy that prices reflect the conditions of the physical marketplace – that is, of supply-and-demand fundamentals. It is for this reason that the Commodity Futures Trading Commission (CFTC) was tasked under statute to protect market participants and the American public by implementing necessary rules and regulations designed to prevent fraud, manipulation and excessive speculation, thereby assuring fair, transparent and stable commodity markets.

At the same time, Congress is currently considering legislation that would seek to reduce U.S. greenhouse gas emissions by establishing a carbon trading market. Estimates indicate that this market could top hundreds of billions or even trillions of dollars. The potential scale of such a new market increases the importance of the existence of a regulatory structure that fosters orderly and transparent markets.

To that end, CEA would like to commend you and your fellow Commissioners for looking at ways to bring added stability and confidence to the markets. We welcome your hearings into the role of aggregate position limits on energy futures – across all trading venues – and the need to increase transparency through full disclosure and accurately categorizing all transactions whether commercial or non-commercial; via regulated exchanges or over-the-counter environments.  Congress and the Administration are also considering proposals to bring greater transparency and counter-party risk management to the over-the counter-energy and other derivative markets.  Any new position limits imposed on regulated exchanges should be coordinated with limits imposed to the over-the-counter markets in order to ensure that regulatory changes are truly effective in addressing concerns related to market manipulation and excessive speculation.

Simultaneously, we recognize that poorly constructed regulatory mechanisms could be counterproductive and we urge you to proceed thoughtfully so as not to impede the price discovery function of commodities markets or deny necessary risk management tools to bona fide hedgers. Commercial traders participate in energy commodity markets as a means of hedging prices of commodities they either produce or consume in the course of their business, and ensuring their access to these markets is paramount. That said, a certain level of participation by non-commercial counterparts is necessary to ensure adequate liquidity and stability in the market. As you work through the regulatory process, we urge you and your fellow commissioners to remain mindful of these distinctions and to seek an appropriate balance that promotes fair and efficient market function.

Energy consumers and producers alike depend upon properly functioning futures markets. Free markets function best when there is accountability and transparency, as well as the prevention of undue market power. Therefore, position limits are important tools in CFTC’s current authorities for addressing the potential contributions of large individual traders to price movements in futures markets.

Again, CEA would like to commend you for continuing to uphold the important CFTC mission in defense of the American public, energy consumers and the integrity of the markets. If at any time our coalition and its member groups might be able to assist the commission with information or comments on this or any other matter, please let us know.

Very sincerely yours,

David E. Holt
President

Alaska by numbers

Advocates of increased domestic drilling have enough important battles brewing in the country’s lower 48 states to keep them busy. But it is important that we don’t inadvertently overlook Alaska, or dismiss it as a region where drilling is alive and well.

In some respects, drilling is alive and well in Alaska. The state accounts for almost 15% of total U.S. production and the Alaska Pipeline Service Company says it transports some 730,000 barrels per day.

But production is way down from its peak and the current capacity on the Trans-Alaska Pipeline System is less than half the 2.1 million barrels per day shipped in 1988. This diminished capacity flies in the face of abundant reserves. The U.S. Minerals Management Service (MMS), which tends to err on the conservative side, estimates that there are some 27 billion barrels of oil and 132 trillion cubic feet of natural gas in the waters off the coast of Alaska. That’s just about a third of all the oil estimated to lie beneath all the country’s offshore waters.

Oil producers in the Gulf of Mexico got some good news last month when a U.S. appeals court clarified an earlier decision and ruled that oil and gas projects initiated under the Bush Administration could go forward as planned. But that ruling left projects in Alaska’s Beaufort, Chukchi and Bering Seas in limbo. Although the federal government last year awarded $2.6 billion in leases in Alaska, those projects remain on hold, pending the resolution of some frivolous lawsuits.

Some of the country’s contested oil production sites would add incrementally to the domestic energy supply, and these incremental improvements are definitely worth pursuing, both for conventional and alternative sources of power. However the reserves in Alaska are so vast, they hold the collective potential to be a real game changer, helping the U.S. significantly reduce the oil it imports from overseas. The Chukchi Sea is considered the most underdeveloped source of offshore petroleum in the U.S.

One study by the University of Alaska estimated that Alaska’s outer continental shelf could produce nearly 1.8 million barrels a day, or 300,000 thousands barrels per day more than what we currently import from Saudi Arabia. The same study estimates there is enough natural gas in those waters to produce 13% of total U.S. demand.

It goes without saying that increased oil and natural gas production would create thousands of new jobs. Another important wrinkle in the case for more exploration and drilling in Alaska is that the Trans Alaska Pipeline System depends on it. Without the addition of new oil from Alaska’s coastal waters TAPS’ capacity could decline to the point that, by the year 2046, it could no longer be viable.

There may not be a quick resolution to the disputed leases in Alaska, but it is critical that we remain focused on this oil-rich region and continue a grassroots campaign to put pressure on lawmakers to make the decision that is right for the country’s energy security and its economy. The recent favorable rulings covering Gulf drilling show that these efforts do not go unnoticed. The Call to Action section of CEA’s Web site details why a strong domestic oil sector is critical. When writing to your Congressional representatives, feel free to use any of the attached text, or make the case in our own words. And thank you for all your help so far. It has made all the difference.

CEA: LCFS a Road Map to Higher Fuel Costs, Expanded Foreign Energy Dependence, Loss of U.S. Jobs

Consumer Energy Alliance responds to ethanol coalition’s support for a Low-Carbon Fuel Standard

WASHINGTON – August 14, 2009   Earlier this week at an energy forum in Nevada, a national coalition representing ethanol producers unveiled a “road map for a greener America” founded on the adoption of a policy known as the Low-Carbon Fuel Standard (LCFS).

In response to that effort, and with an eye on separating fact from fiction on the economic and strategic consequences that such a proposal would create, Consumer Energy Alliance (CEA) vice president Michael Whatley released the following statement:

“A LCFS would have serious consequences on America’s economic and strategic position in the world. An LCFS isn’t about making our environment any better, but it would make fuels from existing and future sources — sources we need — so expensive and scarce that Americans will be forced to look elsewhere for the energy they need to drive their cars, heat their homes and live their lives.”

Added Whatley: “Worse than that, an LCFS would prevent America’s fuel producers from accepting oil supplies from our closest, most important allies in the hemisphere – especially Canadian oil, of which we import more than 2.5 million barrels a day. In fact, under an LCFS, even some of America’s own homegrown reserves of crude oil would be targeted for elimination – creating a dangerous vacuum that some of the most unstable regimes in the world will be happy to fill.

“That’s not an effort that American energy consumers can support – especially when all the facts are laid out on the table. And while CEA members continue to fight for an ‘all of the above’ approach to leveraging America’s homegrown energy potential, which includes finding ways to expand our use of advanced sources of biofuels, a nationwide LCFS falls squarely outside that mandate.”

NOTE: At its core, an LCFS is a mandate on our nation’s refiners to reduce the “lifecycle” carbon emissions of the fuels they produce. But since the actual carbon content of most fuels is constant, the only options available for refiners under an LCFS is to either stop accepting shipments of “heavy” crude from Canada, Mexico, and much of the American Intermountain West, or buy up government-issued credits for the right to remain in business.

Either way, American jobs will be put in danger, the price we pay for gasoline will go up, and the amount of oil we import from unstable regimes abroad will increase substantially.

And now, a common sense tip on saving energy

The challenge of helping the world consume fuel more efficiently is a highly complex business that owes a lot to cutting edge science and technology. But when U.S. Energy Secretary Steven Chu appeared on Comedy Central recently, he offered some decidedly low-tech advice: Make it White.

White, as in white roof, that is. Chu reminded his modern audience of a basic fact that dwellers of warm climates have understood for centuries: when you paint a roof, or even an entire house white, it absorbs less heat. Way back when, that simply meant that everyone was a little bit more comfortable. Today, it means less air conditioning, lower electricity bills and reduced emissions. By Chu’s own account, if the world could somehow manage to turn all its roofs white within 20 years, it would save about 24 billion metric tons of carbon dioxide emissions – the same amount the entire world emitted last year. “So, in a sense, it’s like turning off the world for a year.” It’s a rhetorical argument of course, but it does show that little changes can add up.

The New York Times cites studies showing that in hot, sunny climates, white roofs reduce air-conditioning costs by at least 20%. They are not much more expensive than standard darker roofs and the investment can pay for itself quickly.

One disclaimer: People who live in places that have cold winters should probably keep dark roofs, which during cold, sunny days help keep homes warmer and reduce heating costs. But if you hail from a place like Arizona or Florida or southern California, take Chu’s advice and go light. Saving energy doesn’t always have to be so complicated.

Green shoots emerge, but U.S. industry still needs a lot of support

Historically, one of the biggest impediments to true energy independence has been our country’s collective failure – and that means policy makers, business people and man on the street types alike – to stay focused on the goal through bad times and good.

Many people still associate the last big push to wean ourselves off foreign oil with the last really bad recession, during the Jimmy Carter Administration. When more prosperous times followed, many of those same people and a lot of others who weren’t even alive back then conveniently forgot what was so bad about dependence on foreign oil in the first place.

Fast forward to the current Great Recession, which folks are so eager to put behind them that they are focusing on the thinnest shreds of good news, such as last week’s report that July unemployment actually declined, to 9.4% from 9.5% in June.

But just as the positive ruling that will allow some drilling in the Gulf is no reason to abandon efforts to free up other coastal waters in dispute, a glimmer of an economic recovery — while certainly welcome — is no reason to forget about all the U.S. industries that are still struggling and could be hurt more by volatile oil prices.

A couple of reality checks: Unemployment is still very close to 10%, a level that just one year ago seemed unfathomable. Several industries such as retailing and construction continue to make deep cuts. Even as the unemployment rate fell in July, some 247,000 more jobs were lost, a paradox that reflects large numbers of workers exhausting unemployment benefits and no longer counted among the jobless.

By most accounts, the modest decline in July unemployment was a blip rather than the start of a new trend. Nationwide unemployment is still widely expected to move into the double digits before it improves significantly.

Many states are already there. California’s unemployment is 11.6% and Florida’s is 10.6%. It’s worth noting that these are both oil-rich states that could benefit from a loosening of drilling restrictions.

This story provides a good explanation of how the failure to commit to a strong domestic oil policy is a vicious cycle: Dependence on foreign oil leads to price volatility and uncertain oil industry profits, discouraging oil companies – restrictions notwithstanding – from spending on exploration and ultimately resulting in tight supplies and more need to import oil from abroad. And then the cycle starts over again.

Even as we all look forward to the end of this long and painful recession, we need to see the downturn as an opportunity to commit to doing things differently and breaking this decades-old cycle of oil dependence.

CEA Alaska Director in Richmond Paper: “Let Alaska Jumpstart Economy”

“We must unleash our world leadership in conservation and 21st century technology to develop our resources safely. We can stop the economic hemorrhaging caused by our dependence on foreign energy. To help do that, we must safely produce Alaska’s energy while protecting its environment.”

“Alaska‘s energy can help jumpstart our economy and provide resources to prevent future price spikes. Salazar, Congress, and the Obama administration should protect the United States and support American consumers by letting American workers produce America’s energy.”

Dave Harbour, Executive Director of Consumer Energy Alliance of Alaska, submitted the following Op-Ed to The Richmond Times-Dispatch on August 5, 2009. View by clicking here.

ANCHORAGE, Alaska Oil topped $145 a barrel last summer, and gasoline settled in uncomfortably above $4.25 per gallon. Compared to those historic prices, today’s $70 oil and $2.70 gasoline might seem like a bargain.

But if we want to avoid a replay of the past, we must act now to confront the conditions that created those volatile prices, starting with Alaska. Accounting for three quarters of our nation’s coastlines, Alaska’s offshore resources exceed those in the Gulf of Mexico. With the giant Prudhoe Bay oilfield and infrastructure, Alaska also has an expert work force needed to produce its abundant resources. But for that to happen, the federal government must take action.

We need a decisive approach to America’s energy needs. We must unleash our world leadership in conservation and 21st century technology to develop our resources safely. We can stop the economic hemorrhaging caused by our dependence on foreign energy. To help do that, we must safely produce Alaska’s energy while protecting its environment.

Alaska produces more than 13 percent of America’s domestic crude oil. But we rely on the Middle East and other countries for 70 percent of the oil we use. The sad story is that we could easily improve our national security and reduce our vulnerability to foreign oil by turning to Alaska and other offshore areas. The associated royalty and tax revenues and the thousands of jobs offshore production may well create would provide America with an economic stimulus that strengthens – not weakens – future generations.

Much of Alaska’s abundant energy resources lie offshore, in areas that for years were made off-limits by the federal government. When energy prices shattered record highs last summer, both the Democratic-led Congress and the Bush administration allowed their decades-old bans on outer continental shelf (OCS) development to lapse. But the Interior Department must first include areas of Alaska’s offshore region in its five-year plan for development before any exploration can take place.

This problem came to a head earlier this year, when a federal court nullified the Interior Department’s current five-year plan, a strategy that included energy in Alaska’s North Aleutian Basin and Beaufort and Chukchi Seas. Fortunately, all that’s needed to reinstate the five-year plan are a few technical changes. Interior Secretary Ken Salazar could quickly make those changes, and unleash a safe search for Alaska’s energy.

Claims that we have to sacrifice the environment to produce energy are untrue. Energy production is cleaner, more efficient, and more effective than ever. Billions have been invested to develop technologies that have revolutionized energy production. Footprints have been reduced, limiting environmental impact. 3-D seismic and 4-D time-imaging technologies have made finding resources easier. Equipment like storm chokes and blowout prevention devices are now standard.

We must produce more domestic energy and not fear the false arguments of those who would prefer we produce no energy at all. Alaska’s energy can help jumpstart our economy and provide resources to prevent future price spikes. Salazar, Congress, and the Obama administration should protect the United States and support American consumers by letting American workers produce America’s energy.

Good news for the Gulf

A federal appeals court ruled on July 29 that new oil and gas drilling in the Gulf of Mexico can go forward as planned; clarifying a decision it issued earlier this year to block some projects initiated during the Bush Administration. An August 19 lease sale is now set for some 18 million acres covering an area projected to yield up to 423 million barrels of oil and 2.64 trillion cubic feet of natural gas.

Needless to say, oil industry groups are applauding the ruling. So is Interior Secretary Ken Salazar, who stressed that any viable U.S. energy strategy must include some domestic production.

In a political climate where policy is so easily swayed by public opinion, CEA wants to thank all its supporters for helping to elevate our cause … and to remind them that much work remains to be done.

Oil producers are still waiting for clearance to explore Alaska’s offshore region, and the vast majority of the coastal waters in the lower 48 states remain off limits, even though a longstanding ban on offshore drilling in the country’s outer continental shelf was lifted more than a year ago.

Hopefully, the latest court ruling signals a growing commitment to end our dependence on foreign oil and create more jobs in the process.

Good for the economy, good for the environment (and not a bad deal for consumers, either)

The federal government kicked off its cash for clunkers program in July, offering some serious money to get old gas guzzlers off the road. If you were thinking a few hundred dollars to take some rusty lawn decorations off the hands of people who couldn’t be bothered to make a trip to the junk yard, think again: Under the now $3 billion Car Allowance Rebate System (CARS), owners of qualifying vehicles can get up to $4,500 to turn the vehicle in to a participating dealer who will destroy its engine to ensure it never sees asphalt again.

Clearly any program that will remove cars that fail to meet today’s strict vehicle emissions standards is good for the environment. But the timing of this program, in the midst of a historically deep recession that has devastated the U.S. auto industry, combined with the government’s commitment to invest a substantial amount, seem certain to make this program a winner on multiple fronts.

Some car makers are adding their own incentives on top of the government’s generous offer. Chrysler, for example, is matching the federal rebate dollar for dollar for any consumer shopping for a new car. How can it afford to? The answer, it seems, is that it can’t afford not to. This story reports that, in addition to slow sales, U.S. carmaker inventories are bloating as a result of lease turn-ins: More than half of those people who have turned in leased General Motors vehicles in recent months have not replaced them.

Now, it looks like that trend might finally start to reverse as the government rebates and added dealer incentives make spanking new cars affordable to many people who were previously priced out of the market by a long shot. PriceWaterhouseCoopers thinks the program could generate 200,000 new car sales in the U.S.

None of this means that the program is flawless. Critics have disputed everything from the amount being paid for those old clunkers to the qualifying criteria. Some 20-year-old cars don’t make the cut, while relatively new models do. The online car buying guide Edmunds.com calculates that the new car sales that are generated through the program will cost American taxpayers $20,000 apiece. Other forecasts that predict much broader participation calculate a much lower cost per car turned in.

More to the point, however, Cash for Clunkers, and all the consumers and car dealers lining up to participate, shows that it is possible to serve different causes at the same time.

Commuting to work in a comfortable car doesn’t have to be at odds with serving the planet.

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