Freedom Line Blog

Here’s some more deservedly bad news for the Energy Department bureaucrats that brought us at least 12 multi-million dollar loser loans like the $535 million sinkhole known as Solyndra — a damning indictment from the Government Accountability Office summarized by The Hill:

The Government Accountability Office, in a new report, said it took Energy Department staff more than three months to provide data on the status of its loan guarantee applications.

“Because it took months to assemble the information required for our review, it is also clear that the [Energy Department’s loan office] could not be conducting timely oversight of the program,” the report says.

With typical understatement, the GAO also concluded that the Energy Department’s failed accounting for billions in taxpayer money “is not consistent with one of the fundamental concepts of internal control”.  Sounds like it’s time for Congress to exercise some external control to get things back to normal.

Over the weekend, the Wall Street Journal‘s Stephen Moore had an instructive and inspiring piece on the economic boom occurring in North Dakota as a result of the Peace Garden State’s (yes, that’s their actual nickname) aggressive development of oil resources.  More depressing, however (especially for this Golden State resident), was the contrast Moore drew with California:

In 1995, the U.S. Geological Survey estimated 150 million “technically recoverable barrels of oil” from the Bakken Shale [in North Dakota]. In April 2008 that number was up to about four billion barrels, and in 2010 geologists at Continental Resources (the major drilling operation in North Dakota) put it at eight billion. This week, given the discovery of a lower shelf of oil, they announced 24 billion barrels. Current technology allows for the extraction of only about 6% of the oil trapped one to two miles beneath the earth’s surface, so as the technology advances recoverable oil could eventually exceed 500 billion barrels.

Now contrast this bonanza with what’s going on in another energy-rich state: California. While North Dakota’s oil production has tripled since 2007 (to more than 150 million barrels in 2011), the Golden State’s oil production has fallen by a third in the past 20 years, to 201 million barrels last year from 320 million in 1990. The problem isn’t that California is running out of oil: In 2008, when the USGS estimated four billion barrels of recoverable oil from the Bakken, it estimated closer to 15 billion barrels in California’s vast Monterey Shale.

As Moore elaborates later (and as I’ve written at length both here and elsewhere), California’s failures are the byproduct of a governing class that regards traditional (read: viable) energy sources with suspicion at best and contempt at worst, prohibiting many efforts at energy exploration, setting renewable energy mandates, and enacting a statewide version of cap and trade.

One statistical contrast tells the whole story. The resources in California’s Monterey Shale are nearly four times as great as those in North Dakota’s Bakken. Meanwhile, California’s 10.9 percent unemployment rate is more than three times as high as North Dakota’s 3.3 percent rate. This is not fate. This is the result of choices made by California’s policymakers. The state’s voters should judge them accordingly.

With gas prices at record highs for this time of year, CFIF’s Renee Giachino uses facts to dispel President Obama’s myth that his administration is committed to an “all of the above” energy policy that includes increased development of domestic oil and gas.  Giachino’s message to the President: “Stop the dreaming. Start the drilling.”

Rick Santorum spoke in Mobile tonight at a dinner for the Alabama Policy Institute. I got a private five-minute interview with him before the dinner. Here’s how it went:

Q: “This is narrowcasting. You look at the [exit] polls and you are doing great among some groups but you are not doing well among two groups: single women, and people making over $100,000 and a lot of them are just over 100 thou, small businesses, not manufacturers but retailers. What do these groups not understand about your economic message that you would like them to understand?”

Santorum: “My economic message is, we’re cutting corporate taxes for everybody to a flat tax at 17 /12 percent, we allow complete expensing — a very very simple and fair tax code that allows the small business guy and the large guy to pay the same rate at the same simple tax form that they have to fill out. That to me is about as pro-small business — and the same thing is, we cut the top rate [on individuals] to 28 percent so those who are not corporations but file under the individual returns will have a tax rate of just 28 percent. Make it a very very simple tax code as far as deductions are concerned, just five deducations. Again: simplicity, predictability, all of those things are very growth-oriented and with lower rates. I’ve also pledged in this campaign that I’ll repeal every single one of Barack Obama’s high-cost regulations that cost over $100 million…..

[segue: crosstalk about single women and “media narratives”]…

I am about equal opportunity. If we give people the opportunity to rise in society, then people will be able to rise by themselves. We’re talking about lower taxes and less regulation and a society that is nurturing. And people say, ‘well, you’re just for families,’ well, families are important to our country, families are important so we have stable communities where moms and dads are together raising children — and that’s a good place for people to live, not just those families but single women and others.

—-

Q: “The second narrowcast question is, is there anything that people on the Gulf Coast might want to know about you, any national interest you’ve perhaps that might have particular local relevance to people in Mississippi and Alabama?”

Santorum: “Energy is obviously a very important issue. We believe the Gulf is an area that has tremendous promise, underutilized, all sorts of opportunities out there for expansion of oil and gas exploration; and the administration has not opened up and has not supported  opening it up. And that’s opportunity for jobs, here along the Gulf Coast.

You know, I think one of the other things that I know is important here is national security. And I’m the only person in this race who has said I will not cut the Defense Department. Flat-out, absolutely no way. In fact, it’s the only department I pledge will have an increase in spending, because we want to make sure that the benefits and salaries for men and women in uniform continue to go up as they should be with inflation…. and assuming no nuclear Iran, we are looking at a defense budget that is going to go up, modestly, and we’ll invest in making sure we will be the best trained, best equipped, and the best led military in the world — by far.”

In my column last week, I focused on how the Obama Administration’s energy policies harm the economy by subsidizing “clean fuels” that are not viable at market while handicapping the energy sources that actually work (and are affordable) in the here and now. An editorial in today’s Washington Examiner drives the point home:

The number of approvals for drilling in the Outer Continental Shelf in the Gulf of Mexico — which accounts for a third of all U.S. oil production — under Obama has plunged from more than seven per month to only three. Measured in terms of how long is required for the government to consider a permit application, the average for the five years before Obama was 60.6 days. The average is now almost 110 days, according to the Institute for Energy Research. Viewed in terms of the percentage of all permits sought that are approved, the five-year average before Obama was 73 percent. Today under Obama, it is 23 percent and falling. In other words, it is almost certain that the oil-drilling rig count will head back down in coming months, but it will be in response to government interference rather than as a result of price fluctuations. And the price of gas at the pump will continue to go higher.

Read that again. A 2/3 reduction in the number of permits issued and a doubling of the time it takes to get said permits. And the president really wants us to believe he doesn’t have any “silver bullets” for gas prices?

About the only thing that Dr. Steven Chu, President Obama’s Secretary of Energy, deserves credit for these days is honesty. Testifying before Congress yesterday, Chu was asked by Republican Congressman Alan Nunnelee of Mississippi whether the Obama Administration’s energy goal is to reduce the cost of gasoline. Chu’s response, according to Politico:

“No, the overall goal is to decrease our dependency on oil, to build and strengthen our economy,” Chu replied. “We think that if you consider all these energy policies, including energy efficiency, we think that we can go a long way to becoming less dependent on oil and [diversifying] our supply and we’ll help the American economy and the American consumers.”

… “We agree there is great suffering when the price of gasoline increases in the United States, and so we are very concerned about this,” said Chu, speaking to the House Appropriations energy and water subcommittee. “As I have repeatedly said, in the Department of Energy, what we’re trying to do is diversify our energy supply for transportation so that we have cost-effective means.”

In other words, “We’re perfectly content to see oil prices shoot through the roof if it means all you knuckle-draggers will start driving Smart Cars.” Should we really be that surprised from the man who once told the Wall Street Journal, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,”? Chu’s intransigence represents a broader liberal pathology: an ideological allergy to economic growth.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Jim Geraghty at NRO has the story:

A report by Greater New Orleans Inc., an organization of businesses large and small in Southeast Louisiana, lays out how the Obama administration is approving only a fraction of the new permits, significantly less than preceding administrations in both deepwater projects and shallow water projects, that getting approval from Obama’s Department of Interior takes much longer than before he took office, and how Obama’s administration rejects a much higher percentage of proposals for drilling than before he took office….

The three-year average for shallow-water drilling permits had been 14.7 per month; the Obama administration now has that down to 2.3 per month…. The average approval time has increased from an average of 60.6 days in the preceding five years to 109 days in 2011….

I wrote about this general topic last year right here. And here. Meanwhile, as has been reported numerous places elsewhere (I believe I first broke the story four years ago in the Washington Examiner, or at least broke it within the US), Obama has gone out of his way to help promote and subsidize Brazil’s efforts to develop its own oil industry.

This is madness. And it is costing Americans a fortune.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Dodd-Frank, the monstrous financial “reform” legislation enacted two years ago, contains hundreds of byzantine provisions targeting banks, mortgage lenders, and traders on Wall Street.  All of those new rules and regulations have been contested from both sides of the political aisle, and regulators have requested additional time to even understand its requirements.  There’s one little-known provision, however, that was snuck into Dodd-Frank at the last minute and should alarm everyone, regardless of political point of view.  Namely, new payment disclosure rules for American oil, gas, and mining companies that instantly threaten our nation’s energy security.

Typical of the current trend in Washington, Congress has tasked a regulatory agency, the Securities and Exchange Commission (SEC), to carry out this mandate. The new regulation, formally called “Disclosure of Payments by Resource Extraction Issuers,” is found in Title XV, Section 1504 of the bill. Put simply, the rule would require that any company listed with the SEC and engaging in energy production overseas must disclose literally every single payment made to a foreign government.

The rule would create a competitive disadvantage for American energy producers because not only would state-owned companies such as those in Iran and Venezuela be exempted, they would also suddenly possess detailed knowledge down to individual wells and projects.

Senator Ben Cardin (D – Maryland), one of the champions of this provision, has curiously argued that “it’s appropriate to require companies to provide project-level information…” According to him, specific, sensitive financial – even proprietary – data on particular drilling projects should potentially be surrendered, including to those countries or companies who don’t share America’s intentions.

Pete Sepp at the National Taxpayers Union recently explained the problem well:

“…Here is the painful rub with Section 1504: In essence, the rule would give foreign competitors—largely state-owned oil and gas firms—access to information about what American companies are paying to governments overseas, enabling them to outbid and outmaneuver in the global race for energy resources.”

That means that energy firms controlled by the Iranians and the Chinese would receive a huge helping hand compliments of the SEC, one that would severely undercut the international competitiveness of American companies. What’s more, the state-run energy firms that would benefit from the SEC’s new payment disclosure rule already maintain a large advantage over our domestic producers – not only financial backing from their home governments, but also ownership of the lion’s share of proven oil and gas reserves worldwide.   (According to The Wall Street Journal, state-run companies now control more than 75 percent of global oil production.)

And, quite simply, after the rejection of the Keystone XL pipeline and renewed calls for new tax hikes on American oil and gas companies, this new SEC regulation would deal yet another blow to an industry that is essential to our economic recovery. Why then would Congress and the SEC side with petro-dictators over American motorists and manufacturers?

An alternative would be for the SEC to implement a payment disclosure rule on a country-by-country basis, which could help protect American companies’ interests in specific projects abroad.  Or, preferably, Congress could reconsider that section of Dodd-Frank altogether.  Recall that Capitol Hill spent significant time more than 30 years ago hashing out the Foreign Corrupt Practices Act, which already specifically addresses  the transparency and payment issues at hand in Section 1504. For the sake of American future energy and economic security, our chief securities regulator must keep America’s interests first – not Russia’s or Iran’s or Venezuela’s.

In my commentary last week — focusing on the economic weaknesses of the Republican presidential candidates — I spent some time looking at Newt Gingrich’s enthusiasm for various energy subsidies, a pathology that he’s shared with much of the bipartisan establishment of the last decade or so. I noted in conclusion:

The Speaker is smart enough to know that the virtues of a free market apply to the energy industry just as much as any other. Fuel markets work best when consumers are making decisions based on price and quality, not when politicians are hand-picking energy sources to please favored constituencies.

This is just as true of conventional fuel sources like coal and oil as it is of boutique alternatives like hydrogen, wind, or solar. And it’s just as true whether it’s Democrats or Republicans giving the handouts. That’s why it’s so refreshing to see a group of Tea Party conservatives on Capitol Hill attempting to strip the crony capitalism from the energy industry. As Timothy P. Carney reports in the Washington Examiner:

Freshmen Rep. Mike Pompeo of Kansas has proposed the loftily titled “Energy Freedom and Economic Prosperity Act,” while the Senate’s Tea Party heroes, Jim DeMint (S.C.) and Mike Lee (Utah), have introduced the companion bill in the upper chamber.

The bill, which Pompeo hopes to insert into legislation extending the payroll-tax credit, would take a huge bite out of energy subsidies by eliminating tax credits for everything from solar panels and wind turbines to oil drilling and nuclear power generation. At the same time, the measure would cut tax rates.

…”This is the model,” Americans for Tax Reform President Grover Norquist told me Friday. It gets rid of the hodgepodge of distorting credits that steer money away from productive energy investments and toward politically favored activities, and it also lowers everyone’s rates. Neutral, low taxes, conservatives have long argued, are the formula for prosperity and economic growth, not to mention fairness.

On this, Norquist is precisely right. By taking the federal government’s hand off the scales, this bill would allow energy providers to flourish or falter on the merits, rather than according to the size of their lobbying budgets. And by lowering tax rates, it would ensure that providing Americans with the energy they rely on to do everything from heating their homes to driving their cars would be both more profitable for producers and more affordable for consumers.

Pompeo is to be saluted for his courage. Now it falls to the American people to push for this bill’s passage. A wide array of energy industry lobbyists will be hell-bent on killing it. That’s just one more testimony in its favor.

CFIF Contributing Editor Ashton Ellis discusses how President Obama’s decision to block the construction of the Keystone XL Pipeline will cost Americans roughly 20,000 new jobs and 700,000 barrels of oil a day, and how the decision ultimately could benefit China at the expense of the U.S.

Listen to the interview here.

During a visit to Solyndra’s Fremont, CA, headquarters President Barack Obama infamously proclaimed “we can see the positive impacts [of Recovery Act stimulus money] right here at Solyndra.”  A year later, Solyndra filed for bankruptcy.  Less noticed was Vice President Joe Biden’s equally presumptuous statement last year that Indiana-based EnerDel – a maker of government subsidized batteries for electric cars – was the “start” to reorienting “the way Americans power their lives.”   As of yesterday, exactly one year after Biden uttered those words, the latest green energy fiasco declared bankruptcy.

For those keeping score, that’s Solyndra costing $535 million, EnerDel $118 million, with more failures to follow.  Had enough, America?

From the recent decision to block construction of the Keystone XL Pipeline to Solyndra-like “green energy” initiatives, CFIF’s Renee Giachino discusses the Obama Administration’s failed energy policies in the week’s Freedom Minute.

A funny thing happens when you overlay two of President Barack Obama’s recent energy proclamations onto a 2008 electoral map: You find out just how political is his decision to kill the Keystone XL pipeline and embrace natural gas from the Marcellus Shale formation.

Here’s a map of the Keystone XL project.  And this is a map of the 2008 presidential election.  Note that the path of Keystone XL runs from Canada directly south through six states: North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, and Texas.  All of these states voted for John McCain in 2008.  (Incidentally, not even a sideline to Obama’s Illinois during the pipeline’s initial phase could placate the anti-fossil fuel President.)

Now look at this map of the Marcellus Shale natural gas formation that the Obama White House now says would be a great place to start drilling for America’s energy future.  It touches vast swaths of New York, Pennsylvania, and Ohio, with a large portion covering West Virginia.  Obama won New York, Pennsylvania, and Ohio in 2008, and will need to do so again in 2012 to stay in the Oval Office.

As I said in my column last week, expect to hear Obama make the pitch that natural gas from Marcellus Shale is the new way forward as a way to placate blue collar energy workers in states he needs to maintain – and in the case of West Virginia, possibly pick up.  (Reports are coming in that the President will devote a significant portion of his State of the Union Address to promoting domestic natural gas production.)

It’ll be a tough sale.  Obama’s EPA is trying to regulate the West Virginia coal industry out of existence, while working class voters are rightfully suspicious of a President who promises everything from expanded offshore drilling to solar powered miracles (Solyndra, anyone?), only to be exposed as a fraud.  Natural gas may be the next big thing, but it won’t mean anything to a coal worker out of work because his industry went out of business thanks to Obama’s latest round of picking winners and losers.

The big question is: Will the GOP be able to turn Obama’s politicization of America’s energy future into an articulate appeal for an all-of-the-above approach?

This insight, courtesy of Warren Meyer writing in Forbes, tells you everything you need to know about why the Obama Administration’s decision to block the Keystone XL Pipeline is misbegotten:

Some would argue that [the pipeline’s] opponents aren’t anti-energy, they just want to shift energy use from fossil fuels to “green” energy like wind and solar.  This is either disingenuous or unbelievably naive. The Keystone XL pipeline would have single-handedly carried more energy to the United States than the sum of all the green energy projects funded by the Obama Administration. And it would have done so entirely with private  funds rather than the Administrations increasingly ill-fated and ham-handed attempts at venture capitalism with taxpayer funds. The fact of the matter is that, for the foreseeable future, opposing fossil fuels is equivalent to opposing energy use.

That, my friends, is the nub of the issue. Liberal environmentalists — those same individuals that sneeringly deride their opponents as “anti-science” — can’t come to grips with the empirical reality: there are conventional energy sources that work and “alternative energy” sources that are viable only in the more fevered recesses of their imaginations. The greens can deny that reality all they want, but they won’t be able to deny the subsequent consequences: higher energy prices and lower economic well-being. That’s a very high price to pay for a sense of moral superiority.

From BusinessWeek:

President Barack Obama’s rejection of TransCanada Corp.’s Keystone XL pipeline permit exposed a split in a core Democratic constituency and handed Republicans a new line of election-year attack.

Unions representing construction workers condemned the move while labor groups including the United Steel Workers, the United Auto Workers and the Service Employees International Union joined with environmental advocates in saying they support Obama’s decision. It also triggered swift criticism from congressional Republicans and the party’s presidential candidates.

Expect Republicans to run ads targeting blue collar workers in Rust Belt swing states like Pennsylvania and Ohio where ties to manufacturing jobs run deep.  When Obama ran against Hillary Clinton in 2008 he consistently lost the white working class vote for stances like picking sky-is-falling environmentalists over John and Jane hardhat.

Dissatisfaction among traditionally Democratic blue collar voters toward Obama has been building for months due to political decisions that – as discussed in my column this week – kill unionized jobs in coal and oil, but interestingly not natural gas.  Obama’s turn away from blue collar voters has been met with a renewed emphasis on ginning up votes among other core Democratic constituencies like recent college graduates (hello, Occupiers!) and other gentry liberals.

But the strategy of maximizing votes in liberal enclaves like college towns and deep blue coastal states that Obama would win anyway doesn’t quite add up for one simple reason: the Electoral College – not the popular vote – elects the President.  Even if Obama gets a larger share of liberals in blue states like California he still nets only 54 electoral votes.  But if he fails to connect with everyday Democrats in swing states in Ohio and Pennsylvania that see their President willfully killing jobs they’d otherwise have, he’ll move entire states into the Republican column.

This kind of divide-and-conquer strategy looks like a recipe for defeat.  Then again, from my perspective, I couldn’t ask for a better campaign strategy.  (Unless, of course, this scenario occurs.)

Here’s my contribution to the debate on how to cut the federal deficit: Congress should cut the criminally mismanaged loan program administered by the Department of Energy.  Under Secretary Steven Chu’s watch, the department has doled out $535 million to the now-bankrupt Solyndra, with a separate $400 million sweetheart deal to Abound Solar.  Both firms are financially backed by top-dollar campaign bundlers for President Barack Obama’s presidential runs.

Had this program not been in place nearly $1 billion of taxpayer money would not have been parceled out to crony capitalists.  (Add the $548 million steered to Siga Technologies Inc. for a smallpox drug America doesn’t need, and you’re at nearly $1.5 billion to pay for products the private market doesn’t want.)  Is there a Democrat in Congress willing to defend this massive waste of taxpayer money, money that could have been spent to pay down the debt, shore-up Social Security, or extend the payroll tax holiday?

The best reason to get a Republican nominee quickly is so that the broader American electorate can be educated on the enormous amounts of waste, fraud, and abuse inflicted on the nation’s fisc by the Occupiers in the White House.

The Wall Street Journal reports that Hillary Clinton’s State Department is opening a brand new “Bureau of Energy Resources” today.  Amid the bureaucrat gushing about a “six-fold increase in personnel,” perhaps it’s worth considering just how unnecessary is this new office since its mandate seems to overlap substantially with other agencies.  Here are the “new” duties according to the article:

• Shore up stable supplies of affordable energy for the U.S.
• Promote clean energy and changes in markets to make alternative-energy technology more competitive
• Manage the geopolitics of the energy world
• Unabashedly support the export of U.S. technology, working with countries to put in a level playing field so U.S. goods can compete internationally
• Direct the development of the shale gas revolution in the U.S.

If you thought all of these mandates already apply to other entities, you’re right.  Someone should alert the Department of Energy, the U.S. Trade Representative, the Department of the Interior, and the Department of Commerce – as well as a host of smaller outfits known only to the industries they regulate – that yet another federal agency is open and ready to do business harm.

While congressional investigators continue to probe into whether the Obama Administration broke federal laws in awarding a $535 million loan to now-bankrupt Solyndra, the Wall Street Journal details how crony capitalism prolonged a series of bad decisions by the solar company’s management.

Here’s the money paragraph:

In mid-2009, Solyndra had a choice: It could hunker down with its existing factory and try to slash costs to meet competition, drawing on additional private capital as needed, according to the people familiar with the company. Or, with a loan from Uncle Sam, it could gamble and build a brand-new, bigger factory in a bid to gain economies of scale and dominate the market.

Choosing to gamble, Solyndra overbuilt its manufacturing capacity, and continued rushing to market a product that was not marketed – or priced – correctly.

As the WSJ article makes clear, not all of Solyndra’s problems were the result of inept management.  An unexpected drop in the price of a competing product turned Solyndra’s profitability upside down.  The market was sending Solyndra’s management a message to rethink their strategies.  The Obama Administration bypassed that all-important-process with huge amounts of money to continue pursuing failure.

Come to think of it, that pretty much sums up the president’s thinking when it comes to government spending.  No wonder his new jobs plan is dead on arrival.