SOTU From an Energy Perspective

Wednesday’s State of the Union address was as much about the subjects the President avoided as about the issues or policies he proposed.

The word “wind” occurs not once in the speech. References to solar energy have to do with the number of jobs created building solar panels. Gone are the promises of a future of Rainbows, Unicorns and Magic Windmills; the Administration seems to have come to the realization that wind and solar may make a marginal contribution, but they will never be primary energy sources.

Now the focus is on “advanced biofuels” and “clean coal technology”. Advanced biofuels, relying on algae and whatnot for the generation of diesel equivalent, is one of those technologies that looks great in the lab. Its problem will be scalability, whether industry can figure out how to replace gasoline milllions of barrels at a time.

Clean coal gets the support of the big utilities and the coal companies, but implicit in their support is the government’s financing of the huge capital commitment.

Natural gas is the 800-pound gorilla that the President struggles to avoid. Natural gas delivers everything the President says he’s looking for in an ideal fuel: it is abundant, clean and American. Its infrastructure is in-place and the means to exploit it is off-the-shelf. Innovation and technology have increased the assessed resource base by over a third in just four years; we think we have a 100+ year domestic supply at current consumption rates. A commitment to natural gas would put people to work immediately, not speculatively and not years from now.

It’s as if a profitable, healthy domestic gas industry would create a problem for the President. As illogical as it may seem, his policies discourage domestic exploration. Obama seems to think that profitable, productive capitalists are a symptom of, not a cure for, the disease that ails our economy.

So what’s the problem? Success exacerbates the uneven distribution of wealth? Independent energy producers tend to be red state, conservative Republicans? That the Natural Gas Solution is by its very nature not Obama-centric?

Or maybe ALL OF THE ABOVE?

Back to the speech…

Next, we need to encourage American innovation.  Last year, we made the largest investment in basic research funding in history – an investment that could lead to the world’s cheapest solar cells or treatment that kills cancer cells but leaves healthy ones untouched.  And no area is more ripe for such innovation than energy.  You can see the results of last year’s investment in clean energy – in the North Carolina company that will create 1200 jobs nationwide helping to make advanced batteries; or in the California business that will put 1,000 people to work making solar panels.

But to create more of these clean energy jobs, we need more production, more efficiency, more incentives.

N.B. - “More incentives” = “Your Tax Dollars At Work”

That means building a new generation of safe, clean nuclear power plants in this country.

Wait! Nuclear energy?! Show me five Democrats who are ready to get behind that!

It means making tough decisions about opening new offshore areas for oil and gas development.

Your Interior Secretary has been sitting on a new five-year leasing plan for the OCS, Mr. President - so let’s make those “hard decisions”, already!

It means continued investment in advanced biofuels and clean coal technologies. And yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.

In other words, your brand of “clean energy” can’t cut it in the marketplace. Mine can.

…[A]t a time of record deficits, we will not continue tax cuts [sic - he means “tax breaks” - ed.] for oil companies, investment fund managers, and those making over $250,000 a year. We just can’t afford it.

Obama at his best: World Class Demagogue. Sure everybody hates oil companies, they’re an easy target. But oil companies are actually energy companies. By cynically choosing to demonize the oil industry, and punish them via the tax code, you punish the very companies who find and develop natural gas. The tax code doesn’t distinguish between oil and gas. The advances in natural gas technology have been led by America’s independent producers - the smaller, non-integrated companies who don’t own refineries or sell gasoline.

Note also that the American independent, by and large, won’t immediately benefit from opening the OCS. I would expect the players to be many of the same ones who dominate deepwater exploration. There will be American multinationals like Chevron and ExxonMobil, but also more foreign participation than many realize: Shell, BP, Statoil, Petrobras, Ecopetrol, Repsol, ENI, and even (quietly) CNOOC.

I know there have been questions about whether we can afford such changes in a tough economy; and I know that there are those who disagree with the overwhelming scientific evidence on climate change. [Laughter and catcalls. - ed.] But even if you doubt the evidence, providing incentives for energy efficiency and clean energy are the right thing to do for our future – because the nation that leads the clean energy economy will be the nation that leads the global economy. And America must be that nation.

So what you are saying, Mr. President, is that regardless of the validity of the “science” of Man-Made Global Warming, we should lead the charge to fix it anyway, because that’s what the rest of the world wants? This reminds me of the parental admonition: “If ‘all the other kids’ jump off a cliff, are you going to follow them?” Except in this case, you’re suggesting that America lead the rest of the world off that cliff.

As an engineer, that kind of thinking is anathema to me. Waste kills. By intentionally investing in technologies that are sub-optimum, we squander capital. It is less efficient than it could be. That may cost prosperous countries a few points on the standard-of-living scale; to undeveloped countries, those on the economic margin, it may mean the difference between clean and filthy water, between plagues and health, between life and death.

…[W]e need to export more of our goods. Because the more products we make and sell to other countries, the more jobs we support right here in America. So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America. … We have to seek new markets aggressively, just as our competitors are. If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores.

If we force our energy costs to be artificially high, our cost of manufacture go up. American goods are less profitable, and less attractive to foreign markets.

Mr. Obama, you are taking America down the wrong path. The one you have chosen will lead to a reduced level of prosperity and economic stagnation. American, market-based solutions can accomplish most of your stated goals. Wake up, drop the ideology and the demagoguery, and let’s get to work.