Sunday, March 8, 2009

Regulate, Bail Out, Nationalize

Is the energy industry in the cross hairs?

One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.”

—Ayn Rand, 1975

Despite the tanking global economy and an aggressive, nuclear Iran on the horizon, the Obama administration still has time to fret about the weather, now verbosely referred to as ‘anthropological global climate change’ and is charging ahead on policies to curb carbon dioxide emissions.

By April, the EPA is expected to issue an endangerment finding labeling carbon dioxide a dangerous pollutant subject to regulation under the 1990 Clean Air Act. It would set off the most extensive rule making avalanche is the history of our government, and it neatly sidesteps the legislative branch since regulatory powers under the Clean Air Act are the provision of the executive branch. In the future, these regulations could be extended to any other heat trapping gas. Additionally, the Obama administration plans to level punitive taxes and fees on energy producers in the Gulf of Mexico, ostensibly for the crime of conspiracy to commit global warming. Obama’s budget includes a $4 per acre fee on non-producing oil and gas leases in the gulf while simultaneously levying an excise tax on oil and natural gas produced in the Gulf.

Of course, Congress won’t be left out of the fun. In his address to the joint assembly in February, Obama urged them to aggressively pursue Cap and Trade legislation. Such legislation would force a cap on CO2 emissions and energy companies would essentially have to purchase permits from the government in order to do business. Timelines vary, but this legislation will be a reality by next December at the latest and is already part of the President’s budget.

CO2 production is implicit in nearly every facet of productivity; for the average citizen, the effects of hyper aggressive regulation will manifest themselves as an across the board increase in cost of products manufactured in the United States, pain at the gas pump, and noticeably higher electricity bills. For the energy industry – companies that produce electricity for homes and businesses and fuel for our transportation – these policies amount to a full fledged government assault. The aim is to cripple our capacity to use natural gas, oil, and coal for energy production under the banner of combating climate change. Obama’s plan purports to fill the gap with green energy, but at present, the capacity does not exist. In their current state, alternative energies simply cannot meet our energy needs. Research into environmentally friendly technology to achieve energy independence is a worthy bipartisan cause, but even under the best circumstances, new technological development will not keep pace with the avalanche of anti-energy legislation and regulatory actions bearing down on energy producers as soon as this year.

So with our reliable methods of energy production hamstrung by CO2 regulation, and the promised new technologies – and their accompanying infrastructure – years, maybe decades away, how do we power the motor of the world? President Obama devoted air time on the campaign trail to singling out and demonizing Exxon-Mobile. When his energy plan achieves its stated aims and has brought Exxon-Mobile and other energy producers to their knees, then what? Will we be told they are ‘too big to fail’? Currently, the conventional wisdom holds that the evil, greedy oil companies are recklessly profitable; would you, the tax payer, prefer to spend billions (trillions?) bailing them out? Should we soon expect a ‘Regeanesque’ speech from the Oval Office somberly informing us that our only hope for economic survival is to make another sacrifice for the greater good and nationalize our energy industry?

Of course, maybe I shouldn’t be so worried. I suppose that won’t be so terrible. Nationalized energy has worked out fabulously in Venezuela. Hasn’t it?

Further Reading


Cap and Trade

Oil and Gas fees/treasury sec


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